Animas Update & The Last Mining Stock Opportunity of 2008
Animas Resources (ANI – ANIMF) Update &
The 2nd (and last) Great Mining Stock Buying
Mining & Natural Resource Insights #4
Two weeks ago, (from left to right below) large shareholder, Jeff Phillips, mining web maven, Bob Moriarity of 321Gold.com, yours truly, Animas director, Mark Brown and Animas CEO, Greg McKelvey toured part of Animas’ huge Santa Teresa Gold District in the Sonora desert near Magdalena, Mexico.
Here are the five happy Animas shareholders at dinner in
In 1982, Doug Casey and I re-published the Norman Lamb classic, Small Fortunes in Penny Mining Stocks in time to catch the huge gold and silver mining stock bull market boom, which occurred after gold and silver peaked in 1980/1. Even if you believe that precious metals topped for years to come in 2007, the stocks should resume strong up-trends soon. In fact, this scenario has repeated more than once since 1980. (If you want to prepare for the profit explosion in another, coming boom you might want to read my Nanotech Fortunes!) Be sure to see below where we cover the 2nd great mining stock opportunity of 2008, which is upon us, now. Remember, to receive Mining Insights regularly and receive timely updates on where to place stop loss orders and when to take profits, please send a note to darrell@resourcedevelopment.com)
While I had studied many reports on the mines and prospects on the now roughly 200 sq mile lands two years ago, helping my friend pick a major project for his early stage company (see my initial recommendation of Animas in February, along with my bona fides), this was my first trip there to kick the dirt. The first drilling on the properties in years is now progressing and we were able to view the #3-hole clean-up and logging. (Greg, Mark and Jeff look on below)
As you know from our quick update, sped out to you on our immediate return, I was much more than impressed, and urged you to pick up shares immediately.
The core from this hole (Even rich ores in this area do not yield visible gold; Bob, Greg and Mark examine with jeweler’s loops. I also found the pitch-black material studded with pyrite over 20 meters, down where they’re looking, to be particularly interesting) can be seen below.
Greg is the penultimate junior gold mining geologist and executive. At home in major companies or meeting daily junior public company demands, he leads the rest of the extraordinary team (see our recommendation link above or http://www.animasresources.com/s/Management.asp). Careful not to mislead or over-promise in any way, he could not disguise his joy and excitement in leading the development phase of a district that by his own admission “they will probably still be drilling decades from now”.
Before it is sent to the assay lab, the core is meticulously split to ensure the ability to re-check the grade of any section, and there is aggressive, detailed maintenance of physical control and accountability of all of the rock, including measurements of length and depth from surface of each intersection. Even the driller has high-tech tools to determine the exact angle of the hole through the earth after the core has been pulled, as that angle can vary from the planned angle for any number of reasons beyond the control of the driller.
Please note the stark differences in the “look” of the rock above from almost one intercept tray to the next. For me, this indicates the radical forces of super-intense heat, steam, pressure and explosive energy that geology perpetrated on this ground, probably multiple times, through an extraordinary geologic history.
I don’t remember the last time I saw anything like this. Again, while I can’t guarantee there is economic gold in this particular core, I can guarantee there is plenty of gold throughout Santa Teresa (we have the surface, soil and chip sample data over huge areas to prove it, as well as the un-mined gold from at least 5 open pit mines that I saw that day).
Here’s a picture of some workers splitting core next to the main administration building. That’s rock being cut with a diamond saw.
Jeff “warned” me that super-sharp VP Exploration, John Wilson was the most “negative” (read: down-to-earth, realistic) member of the team. At the end of the day, I had to disagree. Here’s my take: Some market participants have unrealistically high hopes for the first 4500 meters of drilling (the next 5500 meters should start in August or September), John, Greg and company advisors have some ideas to test with these holes that could dramatically alter how the company and the property are currently viewed. While they could, if born out, multiply by many times the potential of the ground (most knowledgeable observers would probably grant the company somewhere about 1 million ounces currently with the potential to double or triple that). In the 5 previous open-pits, vast stretches of gently rolling land with exceptional, persistent surface anomalous gold, large geochem, strong IP and magnetometer readings and significant alteration maps I saw, I believe there are multiple multi-million ounce targets on the property . . . and we didn’t even step onto the 12 square mile section that Animas believes holds the richest promise!
