Nautilus Minerals faces project setbacks

Share |

I scarcely have the time to scan the Canadian market, however there are occasionally those opportunities which just cross by eyes and demand a comment. Nautilus Minerals (TSE.NUS), a mineral explorer listed on the Toronto, London stock exchanges, is seeking to develop subsea exhalative mineral occurrences. These deposits present some unique problems, however the history of engineering development, say to the oil & gas industry, conveys that there need not be such a huge obstacle exploiting these deposits. 

The stock has over the years disappointed enthusiastic investors who have pushed the stock from $6 to just 32c today. This capitalises the company at $76million, which strikes me as a very low value given the potential for these types of deposits. Consider that the stock price has collapsed in more recent times because its JV partner, the PNG government through its investment vehicle has ended the relationship after it spend $70 million for its 30% equity. The implication is that the capitalised value of NUS's retained equity would be something of the order of $180mil. This of course is only a historic cost, and ignores any farm-out advantage. The stock price has found a short-term bottom, and has been selling recently on high-volumes, which gives us confidence. I am very suspicious of the PNG governments termination of this agreement. Given the abundance of corruption in PNG, one is inclined to think that some party of investors is involved in market manipulation, whether:

1. Personal investment gains

2. Strategic stake building

Time will of course tell what is the case. None of this really detracts from the appeal of the investment. The matter has gone to arbitration with the Australian government. I fully expect that some Western Australian  or Chinese company will take a stake in the company. This strikes me as a very good entry. The latest presentation describing the company's activities and mining method. The clear advantage of such mining is that:

1. It does not produce waste - it merely displaces it

2. It recovers only the valuable portion - the waste is the same silt that was deposited, in the same anaerobic environment, so there is no chance for oxidation.

3. It has no apparent impact on the seafloor since there is little aquatic life (at depths below sunlight penetration) at such depths and the areas affected are quite minor in comparison to the vast sea floor. 

4. There is no extensive impact to existing land uses, i.e. The impact on fishing would be minor. Even sediment 'siltation' can be reduced by dispensing at deeper levels (below fishing trawlers).

The company has outlined a resource at Solwara 1 & 12 of 3 million tonnes grading 7.8% copper , 5.5g/t gold (some silver & zinc). This is very high grade ore. The company is backed by a number of industry majors is there is no shortage of funding. The company is well-cashed up with $90mil in the bank. 

Salwara in the New Britain area of PNG is the most advanced project, however the company is also assessing another far larger, lower-grade, nickel, cobalt, rare earth deposit in the waters of Tonga.  

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Marengo Mining (MGO.ASX) - trading out

Share |

Yesterday I took short term trading profits on Marengo Mining (MGO.ASX). I traded into Global Mining (GBE.ASX), which is currently striking low-term or all-time lows, and thus made a compelling entry. Looking at the chart for Marengo Mining, this stock appears to be going back to 9-10c support. This will probably happen in association with an issue; but I can't recall their cash position. The long term chart offers no short term clues of course; but it does show that we are looking at a lot of lateral consolidation before this stock breaks out. This is of course consistent with the VERY long development lead time. Let's not forget that this project is in PNG, and that exploration costs are high. I recall City Resources in the 1980s being absorbed by other interests because of the huge cash drain of its PNG interests. 

This company it at least more focused. The problem is that it found the most lucrative exploration area - highest grades after outlining the main ore zone. A great stock to trade though off that 9-10c support....though those trades will get commensurately smaller as that 'wedge' close out. 

Note the stock is struggling to achieve pass its moving average; and 15c is an important resistance.

Not a bad return for a fortnight stake - 12.5c to 14c. What's that 20%?

This is also an industrial stock and we are in a recession. Copper is an appealing commodity however.

Japan Foreclosed Guide Profiting from the Gold Boom

Mining Fundamentals eBook

Author Andrew Sheldon| 

Applied Critical Thinking | www.SheldonThinks.com

Niobum in size; global in opportunity. Yeh baby!!

Share |

Today I purchased another 100K of Global Metals & Mining (GBE.ASX) at 6.9c. This stock is cashed up with some $26mil in cash; and yet the company has a market capitalisation of $15million, a world-class niobium resource, banking by a Chinese state enterprise, and a number of other interesting projects. Better news still!!!!!

1. They are at a technical support level which stretches back to early 2009 - that will be a very strong support; which means that it was always going to be reached. 

2. There is still some stock left at 7c - well just 40K units. Well, sorry guys. You really ought to get on my mailing list. 

