 |
|
 HOME |
ARCHIVES |
FORUMS |
SEARCH |
SITE MAP |
ABOUT US |
|
| Home -> Archives -> Bill Fox -> The Cortez Story - Part Three: Overview of Players and Two Majors |
|
|
March 06, 2005 The Cortez Story - Part Three: Overview of Players and Two Majors |
  |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Precious Metals Special Report Outline: Part Three: Overview of Players and Two Majors To a large extent Newmont Mining Corporation and Placer Dome drive the Cortez Trend development. They do this in two ways. First, through their development of low cost processing infrastructure in the area, they increase the profitability of mining low grade ore and thereby increase the number of economically viable prospective targets. Secondly, they hold the largest land positions on the Cortez Trend. They understand the geology better than most anyone else, and have the strongest vested interests in making the trend play successful. Third, they have been the most active major mining companies in regard to arranging joint venture deals with junior mining companies. They help play the bank to finance exploration drilling. Placer Dome and Newmont have a reputation for being top mining firms with outstanding exploration departments that make sound business decisions. Every week, junior mining companies bring them more deals and ideas than they know what to do with. They have the staff resources to analyze every deal in extreme detail before making a move. When they select a particular property for a JV, that is usually a very good indicator. Therefore, it can pay for nvestors to look very closely at Newmont and Placer Dome first and what they are doing. In my discussion of junior mining companies in Part Four, I highlight in red joint venture activity with major companies. ...watch out for that "moose pasture closeology" Before profiling Newmont and Placer Dome, I would like to review some lists. Please note from the map of the Carlin Trend at the beginning of Part One of this article and also in Part Five how the trend seems to have "passed over" certain areas. Therefore, there is always a risk that if you invest in a single land position, you can find yourself empty-handed even in a hot trend area. In addition, it is important to understand the basic geological premises behind your investment to avoid buying a company whose properties might reflect what John Kaiser quaintly refers to as "Moose Pasture Closeology." Lastly, Paul van Eden commented at Al Korelin's round table at the Nov 28th-29th San Francisco Gold Show, "Don't think of buying exploration stocks as investing under any circumstances, because it is not. It is pure speculation. If you do not have money to speculate with, don't." As of Jan 3, 2005, John Kaiser's "Bottom-Fish Standings" list included Levon Resources (H, LVN,), NDT Ventures (TSX-V, NDE), and White Knight Resources (TSX-V, WKR). Levon and NDT Ventures were listed on 3 Jan 2005 as being within the bottom fish price zone, whereas White Knight had moved above the price placed when last reviewed 5 Jan 2000 and was now rated a "Speculative Cycle Hold 100%." (100% means he has not recommended selling any shares yet to take profits). As far as personal disclosure, John Kaiser has stated that he owns shares of Miranda Gold. The "X-Report" published 23 June 2004 by Haywood Securities of Canada, highlighted the following companies based on the theory that the best action will run from NW to SE along the Cortez Fault area and not significantly involve side areas: Victoria Resources Corp. (TSX-V, VIT), White Knight Resources (TSX-V, WKR), Coral Gold Corp. (TSX-V, CLH), Miranda Gold Corp. (TSX-V, MAD), J-Pacific Gold (TSX-V, JPN), Levon Resources (TSX-V, LVNH), NDT Ventures (TSX-V, NDE), and Nevada Pacific Gold (TSX-V, NPG). In its Daily Letter dated September 15, 2004, Canaccord Capital of Canada focused in alphabetical order on the following companies: American Bonanza (TSX-V, BZA), BacTech Mining Corporation (TSX-V, BM), Coral Gold Resources (TSX-V, CGR), Greencastle Resources (TSX-V, VGN), J-Pacific Gold (TSX-V, JPN), Klondex Mines (TSX-V, KDX), Miranda Gold (TSX-V, MAD), Nevada Pacific Gold (TSX-V, NPG), NDT Ventures (TSX-V, NDE), Victoria Resource (TSX-V, VIT), and White Knight Resources (TSX-V, WKR). The aforementioned lists do not necessarily reflect my own views or the position of my broker-dealer Sammons Securities. The Players This alphabetical list below is based on companies that have visible holdings on the Mineral Information Maps produced by Intierra Resource Intelligence portrayed at the beginning of Part 5. Agnico Eagle (http://www.agnico-eagle.com/)
NYSE symbol: AEM.
