With the glowing victory of Obama still fresh in our memories from last evening - today's market overall so far looks grim once again despite the so-called Election Rally that popular press raved about yesterday.
Inheriting a mess of economic and external relations from eight years of Bush will take time, alot of charisma, and plenty of hand shakes. Given the two - I do tend to agree with the public on this one, Obama is likely the better person for the job.
For our mining juniors - there is hope that along with Potash, energy bills, and others will likely be a good thing.
Oil surged 10% on the "Election Rally" yesterday to $70+ a barrel, only to fall flat down to $67 on reality that demand would not change so fast despite a favorable voting decision. Things take time to move - and in the meantime - inflation will start settling in - the $700 billion package and more - has yet to be paid.
A successful broker and analyst we follow from time to time at Canaccord has qutoed a study from this month's Canaccord lead analyst - Wendell Zerb.
The first view is from our senior mining analyst, Wendell Zerb, whom recently penned a nice report titled A "defensive" slant in an offensive small-cap mining sector. I thought I would pirate a few comments from Wendell due to the amount of phone calls I’ve had of late from individuals interested in exploration companies that have great management and great exploration projects but have had their stock prices absolutely hammered in this recent downturn. Wendell goes on to explain: The small-cap mining sector has been in the worst, most precipitous decline over a 12-month period, since the crash of 1987. Since peak highs in May 2007, the TSX Venture is off 75%. As a comparison, starting in April 1987, the market (VSE) declined about 75% over a 3.75-year period. Following the Bre-X crash of 1997, the junior mining fallout spanned about 3.5 years and the total decline was about 73%. The main market pressures continue to be related to the credit crisis plaguing the US, which has now transcended globally. With this, new concerns of economic pressures equating to global recession take centre stage on world markets. With investors becoming highly risk averse, junior markets have come under extreme pressure, especially since May 2008.Wise words from a seasoned analyst - unfortunately he fails to mention that most of his picks in the last few months have also been off - like 90% of the analysts out there.
Exacerbating the situation are investment fund losses that have required these companies to liquidate positions in already illiquid stocks. Our investment thesis does not include an attempt to time the turnaround for the junior sector. We believe at current levels, segments of the junior sector offer fundamentally good value, while recognizing aversion to the small cap sector can include prolonged periods of value deterioration. We believe companies with low treasury levels, soft management, and weak upcoming exploration plans are at the greatest risk for further share price erosion. With the unknowns associated with the timing of a broad junior mining market turnaround, we suggest exposure to small caps be associated with well-managed, cash-rich, companies that will maintain active, but modest, exploration & development programs on top quality targets over the next 6-18 months. Within that period, we are hopeful a good defense leads to the best offence, and an off-the-bottom rally provides substantial returns for risk-tolerant investors.
Regardless, which quality junior and area of the world does he include in his now much smaller portfolio of picks: Argentina.
Minera Andes (MAI.to) and the TNR Gold Corp's Los Azules was mentioned and coverage commenced.
At $0.05-0.07, TNR is a solid bargain. MAI has trended up already to $0.80 - with Canaccord's price target at $1.40. Snippet of the research attached below. Due dilligence for your own investments, but smart money goes in early - I think both are wise investments if you've been following this blog for a bit of time. Specially pay attention to this portion:
Based on the significance of the Los Azules Cu project we expect Xstrata will opt to back in to a 51% interest. Based on current estimates of Minera Andes expenditures to complete its obligation, we believe Xstrata’s 3x back in could provide Minera Andes with a cash payment of up to US$30 million. Minera Andes’ future obligations for the advancement of Los Azules then become minimal and it maintains a significant interest (minimum 45%) in a very large Cu asset. Given the size of Los Azules, a 45% project interest could be sought after by Xstrata, or a third party. The option agreement between Minera Andes and Xstrata does not include a first right of refusal for Xstrata on MAI’s interest in Los Azules. Based on our back of the envelope estimates, in full production, Los Azules could produce a life-of-mine (LOM) average (20 years) of 388 million lbs of Cu annually at C1 cash cost of about US$0.70/lb.While TNR isn't mentioned directly in the article, TNR is referenced in Minera Ande's resource estimate 43-101 on SEDAR.com. I can provide an upload link to the PDF if you wish, otherwise simply Search under companies on Sedar.com for Minera Andes - and sort out by Technical Reports - it should be under there.
Canaccord analysts are waiting for TNR's developments. Now would be a great spec buy to pick up some shares for cheap.
It actually get better for TNR - the next company covered is Northern Dynasty - of the gigantic Pebbles Deposit fame up in Alaska.Northern Dynasty advances Pebble project in 2008
2008-10-27 13:42 ET - News Release
Mr. Ronald Thiessen reports
NORTHERN DYNASTY MINERALS LTD. -- SUCCESSFUL 2008 STUDY PROGRAM CONTINUES AT ALASKA'S PEBBLE PROJECT
Northern Dynasty Minerals Ltd.'s core drilling and other study activities at the Pebble LP's (PLP) project site in southwest Alaska continue to advance. The Pebble project remains on track to complete a prefeasibility study in the second half of 2009.
