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Volume 15 | Number 1 | Summer 2012 Vancouver, British Columbia www.ReportOnMining.com Planning for Profits - Report on Mining edition is published four times a year by Fusion Publishing Inc. All rights reserved. Any reproduction or duplication without prior written consent of Fusion Publishing Inc. is strictly prohibited. Published by Fusion Publishing Inc. Canadian Office Fusion Publishing Inc. #317 – 1489 Marine Dr. West Vancouver, BC Canada V7T 1B8 1.888.925.0313 (Toll Free) USA Office Fusion Publishing Inc. 145 Tyee Dr. Pt. Roberts, WA USA 98281-9602 1.888.925.0313 (Toll Free) Publisher Terry Tremaine Associate Publisher & Editor Connie Ekelund
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urope is certainly causing a lot of anguish. I am sure we would all welcome not having to see headlines suggesting the end of the world is nigh. Personally, I would prefer to suggest the beginning of a bull market is nigh. Resource stocks are so undervalued that it cannot be otherwise. Here in Canada with a resource driven economy, companies are finding it difficult to source the skilled labour needed to keep up with demand. Obviously this demand is not reflected in marketplace valuations. This can only go on for so long before astute investors recognize opportunity. A recent trip to Australia provided an opportunity to experience the same phenomena. Again a resource driven economy so starved for skilled labour, job fairs are being held in other countries to source the needed commodity. In Perth, centre of the resource industry, hotels are running at 100% occupancy and there is no labour to build more properties. With demand of that kind can a bull market be far behind? After a decade of publishing Report on Mining here in Canada we are in the process of launching an Australian edition. We believe things are about to change — don’t be left behind.
Production Manager Christie Smith Contributing Editors Elvis Picardo Metals Economics Group Account Managers 1.888.925.0313 Terry Tremaine Maureen O’Brien Marie Richards Garry Ferris
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NORTH AMERICA 6 Focus Graphite Inc. 11
Commodities Outlook by Elvis Picardo
14
Aurvista Gold Corp.
16
Pipeline Activity Index by Metals Economics Group
18
GTA Resources and Mining Inc.
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Summer 2012 | Planning for Profits | Report on Mining 5
GRAPHITE F
ocus Graphite Inc. is engaged in the exploration and development of the Lac Knife deposit located in the Cote Nord region of Quebec. At 16% carbon grade overall, it is the highest-grade mineable graphite deposit in the world today. The Lac Knife crystalline flake graphite deposit is situated amidst excellent infrastructure and boasts a NI 43-101 compliant feasibility study published in December 2011. The Lac Knife holding consists of 57 mining claims, covering approximately 3,000 hectares located 35 kilometres south of Fermont, Quebec, near the Labrador border. The Company, formerly Focus Metals Inc., acquired a 100% interest in the property upon acquisition of the numbered company, 3765351 Canada Inc. on October 4, 2010. Focus Metals also signed an acquisition agreement with Everton Resources Inc. on May 21, 2010, to acquire an 100% interest in 13 properties in the Labrador Trough region of Quebec. The company also holds a 50% interest in partnership with SOQUEM, the Quebec Government’s commercial mining and development company in the Kwyjibo, Quebec, rare earths and iron ore property some 10 kilometres north of Lac Manitou, and northwest of Sept-Iles.
6 Planning for Profits | Report on Mining | Summer 2012
Focus Graphite is well positioned to become a leading and dominant technology graphite developer among both the existing firms and new entrants in the rapidly expanding graphite space. According to Gary Economo, the CEO and driving force behind this exciting company, “As we have the highest grade deposit on the planet, it allows us to mine 95% grade graphite at much lower costs than anyone else. That is a built in competitive advantage for us now and going forward.�
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Focus will produce 95% or higher purity graphite after initial processing. This is a critical differentiating factor since technological applications and developing technologies rely on the higher grade graphite that Focus can readily deliver. The deposit at Lac Knife was in fact discovered nearly two decades ago with permitting and feasibility studies undertaken at that time. Those studies proved to be a valuable time and money saver as they established a knowledge base for subsequent drilling programs on the property. Mr. Economo detailed the current position, “We are essentially redoing the earlier work so the procedure is more routine than surprise oriented. We are well positioned due to our history, location and graphite grades, with our high grade graphite giving us flexibility to meet the demands of an ever-changing and expanding marketplace.” Mr. Economo suggested the deposit may be up to five times larger than the eight million tonnes averaging 16% graphite thus far discovered since the deposit remains open in all directions and at depth. The unique position of Focus Graphite bodes well for evolving into a dominant player on the world supply scene including a possible role in establishing graphite pricing structures.
