The Next Mining Boom’s “Stocks to Watch” from the RIU Explorer’s Conference
The Next Mining Boom: Reporting to you from the RIU explorer’s conference in sunny Perth, Western Australia, where we are rubbing shoulders with the who’s who of the junior resources sector.
At The Next Mining Boom we are always on the lookout for the next junior mining stock that has the potential to return 100’s if not 1000’s of per cent profit.
We have identified our top “stocks to watch” from the two day extravaganza of mineral exploration companies and emerging new miners, and in this article we will be providing you with a short summary of our favourite stocks.
Not only did we watch the conference presentations, but we spoke to directors, brokers and fund managers during the day to investigate which stocks were the favourite picks of the well connected, big players of the “wild west”. Supplemented with our own in house research, in this article we will be presenting you with the stocks that stood out on all counts.
So join us (in spirit, at least) at the Esplanade Hotel in Fremantle, we’ll give you a quick summary of the conference, and then and get ready to hear about the picks of the bunch!
Our aim is to give ourselves (AND YOU!) the best chance to find stocks that start small but could end up BIG, and hopefully make us ALL money along the way.
Discoveries such as Sirius’ (ASX:SIR) Nova discovery in 2012 have shown that it is possible to make a lot of money investing in small resources stocks. IF you pick them right and maybe have a little bit of luck involved!
For those of you that don’t know, SIR went from 5c to $3.00 in a matter of months in 2012!
In this post we have given a summary of the stocks that we think could have the necessary characteristics to make us all a lot of money in the future.
Your feedback and comments are welcome. Please let us know if there is a stock that you think could be ‘the next big thing’.
The conference began on a day where the Australian stock market (ASX 200) closed above 5000 for the first time in four years. This has largely been driven by large industrial dividend paying stocks.
At Next Mining Boom we really don’t pay a lot of attention to these types of stocks. After all we are all about making money from investing in junior mining stocks.
However, it shows that investor confidence is returning! Which we believe (and hope) will trickle down to the small end of town where we operate.
Besides, industrial and big dividend paying stocks are boring right!?!
But, back to the conference….
Here’s a copy of the conference brochure front page:
Which can be found on RIU’s website here:
Alex Passmore of stockbroking firm Paterson’s gave a market update early on in proceedings.
He highlighted that liquidity is one of the major issues facing junior miners (liquidity and being able to get in and out of a stock forms part of our investment criteria – have you ever heard of the term crab pot? You don’t want to get in to a stock and not be able to get out!). The high Australian dollar also hasn’t helped, and funding issues have made life difficult for the junior miner.
HOWEVER he showed that resource stocks are on the rebound.
He spoke about the success stories at the big end of town. Regis Resources (ASX:RRL) is the most obvious example of this.
In the junior sector, Sirius(ASX:SIR) and graphite explorer Syra (ASX:SYR) have really helped spark some interest in the junior sector again.
He maintained that market awareness and investor confidence are key to the junior end, and we tend to agree.
Day 1’s program was as follows:
Highlights of day 1 included:
Peel Mining (ASX:PEX)
In our view, PEX’s most interesting project is the Mallee Bull copper-polymetallic (multiple metal) project in an area known as the ‘Cobar superbasin’ in New South Wales, Australia.
Results released on this project in August 2012 saw the PEX share price more than triple in a matter of days.
PEX has a backer in CBH Resoucres (ASX:CBH) in the Mallee Bull project. Once CBH spends ~$8m ,this will give CBH a 50% interest in the project. However, in the meantime PEX doesn’t have to spend its own money and is free carried. Not a bad deal!
PEX’s mineralisation at Mallee Bull shows a similar style of mineralisation similar to those found elsewhere in the Cobar district. This includes the world class CSA mine, one of Australia’s highest grade copper mines.
Dacian Gold (ASX:DCN)
DCN IPO’d in November 2012 and offers an interesting investment proposition. DCN has proven management operating in a region in Australia well known for high grade gold deposits.
DCN acquired the Mt Morgan’s Project in the Laverton district of Western Australia in January 2012. This gave DCN a resource base of ~842koz of gold. DCN’s focus is on aggressively exploring and building on this Resource base to support a future mining operation. DCN is aiming for a minimum 100kozpa operation over a 5 to 7 year mine life.
DCN’s Chairman is Rohan Williams, who was the founding Managing Director of Avoca Minerals. With Avoca, Williams took a $7m IPO in 2002 to a $1b gold producer in 8 years prior to Avoca merging with Anatolia Minerals in 2010. This merger created Alacer Gold (ASX:AQG).
DCN has a $6.3m exploration budget planned for 2013 and has $19m cash in the bank. Drilling results will be the main catalyst for DCN in the near term with a resource upgrade flagged for the end of Q1 2013.
Rox Resources (ASX:RXL)
Rox was one of the bright stories in 2012 in the junior mining space after receiving encouraging initial results from drilling at its Mt Fisher project targeting nickel sulphide mineraliation in December 2012. All 5 first drill holes intersected mineralisation with grades >1% nickel and up to 5% nickel. The RXL share price increased fourfold on this news!
Nickel sulphide is hot property at the moment after Sirius’ (ASX:SIR) Nova discovery sent it from 5c to $3.00 in 2012.
RXL went in to trading halt on the second day of the conference and came out with more impressive drilling results on Friday the 15th February sending RXL shares up around 30%.