Has operatorship and an earn-in deal for roughly 60% of the NDT Ventures property
on the southern border of the main Cortez Joint Venture area. Agnico Eagle
also has an earn-in
deal through a subsidiary on the Norma Sass property of Coral Gold. A Tale of Two Majors Newmont Mining (http://www.newmont.com/en/) NYSE symbol NEM. For the uninitiated, Newmont Mining, headquartered in Denver, Co, is the largest gold mining company in the world. Newmont controls sixty million acres, land roughly the size of the United Kingdom, and is one of the best run and lowest cost major producers in the industry (so is Placer Dome, incidentally). It's President, Pierre Lassonde, and Chairman, Seymour Schulich, became industry legends for their remarkable performance running Franco-Nevada, which later merged with Newmont. A number of industry insiders who have known Mr. Lassonde have told me that he is a "professional's professional," both a very shrewd deal-maker and a very ethical individual, which can be a rare combination. In recent months Newmont's stock has traded at roughly twice its net asset value per share, and a liquidation value (suggested by fund manager Bill Fleckenstein's analysis) that anticipates roughly a $50 rise in the gold price from where gold has been recently fluctuating in the low to mid-$400's. Newmont has become a bellwether of the precious metals sector reminiscent of Intel for semiconductors in the 1990's. The firm also played a leadership role to help eliminate the aggressive hedging among major gold mining companies that I discuss in Part One that drove the price of gold down to ruinous prices for half the mining industry in the late 1990's. As I also mentioned at the beginning of Part One, no one needs to lecture Newmont about finding Carlin-type deposits. It was Newmont mining geologist John Livermore who found the original Carlin deposit after reading an article and hearing a lecture by Dr. Ralph Roberts. However, there was so little exploration in the late 1990's on account of depressed gold prices that it created roughly a five year gap in the exploration pipeline across the gold mining industry. Because of the long lead-lag times required to find resources and put them into production, gold mining industry analysts predict a steady decline in gold production for the next five years even if gold prices zoom. I go into this and other factors in more detail in my article "Back of the Envelope Analysis for $1,000 Gold in Five Years." The period of industry consolidation that accompanied severely depressed gold prices in the late 1990's -the same period in which the exploration pipeline shriveled up --all of this had the paradoxical effect of increasing the need by majors to find ever more reserves to maintain their higher post-consolidation production levels. Generally, major gold mining companies are not as good at exploration as the juniors, yet they are not replacing their reserves at the same multi-million ounce rate per year that they are producing them. This means they will likely to feel even more pressure to engage in joint ventures or acquire juniors in the years ahead, putting even more upward pressure on junior mining company stock prices. Size of Cortez land position: This is difficult to calculate, particularly since many of the former Santa Fe railroad "checkerboard" parcels in the northern area are unmarked on the property map in Part Five. Also, the northern and southern borders of the Cortez Trend are not precisely defined. My very intuitive guess is that Newmont is probably the largest landholder in the area, except that the company controls the tail ends of the Cortez Trend play. Newmont does not appear to have proven deposits on the Cortez Fault system itself, whereas the Cortez Joint Venture area (60% Placer Dome, 40% Kennecott) holds the "center" and has proven mega deposits within the Cortez Joint Venture area on the fault system. Placer Dome has actively explored the Cortez Trend area much longer than Newmont, and has probably has a first mover advantage in staking the most prospective parcels. Cortez Trend Properties: Newmont is operationally active in the area. According to Newmont: "In 2001, Newmont acquired Battle Mountain Gold Company, giving Newmont ownership of the Phoenix property, south of Lone Tree, where historic mining has left a halo of lower-grade gold and copper reserves... Construction of a new 37,000 ton-per-day mill and other facilities is scheduled to begin in early 2005, with production beginning in 2006. Nevada management is working to ensure a smooth transition between the scheduled cessation of mining at Lone Tree and the startup at Phoenix." A Newmont spokesperson told me that recent drilling has now proven up 6.2 million ounces of gold and 420 million ounces of copper at the Phoenix Mine. However, I was informed by another source that from a technical geological viewpoint, Phoenix does not involve a sedimentary Carlin-type deposit, but rather involves the product of a granitic intrusive. 
