A mining and exploration retrospect for December 22, 2012, to January 4, 2013

by Greg Klein

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To accommodate the Christmas/New Year publishing schedule, this review covers two weeks.

From risk to risk

“Although some companies and the province laud Ontario as being one of the best mining-friendly jurisdictions in the world,” that reputation is changing, according to a Thunder Bay-based drilling contractor. In the January 2 edition of Northern Ontario Business, Barb Courte, president of Cobra Drilling and North Star Drilling, said the province is facing a downturn in early-stage exploration.

The article stated, “In conversation with her industry colleagues, Ontario is considered a ‘risk area’ for investment, based on some high-profile First Nations-industry conflicts, along with the uncertainty of how the new Mining Act plans and permits regulations will play out.”

Regulations that take full effect in April will give native bands more power to block drilling on Crown land.

Courte told Northern Ontario Business her companies did well in 2012 but business has now dropped by about 50%.

A supplier dates the drilling downturn to last April. Hugh Paxton, GM of Wire Rope Industries Distribution, told the paper, “It’s the lowest numbers we’ve seen for drilling supplies since we’ve been [in] it for the last four years.”

Courte, meanwhile, hopes to make up for lost business in the Caribbean. Unigold TSXV:UGD has contracted her to send four drills to the Dominican Republic in autumn and she’s getting inquiries from other companies operating in the country, the story stated.

Unigold calls the country a “premier mining destination.” The company’s most recent (November 28) news release stated the government “supports development and exploration in the mining sector. In addition, the country has well-established mining laws and environmental laws.”

Two days later, however, Mining Weekly offered a different perspective. A spokesperson for the Xstrata Nickel subsidiary Falcondo told the publication, “Security in the country has seen a gradual deterioration, which has forced us to significantly increase our security costs. They have tripled in the past few years.”

Mining Weekly added, “Dominican President Danilo Medina has acknowledged the problems and promised in a televised speech to the nation on [November 27] to improve security and reform the country’s police force. According to the World Economic Forum’s latest Global Competitiveness Index released in October, the Dominican Republic ranked 143rd out of 144 countries worldwide in reliability of its police force.”

New mega-company consolidating China’s rare earths production

A planned 12-company takeover could mark the first step in creating “a massive rare earth enterprise that will integrate light rare earth resources” in northern China. According to a December 28 China Daily article, newly signed framework agreements would have the companies and their shareholders hand over a combined 51% interest for free to the Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co (REHT). In return, REHT would provide management, technology and funding, while setting production and export quotas. The agreement allows one year for the deals to be consummated.

“If the first step goes well, REHT will eventually team up with major rare earth producers in Gansu, Sichuan and Shandong provinces to form the China North Rare Earth Hi-Tech Co,” China Daily reported. “Authorities expect bigger enterprises to churn out products with higher added value and shoulder more responsibility in environmental protection.”

With just 23% of the world’s rare earths reserves, China supplies over 90% of global demand, the paper added.

Can placer miners meet B.C.’s environmental code?

An enduring legacy of the Fraser and Cariboo gold rushes, placer mining remains a British Columbian institution. But now that a forgotten 2011 environmental report has come to light, the miners are worried.

An audit from B.C.’s Ministry of the Environment found 74% of 23 placer operations inspected in 2010 didn’t comply with land restoration requirements and 43% of miners “were also working in streams without authorization,” the Vancouver Sun reported on December 26.

“The placer mines range from one-person operations to larger operations that employ dozens of people and use heavy equipment to extract gold from sand and gravel,” said the story.

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August 17, 2012

By Kevin Michael Grace

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Gold was up (at press time) $1.70 (+0.1%) for the week to $1,616.70, and silver was up $0.29 (+1%) to $28.23. According to Business Recorder August 16, “Gold prices firmed on Thursday on speculation that central banks may be set to launch more bullion-friendly stimulus measures to boost growth, though mixed US data that dampened expectations for imminent Federal Reserve action kept prices in a range [just over $1,600].”

According to economists surveyed by Reuters, the odds of QE3 are “about three in five.” Ambrose Evans-Pritchard writes, “Markets are pricing in an 80% chance of yet more printing by the US Federal Reserve in September or soon after.” And “China is sufficiently alarmed by the flint hardness of its ‘soft-landing’ to talk up trillions of fresh stimulus. The European Central Bank is preparing to print ‘whatever it takes’ to save Spain and Italy.” Meanwhile, “Five years on, the Great Recession is turning into a life sentence.”

What about the US “recovery” that Vice President Joe Biden is raving on about? (Watch this video, and you will see that the word “raving” is used advisedly.) According to Gary Shilling, “We’ve had three consecutive months of declines in retail sales. That’s happened 29 times since they started collecting the data in 1947, and in 27 of the 29 we were either in a recession or within three months of it.” The Daily Ticker reports, “Shilling expects this recession will last about a year and shave about 3.5% from growth from peak to trough.”

Tweedledum and Tweedledee: "If you think we're alive, you ought to speak."

As noted in this space a year ago, Bernancus Magnus will be forced to resort to QE3 because, based on his own Bernanke Doctrine, that’s all he can do. Actually, there is one final trick left up his sleeve, “dollar depreciation by stealth: wholesale purchases of foreign currencies.” Evans-Pritchard concludes, ominously, “Much of [our] debt will have to be written off. Whether this is done by inflation (1945-1952) or default (1930-1934) will be the great political battle of this decade. Pick your side. Pick your history.”