Day 2’s program was as follows:
Highlights of day 2 included:
Macphersons Resources (ASX:MRP)
MRP’s Nimbus-Boorara ‘polymetallic deposit’ is located near Kalgoorlie Western Australia. The commodities the deposit holds are silver, gold, zinc, lead and copper.
The main commodity that MRP is involved with is silver. MRP’s current resource is 18.3Moz silver equivalent @ 129g/t.
For those unfamiliar with silver and more familiar with gold, the easiest way to think about grade is in terms of putting a silver grade in to a ‘gold equivalent’. If you divide the gold price by the silver price you get what is called the ‘gold-silver ratio’. At the time of writing this would be 1650 (the price of gold in $/oz) divided by 31 (the price of silver in $/oz) and hey presto, the gold-silver ratio is around 53.
Now, putting MRP’S 118g/t in to a gold equivalent, this would mean dividing 129 (MRP’s grade) by 53 (the gold-silver ratio) giving a gold equivalent of around 2.43g/t.
MRP is targeting 2Mozpa of silver with capital expenditure as low as $40m. Long lead items have already been ordered with first production aimed for early 2014.
MRP is aiming for cash costs as low as $10/oz (gold equivalent costs of around $530/oz which is quite impressive). This would allow for high margins at the current silver price of >$30/oz.
Importantly, MRP have around $12m cash in the bank.
We think that this article is worth reading on silver: http://dailyreckoning.com/the-silver-shortage-of-2013/ and while you’re at it google ‘JP Morgan silver conspiracy’ and ‘hunt brothers’
(We don’t necessarily agree with everything you come across but it makes for an entertaining read either way!).
Orinoco Gold (ASX:OGX)
OGX burst on to the scene of the Australian gold investment community in August 2012. OGX is a high grade gold explorer located in Goias state, Brazil; the second largest gold producing state in Brazil.
OGX’s 70% owned Curral de pedra is 20km from Troy Resources (ASX: TRY) now rehabilitated Sertao gold mine which produced 247koz Au at a high gold grade (29g/t)
OGX’s drilling results to date show that the gold is fairy ‘nuggetty’ where high grade gold is not evenly spread. This is not dissimilar to other projects that Australian investors would be familiar with that have produced impressive returns and good projects such as Northern Star’s (NST) Paulsen’s project and Silverlake’s (SLR) Daisy Milano project.
We recommend you do a quick google search of ‘Yamana gold’. OGX’s exploration team is the very same one that previously operated for $12bn CAD market cap Yamana in Goias State. So, they know the area!
Based on the dimensions defined by drilling, the system could possibly host multi million ounces. We think it is also worth noting that the prospectors that were on OGX’s deposit prior to drilling mined around 6koz of gold using simple techniques over five years at a super high grade of +50g/t.
We feel that the nature of OGX’s project is not well understood by the Australian investor due to its nuggetty nature and we will be watching closely as OGX aims to deliver a maiden resource and look to begin trial mining (and begin generating cashflow) in 2013.
Blackham Resources (ASX:BLK)
It’s been a busy year or so at emerging gold developer BLK since it took control of the Matilda gold project, located in the Northern Yilgarn region of Western Australia.
BLK plans to be an ~50kozpa gold producer from 2014 at cash costs of ~$1000/oz.
BLK continues to grow its resources which now stand at 1.5Moz @ 1.9g/t and was a mere 310koz Au little more than a year ago.
Historically, the Matilda project produced ~163koz and, as it is a historic mine, BLK has an existing mining lease. A processing plant is nearby which BLK could possibly take advantage of.
In February 2013, BLK announced a $13m funding package from mining entrepreneur (and ex-President of the Melbourne AFL Football Club) Joseph Gutnick’s Great Central Gold in a deal that means Great Central will have a 19.8% holding of BLK upon shareholder approval. Following this, Joe Gutnick will become Chairman of BLK. This funding will allow BLK to begin an aggressive 30,000m drilling program.
Doray Minerals (ASX: DRM)
Western Australia’s newest high grade gold mine (DRM’s Andy Well mine), 45km’s north of Meekathara, WA has gone from discovery to mining in just two and a half years.
DRM plans to be a ~75koz per annum gold producer beginning in the third quarter of 2013 over an initial four year period. Although this seems like a short life of mine, it is not unusual for a high grade gold miner to start production with small resources, then add to its inventory through exploration (think Kingsrose (ASX:KRM) etc) .
Exploration should add to DRM’s resources of 338koz at an impressive grade of 15.1g/t. DRM is fully funded into production so don’t expect a capital raising (good news) as long as DRM remains on time and on budget.
The big end of town is gathering speed and investor confidence is slowly starting to return which if continued, should trickle down to the junior mining sector.
If you like our posts, or think there is a stock we should be taking a closer look at, please feel free to email us here. We always welcome hearing from fellow investors.
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If any of the terms mentioned have confused you or you want to learn more about our investment methodology, we recommend purchasing a copy of our book ‘How to Invest in Resource Stocks’
If you are a sophisticated investor and meet s708 requirements please join our VIP club. We are able to offer a limited number of free conference tickets to conferences just like this in the future (and offer exclusive deal flow not usually available to the ordinary investor).
Good luck in your investments.
The Next Mining Boom