Should Gold Mining Investors Consider Kilgore Minerals?
May 14, 2018
We wrote about Kilgore Minerals this past winter, because it holds prospective U.S. uranium properties. While studying the company, it became evident the companyís uranium would take a backseat to the companyís gold property in southern Idaho. We reviewed Robert Bishopís commentary in his self-published Gold Mining Stock Report. Mr. Bishop is highly regarded as an astute junior gold stock picker, and his analysis is quite thorough. There is little doubt Bishop holds high esteem for Kilgore Mineralsí Chief Executive Norman Burmeister.
More importantly, the very successful Pinetree Capital (Toronto: PNP) has made a significant investment in Kilgore. Respectively, the Chief Executive and CFO, Sheldon Inwentash and Larry Goldberg, of both Pinetree Capital and heavily touted Mega Uranium (TSX: MGA), have personally invested in Kilgore Minerals. A recent Forbes magazine article took a swipe at both Mega Uranium and Pinetree Capital. Actually, it was more of a head butt. Pinetree Capital is back to trading above C$17/share, up from a year ago when it traded for less than $3/share. So the Forbes article was a non-event for Pinetree Capital. And their holdings in Kilgore Minerals, which reportedly are estimated at between 10 and 20 percent of the company, were passed by without notice.
Kilgoreís Idaho gold property has been explored since the 1930ís, when a gold discovery was made by the Blue Ledge Co. Nearly 50 claims were staked in 1982 and leased to a Kennecott subsidiary in the mid 1980s. Seven holes were drilled. By 1990, Placer Dome acquired the property and drilled 39 holes, more than 21,000 feet of drilling. A Pegasus joint venture drilled another 23 holes, nearly 10,000 feet of drilling, by 1994. Echo Bay earned majority interest in the property, by 1996, after having spent $3.5 million drilling 122 holes for more than 82,000 feet. In 1997, with the falling price of gold and troubles in the mining sector brought on by the Indonesia stock fraud, Bre-X Minerals, Echo Bay dropped its exploration ambitions on Kilgore ñ and shelved all of its exploration projects. In 1998, Latitude Minerals continued a modest exploration of a little more than 4,000 feet.
Near the bottom of the gold bear market, Kilgore Gold (a wholly owned subsidiary of Kilgore Minerals) acquired 100 percent ownership of the property. A new round of preliminary exploration identified new gold targets. By 2004, Kilgore Gold expanded the companyís property holdings to 3,000 acres. Has this property been drilled like Swiss cheese or does Norman Burmeister know what he is doing? Itís had nearly 200 diamond and reverse circulation drill holes, totaling more than 126,000 feet of drilling.
In an earlier interview with Burmeister, he told us, ìIím very excited about this project. It was a property that was very high on Echo Bayís list.î Major companies have expended more than $8 million to define a modest, and possibly economic, resource. At least three different entities have established resource estimates on the Kilgore gold property. In 1996, Placer Dome reported 14.1 million tons, grading 0.04 ounces/ton and with a cut-off grade of 0.015, for a deposit of 561,000 ounces of gold. A year later, Echo Bay released a sectional estimate report showing 18.7 million tons, grading 0.029, for a total of 534,959 ounces of gold.
However, the only resource estimate approved by Canadian regulators (Kilgore trades on the Toronto Venture Exchange) is the Van Brunt/Rayner Technical Report, filed in October 2002, and which is compliant with National Instrument 43-101 (NI 43-101). This report showed about 7 million tons trading 0.031, with a 0.01 cut-off grade, for an indicated resource of 218,000 ounces of gold. The report showed an inferred resource, adding another 269,000 ounces of gold. This is close enough to the Placer Dome and Echo Bay estimates, but it is unlikely to be mineable unless Kilgore finds more gold.
During the 2004 drilling program, Norm Burmeister got the sniff of what might make this an attractive acquisition by a major gold company. ìWe are looking for a high grade feeder system,î Burmeister told us. In the previous drilling program, Burmeister got and encouraging intercept of 0.465 ounce per ton gold over 10 feet within a broader 170-foot zone of low-grade mineralization at 0.04 ounces per ton. On Tuesday, Kilgore Gold made its announcement it would commence its chase to find out if, indeed, there is an elephant discovery of gold on its property.
