Merchant banks—Endeavour (TSX: T.EDV, Stock Forum) is one—typically get little credit for their holdings. The shares act much like a closed-end fund—at this point in the commodities melt-up—selling for a discount to the market value of its portfolio, even when, as in the case, the merchant bank is making $20 million or more a quarter in fees.
"Everyone is searching for good gold assets," says James Longshore, whose Xtra-Gold Resources (OTC:BB: XTGR, Stock Forum) is prospecting Ghana's Kibi Gold Belt. "The consolidating has begun."
Endeavour purchased 38% of gold producer Crew's shares about four weeks ago. Crew and another West Africa company, Etruscan Resources (TSX: T.EET, Stock Forum), are the first two planks of Endeavour Financial's stated strategy of cobbling together a producer-prospector juggernaut in the nations of Burkina Faso, Sierra Leone, Guinea and Ghana.
Now that OAO Severstal, a steelmaker controlled by Russian billionaire Alexei Mordashov, is bidding about $400 million for Crew, Endeavour will be searching for other cheap gold holdings in the region. West Africa "is one of the last frontiers. Randgold went there in 1998 and put together all West Africa assets, on the way cheap, and look where they are now," says Xtra-Gold's Longshore. "A few years ago you could have had many of the concessions now being worked by Redback or Keegan or some of these others for pennies on the current dollar."
Ghana is seen as West Africa's primary gold hub with 3 million ounces of gold per year. The other countries are "low hanging fruit that can easily be brought into production, but just not as easily as English-speaking Ghana," says Longshore.
We here at Ticker Trax have been engaged in the Ghana dynamic since 2003, when we first toured the nation, courtesy of Sam Jonah, the Ghana pioneer who ran Ashanti Goldfields and the flagship Obuasi Mine.
On the subject of serendipity, this is the week I have been charged with introducing Xtra-Gold Resources' Longshore to a few of my closest natural resources in and around San Francisco. (Natural, as stated earlier this week, in that the asset managers I have known for months, years and in four or five cases locally, decades, are investing more and more of their money in hard assets, such as gold.)
Xtra-Gold's 600-meter ridge above Zone 2 of its Kibi Gold Trend will—and I stake my reputation and the livelihood of Ticker Trax upon this premise—will one day be seen as a intensely high-grade source of gold that equals, or dwarfs prospects that are being worked (or mined) by Redback, Keegan Resources (TSX: T.KGN, Stock Forum) and others in Ghana.
James Longshore and his Ghana team, including VP of Exploration Yves Clement, and two new consultants whose reputations of geologic valor and honor precede them, are perhaps 18 months behind where CEO Dan McCoy has taken Keegan in the Esaase.
As Xtra-Gold's contracting rigs in the Kibi add, say, another 150 drill holes to their current 68 holes in the next six to nine months, it is likely that Xtra's market value will slowly and surely climb, notch by notch, toward per-ounce market cap metrics that are more representative of 3 million-plus ounce prospects. Whether those metrics get into the $150 per-ounce acquisition costs seen in the past three years (Agnico Eagle-Cumberland, for instance; or Yamana Gold-Desert Sun) depends on the size and grades of this vast Kibi Gold District that Xtra has been developing for several years.
A question this morning, coming at us from points West and East, is whether a merchant bank or an Africa-active major, such as Newmont Mining (NYSE: NEM, Stock Forum), would jump the data gun and make a run at tightly held Xtra-Gold Resources.
Says Longshore, as we head to SFO Airport for his flight back east, "We've always stated our intention is to sell the company, but not before we prove out the ounces we think we have on our prime concessions." Our take is simple: Even if Xtra shows, over the next year, a resource of merely half what Mr. Longshore and his team believe is possible (say 2 million ounces instead of 4 million or 5 million ounces), the extra gloss of Ghana, its mining-savvy laws, ocean access and legacy of 25-year and greater mine life spans will result in valuations per ounce far higher than anything else outside of Ghana but in West Africa.
We here at home have been adding to our Xtra stake this week and last. Xtra-Gold Resources is a Planetary Prospect of this service. In the world of funny serendipity, so is Endeavour Financial.
Actionables:
- Great Basin Gold (TSX: T.GBG, Stock Forum) updated investors on its quarterly performance. Nothing of great shakes on the surface. The hidden heart of the mining matter, specifically the Burnstone Mine I visited three weeks ago in South Africa, has to do with the mechanized mining principle known as long-hole stoping drilling. I have seen how it works, and one day, GBG and others will be seen as pioneers in the cost-effective procedure. Ferdi Dippenaar's Great Basin Gold and its initial long-hole stoping trials are reducing waste and saving time among the thin veins at Burnstone. GBG hopes to accelerate what it calls a "higher level of mechanized mining" during the next 12 months. (See details.)