Do you hear our politicians speaking about this? Not a bit of it. In the United States, the presidential election is once again solely a contest of personalities: Barack Obama, who represents New America (yay!) versus Mitt Romney, who represents Old America (boo!).

Biden, who represents Crazy America, thunders that Romney is “gonna let the big banks again write their own rules. Unchain Wall Street!” According to Jean-Claude Groulx in the American Thinker, Wall Street has been remarkably unfettered under Biden’s boss. He notes that the Government Accountability Institute has reported that the George W Bush administration “obtained over 1,300 corporate fraud convictions, including those of over 130 corporate vice presidents and over 200 CEOs and corporate presidents,” and the Bill Clinton administration “prosecuted over 1,800 S&L (savings and loans) executives, senior officials, and directors, and over 1,000 of them were sent to jail.” The Obama administration, in contrast, “has not brought criminal charges against a single major Wall Street executive.”

Certainly not Jon Corzine. The New York Times reports August 15, “A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives.” Why so? “Chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear.” Hey presto! Now you see it; now you don’t.

Of course that decision has nothing to do with the following: “Corzine is not only a former Senator (and Governor of New Jersey) but is also a former CEO of Goldman Sachs (where he employed Gary Gensler, current Chairman of the Commodity Futures Trading Commission), is ascloseasthis to the Democratic Party and is the man President Obama called ‘our Wall Street guy.’” And he’s still Obama’s guy… Corzine has raised at least $500,000 for [the Obama-Biden] re-election campaign, funds that President Hope and Change does not regard as at all tainted.”

Don’t expect Romney to make anything of this. If he did, he would have to answer questions about his VP pick, Paul Ryan, who trousered a tidy sum based on insider information he garnered as a congressman during the 2008 meltdown.

Of all the binary divisions in life—cats vs dogs, Coke vs Pepsi, Yankees vs Red Sox, Microsoft vs Apple, etc—Democrat vs Republican (or insert national variation here) is the least important. The politicians of all parties belong primarily to the Government Party. Their loyalties are not to classes, factions, regions or (ha! ha!) the commonweal; their only loyalty is to themselves—and the bankers like Jon Corzine who fund their hegemony. To speak of the calamities that threaten their nations would suggest that they have been consistently and woefully wrong in their policies, and they can’t have that. So pick your poison, inflation or default. Either is excellent news for gold.

Stock Tips and Joke of the Week

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August 9, 2012

By Kevin Michael Grace

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Gold was down (at press time) $4.80 (-0.3%) for the fortnight to $1,615, and silver was up $0.49 (+1.8%) to $27.94. According to GoldCore, “Recent dollar strength and a lack of clarity in the minds of many market participants regarding whether the [European Central Bank] or the US Federal Reserve Bank will employ more quantitative easing to prevent double-dip recessions and even depressions may be partly to blame for gold’s lack of gains recently.”

However, “The dollar is set to weaken again due to the appalling US fiscal situation, and further quantitative easing and money printing on behalf of the Fed, ECB and [Bank of England] is almost inevitable.” We shall see.

The planted axiom in all such predictions is that the State has the power to compel the economy to do its bidding. One wonders for how long the State, as currently constituted, will be able to presume to hold such power.

Berlin, 1848: To the barricades again?

Reuters reports August 7, “Italy shrank further into recession in the second quarter for a 2.5% yearly decline, data showed on Tuesday, threatening attempts by Mario Monti’s technocrat government to control a debt crisis that is undermining the whole Eurozone.” What does “technocrat government” mean?

Wikipedia explains that on November 16, 2011, Monti, an unelected Senator for life, “was officially sworn in as Prime Minister of Italy, after unveiling a technocratic cabinet composed entirely of unelected professionals.” It would appear then that Monti is a dictator, and his cabinet ministers are consuls. That’s the Old Roman way, but it’s not what we understand as constitutional democracy.

Why the European Union expects Monti’s diktaks to be obeyed by the Italian people is anyone’s guess. The EU has not yet appointed a dictator for Spain, but the same problem applies. Mario “Batman” Draghi is now the Pontifex Maximus of the Church of Europe, just as Benedict XVI is the Pontiff of the Roman Catholic Church. They were both elected solely by their peers, but the difference is that no one is compelled to remain a Catholic, while apostasy from the European Church is not an option.

Peter Schiff, the prophet of the housing collapse, declaims, “Two-thousand and eight was just an overture. The opera is coming. The real financial crisis is coming in 2013, 2014. And so, we’ll get a real choice, a fork in the road. One way is going to lead toward complete authoritarianism, complete totalitarian government, and the other way is going to lead back to freedom.” Unfortunately, Schiff does not specify the means by which the road to freedom will be constructed.

At the Automatic Earth, Raúl Ilargi Meijer argues, “Here’s your key: It’s the people, stupid! Not the economy; it’s only the economy if that economy can actually be resurrected. The future of Spain and Europe will be decided in streets and kitchens and living rooms, not in bank vaults and boardrooms. You can only squeeze the people so far. That’s not some political statement, nothing to do with socialism or anticapitalism; it’s just a basic fact. Apparently, it’s going to take a brush with reality for many loud-mouthed pundits and politicians to figure that one out. So be it.”