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Mr. Economo on the future price of graphite: “I don’t believe graphite prices are going much higher although some industry observers have suggested otherwise. It doesn’t make economic sense to me since the end users, our clients, won’t have viable business models should the price double or triple again from recent price levels. I believe supply will match overall demand and prices will stabilize in time.” A Preliminary Economic Assessment (PEA) is expected by mid-June 2012 and will move Focus Graphite from pre-development to the development stage. According to Mr. Economo, the PEA is on schedule and is confident June 2012 will mark an evolution for Focus Graphite once that document is released.
Summer 2012 | Planning for Profits | Report on Mining 7
Mr. Economo on the import of the PEA: “Once we have it in hand, the balance of the financing will come from a number of sources including existing shareholders, the Quebec government, off-take partners and institutional investors.” He also noted that Focus does not need a fully bankable feasibility study. Financing arrangements are already in place. As a value investment, Focus Graphite’s planned, integrated, green technology-oriented business structure is insurance against market challenges. By de-risking each component of its mine-to-customer supply chain in conjunction with the plan to move construction forward quickly by using the $27 million on hand from institutional investors, there are no clear threats to Focus’ plans. One of the company’s intangible assets is its expertise in delivering unique product solutions to individual customers. Focus works directly with end users and assists in defining the inputs required to create a profitable business, then efficiently meet those specifications. According to Mr. Economo: “We use technology to create products our clients need from our 95% graphite material which allows us to meet customer expectations. As an example, we are able to produce the actual anode for the battery sector.” He went on to further explain market differentiation and diversification. “When you get 95% grade, there is non and expanded flake graphite with different corresponding markets which is good for us since we will not be dependant on just one sector. In fact, we are effectively diversified across a number of different industries and can shift quickly as trends change. The graphite industry differs from other industrial sectors given the unique input requirements of each client.” In preparation for the upcoming development stage, Focus has been discussing off-take agreements with at least five potential buyers. The high-grade deposit gives Focus a considerable competitive edge as the cost-to-profit ratios are substantially higher and price marketing will become a long-term profit advantage in contracting discussions with potential buyers. 8 Planning for Profits | Report on Mining | Summer 2012
The Company has created a marketing strategy by engaging with several sales and marketing partners around the globe as Carbon/Graphite is a unique specialized technical sale requiring specific expertise. Mr. Economo elaborated, “We engaged with some of these companies over a year ago and as such are well on our way to establishing a vast footprint around the globe with our key partners.” China, for example, which currently produces more than 70% of the world’s graphite is a net importer of refined and processed graphite used primarily for technology applications and purposes. In a recent interview, Mr. Economo said it was his intention to make some deep inroads in the China and East Asian markets for processed graphite. Initial production is planned for early 2014, possibly as early as Q4 2013, with no reason to expect a slackening in demand for technology graphite and for high demand lithium-ion battery materials in the interim. The licensing, purification and anode production partnership with Hydro-Quebec’s l’Institute de Recherche d’Hydro-Quebec, or IREQ, has Focus well-positioned to combine the lowest cost, highest-grade graphite with IREQ’s refining and production technologies for battery grade graphite and anodes for Li-Ion batteries.
