J. Taylor's
GOLD & Technology Stocks
Animas Resources Ltd.
Jay Taylor
Jun 6, 2008
New Buy
Recommendation
Animas Resources Ltd.
Animas Resources (TSX.V: ANI) is a newly formed North American-based exploration
company. As you can tell from the chart above, its public equity
heartbeat began in August of 2007. What is most impressive about
this company is its highly seasoned management team, who have
come out of retirement because they believe they have a chance
to find one or more major gold deposits in a Carlin-style deposit.
The company's flagship property is the Santa Gertrudis Deposit,
located within a 170-sq.-mile concession.
The Santa Gertrudis
Cucurpe, Sonora State, Mexico
The Santa Gertrudis Gold Project
("SG") is located 180 km north of Hermosillo, Sonora,
Mexico. It was discovered by Phelps Dodge in 1986 and put into
production as an open-pit, heap-leach operation in 1991. In 1995,
Campbell Resources purchased SG from Phelps Dodge for $10 million.
From May 1991 to October 2000, the SG Property produced 564,000
ounces of gold, with an average grade of 2.13 grams/tonne being
placed on the leach pads. The resource on this project, when
production began, was 1.2 million ounces of gold.
During the same period, the
Amelia Mine, located directly north of the SG Deposit, mined
over 1 million tonnes of ore grading 2.88 grams of gold per tonne
by an Australian company. Campbell and the Australian company
later ceased mining and processing activity due to low gold prices
during the late 1990s and settled some outstanding debts by assigning
several core area concessions, including the un-mined Cristina
Deposit, to local Mexican contractors. In 2006, Animas Resources
acquired these properties for $5.7 million.
Animas' management believes
the potential is good for finding a Carlin-style high-grade mineralization
at lower depths in addition to verifying and expanding near-surface,
oxide mineralization at SG, which was previously ignored by prior
operators who were interested only in the lower-cost, open-pit,
heap-leaching operations. So what we have here is a project with
an existing open-pittable oxide resource that could get much
larger (but is yet to be verified under 43-101 regulations) and
what seasoned exploration geologists believe is the potential
to find a high-grade monster deposit at depth that served as
the feeder for a small percentage of gold that escaped to the
surface, where it was subsequently weathered.
Certainly, Animas management
is not alone in their view that SG could host a Carlin-type gold
deposit. In 1997, Campbell commissioned Behre Dolbear & Company,
which concluded: "...that the property contains potential
for a deep, Carlin-type target from an examination of the property
and the presently available data for the project. The geology,
structure, geochemistry, geophysics and mineralization are indicative
of this type of system and the similarities to the Post-Betze
deposit are very striking. Santa Gertrudis is at the same position
the Carlin Trend was at the point in time when Barrick bought
the Gold Strike property from Western States Minerals and started
their deep exploration program." And, "The
deep exploration potential at SG is very positive and the chance
for deep mineralization is very good. The surface potential,
as you know, is without question. There is excellent potential
for additional shallow gold deposits both adjacent to known oxide
gold occurrences and under shallow gravel cover."
The surface potential that
is without question is displayed on the map on your left. Note
the soil anomalies (red circular features) and rock anomalies
(pink circular features). Also note from the map on the prior
page, the mineralized areas shown outside of the old open-pit
mining area.
Animas Resources' technical
team has initially identified six high-quality areas within the
main Santa Gertrudis historic gold-producing part of the Santa
Teresa mining district, each one of which appears to contain
the potential for the discovery of a large-scale gold deposit.
As exploration moves forward over the next year, exciting results
on one or more of those targets could move these shares considerably
higher.
The Bacanuchi Project
Sonora State, Mexico
The Shirley Concession covers
a 296-square-kilometer area. It is located in the Bacanuchi area
of northern Sonora, Mexico. Its hydrothermal alteration and oxidization
of sulfide minerals exposed to surface weathering makes this
a very enticing grassroots exploration target for the company's
geologists. The Bacanuchi area is known for its past production
of copper, silver, and gold by local artisanal mines. CRM airborne
magnetic dataset details the Bacanuchi area to be within the
same productive batholithic rocks that host the Cananea and the
Maria producing mines.
The gold potential has never
been assessed in light of modern ideas, and the porphyry copper
potential may not be completely evaluated by previous workers.
The property is located 25 km northeast from Santa Gertrudis
and 35 km south of Cananea, a world-class porphyry copper deposit
located 40 km south of the U.S./Mexico border.
MANAGEMENT:
The strongest case for Animas
is its highly experienced, technically oriented management team,
some of whom I have met. Following is a summary of key management
personnel followed by an equally impressive list of advisory
board members.