Call him hysterical or dangerous, but he could be right. It is a commonplace in the West that political violence is “unthinkable.” But this is merely a shibboleth of our post-1945 regime. Not for the first time (and not for the last), this space defers to James Burnham’s (1943) The Machiavellians, which could have been titled, The Way The World Really Works. Here he paraphrases the French syndicalist Georges Sorel: “The lessening of overt acts of violence in social relationships is merely the correlative of an increase in fraud and corruption. Fraud, rather than violence, has become the more usual road to success and privilege. Naturally, therefore, those who are more adept at fraud than at force take kindly to humanitarian ideals. Crimes of fraud excite no such moral horror as acts of violence.”

Burnham then quotes Sorel directly, “We have finally come to believe that it would be extremely unjust to condemn bankrupt merchants and lawyers who retire after moderate catastrophes, while the princes of financial swindling continue to lead gay lives. Gradually the new industrial system has created a new and extraordinary indulgence for all crimes of fraud in the great capitalist societies.” Remarkably prescient for a book published in 1906.

Ilargi contends, “The ‘resolution’ of the LIBOR scandal (which will probably never be completed) will show us once again that we have a choice to make between either saving the banks or saving our economies and societies. We can’t do both. But in all honesty, I doubt that the prospect of such a choice is real. It looks to me like the choice has long since been made by a succession of unrepresentative representatives we elected with our empty votes, and who have left us with a runaway crossover between Frankenstein and the Sorcerer’s Apprentice. I wasn’t kidding when I said the other day that if you want your vote to count, you’ll have to get out into the streets to do so.”

Again, we shall see. As for QE3 being “almost inevitable,” Peter Schiff dispenses with the “almost.” “When Ben Bernanke says we’re only going to give the economy more stimulus if it needs it, it’s like telling a heroin addict, ‘We’ll only give you more heroin if you need it.’ The economy is going to need it, because without it, it’s going to collapse. But it’s not right to give a heroin addict more heroin just because it’ll keep him high.” Not right but certainly good for gold.

Stock Tips and Joke of the Week

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June 7, 2012

By Kevin Michael Grace

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Gold was up (at press time) $28.80 (+1.8%) for the week to $1,591.30, and silver was up $0.83 (+0.3%) to $28.54. Gold fell $42.90 today; the Wall Street Journal attributed this to Bernancus Magnus making cryptic remarks to Congress about further quantitative easing.

On the one hand, “Banking and financial conditions in the United States have improved significantly since the depths of the crisis.” On the other, “The situation in Europe poses significant risks to the US financial system and economy.” The Great One refused to be drawn, remaining gnomic and imperturbable. “If we decide that further action is required, then of course we have to decide what action is appropriate or what communications are appropriate.”

Holbein: An economist meets his nemesis.

So, if Kent Brockman were to ask the Ben Bernanke, “Professor, without knowing precisely what the danger is, would you say it’s time for our viewers to crack each other’s heads open and feast on the goo inside?,” he would answer No.

Martin Wolf of the Financial Times would answer Yes. “Given such uncertainty, panic is, alas, rational.”

Prime Minister Harper, no mean gnome himself, is somewhere in the middle. “Ever since mid-2008, I have been constantly worried,” he told Peter Mansbridge Tuesday. (More on this admission below.) On the one hand, “Our European friends have done a great job of avoiding a catastrophic event over the last four years.” On the other, “We are now four years into this crisis, and we do not have definitive solutions.”

Harper continued, “I don’t want to sound too alarmist”—uh oh!—”but we are kind of running out of runway here.” He argued that in the absence of definitive solutions the Eurozone “will come apart one country at a time. And that will be very bad for everybody.”

Mansbridge was quite deferential to Harper, and this was to be expected, as Harper gives few interviews and won’t abide hard questions. (Not that any other interlocutor would have been tougher; Canada has no Jeremy Paxmans.) Even so, he laid it on pretty thick: “Listen, I’m not an economist, you are…” Mansbridge, like so many others, labours under the delusion that economists possess expertise similar to that of engineers or physicians (or dentists). Lord Keynes once wrote, “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.”

Jeremy Paxman would have demanded that Harper explain his extraordinary statements of September 15 and 26 and October 10, 2008: “My own belief is, if we were going to have some sort of big crash or recession, we probably would have had it by now”; “The only way there is going to be a recession is if they’re [the Liberals] elected”; and “This country will not go into recession next year.” Golly, this was well past mid-2008, and yet he doesn’t sound worried, does he?

Keep in mind that Harper’s statements were made concurrent with (but mostly after) the firesale of Bear Stearns, the collapse of IndyMac Bank, the seizure of Fannie Mae and Freddy Mac, the firesale of Merrill Lynch, the collapse of Lehman Brothers, the AIG bailout and the seizure (and subsequent firesale) of Washington Mutual.

Only an economist could have got 2008 that wrong. Of course there was an election October 14, 2008, so perhaps Harper chose the path of least resistance. As for the current crisis, “I don’t think it’s helpful for leaders to speculate on catastrophic scenarios.” So don’t expect the truth about our economic situation from Harper (or Bernanke). They don’t know and even if they did wouldn’t tell us.

In the interim, Harper, who as an expert could not possibly get 2012 wrong, has suggested his definitive solution for Europe (fiscal union) and his “contingency plans” for Canada (even lower interest rates, more stimulus, further free-trade agreements to lower wages): more of the same that got us where we are now. No, the economists are not yet humble and certainly not competent, but they continue to believe that the fool who persists in his folly will become wise.

