Animas Resources
My First Resource Stock
Recommendation in 8 Years
Darrell Brookstein
published Feb 11, 2008
[Editor's note:
Readers in a hurry can jump straight down to the Animas Resources part of the page.]
"Without the recent capital
infusions, Citigroup and Merrill Lynch would be bankrupt . .
. Bankrupt. That can't be good!" (N.B. - the largest commercial
bank and the largest investment bank in the world)
"They've marked down their
'bad' assets. What they do not realize is that their 'good' assets
are bad, too."
"The bond insurers have
no ability to meet their obligations."
-James Cramer - CNBC
January 18, 2007
Love him or hate him, we have
arrived at this place. It is a place we have not been in this
writer's 34 years as a financial and investment professional.
I hope that one day soon (within
6 -18 months) I will be able to write as enthusiastic recommendation
for our first nanotech stock as I can now about my first resource
stock investment in 8 years, below.
We remain confident that the
next 2 - 3 years will be the best time to get in on the ground
floor of the coming Nanotech Boom (having kept you out
of that "space" for the last few years while others
were exaggerating and promoting "Nano-stocks" with
careless abandon and ignorance of how speculative markets work).
We hope to help you uncover many opportunities to make huge profits
in cutting-edge technology companies. However, we would be remiss,
despite our focus, not to help prepare our members for a possible,
serious economic meltdown.
It seems self-evident that
one should have aprecious metals mining share component
in their portfolio.
This letter contains our
research report on a speculative gold mining stock - Animas Resources
(Symbol ANIMF in the U.S. and ANI in Canada - easily traded through
companies like Schwab and E-Trade). It controls the core of an
entire, historic, prolific yet grossly under-explored, gold mining
district (numerous mineral deposits within hundreds of contiguous
square miles) and trades in the U.S. and Canada.
Just prior to New Years, we
typically make predictions for the next year that either are
off the screen of mainstream investment professionals or are
contrary to the overriding current opinion in the markets. In
the past, these contrarian views have had exceptional results.
(For example, in 2006 we called a major top in the Chinese stock
market for 2007, at a time when there was universal certainty
that the shares would continue their long-term bull market.)
We recently named early-stage,
speculative, developing, precious metals mining stocks as the
#1 investment for 2008 and
named four of the companies that we own as excellent examples
and recommendations for purchase. Many of these junior mining
shares have not kept up with the prices of the metals. We believe
this will change soon for the high-quality issues, but the not
so great ones will probably continue to under-perform or have
even more severe problems for now.
Some of you e-mailed to say
you had bought them at great prices in December 2007 and were
profiting, but were interested in more information.
While I have been personally
and professionally investing in natural resource shares since
1980, continuing through my years focused on nanotech, "small"
and advanced technologies (like MEMS, micro fluidics and advanced
materials, etc.), I am taking this opportunity to share a research
report on a mining stock for the first time in almost 8 years.
We hope you enjoy it and profit
from it!
If you do, and wish to hear
more in the future, please e-mail (darrell@resourcedevelopment.com)
and tell us you wish be on a list for possible gold and silver
mining and natural resource stock information.
In our experience of over
25 years, natural resource and mining stock investing has offered
and continues to offer dynamic, profit-exploding potential for
absolutely, astoundingly huge returns. However, timing and ability
to distinguish quality are everything.
Those of you who have read
Nanotech
Fortunes or our other writings on nanotech investing at www.nanotechnology.com
know that I have had a successful career focused on venture capital,
private equity, investment banking and trading in mining and
natural resource shares. My detailed background in this area
is at the end of this article and I encourage you to read it.
It will enable you to understand our level of credibility in
the natural resource sector. Just as importantly, you may appreciate
our deep expertise in the Canadian public venture capital markets
and the Toronto Venture Exchange, which we have been endorsing
as the best venue available for early-stage company finance in
nanotech and other advanced tech-related fields.
Now, allow
me to present one of the best, if not THE BEST, gold mining
speculations I have ever seen. By way of fair disclosure,
I own shares in this company and have participated in private
placements to fund its treasury (please review the
disclosures at the bottom of this paper).