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“We’ve made every effort to de-risk the project for our investors: our studies will be done, our financing has been identified, the infrastructure is there, the engineering capability has been retained, our potential customers are engaged, and permitting requirements are in process.” Despite having no control over the timing of government approvals management remains confident the process will fit within the existing plans and corresponding time frames. The proposed mine site is located in the Fermont Iron Ore District, home to production of all of Canada’s iron ore. The district’s infrastructure is advanced with hydro, rail lines, roadways and labour all readily available as Focus executes their plans. Mr. Economo on mine development: “We have a 75 metre pit so it is not a difficult mine nor is it a challenge for us, rather, if there is a challenge it is on the consumption side of the equation.” The current management team clearly has what it takes to deliver on all counts with a combination of specialized expertise and talent that will guide the development of Focus Graphite into a world leader. The President and CEO, Mr. Economo, has over 20 years in the high tech sector, particularly sales and marketing of graphite applications. He also has a track record of success in taking start-up companies public and is an experienced fundraiser. The Chairman, Jeff York, built and ran a company with $1B in sales. Focus Director Francis Pomerleau, through his company, Pomerleau Inc., built large infrastructure projects in Northern Quebec. Tony Brisson, VP of Exploration and Qualified Person and Director Marc-Andre Bernier have decades of combined geological experience in the province of Quebec. Rounding out the core management team is Judith Mazviwah-MacLean as CFO. Judith has a rare skill set as both a Geologist and Financial leader. Mr. Economo stated: “Judith is an unbelievably rare person and has been priceless in terms of helping Focus move forward; she has been a phenomenal asset to our company.” www.ReportOnMining.com
If all this wasn’t compelling enough, Focus Graphite also has a 40% ownership stake in joint venture Grafoid, a company created to invest in and commercially exploit graphene through co-development of unique applications with global partners. Grafoid has successfully managed a development process for economically scalable bilayer and trilayer graphene. It has already identified a number of potential development projects. In summary, Focus Graphite has a built-in competitive advantage with high graphite grades that will result in the lowest costs of production through the supply chain. Focus is committed to enhancing shareholder value via a vertically-integrated business structure that also provides shareholders with an early stage investment in Grafoid. Focus is well-funded with all planned 2012 Lac Knife and Kwyjibo drilling activities fully financed. The market continues to be supportive with future capital requirements arranged and ready to flow once the PEA is released in June 2012. On May 3, 2012, Focus Metals shareholders voted their approval to change the company’s name to Focus Graphite Inc. Focus Graphite trades under the same symbol as Focus Metals “FMS” on the TSX-Venture Exchange, on the OTCQX: FCSMF and under FKC on F SE. Focus has 122,238,770 shares outstanding fully diluted with a trading range from $0.54 to $1.33 during the past 12 months. Shares were recently trading in the $0.60 – $0.70 range but are not likely to remain at those levels as management continues to execute a very well defined program. To learn more about the opportunity and to review current and previous press releases, visit their website at www.focusgraphite.com
Focus Graphite Inc. 912-130 Albert Street Ottawa, ON, Canada K1P 5G4 Phone: 1.613.691.1091, Ext. 101 www.focusgraphite.ca TSX-V: FMS; OTCQX: FCSMF; FSE: FKC Year Hi/Low: $1.33/$0.52
Summer 2012 | Planning for Profits | Report on Mining 9
THINK GRAPHITE TODAY,
ABOUT GRAPHENE
THINK GRAPHENE TOMORROW.
THINK FOCUS GRAPHITE FOR THE FUTURE. As the world transitions to high-technology clean energy applications, the challenges for the graphite industry are twofold: maximizing processing efficiencies and reducing costs to our customers. Emerging technology applications for electric vehicle batteries, fuel cells, bulk energy storage and nuclear power generation will drive graphite demand for the future. New construction materials for wind turbines, solar arrays, civil infrastructures and the transportation sector will add to that demand.
Graphene is a two-dimensional allotrope of graphite; a honeycombed lattice one atom thick and capable of withstanding 150 million psi pressure. It is conductive; transparent; flexible; anaerobic and is the scientific world’s new wonder material.
Focus Graphite couples the lowest-cost graphite production in the world with the world’s leading graphite processing, purification and production technologies. Striving to supply technology solutions for the green energy sector while meeting customers’ and shareholders’ needs is the cornerstone of our graphite enterprise. Think Graphite: Think Focus Graphite for the Future.
ABOUT GRAPHITE Scan here to learn more about Focus Graphite
Graphite is one of only two polymers of carbon. Diamond is the other. Graphite conducts heat and electricity but maintains its strength at 3500 C. The European Union and China consider graphite to be a critical, strategic mineral.
