The ten-day journey ended at The 2007 Chicago Natural Resources Conference last Saturday. This conference is a small, but distinguished meeting of the resource minds which included speakers such as:
- Joe Granville of The Granville Market Letter;
- Jason Hommel, editor of the Silver Stock Report;
- Jay Taylor of Jay Taylor's Gold & Technology Stocks;
- Mike Shedlock, A.K.A. Mish, from Whiskey and Gunpowder; and
- Bob Moriarty, president of 321gold.com.
At the very core, the mood at the conference was incredibly bullish for precious metals. As you would expect, there was much talk about the continuing decline of the US dollar, the China factor, metal supply and demand, gold derivatives, and many other topics that support higher metal prices.
I heard no one step up to the plate to make an exact prediction on where they thought gold and silver will be in the future. But the general consensus was that precious and base metals are most definitely headed higher...much, much higher.
The most interesting topic that was discussed at the conference in my opinion, however, was mineral exploration in Mexico.
Bob Moriarty spoke about Mexican exploration on Saturday. Unfortunately I missed much of his talk because I was speaking with a presenter representative. However, from what I did hear of Bob's talk, he's very bullish on the country.
And so are most other people that I've talked to recently... Brokers, analysts, newsletter writers, and average Joe investors alike...everyone is in love with Mexico right now. And really, there's no wondering why.
Mineral exploration in Mexico has been a focus of much attention for me over the past few months. I spent about two and a half weeks in Mexico last month visiting the properties and operations of Pediment Exploration Ltd. (TSX-V: PEZ; Frankfurt: P5E) and Rochester Resources Ltd. (TSX-V: RCT; OTC BB: RCTFF; Frankfurt: R5I). And I can tell you first hand that it's time to forget most of what you may think about Mexico and completely disregard everything you've seen on TV.
Mexico has a modern emerging middle-class underpinned by spectacular economic growth and dynamic social change with contemporary mining and tax laws that are inviting to any level of mineral firm from nano-cap exploration firms to multi-billion dollar producers.
According to the World Bank, Mexico now ranks thirteenth in the world in regards to GDP and has the fourth largest per-capita income in Latin America, following only Argentina, Chile and Costa Rica despite its third world stereotype.
Since the economic crisis of the mid-1990s, the country has made an impressive economic recovery. According to the director of the World Bank for Colombia and Mexico, the population below the poverty level decreased from 24.2% to 17.6% in the general population and from 42% to 27.9% in rural areas from 2000 to 2004. Driving through most of the major cities you find hip restaurants and bars, nice cars, new home construction, and most everything else you'd find in any modern city, which is why I say forget everything about Mexico you've seen on TV.
Mexico, a country with a rich mining history that straddles almost 500 years, still weighs amongst the world's largest metal producers...especially in regards to silver production.
Mexico is currently the world's leading silver producer and accounted for roughly 17% of the world's total supply producing nearly 100 million ounces last year.
Because of the country's rich mineral resource, the Mexican government has taken every step possible to become amiable to foreign investment. Under the Mexican constitution, minerals are part of the national patrimony. And the fact is the exploration, exploitation, and beneficiation of the minerals have preference over any other use for the land.
The bottom line...I believe Mexico is one of the best places in the world for mineral exploration today. And from what I gathered from speaking to people at the Chicago show, so do many other of my cohorts.
Now I'd like to take some time talking about three companies that interested me at the show.
Pediment Exploration Ltd. (TSX-V: PEZ; Frankfurt: P5E)
Pediment Exploration is an aggressive exploration firm that I've been following for quite a long time now. And I'll tell you, I believe this company has everything a junior mineral exploration company needs to become a mega-runaway success...a tight share structure, top-notch management, superb technical team, and extreme untapped potential on its ten 100% Mexican owned properties...especially the Juliana, Daniel, Caborca, and Las Colinas properties.
As I mentioned a second ago, I was in Mexico last month checking out a few of Pediment's properties and I was very impressed. One of the most exciting for me was the Juliana project.
Covering an area of over 700 hectares, there's little doubt in my mind that the project contains a substantial gold resource. Armed with only a rock hammer and loupe I was easily able to find visible gold on the surface at a rock outcrop on the property. In fact, I estimate that every one out of ten or fifteen rocks I looked at had some amount of visible gold. In fact, if you want to see an example of one of the rocks I brought back with me that had visible gold on it, simply click here . Pediment has the roads cut and pads set up and is ready to begin drilling. The company says it will have a rig turning on Juliana real soon.