 Animas Resources: ANI-TSX.V
(ANIMF-U.S.)
Corporate Website - http://www.animasresources.com/
Corporate Profile - http://www.animasresources.com/i/pdf/CorporateProfile.pdf
[pdf]
Shares - app. 24 million
Fully diluted - app. 35 million
Approximate share price range
January 2008 - US $1.30 - $1.75
Approximate fully diluted market capitalization - US $48M
Recommendation: Aggressive accumulate and "buy"
recommendation for speculative accounts in the current range
- $1.30 - 1.70
Target: 2.0 - 3.5 million ounces of gold in
"drill inferred" category within 24 months; 5 million
plus ounces "drill indicated" with several millions
more inferred within 48 months.
Potential valuation at exit
based on 38 million shares and $150/drill indicated ounce (based
on $850/oz gold): We see an eventual US $500M to $1B market capitalization;
indicating a potential share price of US $12 - $24.
The Animas story is a very simple mining stock story.
All stories that lead to incredible profits are.
Great people and a great property
make for highly profitable investment potential.
Excellent people and an excellent
property make for a "profit-exploding" investment potential.
Excellent people and a "world-class"
mining district can virtually ensure stupendous profit potential.
In addition, please note: there
is a kind of "triple-whammy" if you will.
There is Bonus Pool directly
tied to the development of the gold resource.
Animas will reward officers
of the Company by granting them one million shares when 1.6 million
of "43-101 compliant" (a Canadian regulatory standard
based on the opinion of a "qualified person" in geology)
ounces of gold have been outlined. Another one million shares
will be granted when 2.7 million ounces have been similarly "circled".
2.7 million ounces is a very
solid mineral asset; one that can attract the serious attention
of major mining companies and the Animas team seems to have "happily"
signed up for this high standard.
Think about that a moment if
you will.
Now, let's take a close look
at these people and the gold mining district and see why I'm
so excited.
First, allow us to personalize
this to indicate why it is so appropriately my first written
mining stock recommendation in years.
About 2 years ago, an old partner
and close friend approached me to look over some data on mining
properties. He had decided he was going to go into the gold mining
business again (great timing, huh?), possibly taking the deal
public on the Toronto Venture Exchange. I was the only expert
he was still in contact with at the time (all that's changed
now, because of Animas he is becoming one of the most "connected"
movers & shakers in the junior mining business). I studied
13 projects and told him 2 were very good and would make excellent
choices, but one of the others, The Santa Gertrudis property,
was the 2nd best property I had ever seen in my life at its
stage of development. However, it had a completely messed-up
land package. Disputes, non-contiguous properties throughout
potential ore zones, recalcitrant and demanding owners, etc.
would cause problems, but if someone were to take the time and
money to "put it all together", one would have a gold
mining district holding the potential of multiple,
individually significant mines.
We never thought that he would
do it; but he did!
And that mining district brought
a truly world-renowned group of geologists, mining engineers,
geophysicists and mining executives (the type of team major mining
powers like Newmont or Barrick would be ecstatic to bring aboard)
out of retirement and/or lucrative consulting careers to a small
company, Animas Resources.
Please deeply review this group.
This is not a typical list of CVs one finds on just any mining
company. This is a "world-class" team.
Greg McKelvey, MS. Geol., the CEO, 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 has also consulted for Lundin Mining, Codelco, Phelps
Dodge and Newmont Mining among others. Mr. McKelvey has successfully
directed and led innovative exploration efforts that resulted
in the discovery of several major ore deposits. He was the VP
of Exploration: Latin America, Phelps Dodge.
John Wilson is VP Exploration. He brings more
than 35 years of experience around the world in exploration and
discovery, resource definition and mine development.
John Reynolds is a consulting geologist/geophysicist
with more than 35 years of experience. He has worked around the
world, leading successful geophysics programs for many companies.
His role is to lead the Company's efforts to understand the immense
existing data from previous work on the Santa Teresa District,
as well as collecting new data in order to target new deposits.