GRAPHITE www.focusgraphite.com
10TSX-V: PlanningFMS for Profits | Report on MiningFSE: | Summer OTCQX: FCSMF FKC 2012
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Commodity Juniors Factoring in Worst-Case Scenario Rebound Likely Only if Macroeconomic Risks Recede By Elvis Picardo, CFA
T
he outlook for commodities seems to have come full circle in the short span of only four months. In January, we noted in our annual commodity forecast that the outlook for commodities this year was clouded by a rising number of wildcards, such as the prospect of slowing growth in China and the issue of Europe’s sovereign debt. But by the end of the first quarter, after numerous equity indexes had recorded their strongest start in years, we were beginning to question whether we were being unduly cautious in our assessment. Commodities did not participate fully in the firstquarter rally, and their mixed performance led to the CRB Commodity index trading changing little over this period. While gold gained 6.6% in U.S.$ terms and 4.8% in C$ terms, it ended the quarter on a downward trend as hopes faded for yet another round of quantitative easing by the Fed. Global growth proxies such as copper and crude oil turned in a strong performance, up more than 11% and about 5% respectively in the quarter.
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That optimism has faded steadily in recent weeks, as familiar concerns about global growth have again manifested themselves. As a result, the TSX index has underperformed significantly so far this year, weighed down by its 45% weighting in energy and commodities. The biggest impact, though, has been felt by the TSX-Venture exchange. As of May 9, the TSX was down 2.3% for the year, underperforming the S&P 500 by 10 percentage points over this period. The TSX-Venture index has fared worse than its senior counterpart, with a decline of 9.4%. But it is only in looking at the numbers over the past one year that the real damage becomes apparent. Over the past year, while the TSX Composite is down 14.6%, the TSX-Venture index has plunged 36.5%, a performance that is even worse than the nations at the centre of the storm in Europe. The Milan bourse in Italy, for instance, has plummeted 36.4% YTD, while Spain’s IBEX-35 has lost 34.5%. It does seem more than a trifle ironic that a market as geographically and financially distant from the European bourses as the Vancouver-based TSX-Venture exchange should be so disproportionately affected by rising macroeconomic risk.
Summer 2012 | Planning for Profits | Report on Mining 11
The problem is that the wildcard risks we had identified at the beginning of this year are presently being perceived as real threats to global growth, which in turn has led to diminished appetite for perceived risky assets such as commodities and related equities. In fact, this marks the third straight year that the issue of Europe and its sovereign debt has roiled markets in the month of May. Unexpected results this week from national elections held by two key European Union (E.U.) nations underscore the fragility of the European situation. Firstly, socialist Francois Hollande prevailed over Nicolas Sarkozy in France. Secondly, a political impasse developed in Greece after the elections resulted in a parliament divided on the subject of implementing austerity measures that are needed to qualify for bailout funds.
“Greece, then, could be the first nation to leave the E.U....” The ushering in of a socialist government in France—one of the two lynchpins of the European Union along with Germany—by itself is enough to question where the E.U. / euro goes from here. But couple that with an outright revolt against austerity by Greek voters, and it is no surprise that markets are bracing themselves for the fact that what was once unthinkable may now become inevitable. Until very recently, top E.U. officials had stuck to their guns in maintaining that, come what may, the E.U. would remain intact and the euro would hold sway as the only currency for its constituents. In fact, European treaties have no provision for a country to leave or be ejected from the euro-zone. A study in December 2009 by the European Central Bank’s legal department attributed the probability of such an event to be close to zero. Greece, then, could be the first nation to leave the E.U., if the party that eventually forms the Greek government abandons the austerity measures demanded by European lenders in exchange for bailout funds. This would force the nation out of the E.U., which would necessitate the re-adoption by Greece of the Greek drachma in place of the euro. The problem is that a Greek exit from the E.U., by virtue of being without precedent, is quite likely to be what is labelled—in somewhat understated terms—as a “disorderly” event. The chief risk in this case is that other embattled E.U. nations will also be expected to fall like dominoes, putting the very survival of the euro at risk. Already, spreads on bonds of countries perceived as being the most at risk, such as Spain and Italy, have widened quite significantly.