Stock Tips and Joke of the Week

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May 31, 2012

By Kevin Michael Grace

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Gold was up (at press time) $3.10 (+0.2%) for the week to $1,562.50, and silver was down $0.55
(-1.9%) to $27.71. GoldCore reported, “Gold fell and tested support at $1,530 [Wednesday] but then bounced very sharply and rose by nearly $40… Yesterday may have been a form of ‘tipping point’ for gold whereby it again starts to display its safe haven status as it did soon after the initial price falls at the time of the Lehman financial crisis.”

The search for a safe haven is now something of an obsession as free-falling Europe approaches terminal velocity. Last week, this space announced the failure of the “last hope to save the European Monetary Union as currently constituted.” Foolish certainty. This week, we see the arrival of another last hope, the European Redemption (!) Pact.

According to Ambrose Evans-Pritchard, “In effect, Germany would share its credit card to slash debt costs for Italy, Spain and others. Yet it is the exact opposition of fiscal union. While Eurobonds are a federalizing catalyst, the fund would be temporary and self-extinguishing. ‘The fund is a return to the discipline of Maastricht with sovereign control over budgets,’ said Dr Benjamin Weigert, the Council of Experts’ (!) general-secretary.

And if you believe that, perhaps you would be interested in some Facebook shares at the low, low introductory price of $38.

Evans-Pritchard concludes, “Ultimately, a sinking fund cannot tackle the root cause of the Eurozone crisis. It may cap debt costs, but it does not alter the intra-EMU currency misalignment between North and South… Yet the Redemption Pact is at least a first step back from Purgatory.”

An odd metaphor. Purgatory refers to the Christian belief of purification by fire. By definition, one cannot step back from it to Redemption. When a body (personal or corporate) becomes corrupt, isn’t purification the proper prescription?

In any event, Theo Sarrazin, the “controversial” former Berlin Senator and Deutsche Bank executive, argues in a new book, Europa braucht den Euro nicht, that Europe should step back from the Eurozone. His reason for arguing this is the same employed when he argued that Germany should reform its immigration policy—the current system isn’t working. For his pains, this lifelong Social Democrat stands accused of “crude rhetoric laced with far-right undertones.”

In a review—not of the book, which she hasn’t read, but of Der Spiegel‘s story linked above—Heather Horn of the Atlantic sniffs, “It’s not that [Sarrazin's] arguments themselves don’t have merit. It’s that the author doesn’t seem all that concerned with complexity.”

Steve Sailer responds, “To ‘have an opinion’ on policy while simultaneously to ‘have no idea’ about the facts the policy confronts appears to be the perfect summation of the kind of intellectual discourse that is considered appropriate in the 21st Century. The role model for contemporary thinkers is Sgt Schultz from Hogan’s Heroes: ‘I know nuffink!’”

This is the paradoxical principle that exercises universal hegemony in the West. The Heather Horns of the world consider themselves rational, progressive and focused relentlessly on the future, but they are imprisoned by the vision of an ever-receding Golden Age. Perfection was achieved circa 1989, when the Berlin Wall fell and globalism (AKA “The End of History” or “Americanism“) was revealed as the economic and social system that would reign over mankind forever and ever, amen.

When our elite meets thoughtful and detail criticism of policy with a bored “You could be right, but what of it, we’ll continue on our merry way, regardless,” it becomes obvious that said elite lacks the intellectual and moral capacity to deal with crisis.

Or as Sprott’s John Embry says at Mineweb, “I think they are trying to paint the tape to make things look much better than they are and, as a result, this may be one of the finest opportunities if not the finest in the entire [gold] bull market which is now in its 12th year.”

Stock Tips and the Joke of the Week

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Western Copper’s Yukon Gold-Copper Project is Seriously Undervalued

By Kevin Michael Grace and Ted Niles

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Western Copper and Gold’s TSX:WRN Yukon Casino project has the goods: proven and probable resources of 4.5 billion pounds copper, 8.3 million ounces gold, 60.6 million ounces silver and 494 million pounds molybdenum. But Western has a problem. “It’s the market,” says President/COO Paul West-Sells. “If you think about it, were trading at one-tenth of the value of our asset.”

Acquired by Western in 2006, Casino comprises 13,124 hectares located 380 kilometres northwest of Whitehorse and 560 kilometres northwest of Skagway, Alaska. It is, West-Sells says, “a very, very large porphyry deposit: 2.7 billion tonnes of ore. Interestingly, it is a weathered porphyry, so it has a supergene in the cap and a hypergene in the delineation. So this is different than deposits you see in British Columbia and a bit more similar to what you see in Arizona and Chile.”

Western's Casino project: 2.7 billion tonnes of ore.

The mining industry has bet heavily on the Yukon, with over 100 companies active there. Western‘s neighbours include the Carmacks Copper Project held by (Western spinout) Copper North TSXV:COL, Capstone’s TSX:CS Minto Mine, Kaminak’s TSXV:KAM Coffee Creek project, Kinross’ TSX:K White Gold project, Northern Tiger’s TSXV:NTR Sonora Gulch project and Northern Freegold’s TSXV:NFR Freegold Mountain project.

West-Sells reports, “When we inherited the project, it had been drilled. So we pretty much immediately issued a prefeasibility study in 2008. And then the market took a turn for the worse.” This was frustrating, but Western realized the “enormous upside” with a 26,000-metre drill campaign, which precipitated an upgraded 2010 resource estimate.

