The Bigger Picture
by Kevin Barker
Some time back we cautioned investors against getting into $1.00 gold stocks, and we weren't too keen
on the fifty centers either. We reasoned that in the event of a blow off those stocks would be heavily
sold, and also have the highest potential returns in any subsequent rally.
After the sell off occurred we advised readers to get into a pair of my faves that went down to a quarter, West Timmins Mining (WTM:TSX) and Western Geopower (WGP:TSX-V). Western Geopower was actually a $0.50 stock, focused on geothermal energy and is drilling for steam in the so-called geysers district north of San Francisco.
Both of those are now cooking right along, and I'm suggesting investors take some money off the table on both, and pocket a 25 to 50 percent gain. I think we're in the midst of a bear market rally that will take many junior stocks higher, and these two in particular to just under their 52-week averages. I advise adding to positions if and when we hit another dip. And I do believe another dip is coming. In fact, I think it will be substantially more than that, a second bottom in fact. The banking bailouts may be doomed and after we get another round of earnings warnings in May I think the Dow is headed for another, lower bottom. The short term money will sell in May and go away, and the smart, longer term money will get into the market sometime after that, probably June or thereafter.
But let's get back to mining. I erred in my earlier comments on West Timmins when I said they had intersected 1.0 g/t gold on their wholly-owned Thorne property in Timmins, Ontario. The cores had actually returned better than 10.0 g/t in a gold rich sub zone of the Golden River West property there. In fact, they hit grades ranging to 23.0 g/t over widths of 1.0 to 4.5 m. Subsequent to that, the company has drilled seven holes into what it calls a 'continuation' of that gold rich sub zone, and logged broad intercepts of mineralization ranging from 13.0 m to 45.0 m, including 37.50 m of 1.60 g/t. That earlier high-grade zone remains open to the west and down plunge.
Actually WTM has done ever better than that of late, grade wise, on its Thunder Creek JV with Lake Shore Gold (LSG:TSX), also at Timmins. They've hit 11.2 g/t over 10.4 m at the Rusk property, which is less than a kilometer from Lake Shore's Timmins West deposit, and apparently at the same depth.
I have high hopes for the Rusk zone. I've read that the Timmins West mine has a rather high cash cost, extending to $600 per ounce. It's very important for Lakeshore to find some high-grade gold zones near it, and quickly too, because production is scheduled to begin in the first quarter of '09. They have to get their costs down. Consequently, I believe that exploration at the Rusk zone will be a very high priority in the coming months, and let's face it: companies have to be very selective about that they choose to spend money on nowadays. Not every good property is going to be drilled until risk appetite returns and financing becomes more readily available.
Also, there is the bigger picture. I think that both Ontario and Quebec have been overlooked as companies scrambled to find and develop the giant, near-surface copper/gold porphyry systems of Latin America. The Quebec and Ontario camps are loaded with gold, but they're a little more expensive to drill and the deposits are certainly more difficult to model. But the multi million once deposits are definitely there to be discovered! As the political risk in Latin America, and around the world, continues to grow, I think it is slowly dawning on investors that Canada is a darned good place to make world-class discoveries, no matter what the challenges are.
Another deal we've been keen on is TiRex Resources (TXX:TSX-V), which has a polymetallic deal in Albania. We got into that one when it began trading a year ago last fall and rose to above C $4.00/share, and we got in again when they announced the receipt of some EU funding last winter. Plus, they're still pulling killer grades from drilling at the Mirdita project. I like the fact that the project is in Albania because it qualifies them for EU money. The European Union wants to industrialize the Albanians as quickly as possible.
To that end, Tirex has already received the first tranche of C $9 million in funding from the European Bank for Reconstruction and Development (EBRD). They need to match the amount for tranche two and three from the commercial sector. That's far from a slam-dunk but they've certainly got a good start. At the time, TXX was reporting 7.10 m of 5.9% copper, 3.4 g/t gold and 37.5 g/t silver from the second set of drill assays at the Gurthi South No.2 zone at Mirdita. They've done even better since. Assays from the first hole at the Letitna zone were announced in January, reaching 61.5 m of 0.57% copper, 1.56% zinc and 0.7 g/t gold. A second zone of disseminated to semi-massive pyrite mineralization was encountered at 330-360m where the rods broke off and the hole was lost while still in mineralization. Tirex wants to continue drilling there, ostensibly to vector in on the heart of the zone. Apparently they're encouraged enough by that 61.5 m section to think it may be part of a system with the potential to host multiple deposits of significant size. And of course the prospect of that is always very interesting to me! 'Go big or go home', that's my motto.
Letitna is actually the third zone of precious metals-rich VMS mineralization Tirex has drilled on the property in the past year. All three zones drilled to date are rich in both copper and zinc and, in addition, all three contain high gold values. Historically, gold values at Mirdita were not disclosed and it is only now that the significant gold potential of the district is being realized. Exciting!
Be careful out there.
Kevin Barker, editor of The Barkerletter, lives in Latin America where he is seeking the world's next billion- dollar mineral discovery. Contact him at .