Niobium is a very important or strategic commodity. You might already know about the commodities that the West wants but China dominates - like rare earths, tungsten and nickel. Well, there is a government more paranoid than the USA, Japan, Korea and EU, and that's the Russians and Chinese!!! Oh, I forgot about the crazy North Korean dictator....but they don't count. So basically, this project is important to the Chinese. Would I expect a takeover? No, because they will acquire their control over the project product marketing by funding everything. Which means GBE will dilute to a passive, minor stake in the project; but this will give them a very appealing cashflow of $15-25mil per annum I suggest, and it will still retain its cash for exploring its other projects. This investment strikes me as a 'no-brainer'. Its not enough to have cash; it needs to be adding value, and here it surely is. They also have a rare earth and gold project if I'm not mistaken.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Stock list - at current date

Share |

I have a number of stocks at the moment:

1. Union Resources (UCL.ASX) - This both has short term and long term potential. I see a financial deal here which will see the phosphate project floated off into a new AIM listing given the world-class standing of this project. This would take the development off balance sheet. I see Union searching for another project whilst it waits for some developments in Iran....even if that requires regime change. 

2. Marengo Mining (MGO.ASX) - This company is developing a major copper-Molybdenum project in PNG with some gold. This project is huge in scope; it has an appealing overburden ratio, only improved by the recent discovery of high grade ore. This is a longer term project, but its market entry will be well-timed. This company is currently capitalised at $153mil; with scalar potential to a large earnings stream.

3. Millenium Minerals (MOY.ASX) - This company has just commenced gold production; and recently had a $8mil issue in order to fund working capital and exploration. This company offers short-medium term upside from drilling results, earnings re-rating and a higher gold price.

4. Gippsland Minerals (GIP.ASX) - This company has an advanced tin-tantalum project, bank syndicate, immense upside given the appeal of smartphones and the like. Egypt as a project host is settling down, so I think we can expect some upside here. 

All of these companies are well set to move forward. I also have some Globe Minerals (GBE.ASX), which is a longer-term proposition. Not concerned because it sits on a wad of cash ($25mil), has a world-class niobium project, underwritten by the Chinese, who are seeking an alternative to the Argentinian company which controls about 80% of global supply. I think Gippsland and Union Resources are listed in Frankfurt; Marengo is listed in Canada.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Marengo Mining (MGO) - progressing

Share |

Marengo Mining (MGO.ASX) is a stock which has a world-class project in PNG. It has a lot of appeal for numerous reasons:

1. Immense resource - low grade, but its huge size and high grade zones give it appeal, scale and leverage. The discovery of the high grade zone is relatively recent. It would be nice if it comes at the front-end of the project, as was the case with the Porgera mine.

2. Institutional backing - the share register is dominated by some major institutions. These include the Sentinel Investment Fund, George Soros, et al.

3. Financial backing - the company has the support of Non-Ferrous China (NFC), a Chinese state-owned enterprise, which comes with bank financing, and probably equity participation for project finance

4. PNG government participation - This includes the reimbursement of Marengo for their $100mil expenditure before they earn 30% equity, i.e. MGO can expect $30mil back form the government I believe. Perhaps PNG govt has 10% free-carried, so it might only be $20mil. 

5. Cash backing of $25mil, say $5mil to finish the feasibility study; that means with PNG reimbursement, they have $45mil to contribute towards a project cost which I guess is around $2 billion. The implication of course is that there is going to be major dilution, with either NFC or institutions coughing up a lot of equity. But I dare say, not before a substantial rise in the share price.

6. Metal output: The mine will product a product stream comprising copper, molybdenum and gold; so the project start-up is commensurate with a turn-around in economic activity. The proposed project is 25Mtpa of ore throughput, doubling to 50Mtpa in time.

There are of course obstacles like the long development lead-time. i.e. The project is scheduled to start production in 2016. You can view a company presentation here; though I would keep watching the company website for an update on these high-grade zones. The Omora Zone is a separate and distinct target close to the existing orebody. This zone can be expected to mined early, and it will thus greatly enhance the commercial viability - since intersections of 165 metres @1.08% copper & 381ppm Molybdenum are more than double the grade of the primary ore zones.