In an email to us, Norm Burmeister wrote, ìThe high-grade zone, called the ìElsa Zoneî, was intersected at a core depth of 410 feet. It is important to note that this hole was drilled in an area that had never been drilled some 4650 feet from the resource area.î The Elsa Zone is located within the Dog Bone Ridge target area. Burmeister also pointed out, ìThere are no known workings in the area, and there is no known gold mineralization at the surface, thus making the Elsa Zone a true ëblind discovery.í Kilgoreís blind discovery in the Elsa Zone proves there may be some prospects in the very large Dog Bone Ridge target area.
The purpose of the 2006 drilling program, Burmeister told us, is to determine ìthe true potential of the Dog Bone Ridge area target.î Niel Prenn, a professional engineer with Mine Development Associates of Reno, Nevada, completed a scoping level update of Echo Bayís 1996 assessment of the project. He wrote, ìThe project appears to have reasonably attractive economics if the ëpotentially mineable materialí can be doubled at $375/ounce gold price.î Prenn saw the Kilgore project as one with a ìlarge epithermal gold deposit.î This confirmed an earlier geological report by Stanton W. Caddey, who wrote in an October 2003 report, ìExploration potential at the Kilgore property for more than doubling the present gold resource with further exploration drilling is regarded as excellent.î
The encouraging drill hole in 2004 helped move this project to the current drilling program. ìWe believe the Dog Bone Ridge target area represents the core of the hydrothermal system that has generated the known low grade resource at Kilgore,î Burmeister speculated. Thatís why he is drilling the Dog Bone Ridge target area. The first holes will be offsets to the promising 2004 discovery hole. ìWe donít know the direction or dipping,î said Burmeister, asking ìWhich way does it go?î The first hole will help Burmeister orient the direction on the north side of the target. Burmeister told us, ìThe knowledge we hope to gain from the Elsa Zone offsets will be important in efficiently testing other Elsa ëlook-a-likeí definitive targets within the Dog Bone Ridge target area.î
A drill campaign tends to intensify expectations. Share prices tend to rally higher, depending upon market conditions, during a drill campaign. The company hopes to drill about twelve holes, down between 500 and 800 feet, in the target area. The first hole may be encouraging, but the results from that hole function as an identifier for where to place the next drill hole. ìThe best target has never been touched,î said Burmeister, referring to the north side of the Dog Bone Ridge. As with many promising properties, they donít always offer the easiest access. In this case, Burmeisterís expectant target on the north side of Dog Bone Ridge might only be accessed by helicopter, if thatís where he has to drill.
What happens if Burmeister is accurate in his assessment? If his favored Dog Bone Ridge target does represent the core of the hydrothermal system, then what will he have found? ìAs such, it represents an attractive high grade epithermal vein-type gold target,î Burmeister responded. ìThe successful interception of high grade gold during the 2004 program confirmed this interpretation.î
In 1980, Burmeister founded Bull Run Gold Mines, serving as Chief Executive and developing a successful Nevada gold mine. He arranged the IPO, which led to a NASDAQ National Market listing, and ran the company for eight years.
For thirteen years before that, he was the chief geologist for Silver Standard Resources. Burmeister discovered the Mill Creek orebody in Elko (Nevada), which moved that company forward. The property was subsequently sold to Freeport-McMoran. Burmeister also conceived for Silver Standard of a novel regional exploration program, covering 10,000 square miles in the Yukon over nearly unexplored territory. In a joint-venture with ASARCO, he helped discovery the Minto orebody in the Yukon. The copper-gold deposit is now going into production through Sherwood Copper.
After forty years in the mining industry, he hopes Dog Bone Ridge will add to his string of gold discoveries and corporate success stories.
