The following is the first in a series of articles concerned with the stock picks of a select group of mining analysts and newsletter writers who follow the junior retail mining sector closely. This week, we chatted with Don Poirier, a Vancouver-based analyst with First Associates. He first broke into the business with Brink, Hudson & Lefever and has been covering the mining scene since the late 1980s.
Among gold equities, Poirier likes
The company has embarked on an aggressive 40,000-metre program of drilling around the Limon mine in Nicaragua in an effort to expand reserves well beyond the two years currently outlined. Limon’s production of 46,000 oz. in 2003 fell 9% short of forecasts, owing to delays in mine development. Production for 2004 is estimated at 53,000 oz., with cash operating costs of US$228 per oz.
In Costa Rica, Glencairn is spending US$26 million to construct an open-pit, heap-leach mine at Bellavista. Once in commercial production, Bellavista will produce 60,000 oz. annually at a cash cost of US$163 per oz. over a 7-year life. The company is in the process of closing a $25.5-million financing consisting of 30 million units priced at 85 apiece. Proceeds will be used to complete construction of the Bellavista mine.
Poirier esteems Glencairn’s management team. “These are fairly savvy market-oriented types who are continuing to look for new assets,” he says.
Last fall, Australia’s
A $2.1-million summer drilling program targeted specific areas of the Tiriganiaq zone in an attempt to upgrade resources. Tiriganiaq, the largest mineral resource on the property, hosts an indicated and inferred resource of 12.3 million tonnes grading 6.8 grams gold, equivalent to 2.7 million oz.
Compalex is undertaking a complete remodelling of the resource in the context of a high-grade underground operation. Previous resource estimates and engineering work were largely focused on an open-pit model. Poirier is optimistic Comaplex will be underground on the project by this time next year, if not sooner, as the company fast-tracks towards feasibility. “There is certainly a big program planned this year,” he stresses. Comaplex is trading at $3.95 in a 52-week range of $5-$1.15.
Eldorado Gold is another gold producer that shows promising growth. This past year the company produced 95,049 oz. from its Sao Bento underground mine in Brazil at a cash cost of US$245 per oz. Company projections have the mine producing at similar levels in 2004 but at a slightly higher cash cost of US$245 per oz., owing to a strong Brazilian currency. Eldorado continues to advance its promising Kisladag project in Turkey through the permitting process and remains optimistic it will receive the two remaining permits to begin construction in the second quarter of 2004. Kisladag hosts proven and probable ore reserves of 138 million tonnes grading 1.28 grams gold, equivalent to 5.3 million oz. The project will be brought into production as an open-pit/heap-leach mine, producing 155,000 oz. in its first full year and increasing thereafter to 246,000 oz. annually for the remaining 11 years of its life at an overall cash cost of US$149 per oz. and a total cost of US$201 per oz. Initial capital costs are pegged at US$58 million, with the second-year expansion costing a further US$31 million.
Eldorado had $105 million in cash on hand at year-end, with 254 million shares outstanding, or 273 million fully diluted. Its shares are trading at around $4 in a 52-week range of $5.02-$1.66.
Among base metals explorers, Poirier recommends
The discovery hole into the new zone was drilled last fall, returning an impressive 57 metres grading 2.54% copper, 1.15 grams gold and 17.4 grams silver from near-surface. Imperial has three drill rigs running on the property, and so far 45 holes have been drilled in the Northeast zone. The zone has been opened up over a length of 325 metres and to a depth of 200 metres. The latest batch of results from nine holes, all of which intercepted significant intervals of mineralization, included 148 metres averaging 1.46% copper, plus 0.31 gram gold and 8.9 grams silver per tonne (including 75 metres of 2.5% copper, 0.52 gram gold and 15 grams silver). “They will be in production at Mount Polley this time next year or sooner,” predicts Poirier.
The Raglan area in the Ungava Peninsula region of northern Quebec is emerging as a highly prospective nickel camp in light of discoveries by
It 2002, Canadian Royalties discovered the near-surface Mesamax deposit on the 70%-owned Expo-Ungava property. The partially drilled deposit contains an indicated resource of 1.4 million tonnes grading 2.1% nickel, 2.7% copper and 0.08% cobalt, plus 0.3 gram gold, 1 gram platinum and 4.2 grams palladium. An additional 130,000 tonnes of similar grading material are inferred.
Last year, Canadian Royalties targeted the Mesamax and Expo areas with further drilling and, in the process, may have discovered a new mineralized zone along side the northeastern boundary of Expo. The potential of this new zone is illustrated by a 108-metre-long intercept averaging 0.87% nickel, 0.69% copper, 0.26 gram platinum and 1.4 grams palladium. Higher-grade sections in this intercept averaged 2.12% nickel, 1.37% copper, 0.08% cobalt, 0.42 gram platinum and 2.99 grams palladium across 18.7 metres.
Canadian Royalties will be conducting a big exploration program this summer, offering lots of promise, says Poirier. In the same vein, Knight Resources is considered a more speculative play. There is a fair amount of anticipation over this summer’s drilling on Knight’s West Raglan project.
Poirier has been a strong backer of
IMA has now completed pole-dipole induced-polarization surveys between the Galena and Navidad Hills on 200-metre spaced lines, and is preparing to step out with drilling in this 1.1-km-long valley. IMA remains in play, says Poirier. “It’s an attractive property with district-wide potential.”
By raising the cutoff to 3 grams for underground purposes, the resource falls off to 1.8 million oz. gold and 3.4 million oz. silver in 4.6 million indicated tonnes of 6.2 grams gold and 10.5 gram silver, plus 4.7 million inferred tonnes of 5.9 grams gold and 12.3 grams silver. Four rigs are turning on the project, and the company is tunnelling in on the 2,800-metre level in preparation for underground definition drilling.
“It’s a big project in a challenging political climate, but I continue to like it for its in situ ounces,” says Poirier. Its shares are trading around $2 in a year-long range of $3.05-$1.
On a more speculative nature, Poirier recommends
Another junior with good management is
Other speculative picks include
Goldcrest Resources is focused on a Western Australian greenstone belt project called Youanmi, which is permitted and comes with a sulphide and an oxide processing plant. Poirier says the project has a gold resource of about 100,000 oz. that stands to grow with additional work. Goldcrest has also picked up a copper-gold project in Burkina Faso, West Africa. Its shares are trading at around 50 in a 73-15 range. “It’s a nice story and I actually own it,” Poirier acknowledged.
Intrepid Minerals is exploring a portfolio of properties in Argentina, El Salvador and eastern Canada. “They have a lot of projects and good expertise in Central and South America, with ounces in the ground,” says the First Associates analyst.
Virginia Gold is a well-managed company that’s focused in Quebec and careful with its cash. Says Poirier: “It’s all frontier Quebec exploration, but there are a lot of good things going on there.” The company is trading at around $1.50 in a 52-week range of $1.88-83.
Cornerstone Capital is a “people thing,” remarked Poirier. There’s a bigger game under way, with the recent restructuring of the company’s share capitalization and management, along with the appointment of Jonathan Challis as president. “Maybe the easy money has been made, but Challis and some of these newer investors are not going to be satisfied running a 50 or 60 mining deal. This is going much higher.”
Be the first to comment on "First Associates’ Poirier favours Glencairn"