The International Monetary Fund, in its April edition of the World Economic Outlook, had identified an escalation of the euro-area crisis as the biggest risk to global growth. The IMF had actually struck a somewhat cautiously optimistic note in its report, saying that improved economic activity in the second half of 2011 and better policies in the euro area in response to the deepening crisis had reduced the threat of a sharp global slowdown. It had raised its 2012 growth estimate for the global economy by 0.2 percentage points from its January forecast to 3.5%, with the growth pace increasing to 4.0% in 2013. While Europe is again front and centre, the specter of a potential slowdown in China is another issue that has taken a toll on commodity prices. The Chinese economy expanded at an 8.1% annualized rate in Q1, the slowest growth pace in almost three years. But economists remain confident that the Chinese government will be able to engineer a soft landing, with some expecting the economy to bottom out in the next quarter or two and rebound later this year. Should the Chinese economy rebound, the impact on commodity prices would be obviously positive. The IMF forecasts China to grow at an 8.2% annual rate this year, which it says is consistent with continued robust— if less buoyant—Chinese demand for a broad range of commodities, as long as it does not enter another period of destocking. But judging by almost any metric, it appears that commodity juniors have commenced factoring in a worstcase scenario, one of a sharp slowdown in global growth precipitated by escalating tumult in Europe and a hard landing in China. The numbers tell the story.
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As of April 30, total financings on the TSX-Venture exchange had plunged by 51.7% for the first four months of the year, compared with the year-earlier period, to $2.24 billion. IPO financings had plummeted by 60.7% to $43.9 million, with secondary financings down 45.2% to $727.8 million and supplemental financings down 54.1% to $1.47 billion. The appetite for commodities is presently so jaded that even gold—that seemingly shining beacon of positive performance—has lost some of its luster. Gold seems to have lost some of its safe-haven appeal, trading lower in line with copper (a reliable proxy for risk appetite) in recent weeks (Figure 1). While the precious metal is up less than 2% in U.S.$ terms and virtually unchanged in C$ terms so far this year, gold producers have been sold off disproportionately, with the TSX Global Gold Sector index down 19.2% YTD. The carnage has affected large and small producers alike (Figure 2), as investors penalize the entire group for a plethora of negative factors, including earnings disappointments, spiraling costs, lower grades and rising political risk. Figure 1: Spot Gold and Copper (1st month futures – May 2007 to May 2012 (Weekly)
Figure 2: Spot Gold (C$) vs. TSX Global Gold Index & BMO Junior Gold ETF – May 2007 to May 2012 (Weekly)
In our opinion, while valuations on a number of commodity stocks are very attractive, a rebound in the commodity sector is likely only if macroeconomic risks recede. An increase in mergers and acquisition activity in the sector, if it occurs, would be an early signal of a potential rebound. Overall, we continue to believe there is compelling opportunity in select commodity producers for patient investors with a long-term investment horizon. While additional downside for commodity stocks remains a possibility, this is more than offset by the prospects of substantial upside if the worst-case scenario does not come to pass. Elvis Picardo is Vice President-Research, and a strategist & analyst at Global Securities Corporation in Vancouver. The opinions expressed herein are his own. All charts sourced from Bloomberg.
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Summer 2012 | Planning for Profits | Report on Mining 13
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V
A
urvista Gold Corporation is a junior gold exploration and development company. Aurvista’s principal asset is the wholly-owned Douay Gold Project located in the northern Abitibi region of Quebec. The Douay project consists of 218 contiguous claims totalling approximately 114 square kilometres located on the Casa Berardi Fault containing a NI 43-101 compliant Mineral Resource of 42.6 million tonnes at 1.29 g/t gold (1.8 million ounces of gold) in the Inferred category and 905,000 tonnes at 1.7 g/t gold (49,000 ounces of gold) in the Measured and Indicated category, at a cut-off of 0.7 g/t gold. In addition to this Resource, the Douay West deposit hosts Measured and Indicated Mineral Resources of 313,000 tonnes at 7.75 g/t gold (77,992 ounces of gold) and an Inferred Resource of 267,000 tonnes at 8.53 g/t gold (73,187 ounces of gold), at a cut-off of 4.0 g/t gold. Aurvista Gold’s Douay Gold project is located along the Abitibi Greenstone Belt, which is considered the second most prolific gold region in the world. Quebec has maintained its standing as a top mining jurisdiction due to government policies ensuring investments into its commodities sector, an immediate example being Plan Nord.