How big could it be? Greg and John confirmed what I had told my friend 2 years ago. The alteration at Santa Teresa covers a larger area than any of us had seen at any other property. Gold has been literally shot through almost every rock type, at practically every depth from surface, over a huge part of the district (and real depth has never been tested though it is more than highly prospective). It is at least the second best project I have ever seen at its stage of development. What was #1? . . . The Carlin District in 1982, which has produced well over 50 million ounces of gold and still has multi-million ounce, oxide discoveries at surface.
Here’s a view of some typical hilly topography in the area. We were at a couple thousand feet, and mining and development are year-round in this relatively benign climate.
From left: John, Jeff, Bob, Greg and Mark at one of the 5 pits we saw that day.
See below, one of Greg’s pictures at yet another pit. Note the obvious more oxide material on the left and the more sulphide material on the right. Reminder: Previously, none of the sulfide was mined because the oxide was easy and the metallurgy/recovery questions for the sulfide was neither asked nor answered, even though the sulfide gold ore outcrops in many places, including right in the pits!
Most mining camps run from “liveable” to “disasters”. Animas has remodeled and quite nice admin offices, dorms and document and eating areas. Miles and miles of serviceable mining roads meander through the district.
Here below, we are riding up the road to yet another open pit mine on the property. Remember, these mines produced over 600,000 ounces of gold from near surface oxide material. While there have been 225 previous drill holes . . .few if any went deeper than 300 feet! There was no need; there was/is so much gold near surface. However, Greg and John could not rule out the possibility for giant porphyry deposits at Santa Gertrudis. Many of the markers are there.
Our recommendation (detailed below) is that Animas should be purchased aggressively now, between $1.45 and $1.70 before the first 3-5 drill-hole results are announced in August. If they are at all explosive, the stock will jump above $2.10 quickly and then above $2.75 as the next few holes come later. If they fail to impress, it in no way condemns the project (did I mention this is HUGE property?) and I would strongly speculate that at least a few of the first 10 holes are going to blow people’s minds. More because of what they say about continuity, persistence, depth and expanse than because of necessarily rich, wide intercepts.
This is not a vein or shear system. Gold is “everywhere” over (world-class "large") large areas. “Economic” in Santa Teresa may come to mean many different things over time as many deposit types are discovered. Santa Teresa is near copper (hey, I haven’t even mentioned the 296 sq km Bacanuchi or Shirley Concession that Animas also owns just down the road, which has multiple a major porphyry copper targets) and was originally a tungsten mine, so I would not be surprised if product other than gold is also mined there.
Now, let’s take a look at the 2nd Great Buying
The TSX Venture Exchange Index is at all-time lows (it’s only 2-3 years old) and this milestone is reaching its nadir at the typical seasonal lows for mining shares and gold in mid-July to end of August. The seasonal conforms to real-life factors, not some randomly occurring price cycle. The factors affecting gold price cycles include the Christmas jewelry-buying season, weddings season in
1990-1994 was a peculiarly difficult period for junior mining shares, but I haven’t seen a much worse a period than “now” since 1978 when I began to focus on these types of shares. The washout since the 2007 highs has been devastating, and while the first buying opportunity I identified in 2008 was good relative to the prior two years, with hindsight it’s clear, we would have been a bit better off to wait. But by roughly averaging prices then with prices now, I am convinced we will be shown to have made extraordinary purchases, when others were/are throwing the babies out with the bathwater. My old partner, Rick Rule, used to say, “Feed the geese when they’re quacking.” (meaning: sell stock to buyers when the buyers are clamoring to buy)
Well, they certainly are not quacking now. This is the opposite of a great selling opportunity, and, that is, by definition, a great time to buy.