There is no doubt that there will be some excitement with this company upon completion of the feasibility study. I expect this stock to rise to 27-30c, before some profit-taking and selling-back, because its a long development lead-time. So there is scope for a trade now.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Union Resources - best bet in bad market

Share |

Looking for some short-term upside as well as some long-term serious upside? Look no further than Union Resources (UCL.ASX). For an update of its fortunes look to the latest quarterly report. But let me summarise:

1. The company has a 45% stake in one of the largest and easily accessible phosphates in the world; well-positioned to supply South American and European markets, if not Africa, where increasingly food production is important. The deposit has resources to last over 100 years; its a world-class resource which can be extracted using offshore dredging; the same technology used to recover diamonds. The difference is - the grade is 19% phosphate, not 0.2 carats per tonne. The resource is not fully-appraised, however 25-years mine-life is good enough for any commercial consideration. Its important because there is scalability.

2. Marawid Mining, a subsidiary of an Oman state-owned engineering enterprise, has acquired a 19% stake in UCL, as well as buying out Minemakers Ltd's stake in the Namibian offshore phosphate deposit for $25mil. That values UCL at twice its current valuation...that's the short term upside. The current AGM announcement suggests there is scope for more capital raising and a placement to Marawid Mining.

3. UCL has a long-standing 34% stake in one of the largest undeveloped zinc-lead deposits in the world. The problem is that the project is in Iran; and the state-enterprise is not recognising its equity-contractual interest. It looks like nationalisation or corruption; but no one is calling it as much. Iran is of course a target for political reform, regime change, or otherwise. That project interest must be worth $350-500mil; which is further upside to UCL, given its uncertain stake. Fortunately, given the promising Namibian project, and the likelihood of a deal over that, this is a 'no-brainer' investment. I frankly am wondering why the market is not responding. 

In the next few weeks I was expecting the following to occur....maybe it still will in the light of the recent appointment of a Marawid(?) director and placement. I have no inside information; but I would have thought that the companies would seek for:

1. Marawid Mining to become the London-based investment vehicle for the Namibian offshore phosphate deposit

2. Union Resources would sell its stake in the phosphate project to Marawid in exchange for equity in that company.

3. Marawid Mining I expected to seek a listing on the Alternative Investment Market (AIM) in London, and raise equity in the project. This should attract a lot of investment attention, and being based in London, it will be a precursor to a London capital raising to advance the project.

4. Eventually we might expect the company to be taken over in some fertiliser market rationalisation/ consolidation

5. I suspect that Union Resources will continue to exist with its Iran project, its passive stake in Marawid Mining, and I suspect it will probably go after more exploration targets.

That is what my crystal ball was saying; but now I'm inclined to think that the companies are taking some other course. Its possible that Union simply needs the case, and Marwid Mining hopes to convert its equity in Union into greater control of both Union and the phosphate mine. Well, the stock I believe has fallen to support, so I will top up a little at 13c. 

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Non-gold stocks which will do well

Share |

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

This is a fitting week for some market action - since its my birthday!! - Celebrated with 3 of my stocks making positive announcements. These are:
1. Union Resources (UCL.ASX) - Its JV partner in the Mossbecker phosphate deposit, Minemakers (ASX.MAK) sold its share in the mine for $25mil to UCL's major shareholder (a third party interest). This values the UCL stake at 34c/share, compared to their current share price of 16c. Of course the Oman engineering company would not make this investment unless they thought the project was worth more. This stock has not really moved yet, but we note that the Oman state engineering firm is already a 19% shareholder in Union Resources. Might we expect a takeover of UCL? There is good reason of course to expect as much since UCL also holds a 34% interest in an Iranian project, at a time when Iran is under sanctions for its nuclear escalations, its President is hugely unpopular, and the civil unrest in the Arab world has already precipitated conflict. Rest assured that next time the US will help the Iranians if they flare up again. Fortunately I believe the shareholders alligned with the management of UCL will ensure a reasonable bid to reflect the value of the Iranian Mediabhad zinc-lead project, the latest undeveloped project of its type.
2. Global Metals & Mining (ASX:GBE) - This company has just had some very appealing deeper drilling suggesting wider ore zones at depth. This company is cashed up ($25mil), and with its Chinese banking, its an appealing and strategic investment. Note that the company is trading at its cash backing...though that will disappear as they spend $5-7mil on a feasibility study. Maybe cheaper since they will probably do the metallurgy through China. Even the feasibility study might be done in China because it will likely be Chinese financing. The problem of course is that this project is still 2 years off from production.
2. Gippsland Ltd (ASX:GIP) - This company has a large-scale tantalum-tin project in Egypt (50% equity share with govt). The company has just secured finance from 4 Egyptian banks, which will allow this project to progress. Not the best commodity market, but both tin and tantalum prices are buoyant. This project is probably 1yr off production, though mine overburden removal can start earlier. Of course it will need a capital raising. 

