I don’t think it will come as any great surprise to my readers but the last two years have been a disaster for most gold/silver share investors. The small junior explorers have had their access to capital virtually destroyed. That’s both a good thing and a bad thing.
For the last twelve years every former drill crew supervisor or ex-taxi driver in Canada has had the ability to put together a couple of Beanie Baby projects (The bigger collection you have, the more valuable.) and a handful of directors to feed off the public financing teat. It didn’t matter how many times you failed or how little you accomplished with the money, you could drill and print, print and drill, print and print.
Investors finally woke up. Sort of. In a frenzy of “Baby with the Bath Water” cleansing, investors divested themselves of every piece of crap Vancouver stock while carefully culling out the cream of the crop real investments which they promptly burned at the stake.
The bad news is that some really excellent stocks of companies with real management are being given away. The good news is that some really excellent stocks of companies with real management are being given away.
The past two years disaster has forced investors to actually look at the companies and the management of the shares they buy. Many have been tried and found wanting. Some are simply brilliant and will be the first to lead higher as investors rejoin the junior space.
I just came back from a trip to Cambodia, my first. I visited a company named Angkor Gold (ANK-V). I was an investor in a PP with them about a year ago and I was interested in learning just how wise my investment was.
Mike Weeks, a successful former oil patch investor, runs the company as CEO and Chairman of the Board. His wife, Delayne Weeks, is VP for Social Responsibility. The company takes community development almost to a fault and while I totally agree with what they are doing, their very newsworthy Social Responsibility almost overshadows the very real technical achievements the company has made.
Raising money has become a virtual impossibility over the last two years for a junior. Based on his very real business experience, a rarity in the mining world, Mike realized early on that ANK needed to move in a different direction. Mike defines the company as a project generator. Lots of companies try that, few succeed.
In two recent joint ventures, Mike Weeks has proven the concept works for Angkor and in effect, put a floor under the price of the stock. The investment community responded by increasing the value of the shares by 60% since the end of 2012.
In January, Angkor released news that they had concluded a deal with a private Chinese company owned by Canxiang Mining Co Ltd. In return for a $2.4 million dollar cash payment, they vended a 78 square km property to the Chinese.
In early March, ANK announced a deal with Mesco Gold where Angkor would vend a 6 square km piece called the Phum Syarung project in exchange for $1.2 million in cash and a 10% NSR. Mesco intends to put the project into production by late 2014. Drill results were as high as 16.7 g/t over 4 meters.
When I read of the deal with the Indian company, Mesco Gold, I was a bit skeptical. A 10% NSR on top of a cash payment is on the verge of highway robbery. I read through the information on the transaction and a light switched on in my head. Mike Weeks may have thought he simply did a sharp business deal but the Indians understood exactly what they were buying and why a 10% NSR was no big deal from their point of view.
The way Angkor refers to the project is “Geologically, PS appears to be a shear zone with polymetallic mesothermal quartz veins showing multiple intercepts with a strike of 275m, open at both ends and at depth.” Well, no kidding.
While both epithermal and mesothermal deposits are forms of hydrothermal (hot water) systems, mesothermal deposits are formed at higher temperatures deeper in the earth. A mesothermal deposit is usually eight times as deep as it is long. So a 275-meter length of epithermal vein system is no big deal, a 275-meter strike of mesothermal deposit can go as deep as 2200 meters. With 16 gram gold material, that’s very nice indeed.
I’d like to see someone burn down their website and redo the whole thing. The news releases are stacked one upon another and you pretty much have to sort through the whole mess to find what you are looking for. The site is way too technical and any ordinary investor would be lost in the techno babble they are currently using.
This is the kind of paragraph that makes me want to pick up a baseball bat and smack someone up the side of the head. “Along with conventional fire assay, ICP-MS and AA analyses, Angkor Gold makes strong tactical use of modern reflectance spectrometry and X-ray fluorescence field analytical methods, coupled with more traditional ground electromagnetic, magnetic and gamma ray tools; all of which are successfully operated by trained Khmer technicians and geologists. In addition, the team has developed a biogeochemical sampling program to replace traditional, time-consuming approaches.”
Here’s what that means in English. In Cambodia they get a lot of rain. It’s a rain forest. And like the Amazon there are a lot of trees and where you have trees, you have termites. Where you have termites, you have termite mounds. The little buggers dig down to the water table and leave their crap behind them.
The lowest cost way of doing an accurate soil sample in a given area with a lot of termite mounds is to take a large sample from a termite mound, log the location, pound it down to about 80 mesh and run it through an XRF or light spectrometry to determine the trace elements linked to gold. Instant (well, not really instant but pretty damn quick) soil sample and cheap.
ANK did 20,000 termite mound samples over an area of 20 square km in 2012. It costs about 1/3 of a normal soil sample so they get three times as much bang for the buck. It’s a really good idea and I’m baffled as to why they don’t just say so. The company also did over 8800 meters of core drilling in 2012.
I really like the management and the staff. Their communication needs a boatload of work; they put a lot of emphasis on the community development but little on their very real technical success.
They have put a major floor under the shares. The Indian company expects to start a rolling production of about 20,000 ounces of gold a year in about 18 months or so. 10% of that would fund all their other work or at $1600 gold would provide for a 11% dividend if they fired the entire staff and did nothing but clip coupons.
Mike Weeks says they can continue to vend out projects from their large land position to continue paying for their serious exploration program. Time will tell but so far, so good.
The only real issue I see is communication and they have hired a Cambridge Phd to set that right. Again, only time will tell.
At $.41 the company has a market cap of about $30 million and that isn’t bad in this environment. Mike Weeks and staff have done an excellent job of staying cashed up without giving away the keys to the candy store. I expect the shares to be among the first to recover when investors wake up to the very real opportunity in the resource sector.
I don’t own shares and the company is not yet an advertiser but it’s possible, so as always, feel free to do your own due diligence.