Claude, Corner Bay top picks in junior sector

The high-tech boom may be almost over on North American equity markets, but junior mining companies are still having a tough time getting noticed by investors. Even smaller brokerage firms that once focused heavily on junior mining have broadened their scope to encompass industrial, consumer-product and biotechnology companies. Indeed, the latest top picks of Pacific International Securities include just two junior mining companies — Claude Resources (CRJ-T) and Corner Bay Silver (BAY-T) — among a basket of consumer, bio-tech and high-tech stocks. PI’s mining analyst, Wendell Zerb, like most of his peers, shows a preference for companies with quality assets and with production or near-term production potential.

Claude Resources was given the nod for its steady and solid performance at the Seabee gold mine in Saskatchewan, and the exploration upside at its Madsen mine gold project in Ontario’s Red Lake district. The company currently trades at about 65; however, Zerb sees potential for it to climb to $1.50 over the next year. The company is debt-free, and diversified, with oil and gas assets.

Production at Claude’s Seabee mine recently exceeded 500,000 oz., more than double that of any previous gold mine in the province. The shear-hosted, underground mine has reserves totalling 579,000 tonnes grading 7.54 grams gold per tonne, plus an additional 1.6 million tonnes (at similar grades) as extensions to depth of current mining workings.

Seabee is expected to produce 54,800 oz. gold this year at a total cash operating cost of under US$200 per oz., and total costs of about US$240 per oz. The mine has produced modest but steady profits for most of its 10-year operating history, though delays in completing a high-grade stope resulted in a net loss of $400,000 in the first quarter of this year.

Zerb, like most mining analysts, is keeping a close eye on Claude’s Madsen project, a former producer currently being explored by Placer Dome (PDG-T). The major can earn a 55% interest by spending $8.2 million on exploration over three years and completing a bankable feasibility study. This can be increased to 60% in return for funding all development costs.

The target is a high-grade deposit similar to Placer Dome’s nearby Campbell mine, and to the adjacent Red Lake mine, currently churning out huge profits for operator Goldcorp (G-T). A first round of drilling was designed to test the structure and stratigraphy of an area presumed to host the historic high-grade Number 8 zone. The next phase is targeting the up-plunge projection of this zone.

Corner Bay, meanwhile, was given the nod for its work at the wholly owned Alamo Dorado silver project in Mexico’s Sonora state. The junior was rated a “speculative buy,” with a 12-month target of $3.40. It currently trades at about $1.60.

“The current resource/reserve estimation (covering all categories) and preliminary mine plan, completed by independent consultant Minetec, outlines potentially minable reserves/ resources of about 100 million oz. silver-equivalent,” Zerb notes.

The project is expected to have a low stripping ratio because of the favourable topography and the configuration of the mineralization. “Furthermore,” Zerb adds, “a high-grade core in the southeastern part of the deposit is near-surface and exploitable at the beginning of the mine plan, which significantly enhances the project economics.”

On the metallurgical front, column leach tests suggest that silver recoveries of between 65% and 70% can be achieved, along with gold recoveries of 85%. The project’s internal rate of return is estimated to be 50%.