Union Resource - deal doubles share price value

Share |

Months ago I bought a stock called Union Resources at 15c. The company has been languishing at 13-15c recently....that was until today when the company announced that a British company had acquired a 47% interest in the Sandpipers offshore Namibian phosphate deposit for $25mil. Maybe this is a shelf company for Omanian state enterprise...not sure. This values Union Resources' (UCL.ASX) stake at the same $25mil, implying UCL is about half its current value. In a better market, you might even place a higher value. You would expect the buyer to have adopted a 'forward-looking' valuation for their stake, so this augers well for UCL, which also is trying to retain its 34% stake in the Mehiabhbad zinc-lead project in Iran....one of the largest undeveloped deposits.
We can expect some further developments with this project....will UCL stay in the project? This is a world class project. The question is whether the company has other projects on its radar.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

A few emergent gold miners

Share |

The question arises as to where to find value in the gold market. Many of the largest companies are over-priced, so the question arises as to where to find value. I have several suggestions:

1. Ampella Mining (AMX.ASX) - This is an emerging gold miner in Africa.

2. Red 5 Ltd (RED.ASX) - This is one of my old favourite stocks. Finally Red is reaching a point of production after a lot of consternation with the enforceability of the mining code in the Philippines. Local opponents of mining projects in the Philippines have been using local governments to block mining. The national government has since enacted a law to ensure local law must be compatible with national law. You might be a brave person to believe that this will be the end of the issue though. RED might however factor into your investment portfolio.

3. North West Resources (NWR.ASX) - This company has struggled in the broader market for three reasons. The small resource base of just 380,000oz, the long exploration-development lead time. i.e. They have taken 10 years to prove up a small resource (i.e. suffered from a lack of market appeal, due largely to vertical ore trend) and market illiquidity. The company has however released a pre-feasibility study suggesting a NPV of $200mil from 4-5 year mine-life compared to a current market value of $21mil. The implication is that, if we allow for a $40mil development cost, they will need about a 1:1 issue to fund development. That gives a market value of $40mil, and we might also expect gold prices to rally, so giving at least a 5x upside. There is also upside from drilling ore deep extensions of ore zones. If we appreciate that this means $5mil/year off earnings, we might decide to discount future resources. Having said that, it makes more sense to drill these zones later, from development headings. Clearly some market pundits are taking to this stock, or is it the company executives, because suddenly there are buyers, and sellers being taken out. There is no question there is value here.....and a capital raising.

Wish I had more mining stocks to recommend but I'm not actively researching at the moment. If anyone has any stocks they want me to look at; by all means do so. Just Australian (ASX) market thanks.

PS: As it turned out sellers dumped on NWR...perhaps someone is acquiring a position or some shareholders are dumping before a forthcoming issue.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Stocks to watch in Australian mining

Share |

Other appealing stocks at the moment are:

1. Global Metals & Mining (GBE.ASX): This company has an advanced niobium project in Africa. Niobium is used as a steel additive, and can be a substitute for tantalum in cell phone capacitors. The company has a market capitalisation of $24mil (223mil shares on issue), and yet it has $35mil in cash. It has just secured a credit facility from a Chinese bank to fund the niobium project, it has a share-buyback strategy in place, and its getting some exciting drilling results for graphite (5-10% graphite is ok grade) and rare earths/fluorite in other projects. The company is seeking a listing on the Toronto exchange in order to raise its profile. That's smart. Buyback shares in Australia, raise more money at higher prices in Australia.
2. Union Resources (UCL.ASX) - The company has a 45% share in an offshore phosphate resource in Namibia. Its JV partner failed to takeover UCL, and now UCL is undertaking a takeover of Minemakers (MAK.ASX). Personally, I would prefer not to see UCL add a premium for MAK's Queensland phosphate resource because its located in an isolated region. The best course of action would be a in-species listing of their respective Namibian phosphate asset, or better still a buy-in by a major investor. This latter option strikes me as the most likely prospect. UCL has the best looking balance sheet; most particularly because it retains any upside from the Iranian Mehiabhad lead-zinc project, which has immense value...if they are able to avoid nationalisation by the Iranian government. This project probably has a NPV of $300-500mil, depending on the scale of the project and prices. The implication is that UCL is well-positioned. It has cash reserves of $2.8mil and 95mil shares in issue at 16c. This company is likely to be a long-life phosphate producer. Expect a takeover or scheme of arrangement to greatly add value to UCL, and MAK as well. 
3. Metals Ex Ltd (MLX.ASX): This is a company that I have liked for some time, particularly for its nickel exposure. Tin prices buoyant, so its appealing that this company produces 2.5% of the world's tin supply, and is expanding production and reducing costs. Fortunately a tight tin market heralds well for this project, however one must acknowledge that the profit margins are thin, and the global resource grade of 0.8% is way below the current mining grade of 1.48%Sn. The more significant issue is the prospect of developing its nickel project, one of the largest undeveloped nickel resources in the world. Nickel is an important alloy in stainless steel, and given the huge market for stainless steel, as well as the life of building facades, expect this to underpin projects like this. I expect this company to make substantial returns from its nickel project. The company is in the process of merging with Westgold, which has the potential to contribute 200,000oz/year of gold production. MLX also has $105mil of investments and cash. I'm expecting a recovery in gold prices due to the very low interest rate environment and perhaps modest inflation.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Union Resources-Minemakers phosphate tussle