Investors Chasing Uranium Mining Stocks, Again: A Favorite Emerges
March 30, 2018
Fifty years ago, uranium fever hit Wall Street. It was then just a few years after a Navajo shepherd in New Mexico, by the name of Paddy Martinez, discovered ìyellow rocksî on his property, mistaking them at first for gold. An avalanche of 1950s dollars (more valuable than the ones we have today) poured into mutual funds and uranium mining stocks, sending their values to astronomical levels. Get ready for dÈj‡ vu all over again, as Yogi Berra once said. Trend spotter, James Dines, editor of The Dines Letter, believes uranium mining stocks could become just as hot, or hotter, than the Internet stocks of the 1990s. (Editorís note: StockInterview.com interviewed James Dines on July 20, 2004, when he forecast a ìbuying panic in uranium.î Since then, spot uranium (U3 08) prices have nearly doubled. Over the past 35 years, Dines has successfully predicted mega trends in gold, internet, palladium and uranium price movements). And now investors are chasing uranium mining stocks again.
A look at industry leader, Cameco (NYSE: CCJ), which money manager Robert Mitchell called the ìSaudi Arabia of uranium,î shows a three-year gain of more than 700 percent. Over the past few years, Australian-traded Paladin Resources, skyrocketed from under a dime to over $2/share (A$). A recent Forbes magazine cover story, entitled Going Nuclear, analyzed uraniumís recent price surge, ìOne reason the price of uranium should keep escalating is that producers are only starting to ramp up to meet the strong demand. Utilities globally need 180 million pounds of uranium annually, but at this point a mere 108 million pounds are coming out of the ground.î
Why the sudden jump? A Morgan Stanley institutional report, published in December 2004, explained that through the 1990s, uranium oxide prices stayed low because surplus uranium came into the market from weapons decommissioning. That surplus inventory worked its way through the market. The Morgan Stanley analyst forecast a ìdeep supply-side shortageî of uranium, citing that new mining production hasnít yet come online to remedy the deficit. In the year-ago forecast, the uranium deficit was expected to grow to nearly 20 million pounds this year (from a surplus of 6 million pounds in 2003), and then leap to a peak deficit of more than 35 million pounds in 2006. Deficits in excess of 30 million pounds were also anticipated for 2007 and 2008. According to the Morgan Stanley analyst, $50/pound may be possible in the spot price for uranium oxide, known in the trade as ìyellowcake.î
Mining Newsletters Favor Strathmore Minerals
Whatís that mean for uranium stocks? Higher prices should be anticipated as more investors, mutual funds and hedge funds search out the best returns. While the lionís share of investment dollars is likely to chase Camecoís price higher, the robust percentage gains in that stock may have already peaked. Generally, new money searches for well-capitalized junior mining stocks with solid uranium projects in their portfolio. One of those most frequently recommended among mining newsletter writers is Strathmore Minerals Corp, trading on the Toronto Venture Exchange (ticker symbol STM.V). Prominent among Strathmoreís projects are in-situ leach mining operations proposed for Wyoming and New Mexico, plus an aggressive exploration program in the worldís richest uranium areas, Saskatchewanís Athabasca Basin (home to uranium mining giant, Cameco).
In September, letter writer Lawrence Roulston of Resource Opportunities recommended Canadian-based Strathmore Minerals (TSX-V: STM), writing, ìThe company is systematically adding value to the projects most likely to be significant in the near term, especially those with near-term production potential.î Also in September, Resource World contributing editor, Alf Stewart, wrote, ìThe two deposits Strathmore is developing were ëcherry pickedí from the inventory of Kerr McGee, largest private explorer of uranium prior to that industry grinding to a halt in the early 1980s. As these properties are largely drilled off, Strathmore may be considered more of a uranium development company than an explorer.î This past June, money manager Adrian Day recommended uranium stocks in his research report, writing, ìSo I am focusing on four main areas in uranium, with one or two buys in eachÖ top exploration companies that have the goods and are likely to bring properties into production. Strathmore Minerals, with technically strong management, lots of properties, and a strong balance sheet, is arguably the best.î
New Uranium Discovery in the Athabasca Basin?
Hereís one of the stronger reasons why investors might anticipate a strong rally in Strathmoreís share price over the coming twelve months: In a November 16th news release (http://biz.yahoo.com/bw/051116/20051116005591.html?.v=1), Strathmore Minerals announced a discrete conductor, more than 30 miles long, after completing an airborne geophysical survey on the companyís Davy Lake property, in the north central portion of the Athabasca Basin. According to the companyís news release, ìThe conductor’s profile response indicates a deep and in places, broad source.î
Virtually all the significant unconformity uranium deposits known in the Athabasca Basin are directly associated with fault structures associated with graphitic conductors. Deposits such as Key Lake, Cigar Lake and McArthur River were found by drilling electromagnetic conductors located within magnetic lows.
