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Sailing Against The Wind

Sailing is on the brain. I’m off to Alaska tomorrow, to join my parents as they explore the Panhandle on their 31-foot sailboat. I’m just a touch excited.

Getting the boat from Victoria to Ketchikan was not easy. When there was wind, it was usually against them. Tides are big up there this time of year, near impossible for a small boat to fight. And it’s simply a long way in a boat that doesn’t move that quickly: Dad’s assessment when they reached Alaska was that an old man on a bicycle could probably have made better time.

But they made it. And they are so happy to be up there, a place they have dreamed of sailing around for many years.

To do it required a combination of conventional sailing expertise and new situation ingenuity. They got up early many mornings to catch the tide. They hugged shorelines to get shelter from opposing winds. They didn’t move on days when the weather was against them and put in long days when the winds were in their favor. When one of the gennaker sheets wrapped around the prop, they sailed 12 miles to dock and found a local diver to untangle it. They navigated the Glacier Bay permitting process, convinced friends and family to fly up for stints, kitted the boat out with an incredible array of supplies, performed major upgrades like a new engine, and simply made it happen.

Of course this is an analogy. Explorers and miners are facing relentless headwinds. Progress is not easy. But despite it all, there are companies out there making headway against the tide.

First off: Excelsior Mining (TSXV: MIN). Want to see a nice chart? Check it out.

MIN has been inching up for months and now it is breaking out. Why? Fundamental strength and gold old promotion.

Excelsior’s Gunnison copper project in Arizona is a good project that has the ingredients of a great mine (45% post-tax IRR anyone?). The studies needed to turn the prefeasibility study into a feasibility are nearing completion, with good news flow expected all through the summer.

With its ducks almost in a row, Excelsior started promoting – something it had not done a lot of until recently.

As I wrote in a subscriber’s only note on April 8th, promotion is often derided as a bad thing, as a desperation move by juniors with projects that cannot stand up on their own. But that just isn’t true. Promotion is an essential aspect of this industry. It’s great to have a strong project, but if you want your share price to advance you have to tell people about it.

Excelsior is talking and people are listening. When the project in question deserves attention, promotion done well is a powerful tool. MIN’s share price is proof.


Another story advancing on conventional hard work is Continental Gold (TSX: CNL). Up 65% since mid-April, Continental is working to prove its Buritica project in Colombia is one of the best near-development gold projects in the world.

Colombia is certainly part of that story and, yes, permitting risk overhangs CNL’s share price. But the Colombia national government labeled Buritica a project of strategic importance for the country, which bestows major confidence it will get the go-ahead. And a green light at Buritica is of strategic importance for Colombia, a country seeking to show the world it is indeed open for exploration and development.

The permitting process has been inching along for more than 18 months. Continental President and CEO Ari Sussman is optimistic approval will be granted by the end of summer. I should clarify: he is certain approval will be granted and is optimistic it will happen within a few months.

But CNL is by no means sitting on its hands waiting for a permit. Quite the contrary – the company just released a new resource estimate that boosted both tonnage and grade in a model so robust that Continental is going to take Buritica straight from preliminary economic assessment to feasibility.

Measured and indicated resource grew by 60%, aided by a grade increase from 11 to 11.4 grams gold-equivalent per tonne. Inferred resources also increased. As a result, Buritica is now home to 12.9 million M&I tonnes grading 10.8 grams gold and 34 grams silver, plus 15.6 million inferred tonnes averaging 9 grams gold and 29 grams silver.

For comparison, the recent PEA assumed average grades of 7.8 grams gold and 19.35 grams silver.

It gets even better. Buritica is a vein system, with high-grade veins cutting through unmineralized host rock. That kind of structure makes it difficult to interpolate between drill holes, let alone extrapolate beyond them. To really know the resource requires a lot of drilling.

CNL addressed that challenge head on. Its resource estimate has the entire deposit modeled as individual veins, which is an uncommon and highly robust method. The latest model included 51% more vein domain composites. That showcases how many structures are involved, how many additional veins CNL’s drills keep hitting on their way to known structures, and how clear CNL’s model of the system has become.

Continental’s small bulk-sample facility also helps: the 30-tpd operation reveals valuable information on metallurgy and ground conditions while also maintaining a valid Buritica mining permit, acting as a tool to train new employees, and creating local employment.

Continental is doing everything it can inside Colombia to increase its odds of permitting success. Meanwhile, the company has persevered with the drill, creating a flood of results that have prevented minds outside of the country from perseverating over the permit question too much.

It’s classic hard work – and it’s working.


On a less conventional front: Integra Gold (TSXV: ICG) has launched a cool new challenge that should outline new targets at its Quebec property and bring new eyes to the Integra story.

When Integra bought the Sigma-Lamaque mine last year, it got what it wanted and then some. What it wanted was the 2,200-tpd mill and tailings facility sitting literally next door to its gold deposit. The bonus: 70 years of prospecting data.

Sitting in the old mine office were hard drives containing 6 terabytes of mining records dating back to 1933, including results from 30,000 old drill holes.

That’s a treasure trove of data – but it would take years of work and millions of dollars to sift through the information. Instead of taking on that task alone, Integra has put everything online and invited the public to figure it out.

Whoever out there in cyberspace can find the next big gold deposit amidst all that data will win $1 million.