- More on Africa: I am, in the wake of an almost two-day tour of the entire Wits Basin in South Africa (some three weeks ago), evaluating Wits Gold and its extensive holdings across that gold-rich region of deep mines. Wits is (TSX: T.WGR, Stock Forum).
- Inter-Citic Minerals Inc. (TSX:ICI; ICI.TO): ICI's executives have been on the China Road for weeks and weeks now. CEO Jim Moore tells me just now that there is "nothing specific" he can tell us about the trip. The Dachang Gold Project in eastern China is the only one of the Planetary Prospects I have yet to see. Says former Holy Cross footballer Mr. Moore, "You are correct that I have been spending a lot of time in Asia. I will be in Hong Kong this weekend and hope that I will be back from the Far East in time to catch you at the PDAC." My own take is that Inter-Citic is weeks or less away from a major China transaction. I added to my position on Wednesday.
- Colombia: The second trip to Bellhaven Copper & Gold (TSX: V.BHV, Stock Forum) properties in Colombia's Bolivar Department is postponed until early April—for lack of helicopters. Nothing to read between the lines. I have no intention of continuing the Bellhaven story until I see again some of the artisanal properties Bellhaven's Julio Benedetti is coveting along and above the Magdalena River. Personally, this is a speculative and compelling price (less than $15 million) for a company with copper and gold assets in Colombia and Panama.
- Frontino: The words are flying fast and flag-nogging furious over the historic Colombia gold mine at Segovia and its bankrupt pension fund for retired miners. I am hoping to see with my own eyes what the fuss is all about. The negotiations for Frontino are fraught with presidential politics, but the intentions of Medoro Resources (TSX: V.MRS, Stock Forum), whose shares I have owned for almost two years via its disastrous predecessor at El Marmato, Colombia Gold Fields, are clear: raise $180 million or more to purchase the mine and fund the bankrupt pension trust for at least two generations of retired miners. We'll see who blinks first. I believe Medoro will outlast all potential bidders for Frontino, and manage to put the gnarled topic of bankrupt pensioners and angry mining unions to rest once and for all. I will be attending Medoro's presentation at Toronto's PDAC in one week. For the location, please ping me.
- Life sciences is looking cheap again. We are looking at several tiny pharma and drug discovery companies.
- Ticker Trax would love to have an invitation to the BMO show in Florida next week. Any ideas? Ping me please.
We are poised to PARE THE LIST. What that means is this: We cannot do research justice to more than a dozen investments in terms of on-spot research. In addition, I wish to add one or two Colombia and-or Peru/Mexico names to the list. Maybe one from Africa. So, in the zero-sum game of my life, something comes and something goes.
As for ownership, as stated numerous times in our 16-month-old Ticker Trax, if a name comes off the list because of bandwidth reasons, I will continue to hold it personally. If, for example, I eliminate Avanti Mining (TSX: V.AVT, Stock Forum), our moly mine at Kitsault in British Columbia, I will give all subscribers the opportunity to sell it, if they wish. I won't be selling early, or late for that matter. In the case of Avanti, whose CEO, Craig Nelsen, has educated me on mining matters going back to his days at Africa's Goldfields, I have been purchasing more shares this past week or so.
Still, I cannot do justice at this point to more than 12 or so Prospects, given our Ticker Trax template of "Seeing It, Knowing It, Holding It, Writing It, Living and Breathing It." I say this even with the outstanding support of our Stockhouse team of writers and editors and technicians—Sean Mason, Keri Korteling and Stanley Chan. They are just as swamped as we are here at Ticker Trax sorting through the news flow.
By the way, at this point in the melt-up cycle, I am finding it hard to sell anything related to natural resources. That might prove to be a mistake on my part. The intention is to hold all of the Planetary Prospects for out-sized returns UNLESS some fact or development changes the outlook for a specific investment.
In all cases, if we here at home were intending to sell ANYTHING on the list of 12, subscribers would get the heads-up at least one full week in advance. As of now, I believe that everything connected to hard assets, including moly, platinum, gold and even real estate, will be rising steadily in the next two years.
All of our Planetary Prospects are in the money since being named and researched in late 2008 and through 2009.