14 Planning for Profits | Report on Mining | Summer 2012
“Particularly when there is volatility in the markets, it is much better for mining companies to be located in a stable mining jurisdiction and Aurvista Gold has done this by owning the largest undeveloped project in the mining friendly jurisdiction of Quebec,” stated Rick Adams, President and CEO of Aurvista Gold. The Douay West project is also located amongst significant operations, being approximately 150 kilometres north of Osisko’s Malartic mine, 80 kilometres east of the Detour Lake mine and is on trend with Aurizon’s Casa Berardi mine. Aurvista has just completed its most recent drill program in the first quarter of 2012 and plans to issue a revised NI 43-101 Technical Report with an updated mineral resources estimate at the end of the second quarter of 2012. This updated resource estimate will include the results from the 20102011 and 2011-2012 drilling programs, incorporating 89 diamond drill holes totalling 33,845 metres. In addition, the program includes re-assaying old core which was originally assayed for high grade only. The revised Technical Report will also use a lower cut-off grade competitive with neighbouring mineral deposits, and will envision the bulk tonnage potential of the property. www.facebook.com/reportonmining
Aurvista Gold maintains a seasoned management team in Toronto, as well as an experienced exploration and technical team in Quebec. Richard Adams is the President and CEO of Aurvista Gold and is a Mining Engineer with an MBA from Queens University. Mr. Adams has 25 years of global mining experience, and was previously a founder of Castle Gold, which later sold to Argonaut Gold for $110 million. The V.P. Exploration on the project is Jean Lafleur. Mr. Lafleur is an exploration geologist with over 20 years of experience with major mining companies. Aurvista Gold also maintains a strong backing from its Board of Directors. Gerald McCarvill, on the Board of Directors of Aurvista Gold, was a founder of Desert Sun Mining which was later sold to Yamana Gold for $700 million. Mr. McCarvill was also a founder of Consolidated Thompson Iron Mines Ltd, which was sold to Cliffs for $4.9 billion.
The Hon. Brian Tobin is also a Director of Aurvista Gold, and Mr. Tobin was previously the Chairman and CEO of Consolidated Thompson Iron Mines Ltd. Mr. Tobin was also the former Premier of Newfoundland and Labrador as well as a high profile Cabinet Minister under Prime Minister Jean Chrétien. Aurvista Gold has a current resource at the Douay Project of approximately 2 million ounces and a market capitalization of approximately 12 million dollars (as of Q1 2012). The revised resource estimate to be released in the second quarter of 2012 should show continued growth in Aurvista Gold’s resource. Unlike elsewhere in the world, where super pits have been developed, there has been no historic mining on the Douay project and the high grade portion remains intact. “The Douay project not only maintains the high grade portions of the resource but it is also the largest undeveloped gold project in Quebec, and we will continue to grow these resources” states Richard Adams. For additional information please go to aurvistagold. com, and for additional securities related data please go to sedar.com. The company trades on the TSXV under the symbol AVA. Aurvista Gold Corporation 4 King Street West, Suite 1500 Toronto, ON, Canada M5H 1B6 Phone: 1.416.682.2674 mkneeshaw@aurvistagold.com www.aurvistagold.com TSXV: AVA Year Hi/Low: $0.80/$0.17
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Summer 2012 | Planning for Profits | Report on Mining 15
Metals Economics Group Pipeline Activity Index, May 2012 Initial Resources Remain Strong But Drilling Activity Stalls
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alifax, Nova Scotia — Metals Economics Group (MEG) Pipeline Activity Index (PAI) reached its highest 2012 level in March before declining again in April on lower financings and drilling. The number of initial resource announcements continues to be strong in 2012, increasing in both March and April. Drilling activity remains lower than the highs of 2011 as adverse markets continue to make financing very difficult for early-stage explorers. Many junior explorers are reporting sufficient cash on hand to continue work, but some will likely scale back their programs to conserve cash. The industry’s aggregate market cap dropped in March and again in April, after showing good gains in the first two months of 2012. Market caps finished April at an aggregate $1.82 trillion, the lowest total since December 2011.