Dr. Odin Christensen is an active member of the Advisory
Board. Significantly, Dr. Christensen worked as Newmont Mining's
Chief Geologist in his last position there. He was responsible
for oversight of the technical quality of Newmont's worldwide
geology programs. As Exploration Manager for the Carlin Gold
Mining Company (later Newmont Gold Company) in the late 1980's,
he guided the exploration teams that transformed the Carlin Trend
from a single mine into the largest gold district in the U.S.-and
one of the most prolific gold districts in the world. Throughout
Nevada's Great Basin, he was responsible for all of Newmont's
geological activities at five separate mines with a staff of
ninety geological professionals. Dr. Christensen was involved
with the initial exploration and definition of the world-class
Yanacocha gold deposit in Peru and of the Mesel and Batu Hijau
gold deposits in Indonesia.
Catherine McLeod- Seltzer
co-founded Arequipa
Resources Ltd., a gold exploration company operating in Peru
that is one of the most acclaimed junior mining stories in history.
As President and CEO, she was responsible for raising over $34
million, and was instrumental in orchestrating a $1.1 billion
takeover by Barrick Gold (ABX).
Donald Ranta, Ph. D. is an eminent exploration and development
mining executive. He has managed successful exploration and acquisition
programs throughout the world, and he has extensive experience
in economic evaluation, 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 Engineers.
Dr. Ranta is the CEO of junior mining company Rare Element Resources.
Significantly, Dr. Ranta was previously VP exploration North
America for Phelps Dodge and VP Exploration for Echo Bay, two
giant mining companies that were acquired by even larger giants.
Importantly for Animas Resources, while at Phelps Dodge, he
managed exploration of the team that discovered many of the ore
bodies at Santa Gertrudis.
By no means are these the only
folks of significant merit on the Animas team. We simply covered
a few; others on board have had great success in their respective
fields. See the rest on their website: www.animasresources.com
Now that we have covered some
of the "world-class" people, let's review the world-class
mining district.
The historic Santa Teresa gold
mining district, featuring the Santa Gertrudis and Amelia properties
are in northern Sonora, Mexico, right on the Arizona border.
You need to know that:
Mexico great, mining-friendly
domicile with a strong mining culture and history, as well as
modern mining laws (in fact, Animas Resource's Mexico attorney
and member of their Advisory Board, Rodrigo, Sanchez-Mejorada,
is credited with writing them!). With one of the highest
ratings in the world for respect for mineral property rights
(said to be in the top 5), country risk should be considered
quite low.
When people ask, "Darrell,
what first attracted you to these properties; what made you think
they might be great?" I can point to a 68-page report by
Behre Dolbear (http://www.dolbear.com/home.php)
on the "Deep Carlin Potential" of the Santa Gertrudis
done in 1997 that was part of all the documentation I went through
as being key.
Here it is if you'd like to
try your hand at it:
http://www.animasresources.com/i/pdf/BehreDolbearonSGCarlinPotential.pdf
[pdf]
You see Behre Dolbear is one
of the oldest, most respected, independent, continually operating
minerals industry-consulting firms in the world. Everyone in
the industry listens when they speak. So, when they said the
following, my ears stood up:
"The deep exploration
potential at Santa Gertrudis is very positive and the chance
for deep mineralization is very good. The surface potential is,
as you know, without question. Santa Gertrudis is at the same
position the Carlin Trend was at the point in time Barrick bought
the Goldstrike property from Western States Minerals and started
their deep exploration program."
Barrick is now Barrick Gold
(ABX), the largest gold mining company in the world, and $44
B major, and the Goldstrike STILL has 15 million ounces and is
just one of their many major gold mines. They were a junior,
like Animas in the early 1980s and the Carlin Trend "made"
them.
http://www.barrick.com/GlobalOperations/NorthAmerica/GoldstrikeProperty/default.aspx
The Carlin Trend in Nevada
is the largest gold producing district in the U.S. The deposits
run from broadly disseminated gold, right on the surface, that
is literally mined with large shovels, to deep underground, bonanza-type
deposits.
http://www.nbmg.unr.edu/slides/jon.htm
How could Santa Gertrudis not
still be being mined in 2007, and be available to a small mining
company if it was so great?