In an interview with Jody Dahrouge, of Edmonton-based Dahrouge Geological Consulting Ltd, he told StockInterview.com, ìEarly indications are that this conductor is similar with other known uranium deposits, graphitic conductors with magnetic lows.î On a scale of one to ten, Dahrouge rated the Davy Lake conductor a ten. ìIt is a long conductor, cut by structures, with deep depth and associated by a late fault,î explained Dahrouge. ìIt is a high quality conductor that continues to depth, and it is typical of those occurring that are associated with known uranium deposits.î Dahrouge described how the MegaTem II airborne geophysical survey was able to pinpoint the conductor as shallow as 600 meters and running deep to 1200 meters. Dahrouge made comparisons to other uranium deposits in the Athabasca Basin. ìThe Sue Deposit near McLean Lake is associated with an electromagnetic conductor that is approximately 2.6 kilometers long,î he said. ìBased on our work at Waterbury Lake, we identified an 8 kilometers long conductor associated with the Midwest Deposit(s). The ‘P2’ conductor at McArthur River is approximately 13 kilometers long. This feature was first identified in 1984, by a ground Deep EM Survey. The Shea Creek deposits, located south of Cluff Lake, are associated with an approximately 25 kilometers long conductor, known as the Saskatoon Lake Conductor.î Dahrouge added, ìThese deposits are located at depths similar to what we expect at Davy Lake.î
What is probably most significant is Strathmoreís gamble, by exploring away from the eastern parts of the Athabasca Basin, some 300 kilometers from the eastern Athabasca Basin, where the major discoveries have been made. ìIt was virtually unexplored,î Dahrouge said with excitement in his voice. ìItís really virgin ground.î While there is ample evidence suggesting multiple uranium deposits in the Athabasca Basin, other junior exploration companies are looking at the shallow parts of the eastern basin, which may not likely yield economic uranium ore. One pundit acidly questioned some of the current exploration activity in the Athabasca region, ìAre they really re-flying old ground thatís already been flown a hundred times, or are they just releasing old data to save money?î Dahrouge pointed out that the uranium appears to be running deeper for many of the newer discoveries, as he believes the Davy Lake property might hold true for Strathmore Minerals in the north central part of the Athabasca Basin.
Important features in many Athabascan uranium deposits are the cross-cutting fault zones. Dahrouge confirmed the Davy Lake conductor has cross-cutting fault zones with a sinistral (left-sided) fault about halfway along its length. According to Dahrouge, there is also a ìconductor extension which crosses the fault from west to east and ëflowsí out into a small, sub-circular magnetic low.î As with many of the Athabascan uranium deposits, which tend to be found between overlying sedimentary units and underlying basement rocks, the Davy Lake conductor fits the bill. Strathmore Mineralís president, David Miller, told StockInterview.com, ìthe 50-plus kilometer geophysical anomaly appears to indicate a basement conductor.î However, Mr. Miller tempered the exhilaration in the air, ìA geophysical anomaly does not make an ore body. These exciting initial results will be followed up with infill geophysical lines, followed by ground geophysics, followed by shallow drilling, looking for alteration. When we have narrowed the target to drill, we will pull in the big rigs and test the conductor at the unconformity.î Dahrouge remains excited about the Davy Lake conductor, and said, ìClearly this represents an excellent exploration target for unconformity type uranium deposits.
What does all that mean? It could explain why Strathmore Minerals might well be on the road to a world-class uranium discovery as further exploration more clearly defines how valuable those newly discovered conductors might become. Meanwhile, Strathmoreís New Mexico and Wyoming properties (amounting to potentially several million pounds of uranium resource) are in the preparatory phase of the permitting process. As the spot uranium price inches forward to the widely accepted short-term target above $40/pound, several of Strathmore Mineralís properties may become instantly more valuable to a utility company who will someday need the companyís uranium oxide to fuel their nuclear reactor.