 Mexican Silver:
I'm all a-GOG
Bob Moriarty
Archives
Oct 24, 2007
I'm just back from another
two weeks on the road visiting up-and-coming juniors. This trip
took me to Mexico for a few days and then to the mouth of the
Amazon in Brazil.
My first visit was to the San
Diego project of Golden Tag Resources [GOG.V] located
near the city of Torreon in Mexico. Golden Tag has entered into
a joint venture with ECU silver to explore the property. Terms
call for GOG to spend $1.5 million to earn a 50% interest in
San Diego. It's a no lose deal for both companies. ECU gets someone
else to spend the money yet keeps a 50% interest. Golden Tag
gets a piece of a nice potential property for peanuts.
Golden Tag has just started
a third phase drill program of 6000 meters in order to define
a greater resource. I try to spend some time on the website of
all the companies I intend to visit to get a better feel for
their intentions and capabilities. Quite frankly, the website
didn't knock me over. They have a nice potential gold project
in Red Lake; on strike with the Campbell and Goldcorp mine and
they have this half interest in a nice potential silver project
in Mexico.
I will say Mexico is about
my most favorite place in the world for mining projects. There
is silver and gold all over the country. 80 years of under-exploration
is giving way to some incredible opportunities. In late August,
Golden Tag released results from the first two phases of drilling.
The results were excellent and showed strong silver, lead and
zinc numbers.
I go to a lot of projects;
I probably spend half my time visiting different companies. [Editor's note:
Half the time? Hmmm - he's away from home 3/4 of the time, I
wonder... He obviously pays Ted a bunch of 'hush dosh'] I see a lot of drill core and read
a lot of press releases touting drill results. And they get really
boring. It's very difficult for professionals to understand drill
results as stated in the typical press release and even more
difficult for ordinary investors. Those companies who want to
confuse, do so easily.
But I've been on the ground
at San Diego and seen the core that went with the results. They
claim a 2.2 million ounce silver resource but that is based on
a very limited number of drill holes. ECU and GOG are in the
process of working on a new 43-101 resource based on the Phase
1 and Phase 2 very successful drill programs. The expanded resource
should be out by the end of November. Based on the holes I saw,
it's hard to come up with a number but depending on the cutoff
grade, it could easily be a barnburner. At these prices, the
stock seems pretty cheap to me.
Project geologist Kateri Marchand
has worked nothing short of a miracle. Along with two assistants,
she has run the entire exploration program, drilled 5,300 meters
of diamond core and defined a lot of new ounces. The budget was
about $1.1 million and with the new 6,000-meter drill program,
GOG expects to have earned their 50% interest shortly.
I am real sure that when the
43-101 is released, anyone interested in silver is going to wake
up in a hurry. Kateri has managed more work for less money in
a shorter period than any project I have seen in years. I was
really impressed with her accomplishments. There is a lot of
silver at San Diego.
The project is only 9 KM from
ECU's silver mine and mill at Velardena. It's in ECU's best interest
to have multiple sources of feed for their two mills with 400
TPD capacity. I suspect GOG and ECU will put San Diego into production
a lot sooner than anyone expects.
When you are comparing mines
and projects, the single most important element is always the
people. I've seen great projects screwed up; I see it all the
time. But good management will always come up trumps. That's
what makes them good management. GOG identified a great project
and locked up half of it. They aren't going to be the biggest
silver producer in Mexico but I think San Diego has excellent
potential for bulk tonnage and I know they have spent their money
wisely.
Lead and zinc prices have been
hitting new records and the rock at San Diego has good percentages
for both on top of the silver. The area has been mined for over
400 years and the surrounding communities have potential for
the hundreds of skilled miners necessary to get into production.
If you want to be mining silver, lead and zinc, the Velardena/Torreon
area is about the best area in the world to be mining.
ECU Silver has a market cap
of about $480 million based on an Indicated and Inferred silver
resource of about 98 million ounces. They have five mines in
the area and two mills but the market is giving them almost $5
an ounce for silver in the ground. At that price, GOG would be
fairly valued today but I expect a much higher resource, their
drill results really were spectacular. In any case, ECU and GOG
will be releasing a joint resource. In the case of ECU, the resource
will be for all their properties and in the case of GOG, only
the San Diego project but it would be easy for any investor to
calculate a fair value based on how the market values the increase
in ECU ounces.
Golden Tag has about $2.5 million
in the bank. They will spend an additional $300,000 at San Diego
which gives them their 50% earn in. And at Red Lake, they have
a budget of $700,000 for drilling by their partner. They anticipate
an additional $500,000 in matching funds to complete the Phase
3 drilling in Mexico. And in addition, they expect to bring in
about $4 million with the exercise of warrants and options. The
company has 35.1 million shares outstanding and 45.9 million
shares fully diluted.
I'm as biased as I can be.
Management and Kateri really impressed me with how much has been
accomplished at San Diego in about a year. The 43-101 will show
the potential and it will be out very soon. With a $12 million
market cap, GOG is really cheap. Golden Tag is an advertiser
and I do own shares. Do your own due diligence, por favor.
Golden Tag Resources
 GOG-V $.395 Canadian
(Oct 23, 2007)
31.3 million shares outstanding
Golden Tag website
Bob Moriarty
President: 321gold
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321gold Ltd
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