In the presence of much lower
gold prices, the earlier operators targeted oxide ores near surface
that could be mined inexpensively and cyanide heap-leached to
extract the gold from the crushed rock (also very cheaply). The
first miners had difficulty with debts and other financial problems,
paid off part with pieces of the property and finally shut down
operations with all those ounces of gold left in the ground.
They even left the very extensive
sulfide gold deposits, outcropping right on surface! Back then,
and even today, the process for extracting gold from "sulphides"
is more labor intensive, requires more treatment processes and
is thus more expensive.
However, with today's much,
much higher gold prices (today, well over $825, but over $600
is considered high by most mining people) the surface "sulphides"
can probably be considered "ore" (an economic, not
a geological term meaning roughly mineralization from which metal
can be extracted at a profit). Furthermore, there are MANY additional
deposits and many structures yet to be drilled, and they portend
potentially millions more of ounces of gold.
Understand, we don't just believe
there is gold to be found; gold has been mined there for a very
long time. In fact, in not so distant years, Santa Gertrudis
produced over 564,000 ounces of gold at an average grade of 2.13
grams per tonne from 1991 to 2000. In addition, Santa Gertrudis
has an historic (non-Nl43-101 compliant), current resource of
approximately 720,000 ounces of gold.
Animas Resources controls 323
square kilometers of the Santa Teresa District now. That is about
125 square miles. 10 miles by 12.5 miles is one way to look at
it. They have consolidated several of the past operators' positions,
and now control more of the District than any of those companies
in the past. Now it is easier to imagine the possibility of several
mines existing if you take into account the gold seems to have
been found in most all the rock types within the district.
We are not contending there
are 20 million + ounces of gold in the Santa Teresa (there well
might be; there have been about 60 million already mined in the
Carlin Trend), or even that they will drill-indicate another
3 million ounces within 30 months (they might). However, we believe
that those 720,000 ounces represent a fraction of the gold, in
a fraction of the deposits, in a fraction of the property, in
a fraction of the district.
The work that has been done
to date is immense, and you should be ready; we expect 2008
drilling to begin sometime between now and April with first results
as early as this May. Here is some of what Animas Resources
has already and is hard at work utilizing for the benefit of
shareholders:
1,017 reverse circulation drill
holes totaling 98,620 meters
225 diamond drill holes totaling
21,122 meters
34,000 rock samples
21,000 soil samples
District wide airborne geophysical
and ASTER surveys
55% of district covered by
a soil geochemical survey
Gold production since 1991
occured in an area over 18 km by 4 km; truly a district-sized
system
Only cursory exploration was
done below 400 meters
Known mineralization extends
under post-mineral gravel cover and is open at depth
Allow us to quote directly
from the company's corporate profile (first part from the Behr
Dolbear report again):
"'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.' (Editor note: my bold) There is excellent potential
for additional shallow gold deposits both adjacent to known oxide
gold occurrences and under shallow gravel cover."
That "shallow gravel cover"
covers an incredible number of square kilometers on Animas' property.
Highly technical, but commonly used tools for finding deposits
below the surface of the ground, without "seeing them with
your eyes" (and before drilling them to prove they are there)
like Induced Polarization (IP), magnetometer work (EM) and other
geophysical work and techniques, indicate many potential deposit
targets in the Santa Teresa District, outside of the known Santa
Gertrudis deposits. Gold mineralization of ore grade also comes
right to the surface (outcrops) persistently in MANY places on
the properties.
Over a 10-year period, two
mining companies at Santa Gertrudis produced an average of 60,000
ounces of gold a year at a grade running between 2.1 and 2.88
g/t.
Those numbers do not even include
production at the Amelia Mine, which was operated by an Australian
company at the time and is now controlled by Animas.
We believe the current known
resource with little credit for upside is worth more than twice
the current, fully diluted market capitalization of about $40
million. It will likely be a great value at $3/share as drilling
uncovers 100s of thousands or millions of ounces more of gold.