Western issued another prefeasibility study in April 2011. “That established the project as it sits today,” West-Sells says. It reckons an initial capital investment of $2.13 billion and a payback period of 3.2 years. The project has a 16.2% after-tax internal rate of return, a $1-billion after-tax net present value (at an 8% discount rate). With a total reserve of 1.06 billion tonnes, the mine life is 23 years (beginning with a seven-year heap-leach operation) at 120,000 tonnes per day.

Western expects to have the feasibility study “complete by the end of this year,” West-Sells says. “We’re working towards getting our permit application submitted shortly after that. We would have the application in probably in 1Q 2013. After that is submitted, we’re looking at about two years for the environmental assessment process to take place. So you’re looking at 2015 to start construction. In two years after that, we’ll have the heap-leach up and running and after that the main milling process will start.”

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May 17, 2012

By Kevin Michael Grace

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Gold was down (at press time) $20.50 (-1.3%) for the week to $1,574.40, and silver was down $1.04 (-3.6%) to $28.06. Gold gained $38.40 Thursday; the Financial Times attributed this to “heightening expectations of further US monetary stimulus, as weak manufacturing data in the Philadelphia region…took investors by surprise.”

GoldCore reported Thursday that “Gold fought back [Wednesday] after touching its lowest level since December 29, as concerns about Greece’s political instability and possible departure from the Euro prompted investors to buy back into bullion.” Our favourite wire service continues to maintain the exact opposite, of course.

Parthenon: Exhausted metaphor alert!

But wait! Pedro da Costa of Reuters writes Thursday, “On again, off again. That’s been the story with prospects for another round of monetary stimulus from the Federal Reserve. Expectations for a third installment of quantitative easing, the much-debated QE3, had ebbed with improving economic data in the first quarter—but are now flowing anew. Following a weak employment report for last month, the latest hint that more bond buys could be in the offing came from minutes of the central bank’s April meeting.”

Da Costa is taken with the analysis of Millan Mulraine of TD Securities: “The line in the sand for action [by the Ben Bernanke] may be the need to mitigate the contagion risks from Europe and may no longer require the realization of the downside risk as a trigger for action. That is, the Fed may be willing to take further action to insulate the economy from the risks, if the probability of a disorderly outcome in Europe increases sufficiently.”

Disorderly, eh? Europe has come to resemble a Gerard Manley Hopkins poem: “How to kéep—is there ány any, is there none such, nowhere known some, bow or/brooch or braid or brace, láce, latch or catch or key to keep/[the Euro]…from vanishing away?/…No there’s none, there’s none, O no there’s none/…So be beginning, be beginning to despair.”

Despair, eh? How about panic? David Cameron has come to resemble the proverbial chicken recently decapitated. Britain isn’t a member of the Eurozone, of course, but this won’t obviate the need for it to pony up when Greece leaves or is kicked out.

How much is yet to be determined, but the final reckoning will be shocking. Doug McWilliams of the Centre for Economic and Business Research told the Guardian a “disorderly” Greek exit “would result in a 5% drop in output”: one trillion dollars.

Eight months ago, this space asked the question, How did “Greece, a country with a piffling GDP of $318 billion, [come] to threaten the economies of Australia (GDP $1.24 trillion), Canada (GDP $1.57 trillion), the European Union (GDP $16.28 trillion) and the United States ($14.78 trillion)”? Eight months later, we have learned that the failure of this piffling country will cost all and sundry more than three times its GDP. And so we have an answer to our question—the economic minds that direct world affairs aren’t fit to run a carnival ring toss.

Stock Tips and the Jokes of the Week

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Abzu Has Two Potentially Big Gold Properties in Ghana

By Ted Niles

Investor opinion is divided on West Africa. On the one hand, it is a place of extraordinary mineral potential; on the other, it is a region with a high level of geopolitical risk. The March 22 coup by Mali’s military is only the latest example. But Peter Klipfel, President of Abzu Gold Ltd TSXV:ABS, has reason to believe that Mali is the exception in the region and that neighbouring Ghana is both rich in minerals and politically secure.

“For the last 15 years now, Ghana has had a very stable government and parliamentary process,” Klipfel reports. “You have an emerging middle class that has expectations of its country and society. They are an entrepreneurial bunch. And for the most part, what you see is a legitimate and fair rule of law and order. If there ever was an issue, I take faith in the fact that it would go a lot better than it might if you were somewhere like Venezuela.”

Klipfel is not alone in this opinion, for Ghana, Africa’s second-largest gold producer, is not short of players. The country has seen a steady influx of juniors over the last decade, and majors active there include Gold Fields, AngloGold Ashanti, Kinross TSX:K and Newmont TSX:NMC. “If you look at Newmont,” Klipfel says, “they see the end coming someday for their Carlin Trend and some of their other deposits. For 10 years now, they’ve been pumping money into their Ahafo Project with the expectation that it is going to be their company maker in the future. That they’ll keep the company going strong from Ghana is, to me, a huge vote of confidence both in the country and its politics.”

Confidence that Abzu hopes to translate into success of its own. Abzu‘s properties in Ghana fall into two categories: concessions that it owns exclusively (six) and those that it holds in joint venture with Kinross Gold TSX:K (10). Of the 16, it has selected two for its flagship operations: Nangodi and Asafo, both highway-adjacent and with access to power and water.