Although still relatively strong, the number of significant drill results appears to be stalling. Gold drilling has remained flat since peaking in November 2011, while base metals results appear to have settled at levels similar to late 2010-early 2011 after a moderate spike in February. As long as adverse markets continue to make equity funding scarce, particularly for early-stage explorers, drilling activity will likely remain below the highs of late 2011. The number of initial resource announcements in both March and April is easily the bright spot for the period. It is the first time since early 2009 that there were 15 announcements in a single month, and the two-month total of 30 is the highest since July-August 2008. Significant Drill Results Announced, May 2012
MEG Pipeline Activity Index (PAI), May 2012
Source: MEG Industry Monitor; Exploration Activity Services Source: MEG Industry Monitor; MineSearch; Exploration Activity Services.
16 Planning for Profits | Report on Mining | Summer 2012 www.facebook.com/reportonmining
Junior and intermediate companies completed 137 significant financings (U.S. $2 million minimum) in MarchApril for a total of $2.6 billion—up 17% from the previous two-month period. Gold financings remained relatively steady, although the $712 million in debt secured during the period is almost quadruple January-February and is the highest two-month debt total in the Industry Monitor’s four-year history. Debt accounted for three of the four largest gold raisings, including $302 million of senior notes issued by New Gold to repay higher interest debt due in 2017. The almost $800 million raised for base metals is up, but more than half was debt, including $200 million for intermediate copper-producer Capstone Mining. The MEG Pipeline Activity Index (PAI) measures the level and direction of overall activity in the supply pipeline, incorporating significant drill results, initial resource announcements, project development milestones, and significant financings into a single comparable index. The PAI is featured in the MEG Industry Monitor—a series of comprehensive graphs and charts, with related commentary, illustrating MEG›s analysis of monthly changes and emerging trends in the base and precious metals pipelines. www.ReportOnMining.com
Using information only available from MEG through MineSearch, Exploration Activity Services, and Acquisitions Services, the Industry Monitor tracks developments based on announcements over the past 26 months of significant drill results, initial resources, project development milestones, significant financings, and acquisitions. For more information and to purchase the complete MEG Industry Monitor, visit Metals Economics Group’s web site at www.metalseconomics.com About Metals Economics Group (www.metalseconomics.com) Metals Economics Group (MEG) is the most trusted source of global mining information and analysis. We draw on three decades of comprehensive information and analysis, with an unsurpassed level of experience and historical data. To help our clients reach better decisions more quickly, we supply raw data and sophisticated analysis based on unbiased research and reporting. From worldwide exploration, development, and production to strategic planning and acquisitions activity—our databases and studies help you make confident decisions and, ultimately, improve results. Contact: Nadine Tanner, Director, Marketing, Metals Economics Group, Suite 300, 1718 Argyle St., Halifax, Nova Scotia, Canada B3J 3N6. T: 902.429.2880; F: 902.429.6593; ntanner@metalseconomics.com
Summer 2012 | Planning for Profits | Report on Mining 17
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hese days, management teams are finding it increasingly difficult to build shareholder value. Nervous investors just aren’t providing the respect that many projects deserve. But if you have a well-funded treasury, a tight corporate structure, a strong balanced management team, superlative drill results and a large helping of good luck, the market should pay attention. Just ask GTA Resources. GTA Resources and Mining Inc. (GTA on TSXV), based in Burlington, Ontario, has been able to create shareholder value through its Northshore Property east of Thunder Bay, Ontario and west of Hemlo. The Northshore Property consists of five patented and two unpatented claims covering 332 hectares, situated in fractured felsic intrusive rocks in the Hemlo-Schreiber Greenstone belt. It has affinities to the Achaean aged gold deposits of the Kirkland Lake and Timmins camps. From 1935 to 