After four bear market years, many a talented geologist is out of work. I bet lots of people pick up on the challenge. After all, the last competition of this sort – the Goldcorp Challenge, back in 2000 – reinvigorated Goldcorp’s Red Lake mine, as entries from around the world revealed a swath of new ounces. It also launched several careers including that of Mark O’Dea, captain of the Oxygen Capital team, who came in second in the competition and has since created billions of dollars in real shareholder value through several exploration and development companies.

Integra is offering 15,000 times more data than did Goldcorp. If the challenge works half as well, in eight months ICG will have a list of high-potential targets to test despite having remained totally focused on its key task, which is advancing its known ounces towards production.


Here’s another way to make the most of industry downtime: have your joint-venture partner build a mine at your high-grade silver project and, while that’s happening, discover the potential for a very significant second ‘bonanza’ zone at depth while drilling to define the lower limit of the resource.

A primo combination of hard work, well-executed plans, and luck.

Mag Silver (TSX: MAG) is partnered with Mexican silver major Fresnillo on its Juanicipio project in the Fresnillo district of Mexico. Mag owns 44%; Fresnillo owns the other 66% and acts as operator.

This is not a little project. Resources at Juanicipio currently stand at 160 million indicated oz. silver at an average grade of 601 grams per tonne, plus 48 million inferred oz. silver at slightly higher grade. For just over US$300 million the partners are building a 2,650-tpd operation that should produce 10.3 million oz. silver and 29,000 oz. gold annually for 15 years, at prices low enough to generate a 41% after-tax IRR.

Mag’s 44% should generate US$70 million a year in after-tax cash flow, based on a silver price of US$23.39. As president and CEO George Paspalas said at a Mag lunch on Wednesday: “This thing is an ATM.”

And that’s before the latest drilling. The Valdecanas deposit comprises two steeply-dipping veins, West and East. The best mineralization to date is in the upper two-thirds of the deposit, known as the Bonanza zone and shown in pink below.

In the Deep zone, in blue, grades drop off.


To confirm that mineralization indeed dies off at depth, Mag and Fresnillo punched four deep holes below the Deep zone – but instead of low grades, they hit exceptional grades over wide intercepts. For example, P2 returned 22.1 metres grading 3 grams gold, 195 grams silver, 5.36% lead, 6.64% zinc, and 0.45% copper. Hole P3-2 cut 26.5 metres of 2.7 grams gold, 405 grams silver, 3.22% zinc, 4.09% lead, and 0.37% copper.

The gold, zinc, lead, and copper contributions are impressive: assays returned an average 23.1-metre true width carrying 708 grams silver equivalent.

The only ‘downside’ to the news was geologic confusion. Epithermal vein systems are zoned, with high precious metal grades on top and increasing base metals at depth. But these deep holes carry high precious and base metal grades.

So Dr. Peter Megaw, Mag’s VP Exploration and one of the world’s Fresnillo district experts, had to figure an explanation. The new theory changes the potential at Juanicipio dramatically.

The idea is this: after the Bonanza zone was deposited, the boiling level migrated down and subsequent events overprinted the first. The boiling level divides the base and precious metal zones of an epithermal vein. That means subsequent mineralizing events around a lower boiling level deposited high-grade gold and silver over already healthy base metal mineralization, in a stacked system.

I will not go through all the geo evidence supporting this theory now, as it would take pages. Anyone interested can contact Mag and I am sure they will happily walk you through it.

The result is what really matters.

If this deeper zone pans out as these first four holes suggest, there is a lot of additional, high-grade mineralization underneath the known deposit at Juanicipio. But it would be deep. Not too deep (mines in the Fresnillo district regularly reach a kilometer into the earth), but deeper than one would mine by ramp.

A ramp is what is currently under construction at Juanicipio. That’s great, in that the ramp will (1) still enable initial production in late 2017 or early 2018, as planned and (2) provide underground drilling access to probe the new deep zone with far more ease and accuracy than from surface.

But Mag and Fresnillo are so excited about these four deep holes that they are already assessing very different options for Juanicipio going forward – like a shaft and a larger mill.

This is all arm waving based on four holes, but the opportunity here is for a mine churning through twice as many tonnes per day at a lower cost per tonne (shafts being more operationally efficient than ramps), with higher average grades and a longer mine life.

This at a mine that, based on its current plan, is already “an ATM”.

The only problem with all this is that, from a low of $6.95 on April 22, Mag’s share price has gained 47%. Great for those invested, but I hadn’t bought yet!

One to watch for a correction, I would say.

This is by no means an exhaustive list. There are many companies advancing against the tide, through means both conventional and novel. There are many others not yet getting rewarded despite consistent, appropriate, intelligent efforts.

It’s a stock picker’s market, as the early stages of a new bull market usually are. Get out there and start picking, with an eye for people, projects, and persistence.

Happy sailing!


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In her letter, Resource Maven explains what she is buying and selling, and why. Maven has bought into several of the markets best - performing stocks well ahead of the curve. She regularly identifies exciting new exploration opportunities and manages the inherent risk by selling some into speculative gains. And the mine builder and operator stocks that form the basis of the portfolio give strong, ongoing leverage to the rising prices of gold and silver. She has your precious metal bases covered.

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