Share |

There is a stalemate in the case of the Union Resources and Minemaker takeover bids for each other. Clearly the problem is that both companies want to progress the Namibian offshore phosphate project, but neither will willing to concede each others valuation. I personally find Minemaker's Wonorah phosphate deposit to be not very valuable because its a large resource in a remote location. Why would a Union Resource shareholder want to dilute their equity with that project, when there is a perfectly located offshore project in Namibia easily beneficiated. It gets better for Union Resources shareholders because an Omanese state engineering company has acquired a 19.9% stake in the company, which means that UCL shareholders will have a better change of getting value from a successful bid. If you read the background Target statement of Minemakers, MAK have no shareholder to give shareholders a blocking state. They don't have the cash for a cash bid, so I think there bid will fall empty. At least UCL shareholders can expect more equity value from their Omanese shareholder. 

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Top ASX stocks for a moving market

Share |

The US market has had some positive earnings reports overnight. We need to remember that the US is rebuilding savings in the household sector, and that the corporations are cashed up. The implication is that there is scope for significant business investment, but I wouldn't be expecting a 'flash flood' of economic activity since the corporate sector is depending on consumer or export market action. 

The market outlook is more positive elsewhere. This is however a trade opportunity. My focus is on the low-cap stocks in Australia which offer strategic value. Cases in point where I have been buying on weakness:

1. Union Resources (UCL.ASX): This stocks has been very good to me as a trade in the past. Mostly on speculation about its Iranian lead-zinc project; the largest undeveloped project in the world. There is a huge sovereign risk attached to Iran of course, so the company has sought out and developed the Mossburger phosphate deposit in offshore Namibia in a JV with Minemakers Ltd (MAK.ASX). Recently an petroleum engineering services company in Oman (the new oil sheikdom) emerged with a 20% stake in UCL; so there is the prospect of a takeover here. This is of course not a surprise to me. I have long written about the prospects for a takeover of this company. The project is at feasibility stage, and really needs some love from a large company. This company fits the bill. After a capital reconstruction, UCL has a market value of just $13mil for a world-class asset with an equity-based NPV of around $100mil; with upside in Iran. We bought this stock yesterday for $0.15.

These stocks are less compelling because there is no imminent or pressing value to be realised to my knowledge.

3. Clean Seas Tuna (CSS.ASX) - It has a strategic positive developing farmed kingfish and other species in South Australia. This company has some backing, but has struggled to firm up a breeding program. The globe is suffering from over-fishing and stricter controls are destined to push fish prices up. Or might we displace our pallet with cheaper fish in other markets. No doubt there will be a move both ways. 

4. Gippsland Ltd (GIP.ASX) is another favourite stock. It is developing a tantalum deposit in Egypt. Not the most stable of places given the political instability. They do however possess a very large tantalum-tin-feldspar resource, and they are capitalised at just $9.75mil. I'm inclined to wait on this one for a better price because there is no clear motive for them to move - except a high tantalum price. Tantalum is not exactly the rarest of commodities. i.e. Australia, South Africa, Canada, Greenland as potential sources of supply. I will buy on weakness as the market is very thin despite its near 1bil issued capital. The fear is actually the prospect of a consolidation. My experience is that consolidations usually undermine a share price. 

5. Vital Metals (VML.ASX) is developing a tungsten project in Queensland, as well as a gold project in Africa. China produces 85% of the world's tungsten and is expected to curtail supplies from illegal mines. This creates appeal for tungsten miners in the West. There is a project being backed by Warren Buffet in South Korea (through a Canadian group), plus an Woulf Resources, with its project in Mexico. Vital also has the Kota gold project in Burkina Faso. 2nd round drilling suggests high grade, modest resource. 

