Tamerlane sees profit-taking on 214% increase

Tamerlane Ventures (TAM-V, TMLVF-O) has secured an agreement on job creation and business opportunities with one of the three First Nations groups it is dealing with at its Pine Point zinc-lead project in the Northwest Territories.

And while the news is a positive indication that negotiations between the company and aboriginal groups are going well — and represents a sign of progress towards the land and water use permit that it needs to begin construction of the project — the Blaine, Wash.-based company saw its shares fall on the announcement.

In Toronto, Tamerlane shares were off over 20%, or 35, at $1.35 on 2.6 million shares traded.

But a spokesman for Tamerlane says the sell-off had more to do with profit-taking than any negative read on the news.

“Our shares have come up so fast in such a short time,” says the company’s manager of investor relations, Brent Jones. “Investors are just taking money off the table.”

Tamerlane’s stock had been on a tear since the end of March, when its shares were trading at 55, and into April. After announcing the acquisition of the Los Pinos copper porphyry deposit in Peru in late March, Tamerlane shares shot up to a high of $1.70 on April 13 — gaining 214% in just 12 trading days.

But Jones says the heavy investor interest wasn’t all due to Los Pinos. He says the flurry of buying largely came as a consequence of the company keeping quiet for so long. Excluding a financial report, Tamerlane hadn’t issued news since Aug. 11, 2006 — and that was only a progress report on its feasibility study at Pine Point.

News of the Los Pinos acquisition showed the market that the company was still alive and well and had the funds — US$1 million — to add to its assets, Jones says.

“In terms of aggressive investor relations activities, management wants to be conservative,” Jones says of the company’s approach. “We want to wait until all agreements are in place (at Pine Point).”

Chief among those agreements is the land and water use permit, which the company hopes it can get by this summer. If the permit is secured, Tamerlane will embark on a staged development of what could amount to be a massive lead and zinc project with a potential 20-year life.

While the company’s in-house feasibility study is currently being reviewed by a third party — Jones expects the review to be completed next month — the first deposit to be mined will be R-190. The deposit has a resource (not compliant with National Instrument 43-101) of 1 million tonnes grading 12.1% zinc and 6.3% lead.

Development plans would see R-190 encircled with a 4.5-metre frozen brine ring measuring roughly 153 metres long and 122 metres across in order to prevent water from entering the underground mine.

Lead and zinc would then be extracted via a dense media separation (DMS) circuit. The project is expected to cost roughly US$85 million, with a mine life of roughly 12 to 15 months.

But it is after that 12- to 15-month period that the real heavy lifting would begin. Cash flow generated from R-190 would be used to develop some of the 34 other deposits on the site. While those deposits would also be developed as underground mines using the freeze ring technology, they do not have the high grades that make DMS processing suitable for R-190, and would require the construction of a mill.

Those potential future deposits don’t have NI 43-101-compliant resource estimates yet, but Jones says they likely host 70 to 74 million tonnes of ore, with many of the deposits grading between 7% and 10% lead and zinc combined.

In a best-case scenario, mining at the other deposits would begin around 2010, but clearly a lot of chips would have to fall into place before then.

Investors, however, can glean some confidence from the fact that Tamerlane is run by a man with a long history and a deep knowledge of Pine Point.

Chief executive Ross Burns worked at Pine Point while it was one of Cominco’s — now Teck Cominco (TCK.B-T, TCK-N) — operating mine. Operations stopped in the mid-1980s when it became uneconomical to dewater the open pit.

Despite the mine closure, Burns was well aware of Pine Point’s mineral potential, and when Cominco let its permits lapse about eight years ago, he snapped them up immediately and waited for zinc prices to rise.

“We’re going back underground,” Jones says. “Now we’re at a point where the price of zinc is very attractive.”

The company, which has 34 million shares outstanding, also recently adopted a shareholders’ rights plan that would be triggered by any unsolicited bid for Tamerlane.