Newmont's holdings are marked in yellow. They lie at the very northern end of the Cortez Trend. Source: Newmont Mining 2) Victoria Resources' Mill Canyon and Hilltop-Slaven properties: Newmont
has 51% back end rights, announced 30
June 2004 by Victoria Resources. Newmont also holds 100% of the alternative
checkerboard properties at Victoria Resource's Hilltop-Slaven properties. The
same holds for Victoria's Preble-Pinson properties which are north of the Cortez
Trend and Interstate 80 but still within the Battle Mountain-Eureka Trend.
Oxidized ores, as the term implies, are typically located near the surface and have been exposed to various forms of aeration and other forms of "weathering," whereas refractory ores are typically found at deeper levels, and have higher sulfide levels (and correspondingly lower oxide levels) that make them more expensive to process. However, a saving grace is that as one goes deeper, the grade (concentration of gold in the ore) tends to increase, so there is an economic trade-off here between the higher gold grade and the increased processing expense from the higher sulfur grade. The cheapest process involves the heap leach method, in which mining companies dump huge mounds of ore on giant pads and slowly drip a cyanide solution through the ore to leach out the gold. To get the gold out of higher sulfide ores, mining companies have to put the ore through more exotic and expensive treatment processes, that typically involve giant roasters and big pressure-oxidation vats. More recently certain companies have pioneered an environmentally friendly approach of using tanks that have sulfide-eating bacteria (please note my discussion of BacTech in Part Four). Newmont has pioneered a hybridized process where it uses bacteria to munch on sulfidized ore in open air heap mounds. Rick Redfern, head geologist for Senator Minerals, told me that the Elko, NV area alone has over $3 billion dollars of processing infrastructure run by majors such as Newmont and Barrick. Some roasters and autoclaves cost $200 - $300 million apiece. Obviously with so much processing capacity on hand, if Newmont wants to avoid laying off workers and closing down plants, or avoid disappointing shareholders with dramatically declining production curves, Newmont must do one or more of the following:: a) learn how to dig deeper cheaper b) make its lean and mean processing capacity even leaner and meaner to profitably process lower grades and c) find more gold --a lot more gold-- in its northern Nevada neighborhood. Placer Dome. (http://www.placerdome.com/) NYSE symbol PDG. 1) Cortez Joint Venture land package. Approximately 400,000 acres or 625 square miles. Placer Dome has the largest land position in the middle of the Cortez Trend in an assemblage of properties called the Cortez Joint Venture (CJV). Placer Dome has a 60% interest in the CJV, and Kennecott, a subsidiary of Rio Tinto (one of the world's largest mining companies), has 40%. On some contiguous properties, the CJV is partnered with Coral Gold and Idaho Mining Corporation. Placer Dome is the lead explorationist and operator of these properties. The enormous mining infrastructure and reserves on the CJV properties did not appear over night. The old Cortez Mine located a few kilometers from the Cortez Hills discovery area operated as a modest open pit operation from 1969 until it was retired in the early 1990's. The adjacent mill continued at 2,000 tonnes per day, processing ore for Horse Canyon, Gap, Gold Acres, and later Pipeline (its last two years) until it shut down in October 1999. In March 1991, Placer Dome discovered the Pipeline ore body about 500 to 600 feet below the surface, followed by the South Pipeline discovery in November 1991. The Crescent Pit, a shallow portion of the South Pipeline deposit, began excavation in 1994. From 1996-97 Placer Dome built and put into operation a new processing plant. Placer Dome made its Cortez Pediment Deposit discovery in 1998, followed by its South Pipeline Extension Deposit Extension discovery in 2000. It made its major Cortez Hills discovery in April 2003. Currently Placer Dome operates three mines in the Cortez Joint Venture area, which consist of the Gold Acres, Pipeline, and Pipeline South Mines. The last two mines are almost continuous, and are hence referred to as the "Pipeline Complex.". The other mines depicted in the Cortez Joint Venture Part Five map are "historical" (inactive). They include the Hilltop Mine, Horse Canyon Mine, Toiyabe Mine, and aforementioned Cortez Mine. Placer Dome has already mined 8.3 million ounces out of the Cortez Joint Venture area from the time period between 1991 and June 2004.. The following resource and reserve data for the Cortez Joint Venture area were taken from page 17.46 of the September 2004 Placer Dome Technical Report:
The above figures do not include the ET Blue discovery, nor do they include Placer Dome's discovery described in Part One involving 500 feet at .7 ounce or 410 feet at over an ounce. Alphabetized list of joint venture partners and ownership positions: 2) Bravo Venture Group's Three Bar Prospect (3.86 sq miles), South
Lone Mountain (2.99 sq. miles), and South Gold Bar property (2.02
sq. miles) In regard to the latter, according to the Oct 21, 2004 Bravo Venture Press
Release, "[Placer Dome can elect] to enter into a joint venture agreement
on such project to earn a 51 percent interest upon total expenditure of $1.0
million. Mining and Exploration Concept of Operations in Cortez Joint Venture Area: According to Placer Dome. "During 2003, Cortez [Joint Venture area] produced 1,065,402 ounces of gold (61% mill, 31% heap leach and 8% carbonaceous ore sale). Placer Dome's share of production was 639,241 ounces at an average cash and total cost of $135 and $172 per ounce, respectively...Cortez's updated forecast for 2004 calls for an increase in Placer Dome's share of production to 630,000 ounces...Its cash and total costs per ounce forecast remains at $160 and $200, respectively...It won the Mining Operation of the Year award at the Mining Journal's Outstanding Achievement Awards..." "Capital expenditures of approximately $91 million (Placer Dome's share $55 million) are planned in 2004. The capital investment includes $47 million for mobile mining equipment and $28 million for tailings and heap leach construction...The net book value of Placer Dome's share of property plant and equipment and deferred stripping is $72 million at December 31, 2003." As mentioned in my discussion of Newmont Mining above, generally the pattern in the Carlin and Cortez Trend areas is that one finds "spotty" gold deposits down to about the first 1,000 to 1,500 feet of depth that are "oxidized" in their molecular bonding and hence lend themselves to milling processes. Going deeper, the gold often gets denser, but it tends to become bound up in sulfide's, meaning that instead of milling, it requires more expensive processes that include roasting, pressure oxidation, and bioleaching to get the gold out of the ore. Placer Dome is about a year and a half away from mining out its shallower
oxide ores at its Pipeline Complex, and hopes to commence open pit operations
at its Cortez Hills deposit within that time so that it can keep feeding its
mills the shallow oxide ores. Page 19-1 of Placer Dome's Sept 2004 Technical
Report describes the following mining development projects: a) Pipeline
pit, containing the Pipeline and South Pipeline ore bodies b) Gap pit c) Pediment
pit, containing the Pediment ore body and d) Cortez Hills pit, containing the
Cortez Hills ore body. The Aug 3, 2004 Raymond James research report on Victoria Resources notes that Placer Dome has a very similar strategic problem as Newmont in terms of replacing the high rate of production of reserve ounces. It states, "Based on Placer Dome's 2004 forecasts, we estimate the company's total cash costs in Nevada will increase approximately 18% on decreasing production. Increasing average costs of production in the Carlin area are important from an investment perspective because they underline the critical importance and strategic worth of new discoveries in the region." Cortez Exploration Strategy: Depleting the shallower oxidized gold-bearing zones does not necessarily mean that the Pipeline Complex area is going to run out of gold. Please note on the White Knight Fault Map near the beginning of Part Five, the Cortez Fault seems to displace and pivot in the Cortez Joint Venture area. Both the Pipeline Complex and Cortez Hills deposit may be sitting on the pivot points at different ends of the Cortez Fault system. This is significant for at least two reasons. The sides of the fault system seem to show controlling structures running in parallel that hold gold deposits. Secondly, the fault system itself may have lots of gold deposits deep inside it. The Cortez Fault system probably goes down over 20 kilometers through the earth's crust to magma, which in Nevada happens to be half as thick as the crust found most everywhere else in North America. In Part Five I address the issue whether the Cortez Fault system may in fact surpass the Carlin Trend. In the Cortez Hills for sure, and to a lesser extent at the Pipeline Complex, geologists see the 38 million year old dikes with Carlin-style gold deposits that are a common characteristic on the Carlin Trend. The gold-bearing zone in the Cortez Hills area seems to be about 200 meters wide. Placer Dome has drilled down 2,500 feet without finding a bottom yet. The depth of oxidized gold is about 1,500 feet. Beyond that, one finds sulfidized gold. A difference between Cortez Hills deposit and the Meikle Mine on the Carlin Trend as a possible comparable is that the Meikle Mine has more sulfides at shallower depths and an average grade of .8 ounces per