Mexico About to Take Center Stage Amongst Junior Explorers
Source: David Banister (3/18/08)
I wrote in late January about “Mexican Juniors” being spicy opportunities down south in the exploration sector. In that article I mentioned four explorers in particular to watch and consider investing in. Animas, Geologix, Canplats, and Pediment. Three of those four went on to all time highs recently, and they have also all pulled back in the past one to two weeks. I believe this is opportunity knocking once again.
I firmly believe these juniors are about to take center stage as gold has now rallied above my predicted $1000 target and silver has surpassed my predicted $20 level. In my last article I mentioned four catalysts that would be required in order for “quality” juniors to take off and recapture the adoring eyes and dollars of the investing public. I will re-list them below
1. Gold going to $1,000 an ounce — CHECK
2. Silver running to $20 an ounce — CHECK
3. Acquisition by a major — CHECK (Barrick buying out Arizona Star)
4. A potential large discovery — CHECK (Canplats?)
Now that all four of the above have occurred within six weeks of my Mexican Junior article, now is the time to accumulate these stocks in my opinion as they have pulled back from their recent highs of the past few weeks.
It appears from the way the credit crisis continues to unfold in the states that a major bank failure is only a matter of time, not so much an “if” anymore. With “The Fed” printing U.S. Dollars like toilet paper, gold is responding to the upside along with silver. The only way out of this mess is for our currencies both in the states and perhaps worldwide to be backed by Gold and/or Silver in the future, and the market is telling you that is the likely ultimate outcome. I would also be remiss if I didn’t mention the depletion of quality grade gold in the ground worldwide, and the geopolitical risks that increase by the month for known deposits or discoveries. Mexico is one of the better places to find gold and silver folks, it’s pretty simple.
There are a few ways to participate in this trend, and typically the area that will gain the most percentage wise in a super cycle are the junior explorers. This happens once the “herd” wakes up and figures out that precious metals are money and are the only way to build wealth going forward. I can buy gold today for $1000 an ounce if I want, or I can buy gold for $40 to $50 an ounce by investing in a junior that is finding it in a economic, mining, and geopolitically friendly arena.
I own Animas Resources, which I’ve also written about for stockhouse this year. Animas has 922,000 ounces of known (non 43-101) gold in the ground on a prior producing gold district. There are 25 million shares outstanding and a $1.70 share price (recent high $2.14 during PDAC). The way I do my math, that’s a $42,000,000 market cap. The price of gold in the ground is $45 per ounce, with tons of blue sky at the Santa Gertrudis district. Keeping things extremely simple, you buy gold at 1/22 the current price and as a shareholder have rights to all of the upside from further gold discovery. Darrell Brookstein penned a piece on Animas recently and he used $150 an ounce for valuation as his target when gold was $850. What happens if gold runs to $1,500 or higher this year? Further, when they start drilling multiple zone targets in late April, the fireworks could really start. Is Animas a triple or more from here this year? Barrick just paid $450 an ounce for proven gold by purchasing the remainder of Arizona Star. At $45 an ounce with potentially millions more in the ground, I’ll go ahead and be an owner of Animas stock. I’m joining Roulston, Moriarty, Brookstein, Lundin, Casey and others— not bad company to be in pre-drilling stage.
Canplats has drilled off several 150-200 meters deep intercepts of solid grade gold, sprinkled with condiments of Silver, Zinc etc in Mexico as well. Their stock recently hit an all time high, and is now up some 10 fold from its lows last October. The stock has consolidated gains recently and is now drilling deeper into the Sulphide zones, any big hits there and it’s off to the races. Doug Casey, Greg McCoach, and Jay Taylor are all believers.
Pediment is also widely followed by the gold investment community and continues to drill off strong gold intercepts at their Baja discovery in Mexico. There are some who think that stock is a triple from current levels as well. Kevin Graham of Graham Analytics recently visited the property and he will have a full write-up out this coming week. Kevin was the first analyst to visit the Animas property and do a site visit write-up on it this past December when it was only $1.20 a share. (www.grahamanalytics.com)
I like the Mexican plays as I discussed in my February article which you can read again below. Now is the time to get positioned before the next leg up. Keep in mind that junior explorers do not necessarily follow the price of gold or silver up, unless they are actually finding the metal itself or own it in the ground. Keep your focus on those who are actually finding economic mineral, known as “Ore”, and invest accordingly — the clock is ticking.
Jan 29th Mexican Juniors article:
ABOUT THE AUTHOR
David Banister has written for CBS Marketwatch.com in the past, has been on national radio, and has written articles for local newspapers on the topics of investing and economics. Thom Calandra, the co-founder of CBS Marketwatch.com, called David, "The best market technician I have ever seen" in 2003. David is a contrarian at heart, with a bent for small cap stocks. David owns shares in Animas Resources. You may reach him at [email protected]