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Speculative stocks to watch

Share |

There are some good speculative buys which are going to emerge from this current crisis of confidence. The market is currently going through a soft point because:
1. Bad news - with EU governance issues, earnings downgrade in USA, unexpected fall in China's growth.\
2. Arbitrary market outcomes - the current market growth outlook seems very much upon the fiat policies of government, i.e. their arbitrary capacity to print money (i.e. quantitative easing) and the non-responsiveness of higher interest rates.

This is a good time to build a portfolio of stocks which will be strong in any recovery, however at this point one's interest should be in stocks which have access or accumulations of cash.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Union Resources under Minemaker's takeover

Share |

About 6-8 months ago we anticipated a takeover of Union Resources Ltd (UCL.ASX) by Minemakers (MAK.ASX), and that day has finally come. Unsurprisingly it was a 9-for-10 script offer, and it was rejected. Both companies are vying for the opportunity to develop the Sandpiper phosphate deposit in offshore Namibia; after the JV company delivered the feasibility study. The study suggests an appealing return; though unsurprisingly the project cost is substantive. Leave it to an industry major to enter the fray in coming months and buy out these companies. The stalemate will ultimately be decided by outside interests because these two companies don't have the resources to launch such a large project. Might that major be BHP after their failed takeover of Potash Corporation of Canada? Maybe Potash Corporation? It really does not matter, as you go with the resource. I'd wait however for the stock price of these two companies to settle. 

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Archer Exploration and Alkane Exploration

Share |

Comment from another of my blogs:

In late 2013, we might expect those base metal stocks, including explorers, to look really good, as well as rare earth stocks like Alkane Exploration. Too early now though. Its always best to go for those exotic elements in these times; as they are relatively under-priced. i.e. Vital Metals might have advanced its wolframite (tungsten) project by this time. China produces 80% of the world's tungsten, and this company has the Japanese government as a partner. This is because the Japanese government invests where security of supply constraints are posed. Another appealing exotic company is South Australian based Archer Exploration....not yet though. Wait for the military strikes.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Some quality exploration stocks moving forward

Share |

Given the sentiments I expressed in this blog article, you might be inclined to think its time to look at resource stocks again. I have still to answer this question, but at this point, let me point you towards several stocks you might like to consider, as well as the type of stock.

Type of stocks

If we are about to engage in a period of solid, sustainable growth, then we want to ditch gold, and look at commodities - copper and nickel. We know copper has very good fundamentals, so this is a very good bet. I also like nickel, as I know of scant new capacity. Undoubtedly there are some projects in Russia, Greenland, Africa, but my interest is in one in particular.

Which companies?

Of course we can buy established miners, or we can buy future miners which are trading at a discount. I have several in mind:

1. Metals X Ltd: This Australian stock is capitalised at $300 million; but in 4-5 years it will be worth $3-4 billion, so it represents good buying. It is sitting on one of the largest undeveloped nickel deposits in the world.

2. Voyager Resources Ltd (VOR.ASX) is another good stock which I just discovered today. The company is developing a raft of good projects in Mongolia, which will supply gold and base metals to China. The grades are clearly commercial, so its just a matter of time for the value of these assets to be realised. This company is capitalised at $100 million, but again, though they might not be the largest projects in the world (at least at this point), they have a few of them. They have $5mil in cash, and having spent as much in the last quarter, you can expect a capital raising in the next quarter. We do like to see exploration though for such a large-scale project, you don't need to worry about the cash burn because the % of cash raised is less than 10% of the equity. The long-term upside is far greater. Expect a takeover bid for this company if the share register is open; but perhaps they already have Chinese stake holders. Do your research!

3. Marengo Mining (MGO.ASX) - This is a more advanced copper-gold play in PNG. PNG is not the easiest regimes in the world to work in, but when you have a large project, you can commit to it far more easily. The tax system I doubt is as favourable as Mongolia, but this is a large project, low grade, and mix of copper-gold.

I am comfortable with the sovereign risk of these countries. Its Turkmenistan, Kirghistan, Uzbekistan and affiliates that I worry about. I've seen projects in these areas delayed long-term.

You may know some other good stocks....honestly I am not focused on the market; but based on my 30 years of market watching...yes, I started when I was about 12-13 years old, these are good stocks...probably better than many you will find.

Japan Foreclosed Guide Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com