NOW is the time to complete your investments for the rally in mining shares I see lasting for from 15-40 more months, and starting over the next 6 weeks.
We have seen nothing to dissuade us from our expectation of $1038 gold and $25.11 silver minimums, and, based on our proprietary, pattern-recognition trading methodology, we still expect those prices this calendar year or by end of first quarter 2009, the latest. We still believe $1300+ gold and $31+ silver are possible before this bull market ends. Attendant with that, the TSX Venture Exchange Index would go significantly above its all-time high.
Based on 30 years of professional involvement with precious metals mining shares, we believe the second great buying opportunity for 2008 is upon us and is likely to be the most important opportunity of both the last and future 12 months.
If you are technically sophisticated and want to wait for a bottom to be “in place” before making further acquisitions, you have our blessing (FYI – Our educated guess is that the actual bottom occurred on July 17 or will occur at a slightly lower level before August 10). However, for most of our readers, purchases should be made immediately and certainly before August 20.
(Recommendations assume an approximate $200,000 junior mining share portfolio. Adjust appropriately for the size of your portfolio.)
Reminder: The following portfolio was compiled with the specific goal of out-performing the TSX Venture Exchange Index and other junior mining-related indices over any multi-month timeframe: up or down.
Recommendations for junior mining share portfolio (see below for the current portfolio):
Buy 15,725 more ANI – ANIMF at $1.45 – 1.70 for 26,000 total shares
Buy 11,765 more RES – RRLMF at $0.65 - 0.80 for 23,000 total shares
Buy 0 more ITF – FGOVF for 2,760 total shares
Buy 1,340 more PEZ – PEZFF at $1.30 – 1.60 for 3,000 total shares
Buy 0 more ETG – EGI for 2,225 total shares
Buy 1,780 more CPQ – CPQRF at $3.45 – 3.75 for 3,000 total shares
Buy 0 more SMR – SLVXF for 7,500 total shares
Buy 1,575 SVM - SVMFF at $4.90 - $5.30 for 2,500 total shares
Buy 2,620 CDE at $2.32 – 2.52 for 4,500 total shares
Buy 255 SSO – SSRI at $27.25 – 30.25 for 500 total shares
Buy 875 HL at $7.90 – 8.90 for 1,500 total shares
Buy 505 SLW – SLW at $14.00 – 15.00 for 1,000 total shares
Buy 805 SIL at $4.65 – 5.35 for 1,500 total shares
Buy 878 NGD (was MRB) at $7.25 – 8.00 for 2,400 total shares
Buy 7,500 MDW at $1.75 – 1.95 for 7,500 total shares
Buy 12,000 OK – OKOFF at $1.33 – 1.45 for 12,000 total shares
Buy 15,000 RRI – RVSDF at $0.88 – 1.00 for 15,000 total shares
Buy 10,000 ITH – THM at $1.35 – 1.60 for 10,000 total shares
We have extensive experience in designing out-performing indices or portfolios.
(See our Nanotechnology.com Small Technology Index, which has stood the test of time since February 2006, beating all other nanotech stock indices in up and down markets, while beating ALL newsletter writers and fund managers in that “space” - - - except our own trading! See The Small Tech Prospector Archive and Nanotech Insights – to subscribe to Nanotech Insights just send us a note at darrell@nanotechnology.com . . . . .
Again, to receive Mining Insights regularly and receive timely updates on where to place stop loss orders and when to take profits, please send a note to darrell@resourcedevelopment.com.)
Please note: In September or October, we will send an updated Mining Insights that will include precise stop-loss orders, as well as the profit-taking strategy for each of our stocks. I hope that I will be invited to tour Rare Element’s property in that timeframe and will be able to give you a follow-up to that report as well.
Happy Prospecting!
Darrell Brookstein
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