tonne, whereas the Cortez Hills weigh in around .4 ounces per ton and have more oxidized gold at shallow depths. As explained near the beginning of Part Five, the major gold deposits in Carlin tend to be within a couple of miles of one of the north-south faults that define the trend (Post-Genesis, Leeville, and Good Hope faults). They also tend to be close to a cross fault. There is nothing yet to contradict this basic pattern in the Cortez Trend area. The next big question is where does the Cortez Fault system lead to running south from Cortez Hills, and north from the Pipeline Complex? The Cortez Fault system does not reveal itself on the surface like the San Andreas Fault in California, but rather it has been completely covered over by recent geological activity. White Knight has been more explicit than most companies about making public its theories regarding the location of the Cortez Fault system and its methods for finding it. Placer Dome plans to more than double its exploration expenditures in the Cortez Joint Venture area in 2005 compared to 2004, which amounted to $6 million. A spokesperson for Placer Dome denied a rumor in a phone conversation with me that Placer Dome is planning to drill 900,000 feet in the Cortez area in 2005. He observed that rig capacity has grown too tight in Nevada to do this amount of saturation drilling, and that furthermore it would reflect an unrealistic 20 fold increase compared to 2004. Looking south from Cortez Hills, there is a chance that the Cortez Fault system pivots and shifts again around the southern Tonkin Springs area, where it may be intersected by a SW-NE trending Tonkin Summit Fault Zone. I talk about the importance of cross faults and describe this phenomenon in greater depth in my "Northeast School" section in Part Five. White Knight has run gravity map studies in such a way that it thinks the northern edge of a possible crisscrossing fault in the Tonkin Summit Fault Zone might run from Nevada Pacific's Keystone property, through the Tonkin Springs Mine area, and through the southern part of White Knight's Indian Ranch property. Placer Dome apparently sees something here as well. Placer has already arranged JVs with Nevada Pacific and White Knight on their respective properties in this area. Looking northward above the Pipleline Complex, according to one source, Placer Dome has staked land just to the north and south of White Knight's Slaven Canyon project. Unless this is a "shot gun" or "fake-out" move by Placer, this suggests that the company's explorationists can envision the Cortez Fault system heading directly north through the Robertson-excluded area, where Placer Dome has a joint venture with Coral Gold, through the "checker board" properties held by Newmont and Victoria Resources, and up through Slaven Canyon where White Knight wants to start drilling several deep holes in April 2005. Stay tuned as the plot thickens. End of Part Three: Overview of Players, Two Majors Back to Part Two: The Fundamentals Forward to: 
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclaimer: The views expressed are those of William Fox, and may not be those of Sammons Securities Company, LLC. This report is for research/informational purposes only, and should not be construed as a recommendation of any security. Information contained herein has been compiled from sources believed to be reliable. There is however, no guarantee of its accuracy or completeness. Bill Fox is VP/Investment Strategist and private client money manager, America First Trust. Bill welcomes phone calls and responses to this article. His web site: www.amfir.com. Address: VP, America First Trust, Reg. Rep., Sammons Securities Co., LLC P.O. Box 820669, Vancouver, WA 98682, telephone: 360-882-5369, toll free: 866-945-5369 (866-WILL FOX), email: wfox@sammonsrep.com. Securities offered through Sammons Securities Co LLC, member NASD and SIPC. Securities offered through Sammons Securities Co. LLC, Member NASD and SIPC. Investment advisory services offered through Sigma Planning Corporation, a registered investment advisor. Views and opinions expressed are not necessarily those of Sammons Securities or Sigma Planning Corporation. Sometimes William Fox offers viewpoints that are not necessarily his own to provide additional perspectives. Please see additional disclaimer on Broker-Dealer/Sammons page. Copyright © 2004-2005 William Fox Image rendition and html coding Copyright © 2000-2008 SafeHaven.com « BullionVault.com
-- Buy gold online - quickly, safely and at low prices » « Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. » |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Printer Friendly
eMail Article
Top of Page
DISCLAIMER
|
HOME |
ARCHIVES |
FORUMS |
SEARCH |
SITE MAP ABOUT US | LINKS | CONTACT US Copyright © 2000-2008 - SAFEHAVEN.com |
ColdFusion by COSTAS PILIOTIS Server Admin by DIGITAL ADMIN SafeHaven Web Site FEEDS  |