The 142-square-kilometre Nangodi concession is located in the country’s north, on the Bole-Nangodi Belt—also host to Endeavour Mining’s TSX:EDV Youga Mine in Burkina Faso. An historical producer, Nangodi was acquired by Kinross when it bought out Red Back Mining in 2010. Abzu is currently earning a 51% interest in the property by spending $3 million over three years. “When we first picked up [Nangodi], it had the lowest hanging fruit available in terms of past work,” Klipfel says. “[It was] something we could sink our teeth into—get drill rigs going on and come up with what we thought would be good results.”

And that they’ve done. In 2011, the company undertook a 27-hole drill campaign, expanding on the 31 holes drilled in the 1990s by Australian miner Africwest Gold. Assays announced December 1, 2011, include

• 1.91 grams per tonne gold over 44 metres (including 4.75 g/t over 15 metres)
• 1.15 g/t over 73 metres (including 7.9 g/t over 4 metres)
• 3.06 g/t over 10.7 metres
• 1.99 g/t over 44.5 metres
• 2.25 g/t over 24 metres
• 1.61 g/t over 16 metres
• 1.53 g/t over 66 metres (including 4.65 g/t over 15 metres)
• 17.93 g/t over 3 metres
• 41.6 g/t over 1 metre
• 1 g/t over 12 metres

Klipfel comments, “We’ve expanded on the area that [Africwest] drilled and taken it from about a 600-metre zone to 1.2 kilometres—about 60-metres wide and drilled at a depth of 200 metres. Mineralization there is the sort that will go to great depths, like many of the other vein deposits in Ghana.”

The company believes that the deposit has “multimillion-ounce” potential. Klipfel explains, “You put a box around what we’ve defined so far—1,000 metres by 50 metres by 200 metres—at the grades we’re seeing, and that would give you two million ounces right there. That, of course, is our hope.” Ground geophysics and trenching work are ongoing at the site, and a minimum of 5,000 metres of drilling is planned to begin in June. An NI 43-101 resource estimate for Nangodi is expected to be released in 4Q.

Klipfel says that the company’s relationship with Kinross is good. “We’ve kept them apprised of things, and they’re happy with the work we’ve done. We’ve already exceeded the first-year expenditure [ie, $500,000], and we’re only eight months into the deal.”

Abzu‘s other flagship property—the 152-square-kilometre, 100%-owned Ahafo concession—is located in Ghana’s south on the eastern edge of the Kibi Belt. While not one of the company’s Kinross joint ventures, it too has a pedigree in that it was acquired and explored by Newmont in the early 2000s. On the basis of Newmont‘s work, plus their own geophysical work, Abzu determined three targets. A 13-hole drill program on the first of those targets returned October 20, 2011, assays including

• 0.67 g/t over 20 metres
• 4.08 g/t over 1 metre
• 0.85 g/t over 12 metres
• 0.6 g/t over 30 metres
• 1.28 g/t over 3.5 metres
• 4.72 g/t over 20 metres (including 62.2 g/t over 1.1 metres)

“We were jumping up and down for joy as far as a shotgun blast coming up with nine out of 13 holes with good intercepts,” Klipfel declares. “We’ve tagged on to something, and now we need to figure out what it is.” He believes that Ahafo, like Nangodi, has significant resource potential. However, before a resource estimate can be considered a trenching program and a further 4,000 metres of drilling in 2012 (planned for 2Q and 3Q respectively) are needed to better understand this project.

With about $1 million in the bank, Klipfel says that his company is due for a financing which will either be done publicly or by private placement “in the next month or so.” He continues, “We want to put about 50% of our effort and money into Nangodi, 35% into Asafo and 15% into the other [properties]. Hopefully, we can get another discovery going by the end of the year.”

Klipfel concludes, “I haven’t been able to be as aggressive about the exploration as I’d like early this year because we’re in budget-minded mode. We undertook 10,000-plus metres of drilling on four different campaigns in seven months last year. We went from blank pieces of paper to two flagship-level projects with multimillion-ounce potential. Including the joint venture with [Kinross], we’ve expanded our concessions from three to 16. I only hope our future allows us to grow like that and come up with goods like we have at Asafo and Nangodi.”

At press time, Abzu Gold had 59.2 million shares trading at $0.21 for a market cap of $12.4 million. Its other concessions in Ghana are located on the Sefwi, Asankrangwa and Ashanti Belts.

Disclaimer: Abzu Gold Ltd is a client of OnPage Media and the principals of OnPage Media may hold shares in Abzu Gold.

Rainy River is Four Years Away from Gold Production

By Ted Niles

Rainy River Resources TSX:RR lost roughly 40% of its value in September 2011. Crummy assay results? Funding problems? Corporate upheaval? None of the above. Just the vagaries of the market. “The Rainy River project is only getting better with time,” President and CEO Raymond Threlkeld emphasizes. “It’s getting bigger and the economics are becoming better.”

The company continues to advance its eponymous gold project, located on 16,530 hectares in what is fast being recognized as an emerging gold district in Ontario’s northwest. On February 24, Rainy River released an updated NI 43-101 resource estimate for the 16,530-hectare property of 5.72 million ounces gold and 12 million ounces silver in the measured and indicated categories, marking a 30% and 32% increase in gold and silver ounces respectively. The report also outlined inferred resources of 2.25 million ounces gold and 6.77 million ounces silver inferred.