1937, the Northshore Gold Mine produced 2,411 ounces of gold at a recovered gold grade of a bit over 21 g/t Au. In 1992, Noranda calculated a preliminary reserve for Northshore’s “Afric Zone” (about 700 metres south of the Northshore Gold Mine) of 2 million tonnes with an average grade of 2.2 grams per tonne, for approximately 135,000 ounces of contained gold between surface and 150 metres vertical depth. (This was a historical estimate for part of the Afric Zone, not in compliance with current NI 43-101 standards). GTA optioned Northshore from Balmoral Resources Ltd. in 2011. The July, 2011 assay results from GTA’s due diligence review indicated high-grade gold mineralization ranging from 19.70 g/t gold (0.575 oz/t ) to a high of 7520.91 g/t gold (219.42 oz/t), with an attention-grabbing consistency across the samples. As CEO Peter M. Clausi said at the time, “The results of GTA’s technical due diligence review, in conjunction with the historical exploration data, point to the high-grade gold potential of the Northshore Property.” The assay results from surface samples, released in November 2011, again showed strong mineralization and consistency. Values ranged from 1.1 g/t Au to 798.82 g/t Au, with over half the samples returning greater than 25 g/t Au. 18 Planning for Profits | Report on Mining | Summer 2012
GTA’s VP of Exploration, Robert Duess, is a well-known geologist with a string of gold successes behind him. After much thought and analysis, in October, 2011 Duess executed a low cost 1035-metre exploration program designed to test the continuity of the mineralization in the Afric Zone. The results from this program came out on February 14, 2012, and a Happy Valentine’s Day it was for GTA’s shareholders. While every hole showed mineralization, many investors focussed on WB-11-11 which graded 3.21 g/t Au over 150 metres with a bonanza grade interval of 760 g/t over .3 metres.
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At that time, GTA had a very tight capital structure with only 14,000,000 shares outstanding. Roughly 8.5 million of them traded that day! Investor demand for its shares caused the price to spike roughly 800%, hitting an all-time high of $2.00. The market recognized the value being created at Northshore. GTA’s management team has considerable experience in investment banking and financing. This experience allowed CFO Brian Crawford to quickly negotiate for and close on over $6 million in new capital in March, 2012, empowering Duess and his technical team to return on-site to put some of that capital to work. While some might expect a let-down in the share price, the GTA team has efficiently sustained the value it has created. On April 18, 2012, GTA announced the results from Holes WB-12-13 and WB-12-14. Hole 13 was spotted roughly 80 metres northeast of the Caly outcropping. Intended to test the lateral strike extent of the Afric Zone, this hole returned a broad intersection of 0.77 g/t gold over 80 metres, including a high grade section of 4.27 g/t Au over a core length of 8 metres. Hole 14 created value in several ways. It intersected the Audney Vein at a true depth of roughly 170 metres, and intersected the higher grade Caly Vein nearer to surface. This returned an average grade of 3.15 g/t gold over 81.5 metres, including 7.82 g/t gold over a core length of 12.0 metres.
Hole 14 returned an average grade of 1.41 g/t gold (uncapped) over a core length of 240 metres. From a shareholder perspective, this hole was important as it extended the lateral and vertical extent of the Afric Zone, and showed the continuity of the high grade Caly and Audney Vein Systems. A recent NI 43-101 compliant technical report called for further work on Northshore, totalling some $1,600,000. An all-in drill cost of just over $200 per metre should leave GTA with approximately $4,000,000 in its treasury after the next phase of exploration is completed. Getting the respect you deserve is difficult at the best of times, and we all know these aren’t the best of times. GTA has been lucky enough able to pull together a balanced team, a strong balance sheet, a tight corporate structure and a high-quality low-cost property to create real value for its shareholders. GTA Resources and Mining Inc. 855 Brant Street Burlington, ON, Canada L7R 2J6 Phone: 1.289.288.3255 pclausi@gtaresources.com www.gtaresources.com TSXV: GTA Year Hi/Low: $2.00/$0.13
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Summer 2012 | Planning for Profits | Report on Mining 19
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