We believe it is a "steal" at under $1.50, and still
a great bargain at $1.75.
The team in place is unlikely
to mine gold from these properties. That will likely be the job
of a major mining company acquirer once Animas is able to indicate
through drilling (prove up) a minimum of 2-3 million recoverable
ounces and get to the inference (an additional inferred resource)
of at least another 2-3 million ounces. By then, assuming $700+
gold, and good economics after the engineering plan is on the
"back of an envelope", do not be surprised to see the
sale of the company for about US $1 B.
We're sorry: Successful professionals
like Greg McKelvey and some of the top members of his team don't
come out of comfortable retirements for a decent salary or to
spend years and years building a mining company. I fully expect
that our shares of Animas owned in 42 months (full disclosure:
I and my family and friends own many shares) will be traded to
a major company for cash and/or stock within 42 months.
We are unlikely to find a better,
lower risk, junior gold mining company for the speculative part
of your portfolio. Certainly, we will not find one with a more
impressive team with proven, mine-finding, mine-making expertise
and direct experience.
There are always risks in any
speculative endeavor. No one can see underground; the drill may
not find the amounts of gold in the grade needed to justify building
a mine; the price of gold may fall precipitously or Mexico may
dramatically change its ways or its taxes. There are innumerable
general risks to owning stocks and speculating in micro-cap issues
(see disclaimers below for even more). However, certainly, where
no risk exists, there are no exceptional returns.
We would buy and/or accumulate
Animas Resources aggressively, in the current $1.30-1.70 range.
I plan to visit the
properties and the Santa Teresa District in March with a group
of geologists and mining analysts. The enlightened perspective
I hope to take away will form the basis of a follow-up report
which you will receive if you sign-up as indicated above. Just
email that you want to be on that natural resource and mining
list to darrell@resourcedevelopment.com. If you wish to receive
our regular Nanotech Insights on successful investing
in "small" & advanced technology stocks, write
at darrell@nanotechnology.com. Feel free to write only once to
request both.
My Mining, Natural Resource
& Toronto Venture Exchange Background
After graduating from Duke,
I worked as a commodity futures broker, specializing in trading,
sales and research related to options on the London Exchange
in gold, silver, copper and nickel.
After meeting Doug Casey
in 1975 at a brokerage firm, we became close associates in the
1980s in a variety of gold mining share related businesses. To
those "in the know", Doug (duly credited with also
introducing this writer to "nanotechnology" in 1988)
is the most important promoter of junior gold stock investing
on the planet. He became the author of the best selling financial
book in history to that time, Crisis Investing in 1981. In that
and his other, two bestsellers, he called the newsletter our
firm penned, The Prospector, "The source
for junior mining shares" and this writer the leading junior
mining stockbroker. When my firm bought the rights to the Norman
Lamb classic, Small Fortunes in Penny Mining Stocks, we re-edited
it, published it with Doug's forward in 1983 and sold thousands
of copies.
Starting as a stockbroker at
First Georgetown Securities, Inc. in Washington, DC, the directors
appointed me president of company in 1978, and we developed one
of the largest junior mining stock broker/dealers in the U.S.
We managed up to $300M in 2007 dollars, specializing in the Spokane
(silver mining) and Vancouver Stock Exchanges (gold and copper
mining), and were among the top grossing U.S.-based brokers in
junior mining shares from 1981 - 1989.
We met Robert Friedland
(see The Forbes 400) in 1982, and were among the first
to recognize his unique genius and promotional capability, recommending
his first four mining companies. For those of you who have not
heard of him, he is best known for Diamond Fields, which struck
it rich in nickel at Voisey's Bay in Canada and was sold to giant,
Inco, for US $3.3 B. During a good part of 1988, at his desk
in Vancouver, I worked with his European institutional investors
and sat in with geologists, mining engineers and geophysicists,
taking active role on joint venture, property acquisition and
company acquisition discussions for those companies.