"The Pebble partnership continues to make sizable investments across a broad range of technical, environmental and social disciplines to move the project forward efficiently toward the completion of a proposed development plan and the onset of permitting," said Northern Dynasty president and chief executive officer, Ron Thiessen. "The tremendous amount of work undertaken this year by geological and geotechnical drilling crews, environmental and socioeconomic consultants, as well as the site personnel that support them, has moved us that much closer to reaching our program goals."
To the end of September, 2008, PLP crews had completed 141,000 feet of drilling in 215 holes. This includes 109,800 feet of drilling in 24 holes to:
- Increase the information base about known mineralization in the Pebble East deposit;
- Continue to delineate the Pebble East deposit;
- Provide detailed geotechnical information for mine planning purposes.
Crews also completed 31,160 feet of drilling in 191 dedicated environmental, geotechnical and metallurgical holes. Drilling at Pebble will continue through December, 2008. Following a six-week-to-eight-week hiatus, site activities will begin again in February, 2009.
Mr. Thiessen said the Pebble partnership, with the assistance of co-owners Northern Dynasty and Anglo American PLC, has assembled a world-class mine development team to design, permit, construct and operate a modern, long-life mine at Pebble. A dedicated team of approximately 20 engineers and technical specialists (many seconded from Anglo American), as well as 58 engineering firms and other consultancies, is currently preparing a prefeasibility study for the project.
"While the high-grade, copper-gold-molybdenum mineralization within the Pebble East zone remains open to expansion, the 2008 drill program will delineate sufficient volume and grades to allow us to finalize a prefeasibility study next year," Mr. Thiessen confirmed. "Similarly, the excellent progress being made by our engineering design team, our environmental study team and stakeholder outreach personnel means Pebble is on schedule to finalize a proposed development plan in 2009 and, following input from project stakeholders, apply for permits in early 2010."
Mr. Thiessen said the Pebble partnership and Northern Dynasty expect to publish a revised mineral resource estimate for the Pebble deposit based on 2008 drilling results later this year. A significant proportion of the known mineralization at Pebble East is expected to move from an inferred to an indicated category.
While drilling continues at Pebble, other 2008 site activities are largely complete. About 26 environmental and socioeconomic study teams visited the project site this year as part of the fifth consecutive year of comprehensive environmental baseline studies.
Northern Dynasty and subsequently the Pebble partnership have invested more than $100-million in environmental and socioeconomic studies over the past five years, including $25-million planned for 2008. The partnership is currently assembling an environmental baseline document for Pebble, which will be submitted as part of the project's permit applications.
"The Pebble partnership has undertaken the most expansive and comprehensive prepermitting environmental study program in the history of mine development in Alaska, if not North America," said Northern Dynasty chairman Robert Dickinson. "These investments will hold the project in very good stead as it prepares to enter the federal and state permitting process."
Other statistics from a busy 2008 study program at Pebble include:
- A total of 10 helicopters have flown more than 9,000 hours, moving crew and equipment from the operations base in Iliamna to various project locations.
- Approximately 800 individuals have worked about 40,000 person-days, with the total number of people at site peaking at 232 in August.
- Approximately 3,420 fixed-wing aircraft flights have brought people and supplies into and out of Iliamna in 2008, including more than 50 groups visiting to tour the Pebble project.
- Site expenditures to the end of September total approximately $50-million, excluding environmental study costs.
- About 90 per cent of 2008 site expenditures (or approximately $45-million) have accrued to Alaskan firms.
"Whether you're looking at investment, jobs, supply and service contracts or revenues to government, we believe Pebble has the potential to be the next great development project in Alaska -- on the scale of a Prudhoe Bay or Alyeska pipeline," Mr. Dickinson said. "But Pebble is also making a significant contribution to the regional and state economy today, in part because of the partnership's efforts to diligently apply local hiring and local contracting policies."
The Pebble LP was established in July, 2007, as a 50:50 partnership between a wholly owned affiliate of Northern Dynasty and a wholly owned subsidiary of Anglo American PLC. Under the terms of the agreement, Anglo American will finance $1.425-billion of project costs to acquire its 50-per-cent interest -- including budgeted expenditures of $140-million (U.S.) in 2008 and $40-million (U.S.) in 2007.
Study activities and program expenditures at Pebble in 2009 will be finalized in December, and are expected to be similar to those in 2008. Northern Dynasty continues to hold $36-million (U.S.) in cash and has no immediate financing commitments for the Pebble project.
Mark Rebagliati, PEng, has reviewed the information on the site program and Stephen Hodgson, PEng, has reviewed the information on the engineering programs. Both are qualified persons who monitor Northern Dynasty's programs.
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