The new estimate followed a positive preliminary economic assessment released November 2011. The PEA projected a 13.2-year mine life with an annual production rate of 329,000 ounces gold and 497,000 ounces silver. Life-of-mine cash costs were estimated at $553 per ounce gold with an initial capex of $681 million. Rainy River’s net present value was calculated to be $786 million with a 19.4% internal rate of return and a payback period of 3.4 years. “To have a project that has a net present value of around $800 million today at a $1,200 gold price is very good,” Threlkeld remarks. “The next PEA that we do—which comes out in June and will be the guide for the feasibility study—is going to show a substantial increase in net present value.”

So what is the explanation for Rainy River‘s stock-price collapse? Threlkeld argues, “Last year, I think we were fairly well valued, but there were factors beyond our control in that there were some shareholders that needed to sell their shares to cure other problems. Shareholder sentiment is a very hard one to control. The generalist portfolio managers have chosen to get out of gold, and a lot of them have moved to US equities. Equities that are dividend paying.”

The company is currently in the midst of an infill and exploration drilling campaign. March 28 results from the Cap and ODM zones include

• 5 grams per tonne gold over 10.5 metres
• 27.5 g/t gold and 22.7 g/t silver over 1.5 metres
• 12 g/t gold over 3.5 metres
• 12.7 g/t gold and 3.3 g/t silver over 16.5 metres
  (including 81.7 g/t gold and 13.9 g/t silver over 1.5 metres)
• 18.1 g/t gold over 3 metres
• 34.4 g/t gold over 1.5 metres
• 1.4 g/t gold over 57 metres
• 1.6 g/t gold over 33 metres
• 15 g/t gold and 24.4 g/t silver over 4.8 metres

Threlkeld comments, “This is outside of the open-pit mineralization that we focused on in the preliminary assessment. These are very good underground-mineable widths and very good grades, [and] it demonstrates that everything is open at depth. [The results] show that as we move in one direction, mainly to the south, the grades are getting a little bit better and that we will have at some point an underground mine that has a very long life.”

He continues, “Our drilling program this year is really focused on converting some inferred resources into indicated—to put in the feasibility study—to explore at depth, like we did with these new assays, and to explore east and west along the axis of what we consider the district, of which we control almost 10 kilometres of strike length. Our program this year will be about 175,000 metres of drilling that will complete new resources and identify new exploration targets for the feasibility study.” The feasibility study, already underway, is expected to be released in 1Q 2013.

Threlkeld declares that management’s strength is in building mines. He and CFO Nicholas Nikolakakis are Barrick TSX:ABX alumni, and COO Michael Mutchler came from Kinross TSX:K. “We have the right experience for a junior company, probably more so than most,” Threlkeld says. “Our intent is to take this to production.”

Project permitting will begin next month. “As we complete feasibility, all the engineering studies go into active permitting, and the permitting timeline is about 24 months. We believe we can seek approvals to start some construction in 2014 concurrent with permitting. There is about a 20- or 21-month construction period, and we hope to achieve full production in 1Q of 2016.”

Rainy River is located about 65 kilometres west of Fort Frances, which gives it two advantages in addition to infrastructure proximity. First, the town’s ailing pulp and paper industry offers a “very trainable” human resource. Second, a Rainy River mine wouldn’t need a new camp for its personnel. Threlkeld explains, “Camps can cost upwards of $60 million to build, [with] an operating cost on top of that. Then you have a labour issue, because not a lot of people like camps—some do it for a while, and you traditionally have a higher turnover than normal. [While we have] a financial advantage in this, there is also a great social advantage—lots of people like to go home at night.”

“Our progress is outstanding,” Threlkeld concludes. “It’s very rare to see a new project that’s wide open and that has great exploration potential for the future. We developed a new resource that added 800,000 ounces to the existing pit; we’re doing optimization studies right now; and we’ve seen increases in our gold recovery in the metallurgical test work. And the recent federal [budget] announcements are very positive for mining as a whole in Canada. I think that the federal mandate to speed things up will push down to the provinces. The provinces need jobs and tax revenue, and we can certainly provide that.”

At press time, Rainy River Resources had 88 million shares trading at $5.12 for a market cap of $450.7 million.

Challenges Notwithstanding, Nunavut Explorers Persevere

By Greg Klein

See Part I of this story.

Nunavut’s mining future might have seemed grim indeed when Agnico-Eagle TSX:AEM applied a $644.9-million write-down to Meadowbank, the territory’s sole operating mine. Newmont’s TSX:NMC $1.61-billion write-down of its Hope Bay Gold Project would seem to validate pessimism. Yet Nunavut mining has flourished in the past, and rising commodity prices have brought renewed interest in past-producing operations. Meanwhile, a new strategic alliance offers hope for largely unexplored lands.

Undeterred by its Meadowbank disappointment, Agnico is pushing its Meliadine Gold Project towards 2017 production. But if Elgin Mining TSXV:ELG keeps to its timeline, it will re-open the Lupin Gold Mine by Spring 2014. Located 400 kilometres north of Yellowknife, the mine was shut down by Kinross TSX:K in 2005 after producing 3.34 million ounces. Production, however, was sporadic. The mine was opened October 1982, shut down January 1998, re-opened April 2000, shut down again August 2003, re-opened March 2004 and shut down yet again in February 2005.