After we turned our book of
4,000 clients over to an old partner of ours in 1989 (after we
correctly predicted a 3-5 year decline in gold and silver prices),
he built it aggressively, adding his own genius and unique twist,
growing the assets to incredible heights. His name is Rick
Rule, and most folks today consider him the top junior mining
share broker and merchant banker in the entire "space".
He has made untold millions for his clients over the years.
From 1981 to 1990, we published
The Prospector and were an SEC Registered Investment
Advisor. Many considered it the premier junior mining stock newsletter.
We recommended, at early, highly profitable stages, stocks involved
in the Carlin Trend (1981), the Hemlo District (1983) and most
major discoveries during that time. In addition, we protected
our next letter's subscribers from catastrophic loss, calling
the Bre-X fraud early. We believe we were the first to
call the Delgratia fraud in newsletter, while making effective
use of our network of top geologists, engineering and geophysical
consultants. We made exceptional profits for our subscribers
in names like Pennaco Energy, Galactic Resources, Sonora Gold,
Cornucopia, Ultra Petroleum, Temple Mountain, Metallica Resources,
Wavecrest, Gold Standard and dozens of other names you have
probably never heard of but zoomed in the natural resource booms
of the past.
In the late 1990s, we established
a mining financial PR and merchant banking firm for Canadian
shares in the U.S.; part of our success was a hedge and private
equity fund called Excalibur Natural Resource Venture Capital,
which had audited, 21% compounded returns, after all fees,
when closed in 2001.
Over more than two decades,
I have spent significant time with more than 100 geologists,
100 mining engineers, 100 prospectors, 100 promoters, 100 mining
brokers and dozens of newsletter writers and visited dozens (if
not a hundred or more) of properties since 1981 ... Along the
way, I have had the fantastic experience of spending time with
Adrian Day, Bob Bishop, Lawrence Roulston, Robert Friedland,
Greg McCoach, Doug Casey, the Coffin Brothers, Ken Gerbino, Brien
Lundin, Rick Rule, Richard Band and Paul Van Eeden, among
many other well-known mining stock luminaries and analysts (see
these per Google).
During this career, our
clients, associates and subscribers invested more than $200 M
in private equity that has become more than $11 B in public market
capitalization.
Darrell Brookstein
email: darrell@resourcedevelopment.com
website: www.nanotechnology.com
Disclosures and Disclaimers
GENERAL TERMS
No investment opinion or other advice is being rendered on any
stock or company. All of the trading stocks we recommend should
be considered highly speculative; you can lose some or all of
your money. It should be assumed that the Author and editor and
their associates may hold or dispose of or trade in positions
in any securities mentioned at any time. Please be responsible
for understanding the terms and vocabulary of stock market investing.
Here is an unaffiliated glossary site that may be useful:
http://www.traders.com/Documentation/RESource_docs/Glossary/glossary.html
Disclaimer: The Nanotech Company,
LLC, Darrell Brookstein and/or Resource Development, Inc. are
not registered investment advisors nor broker/dealers. Readers
are advised that the material contained herein should be used
solely for informational purposes. The Author does not purport
to tell, or suggest to, readers which investment securities they
should buy or sell for themselves. Readers should always conduct
their own research and due diligence and obtain professional
advice before making any investment decision. The Author will
not be liable for any loss or damage caused by a reader's reliance
on information obtained in any of our newsletters, special reports
or on our web site or sent by email or mail. Our readers are
solely responsible for their own investment decisions. The information
contained herein does not constitute a representation by the
publisher or a solicitation for the purchase or sale of securities.
Our opinions and analyses are based on sources believed to be
reliable and are written in good faith, but no representation
or warranty, expressed or implied, is made as to their accuracy
or completeness. All information contained in our newsletters
or on our web site should be independently verified with the
companies mentioned. The editor and publisher are not responsible
for typographical or other errors or omissions. There is no guarantee
of investment results herein whatsoever, either explicit or implied.
Past results are no guarantee of future results or even profitability.
Investors are cautioned that they may lose all or a portion of
their investment if they make a purchase or short sale in these
speculative stocks.
321gold Ltd
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