Investment Comment Tundra project gives Getty some potential

Recent drilling results from its Northwest Territories’ Tundra gold property makes Getty Resources an emerging junior gold stock which could soon produce 100,000 to 200,000 oz of gold annually.

That’s why Julian Baldry, a senior mining analyst at Nesbitt Thomson Deacon Inc., has recommended the stock as a speculative buy in a recent report released by the Toronto brokerage firm.

While the company is still a long way from a production decision on the Tundra property, Mr Baldry regards it as possibly one of North America’s newest major gold deposits.

Located 130 miles northeast of Yellowknife, N.W.T., Getty’s principal asset is shared 51% and 49% by Noranda Exploration and Getty respectively. (Noranda is the operator).

The partners’ main objective this year, is to delineate at least five million tons of reserves grading 0.25 oz gold per ton. A 5-month exploration program involving some 30,000 ft of drilling in the main zone began in February.

The objectives of the program are to delineate the deposit at depth; complete infill drilling between the 400-ft level and the recent deeper intersections for reserve definition and to drill in detail the high grade near-surface portions of the deposit which could represent near-term production.

In May, 1987, Noranda and Getty issued a news release in which a drill hole located 3,500 ft below surface encountered a 32-ft intersection averaging 0.19 oz.

According to Mr Baldry’s research report, the tonnage potential is now enlarged by the latest release which extends the known limits of the deposit. “It is still open at depth and horizontally and should exceed the original target of 5 million tons at 0.27 oz,” he says.

“However, the current drill results cannot yet provide complete assurance that the ultimate outcome will be an economically viable mine,” said Baldry.

“There is still some risk that further drilling at depth will fail to encounter good mineralization and reduce the scale and importance of the discovery.”

In October, 1986, probable reserves were reported as 1.28 million tons averaging 0.28 oz. The bulk of exploration at that time was confined to shallow drilling within 400 ft of surface and the reserves calculated to that depth.

Still, the problems usually associated with Tundra’s northern location are reduced as it is within two miles of the winter road to the Lupin mine. Located 120 miles further north, it is the flagship gold producer of Echo Bay Mines.

Also contributing to Getty’s upside potential, according to the report, is an experienced management team whose aim is to become a major force in international mining. “As more results are released from the Tundra property in the Northwest Territories, this starts to look increasingly achievable,” says Mr Baldry.

Getty Resources owns interests in 39 mineral properties totalling approximately 312,000 acres. The properties were valued at $26,260,000 last year. While 14 of these properties are wholly-owned, the rest are joint ventures in which Getty’s holdings vary from 17.5% to 80% range.

As reported by The Northern Miner on June 15, a decision to start commercial production at Getty’s Tisdale gold project is expected in October. Nevertheless, delays at the Timmins, Ont., project, which is shared equally by Getty and Davidson Tisdale mines, have angered Davidson shareholders.

Despite assurances from management, several American shareholders questioned the delays at the company’s annual meeting. They also demanded that Davidson improve its investor relations.

The initial production target is 200 tons per day escalating as reserves permit, for an estimated annual gross output of 20,000 oz.

Also acting in its favor, is the company’s clean balance sheet. When the report was released, Getty had no current earnings, no debt and $20.6 million in cash in committed funds. Getty shares were trading recently on the Toronto Stock Exchange at $11.75, just below its 52-week high of $14.75 but well above its $3.25 low point.

Based on a $440(US) gold price, Baldry forecasts earnings of 20 cents per share in 1988.

“The stock price will depend, during 1987, on the quality of drill results released from the Tundra project,” said Mr Baldry, who believes the price will be very sensitive and react with either good or bad news.

“Recognizing that the project is still in a speculative phase, the current risk assumed in purchasing the shares is justified by the upside potential.” he said.