Despite its high grade, Lupin’s resource estimate isn’t huge. The June 2011 43-101 shows 720,000 tonnes grading 11.7 grams per tonne for 271,000 gold ounces indicated and 410,000 tonnes grading 10.73 g/t for 141,000 ounces inferred.

The company maintains, however, that existing infrastructure means the mine “does not require a multimillion-ounce deposit to justify a production decision,” putting the project in a “unique position” compared to other Northern projects.

Results from Lupin’s WZSOS Zone released March 6 include

• 5.89 g/t gold over 8.9 metres
• 9.56 g/t over 5.3 metres
• 9.5 g/t over 4.4 metres

Along with Lupin, Elgin picked up the Ulu Gold Project 155 kilometres further north. Another high-grade project, Ulu’s June 2011 resource estimate shows 751,000 tonnes grading 11.37 g/t for 275,200 gold ounces indicated and 418,000 tonnes grading 10.61 g/t for 142,900 ounces inferred, using a 2.5 g/t cutoff. The deposit remains open below the 360-metre level, and drilling is scheduled to resume this month.

Next month Elgin shareholders vote on a proposed merger with Gold-Ore Resources TSX:GOZ, which owns the Bjorkdal Gold Mine in northeast Sweden. Among the merger’s proposed advantages, Elgin states the Bjorkdal team “has Arctic underground and open-pit mining operating experience that will benefit the combined company.”

New to the neighbourhood is HTX Minerals, a privately held project generator that last week announced a strategic alliance with Nunavut Resources Corp, described as Canada’s first Inuit-owned mining development company. HTX already holds a three-year, $3.9-million strategic alliance with Implats, the giant platinum producer, to explore northern Ontario. Under the five-year NRC agreement, the Inuit company is expected to raise at least $18 million to fund exploration.

The alliance hopes to create joint ventures to develop projects which then might be optioned to a third party or sold to a new corporation. The agreement covers the Kitikmeot region of western Nunavut. Kitikmeot consists of 450,000 square kilometres populated by about 5,400 people, 88% of whom are Inuit. The region includes Hope Bay, subject of last month’s write-down.

The NRC was founded by the Kitikmeot Inuit Association which, according to some sources, played a role in the demise of Hope Bay. The February 16 edition of the Nunatsiaq News reports that Kitikmeot Corp, the KIA business arm, received at least $60 million a year from the Hope Bay Project for the last four years.

According to the report, “KIA President Charlie Evalik says money was not a sticking point, but, according to a person who was not authorized to speak publicly and who spoke on condition of anonymity, the KIA may have asked for too much before the mine had even reached production.” Evalik is also Chairman of the NRC.

The newspaper added, “‘KIA played a role in a complex decision,’ is all [Chris Hanks, VP of Newmont's Hope Bay Mining subsidiary] had to say about that issue.”

Evalik was travelling, and another NRC spokesman didn’t respond to a ResourceClips.com interview request by press time.

The HTX-NRC alliance will explore three separately defined land packages: federally owned Crown lands, Inuit Owned Lands and Article 41 lands. The last are actually in the Northwest Territories but were granted to the KIA as part of the boundary negotiations leading to Nunavut’s creation in 1999.

Speaking from Sudbury, HTX President/CEO Scott McLean says, “The alliance helps accelerate the path to discovery. It gives us a social licence because we’re working directly with the people of the region. We’ll be mentoring and training the Inuit so they can become self-sufficient with respect to mineral exploration. We’ll have access to funds without diluting our shareholders’ equity.”

He points out, “It’s a multi-commodity alliance, although if you try to focus on everything everywhere you probably won’t be too successful. But there are some obvious targets that jump off the page—gold targets, nickel-copper targets, VMS targets and diamond targets. However our main drive, at least in the first year, will be in the gold space and the nickel-copper space.”

A number of former mines dot the region, including the Ekati and Diavik diamond mines just south of the Article 41 lands and Lupin to the north. “There’s no reason why we wouldn’t consider taking on a past-producer, particularly if it offered some upside beyond what was done before,” McLean adds.

But even with climate, isolation and lack of infrastructure already ganging up on Northern enterprise, the Fraser Institute’s most recent Survey of Mining Companies found another problem—corruption. The institute pins Nunavut with the third-highest level of graft among high-income jurisdictions. The NWT comes in fourth. Eight percent of respondents said they would not invest in Nunavut for that reason. The survey is based on industry polls and doesn’t provide details or examples.

McLean says he hadn’t heard of concerns about corruption. Newmont’s Hope Bay write-down, on the other hand, “was a concern for everybody working up there. That came out towards the end of our negotiations [with the NRC]. However, this is an area that’s going to be opening up over the next few decades. We’re going to see more and more infrastructure, and a lot of these resources will become more and more accessible. It’s not something that discourages us; it just heightens our awareness of the challenges of working in that area.”

Chief among them, he says, is “the high cost associated with any exploration or development. We’ll wait and see how environmental change progresses and see how all these challenges present themselves as we go forward.”

Other companies working in Nunavut include Advanced Explorations Inc TSXV:AXI, ArcelorMittal, Diamonds North Resources Ltd TSXV:DDN, Minmetals Resources Ltd, Peregrine Diamonds Ltd TSX:PGD, Sabina Gold & Silver Corp TSX:SBB, Shear Diamonds Ltd TSXV:SRM and Xstrata.