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In this article I’m going to re-introduce an exceptionally well managed junior that I believe is truly undervalued at today’s gold price. This junior offers exceptional blue sky exploration upside and has to be, in my opinion, on the radar screens of major gold mining companies for possible acquisition.
Consider this – juniors are the present owners of the world’s future gold supply.
They are the companies who explore for, find and develop deposits to the point where they hopefully attract a major’s attention. And the majors need them more than ever, they need them to explore for and find gold, and they need them so they can purchase them or their projects to grow their reserves and production.
Spanish Mountain Gold TSX.V – SPA made one of the most important gold discoveries in recent British Columbia history. Spanish Mountain’s 100% owned Spanish Mountain property has revealed that it is host to a potentially bulk mineable, large tonnage sediment hosted gold system.
The gold system hosts both high-grade structurally controlled mineralization delivering intercepts such as 29.07 g/t gold over 10 meters, 7.99 g/t gold over 19 meters and 5.04 g/t gold over 22.9 meters while the lower grade stratigraphically controlled mineralization is characterized by intercepts of 1.81g/t gold over 94.5 meters, 1.34g/t gold over 116 meters and 1.30g/t gold over 86.9 meters.
A test mining sample of 6,100 tonnes taken in 2000 from the Mt. Polley Pit averaged 3.02 grams Au/ton.
So far, Spanish Mountain Gold, has put 650 drill holes (500 would be in the resource) into its Likely, British Columbia Spanish Mountain project.
Over 50% of the deposit is close to the surface. The Gold is contained in 9 zones, that may sound like a lot but 90% of the gold is in just 3 zones. In those 3 zones 60% of the contained gold is close to the surface.
Infrastructure
All needed infrastructure – power, water, rail, supplies and major highways are close by. There are many operating mines in the area and locals are very receptive to resource extraction as a way to make a living. There is an experienced trained labor pool to draw from in the nearby towns of Likely, Williams Lake and 100 Mile House and supplies are easy to access.
Less than 15 percent of the 60,000 acre property has been explored
Gold Recovery
Flotation test work was carried out on three composite samples taken from an area that is currently being investigated as a potential starter pit area. The test work demonstrated that at a gold recovery of 96.5% can be achieved. Cleaning of the rougher concentrate through a single stage of open circuit cleaning results in a loss of gold equal to approximately 1.5%. The Company therefore believes that the results support previous metallurgical test results that indicated 95% recovery of gold to a cleaned concentrate.
Bedded Sulphide mineralization (pyrite)
Core sample
Consistent with the results generated by various metallurgical analyses to date, gold recovery assumption at 90% will be used for the PEA which is currently being prepared and which the Company expects to release during the fourth quarter of 2010.
Preliminary Economic Assessment (PEA) or scoping studies are done to examine potential mining scenarios and economic parameters – A PEA or scoping study is an important milestone for a mineral project, it’s the first step in a company’s economic and technical examination of a proposed mine.
Because companies with successfully completed PEA/Scoping studies are further advanced along the development path, and have successfully completed the first of several major studies, a lot of the guesswork about grade, size, costs and metallurgy have been taken out of the equation for investors. They have done sufficient work to give investors a certain level of confidence that their project will successfully move towards being a mine.
First Nations in the area – Williams Lake and Soda Creek – seem receptive to this project and memorandums of understanding (MOU) with the bands are being worked on.
Other Projects
Earlier stage Thunder Ridge, Manson Creek and Prince George properties were acquired because of similar geology to that at Spanish Mountain.
Management
Brian Groves – President and CEO, Director
Brian has 30 years experience in the mining and exploration industries in Canada and Australia. He has worked with junior exploration, junior producing and senior mining companies including AMAX, Noranda and Placer Dome. Brian is a director of Riverside Resources and Kootenay Gold.
Ron Halas – Chief Operating Officer
Ron has 22 years of diverse experience including open pit and underground mining in both base and precious metals. He has worked with major mining companies including Vale Inco, PT Freeport Indonesia, Placer Dome, Cominco Limited and Inco Limited. Ron’s immediate focus will be on the management of engineering studies to advance the Company’s Spanish Mountain Gold project in central British Columbia.
Mr. Stuart Morris – Vice President, Development Geology
Stuart has more than 30 years of experience in precious and base metal production, mine development and exploration in Canada and the United States. Stuart’s experience includes senior positions at Echo Bay’s Sunnyside mine and A.J. Mine project, Placer Dome’s Campbell Mine, NovaGold’s Galore Creek, and Donlin Creek and the Nome Exploration projects.
Directors
Dale Corman
Dale graduated with a Bachelor of Science degree in geology from Rensselaer Polytechnic Institute in Troy, New York, in 1961 and attained Professional Engineer status in Ontario in 1972. He has 30 years experience as a senior corporate officer of publicly listed companies in Canada and the United States.
Christopher Lattanzi
Christopher is a mining engineer and was President of Micon International Limited, mineral industry consultants from its founding in 1988 to mid-2005. He has directed or participated in the preparation of feasibility studies for mineral deposits in Canada, the United States, Africa, Europe and Asia. These projects have involved base metals, precious metals and potash, and initial capital expenditures of up to about $500 million.
Ian Watson
Ian was Chairman & Managing Director of Galahad Gold PLC from 2003 to 2008. Galahad made strategic investments in Northern Dynasty Minerals Ltd., Uramin Inc. and International Molybdenum PLC.
Ian is currently Chairman & Managing Director of Agrifirma Services Ltd., and Chairman of Agrifirma Brazil Ltd., a company recently created to invest in agriculture in Brazil.
Capital Structure
Outstanding Shares: 123,000,000
Options: 10,000,000
Warrants: 34,000,000
Fully Diluted: 167,000,000
Conclusion
I believe junior resource companies offer the greatest leverage to increased demand and rising prices for commodities. There is also a very real and increasing trend for Mergers and Acquisitions (M&A) in the resource sector.
Juniors, not majors, own the world’s future mines and juniors are the ones most adept at finding these future mines. They already own, and find, what the world’s larger mining companies need to replace reserves and grow their asset base.
“As the potential for commodity scarcity escalates, M&A activity in the global mining sector will likely intensify, mimicking a ‘global arms race. With few large targets in play and diminishing key resource reserves, we expect global miners will continue to scour the globe for projects and broaden their deal strategies.” M&A in the Global Mining Sector – No Stone Unturned, PricewaterhouseCoopers
The best gold shares to own will be the shares of companies who own and are developing the deposits the major gold producers might want to buy. With sufficient size, grade and good metallurgy the junior will successfully move the deposit along the development path towards a mine and perhaps a major’s interest will be sparked.
“Scarce opportunities for mega deals have prompted more senior miners to acquire junior mines and exploration companies earlier in their life cycle.” PwC
SPA’s Spanish Mtn. project offers potential for a significant near-surface gold deposit. It’s located near existing infrastructure and amenable to low cost open pit, bulk mining methods. With a PEA expected shortly, done on a measured and indicated resource, this author believes the large gold resource on Spanish Mountain makes Spanish Mountain Gold TSX.V – SPA one of the best precious metal bargains on the TSX-V exchange.
Is this company on your radar screen?
If not maybe it should be.
Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com
If you’re interested in learning more about the junior resource market please come and visit us at www.aheadoftheherd.com.
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Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell.com, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.
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Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
Richard Mills does not own shares of Spanish Mountain Gold
Spanish Mountain Gold TSX.V – SPA is an advertiser on his website aheadoftheherd.com.
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