Gregory E. McKelvey - President
& CEO, MS. Geol.
has more than forty years of extensive, international experience
in Latin America, Africa, and Europe in expanding responsibilities
for significant mining companies such as Kennecott, Cominco,
Homestake, and Phelps Dodge. He also acts as an Adjunct Faculty
member at the University of Arizona in their International Center
for Mining Health, Safety, and Environment and worked for the
USGS in Latin America. He has also consulted for Lundin, Codelco,
Phelps Dodge, Newmont Mining, Gerald Metals, and Quadra Mining.
Mr. McKelvey has successfully directed and led innovative exploration
efforts, resulting in the discovery and identification of several
major ore deposits. He participated in or led the teams that
discovered Sossego (Cu/Au) in Brazil; Sheep Creek (Zn, Cu, Co)
in Montana; Spar Lake--Cabinet Mts. (Cu, Ag) in Montana; Sechura,
(P2O5) in Peru; extensions of the Punta de Cobre (Cu/Au) deposits
in Chile; extensions of ore at Chino (Cu) in New Mexico; the
Codelco IOCG discovery in Brazil, and the recent new porphyry
copper center at Sierra Gorda in Chile. As the former VP of Exploration-Latin
America for Phelps Dodge, Greg will lead for the strategic and
tactical exploration plans for Animas Resources.
John Wilson, V.P. Exploration
- Mr. Wilson has over
forty years of experience and success in all aspects of base
and precious metals exploration, discovery, reserve definition,
and mine development. His work has included discoveries in Brazil,
Nevada, and Peru. He has also done detailed evaluations of numerous
deposits and prospect types in varying geological settings throughout
the western U.S., Russia, Chile, Peru, Brazil, Mexico, Central
America, and Asia. His work for Cyprus Minerals Company, Codelco
Corporation, Amoco, Kinross Gold Corporation, AMAX Mining Corporation,
and Essex has ranged from initial prospect evaluation to the
design and management of regional exploration, deposit modeling,
and development programs. Mr. Wilson has a strong field orientation
with excellent development skills and a proven record of discovery.
Don Ranta, Director - Dr. Ranta is an exploration and
development mining executive, experienced in planning, implementing
and directing successful exploration and acquisition programs
throughout North America, South America, Africa, and other international
locations. He has extensive experience in generative exploration,
project exploration and appraisal, geologic-engineering, and
economic evaluation as well as strategic and business planning.
In addition, he is a former President and Board member of the
Society for Mining, Metallurgy, and Exploration and the current
Vice President-Finance and a Board member of The American Institute
of Mining, Metallurgical, and Petroleum Engineers. He has been
a director of several junior exploration and mining companies.
He has had a significant role
in the successful exploration, discovery, and acquisition of
several major ore deposits including the Sleeper gold deposit
in Nevada, the Emmons molybdenum deposit in Colorado, the McDonald
gold deposit in Montana, and the Santa Gertrudis gold ore bodies
in Sonora, Mexico. His exploration teams participated in the
acquisition or discovery of a number of other deposits including:
the Paradones Amarillos gold deposit in Baja California, the
Aquarius gold deposit in Ontario, Canada, the Kilgore gold deposit
in Idaho, the Seven-Up Pete gold deposit in Montana, the Dolores
gold-silver deposit in Mexico, the Youga gold deposit in Burkina
Faso, the Kuranakh gold deposit in Russia, and the Cochise copper
deposit in Arizona.
Bryan Morris, Director - Until his retirement in August 2003,
Mr. Morris worked for Teck Cominco Limited as Vice President,
Business Development, and was responsible for identifying, evaluating,
and negotiating acquisitions, primarily in the zinc business.
Prior to that appointment he had been Vice President, Finance
and Director of Cominco Resources International Ltd., the listed
international exploration arm of Cominco Ltd., and had held senior
positions in Cominco's finance organization. During his career
with Teck Cominco he also served as a director of several subsidiary
and associated companies. Between 1965 and 1974 Mr. Morris worked
in Peru for Cerro de Pasco Corporation and Centromin. He is a
Fellow of The Chartered Institute of Management Accountants (UK)
and is also a director of several junior mining companies. Currently
he is a director and CFO of Andean American and Sinchao Metals;
a director of Inca Pacific and Mediterranean Resources and, until
late June 2007, a director and CFO of Morgain Minerals.
