Kal Kotecha PhD
Precious metals stocks, especially junior mining stocks, plummeted from 2011-2015. Last summer, we wrote that we felt gold had bottomed and we were starting to accumulate junior mining stocks. Some of the experts disagreed, “I don’t see a case to be bullish or to be positive on resource stocks”, said John Stephenson, CEO and founder of Stephenson & Co. on July 24, 2015
Fortunately we were right on that call but wrong on CMC Metals (TSX-V:CMB)
I lost a handsome sum investing in this tiny junior mining stock since 2010 – expecting that management would keep their word and execute on their game plan. A lot of other investors suffered the same fate as permitting, false promises and the bearish secular gold market were undesired affects contributing to the fall in CMC’s stock price.
The company’s flagship property is the Radcliff Mine located in Southeast California. Basically there are 100,000 ounces of high grade gold located at the Radcliff, based on the company’s January 2013 NI 43-101 technical report. Earlier estimates conducted by Echo Bay Exploration in 1993 suggested that there were 1,148,978 tons grading 0.24 oz/ton for a total of 280,350 in situ ounces of gold (non 43-101 compliant). Mineralized material from the Radcliff Mine would be shipped to the Bishop Mill owned by CMC Metals, located just two hours away. Infrastructure around the mill is excellent and includes 2-4 lane highways access. The Radcliff Mine is permitted and is a 50/50 joint venture between CMC and Pruett-Ballart (PBI), a Nevada based company specialized in mining engineering and the current operator of the Radcliffe Mine.
If properly executed, CMC Minerals could reap a lot of money from gold production – especially from the 3-4 years of expected high grade gold production.
Why then did the stock price plummet so much other than the reasons listed above which led to a 7:1 stock split? There is a lot of permitting and money required to get a mine into production. In CMC’s case it was a combination of: receiving permits from the Bureau of Land Management for the Operations of the Bishop’s Mill, dealing with the Lahontan Water board for the Class A Tailings Pond, working with the California Environmental Quality Act, Water licensing approval, permits for the Radcliff Mine etc.
Understandably, this all takes time. That was not the issue – rather that management did not do a feasible job communicating with shareholders while continuing to over promise and under deliver.
I have been assured that this time things are different. On that basis I agreed to take a small fee on a cheque swap basis to spread the word on the company’s progress. The major reason I agreed is because many investors are in the same position as myself holding a bunch of shares in a company we once truly believed in. If you believe in reincarnation – here is to hoping CMC can be reincarnated.
Some kudo’s should be given to management recently as they have taken serious steps in putting Radcliff into production. They managed to raise money, actually oversubscribed in the recent private placement to help put Radcliff into production. As well, insiders have been buying stock rather than dumping.
A new C.O.O. has been appointed, Ian Graham. Mr. Graham will oversee the operations at the Radcliff Mine and Bishop’s Mill. His bio is listed below. In a recent news release, COO Ian Graham commented: “The recently completed capital raise is permitting the Company to move forward on equipping, staffing and making bond arrangements for the Mill at Bishop, whilst simultaneously working with our partner Pruett-Ballarat Inc. to commence the mining of Mill feed: the Mill and mining JV teams are anxious to drive forward and deliver free cash flow in Q4, 2016.”
Fool me once, shame on you. Fool me twice, shame on me. The question remains, can management come through on making Radcliff a real production story that rewards shareholders? At this point I am leaning towards a “yes”. Even though I see things are changing, this time it is: “I’m too smart to be fooled – you show me the goods”. I am holding my position and not accumulating until I see the mine personally (as promised by management numerous times) and that the company continues to make positive further progress.
Ian Graham’s bio:
Mr. Graham is an accomplished mining professional with over 20 years of experience in the development and exploration of mineral deposits, mostly gained with the major mining companies Rio Tinto and Anglo American. Formerly Chief Geologist with the Project Generation Group at Rio Tinto located in Vancouver, BC, Mr. Graham has been involved with evaluation and pre-development work on several projects in Canada and abroad including the Diavik Diamond Mine (Northwest Territories, Canada), Resolution Copper (Arizona, USA), Eagle Nickel (Michigan, USA), Lakeview Nickel (Minnesota, USA) and Bunder Diamonds (India). Prior to his work with Rio Tinto, Ian held exploration geologist roles with Anglo American. Ian graduated from the University of Natal (now Kwa-Zulu Natal) in Durban, South Africa with a B.Sc. in Geology and Applied Geology (1984) and B.Sc. (Hons) in Geology (1985).
Kal Kotecha PhD
To read the full article: The Gold Update by Mark Mead Baillie
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