- Premium Exploration (TSX: V.PEM, Stock Forum)—Gold in Idaho and Montana.
- Inter-Citic Minerals (TSX: T.ICI, Stock Forum)—Gold prospector and mine developer in eastern China. I purchased more Wednesday. See above.
- Central Fund of Canada (AMEX: CEF, Stock Forum) and (TSX: T.CEF.A, Stock Forum)—Gold and silver repository. Its premiums, being a closed end fund, are rising.
- BioCryst Pharmaceuticals (NASDAQ: BCRX, Stock Forum)—Influenza and leukemia drugs. It is in play. As in: Seen as an innovative drug developer by large pharmaceutical company.
- Endeavour Silver (AMEX: EXK, Stock Forum) and (TSX: T.EDR, Stock Forum) Silver in Mexico. On a property purchase tear. Brad Cooke is the CEO and is clever and trustworthy. Several organizations this week see silver as outpacing gains in most metals for the next several years.
- Xtra-Gold Resources (OTO: XTGR, Stock Forum)—A Canada listing is in the works for the Ghana prospector. This is the West Africa gold prospector that will follow in the footsteps of successful Keegan Resources (TSX: T.KGN, Stock Forum).
- Great Basin Gold (TSX: T.GBG, Stock Forum): This is Ferdi Dippenaar's South Africa and Nevada company. Please see archives for coverage of Burnstone and Hollister mines. After our visit to South Africa three weeks ago, I can say that several companies are circling GBG, looking for ownership of the estimated 400,000 yearly ounces of gold Great Basin will be producing from Nevada and South Africa.
- Candente Copper (TSX: DNT, Stock Forum)—Joanne Freeze's Candente has copper in Peru. A second unit is now a separate company, Candente Gold (TSX: T.CDG, Stock Forum) in Mexico and Peru. We list it because we need copper in our portfolio.
- Great Panther Silver (TSX: T.GPR, Stock Forum)—Silver in Mexico. Robert Archer is the CEO. Like Brad Cooke, he is trustworthy. Like Endeavour Silver, the Panther is on the prowl for assets.
- Avanti Mining (TSX: V.AVT, Stock Forum)—Cheap and aspiring molybdenum mine at Kitsault in British Columbia. Under pressure after a capital raise. Moly futures are trading now in London, I believe. BMO, the bank, helped Avanti's Craig Nelsen and AJ Ali raise $17 million Canadian.
- Colombian Mines Corp. (TSX: V.CMJ, Stock Forum)—Company is in play. As in: seen as large land package for ambitious miners. CMJ's principals and representatives of Colombia gold and oil entrepreneur Serafino Iacono will continue their discussions next week.
- Endeavour Financial (TSX: T.EDV, Stock Forum)—Excellent earnings from the Vancouver merchant bank. Some $22.5 million goes into the cash till. Endeavour is cobbling a West Africa gold company. Etruscan Resources (TSX: T.EET, Stock Forum) was the first candidate. Crew Gold of West Africa was the second—until today, that is.
(Thom owns shares of each of the 12 Planetary Prospects. Thom's personal holdings are available for all to see on Stockhouse, the Canada publishing company. He has no intention of selling any of the 12 Planetary Prospects at present. . .and if he were to, subscribers would be informed well in advance of any shift in research regarding those Prospects.)
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Ticker Trax™ is published by Stockhouse Publishing Ltd. Ticker Trax is an information service for subscribers and neither Stockhouse nor Thom Calandra is a broker or an investment advisor. None of the information contained therein constitutes a recommendation by Mr. Calandra or Stockhouse that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Ticker Trax does not purport to tell or suggest the investment securities subscribers or readers should buy or sell for themselves. Subscribers and readers of Ticker Trax should conduct their own research and due diligence and obtain professional advice before making any investment decisions. Ticker Trax will not be liable for any loss or damage caused by a reader's reliance on information obtained in the reports. Subscribers and readers are solely responsible for their own investment decisions. Opinions expressed in Ticker Trax are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in Ticker Trax should be independently verified. The editor and publisher are not responsible for errors or omissions or responsible for keeping information up to date or for correcting any past information. Ticker Trax does not receive compensation of any kind from any companies that may be mentioned in the report. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed in Ticker Trax. PLEASE DO NOT EMAIL THOM SEEKING PERSONALIZED INVESTMENT ADVICE, WHICH HE CANNOT PROVIDE. Copyright 2010 all rights reserved.