Winnie Wong, CFO - Ms. Wong received a Bachelor of
Commerce Degree (Honours) from Queen's University in 1996 and
is a member of the Institute of Chartered Accountants of British
Columbia. She is currently Vice President of Pacific Opportunity
Capital Ltd.. Her role is to manage the financial administration
team and to assist Pacific Opportunity Capital Ltd.'s management
group on corporate finance projects. Prior to joining Pacific
Opportunity Capital Ltd., Ms. Wong was the controller of Pivotal
Corporation, a company providing software, services, and support
to a variety of businesses. Between 1996 and 1999, Ms. Wong worked
with Deloitte & Touche, Chartered Accountants
Mark Brown, Director - is the President of Pacific Opportunity
Capital Ltd. headquartered in Vancouver B.C. Pacific Opportunity
is a financial consulting and merchant-banking firm active in
venture capital markets in North America. Mr. Brown has assisted
in the successful establishment of several private and public
companies. In the mining and mineral exploration sector, Mr.
Brown has played key roles in the success of Rare Element Resources
Ltd., Sutter Gold Mining Ltd., Portal Resources Ltd., Pitchstone
Exploration Ltd., and other junior exploration companies. His
corporate activities include merger and acquisition transactions,
financing, strategic corporate planning, and corporate development.
Prior to joining Pacific Opportunity, Mr. Brown managed the financial
departments of two TSE 300 companies: Miramar Mining Corp. and
Eldorado Gold Ltd. Mr. Brown has a Bachelor of Commerce from
the University of British Columbia and qualified as a Chartered
Accountant in 1993 while working with PricewaterhouseCoopers
in Vancouver, Portal Resources Ltd., Pitchstone Exploration Ltd.
and other junior exploration companies.
Advisory Board
Jefferey Phillips is currently President of Global Market
Development in San Diego, California. Mr. Phillips brings extensive
experience in the areas of finance, marketing, and corporate
development.
John Reynolds -Mr. Reynolds is a geologist and geophysicist
with over thirty-five years of hands-on experience using a variety
of geophysical methods to explore for, image, and discoveries.
Odin Christensen, Ph.D. - Dr. Christensen worked with Newmont
Mining Corporation for over twenty years. His most recent position
was as Exploration Manager, Bolivia.
Hugh Miller, Ph.D. - Dr. Miller is an Associate Professor
in the Mining Engineering Department at the Colorado School of
Mines, and has a long history of working with mining and exploration
companies.
Catherine McLeod-Seltzer is Chairman of Pacific Rim Mining
Corp. and Bear Creek Mining Corporation and is a recognized leader
in the minerals industry.
Amy McQuade is Vice President of Global Market
Development (GMD). GMD helps private and public companies reach
corporate goals more quickly and efficiently.
George Tikkanen has been active in the mining and
mineral exploration industry since 1956, including more than
22 years at senior corporate and board levels.
Rodrigo Sanchez-Mejorada is a Managing Partner of the law firm
of Sanchez-Mejorada, Velasco y Ribe in Mexico. He is an advisor
to several multinational mining, industrial companies.
Jerry Hanks has over 44 years of experience in exploration,
mineral property evaluation, process development, project management,
due diligence, feasibility studies and startups.
Kalidas V. Madhavpeddi brings over 25 years of experience
in business development, corporate strategy, global mergers and
acquisitions, marketing, trading, and sales to Animas.
Dr. Stephen J. Reynolds is a Professor of Geology at Arizona
State University. Prior to that, he spent 10 years directing
the geologic framework and mapping program at the Arizona Geological
Survey.
SUMMARY & CONCLUSION
 With some 700,000 ounces of historical
gold resources at or near surface with the potential to greatly
expand that number, and given the strong management team in place
and a market cap of only around $35 million, we think this company
is a very attractive speculation on the basis of the company's
oxide potential alone. However, the real upside could come if
a Carlin-type high-grade gold deposit of size is outlined at
depth.
I met with members of this
company's management team in New York and what I came away with
from that meeting is that those men believe they have a chance
to find a monster high-grade Carlin-type deposit. Otherwise,
they would not have given up their retirement days of ease on
the golf links. There are never any guarantees in this business.
But given a historical resource of 700,000 ounces, which we believe
should eventually be increased and confirmed via NI-43-101, and
given its current market cap of $35 million, we do not anticipate
any significant downside risk from current price levels. Anything
short of a multimillion-ounce deposit might be considered a failure
by this blue chip management team, who left an easier post-retirement
life only for the hunt of the next mega Carlin-type gold discovery.
In summary, we see Animas as a gold exploration stock appropriate
for speculative investors, with our usual caveat that even speculative
investors should not allocate more than 5% to any one stock.
As the company moves forward with its exploration program at
SG, we anticipate passing along many positive assays via our
weekly Hotline messages.
May 30, 2008
Jay Taylor
email: jtaylor9@ix.netcom.com
website: www.miningstocks.com
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