Pediment is also currently drilling on its 40,000+ hectare Las Colinas Project. This is another project that really interests me.
Located in the San Antonio Gold District, the Las Colinas deposit has a historical resource of up to 348,000 ounces of gold that was defined by Echo Bay in the mid-1990s. This district is also home to Vista Gold's Paredones Amarillos deposit, which boasts proved and probable reserves of 53,954,000 ton ore with an average grade of 0.82 g/t for a gold reserve of 1,577,000 ounces. But as you can see in a map of the Las Colinas property, Pediment's land dwarfs that owned by Vista. What I'm getting at is that it's quite likely that the historic resource of 348,000 ounces is grossly underestimated.
Pediment has several other properties of interest. I suggest that you check them out for yourself by visiting the company's website at: www.pedimentexploration.com
Minera Andes Inc. (TSX: MAI; OTC BB: MNEAF)
Minera Andes is another story that I've been following for quite a while. The company's 49% owned San José high-grade gold/silver project is now only two months away from production and cash flow, with operations estimated to begin at the end of June.
Last year Minera Andes completed a 21,241-meter drilling program on the San José project. The company recently reported the details of this program, which increased its silver and gold reserves by approximately 71% from those announced in October 2005. The 2006 drill program showed:
- Proven and probable mineral reserves at December 31, 2006 are: 1,958,430 tons with an average grade of 7.2 g/t Au and 450 g/t Ag (using a cutoff grade of $75/ton and a price of $500/oz for gold and $8.50/oz for silver).
- Gold contained: 453,348 ounces proven and probable reserves.
- Silver contained: 28,334,242 ounces proven and probable reserves.
- Forecast average gold production: 60,633 ounces per year.
- Forecast average silver production: 3,119,533 ounces per year.
- Initial production 750 ton/day--with plant and infrastructure to be upgraded to 1,500 ton/day.
- Forecast average operating costs of $200 per ounce of gold equivalent from October 2005 feasibility study.
- Mine life increased from 4.3 years to 6.8 years, a 58% rise.
The San José mine is in the final construction stages and scheduled to start up in the second quarter of this year. Approximately nine kilometers of underground workings have been developed at the mine along with the associated infrastructure. Completion of the processing plant is underway, where the final product will be a silver/gold doré. This year mining will begin at the Huevos Verdes and Frea veins. All of the personnel have been hired for the mine and the processing plant personnel are currently being hired.
As the mine ramps up, production at San Jose is expected to double within the year from 61,000 ounces of gold and 3.2 million ounces of silver to 122,000 ounces of gold and 6.2 million ounces of silver.
To see a copy of the company's power point presentation, click here.
Pacific North West Capital Corp. (TSX: PFN; OTC BB: PAWEF; Frankfurt: P7J)
Pacific North West Capital Corp. is a member of the International Metals Group, a multi-disciplinary management team that combines the expertise of four publicly traded mineral exploration companies. The group also includes Freegold Ventures Ltd., CanAlaska Uranium Ltd., and El Nino Ventures Inc.
Pacific North West is an exploration-stage firm focused on platinum group and base metal projects (mainly nickel) in North America. The company is currently exploring three principal projects:
- the River Valley PGM Project in Sudbury, Ontario;
- the Goodnews Bay Platinum Project south-southwest of Anchorage, Alaska; and
- the West Timmins Nickel Project in Timmins, Ontario.
Pacific North West has also signed a cooperation agreement with SOQUEM Inc. in order to conduct research on platinum properties in the province of Quebec.
The company is 11% owned by Stillwater Mining Co., the only platinum and palladium producer in the United States. Stillwater acquired its position in PFN at $0.45, which is interesting because the stock is trading today for $0.43.
The company also has a decent share structure. PFN has 41,996,202 shares issued and outstanding. According to the latest SEDAR filing, the company has issued 3,964,500 options that are exercisable through October 2011 at an average price of about $0.716. There was no mention of warrants in the filing.
On the negative side with regards to the share structure, however, the latest MD&A filed to SEDAR on March 15th states, "During the year ended April 30, 2006, 2,697,990 performance shares were reserved for issue. At the discretion of the Board, these shares may be issued to such arm's length parties as the Board considers desirable to attract to the Company. To date, 400,000 performance shares have been issued at $0.01 per share."
To see a copy of the company's power point presentation, click here.
Until next time,
Luke Burgess
Gold World
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