Canarc Resource Corp: Ready
for Launch?
Eric Hommelberg
April 12, 2004
When I wrote my piece "2003
- Year of the Juniors" in December of 2002 I said:
"Profits
of 100% to more than 1000% are in the pipeline next year if invested
in high quality junior exploration companies!"
Well, looking back now at 2003 all I can say is that fortunately
that's exactly what happened, many Juniors appreciated by a stellar
performance gain of several hundred percent during last year
which is described in detail in my piece "Juniors are paying
off" November 2003. OK, fine you'll say, that was 2003,
but what about 2004? Too late to get on board? Has the bull market
in Gold ended yet? Or has it hardly begun? Do the Junior shares
still represent a great investment opportunity? Why has the Junior
Exploration sector been hit so hard during Q1 2004? Was it all
Hype after all or just a normal healthy correction? Does a healthy
correction justify a 50% loss on my Junior Gold shares? Can it
happen again? What shall we do? Well, lots of questions which
beg serious answers! In order to answer those questions we'll
have to examine first the current status of the two major pillars
supporting the junior mining companies that in my opinion are:
- Gold Price
- Declining Gold reserves
Gold Price:
Rising Gold prices will lift the entire Gold sector. We just
saw that happening during 2001 - 2003. Higher Gold prices leads
to higher Gold share valuations and vice versa. Due to the greater
volatility of junior mining stocks they tend to rise faster during
a bull-run and tend to drop faster during a correction. A good
example is the latest correction of Q1 2004. While Newmont shares
dropped less than 20%, many junior miners dropped by 50% or even
more. Well, that certainly hurts and I can imagine that this
isn't exactly your definition of an once in your lifetime investment
opportunity!
Although I didn't had the intention to include this flash-back
on Q1 2004 I thought it would be useful to visualize the recent
correction and its impact on the long-term trend. In order to
do so we'll take a look at the long-term chart of the HUI first.
As you will see, during the three-year bull market in Gold, gold
shares do correct every now and then which is of course normal
and inevitable. Sometimes they experience a minor correction
sometimes a major one. You'll notice that the major corrections
do occur when the Gold shares moved too far ahead from their
200 dma and tend to bottom near or at the 200 dma line.
So whenever a Gold Stock moved
too far away from its 200 dma and get over-extended gravity will
pull it back. No single stock ever managed to escape gravity
from the 200 dma permanently. Fortunately those major corrections
do not happen very often (last time it happened before this correction
was March 2003) but unfortunately these sell-offs do scare lots
of investors out of their Gold stocks. To those investors I would
say "don't be scared for a major correction to the 200 dma
because it's almost inevitable and is just a (although a painful
one) typical characteristic of a bull market at work. It happened
in July 2002, it happened in March 2003, it happened in March
2004 and it will happen again."
The good news however is that once such a painful correction
is over the odds are a steady upward trend will commence for
a relative long period (>6 month) without any significant
setback. In other words, History tells us that the best buying
opportunities occurs near or at the 200 dma.
Adam Hamilton (Zealllc.com) told his readers recently:
"As
a matter of fact, I believe that another legendary buying opportunity
is rapidly approaching in gold stocks. In the just-published
March issue of our acclaimed Zeal Intelligence monthly newsletter,
I discussed the convergence of the key technical signs leading
towards this coming strong-buy signal in detail. While not quite
there yet, we are getting closer every day and an amazing buying
opportunity for both investors and speculators looms on the horizon."
Jim Sinclair (JSMineset.com) told his readers something similar:
"Kenny
and I nailed the 1968 to 1980 market and maybe by God's Grace
we will be able to do it again. This is so important because
if you had this information for example in the big tech bull
- knowing when the normal time outs come and when the top forms
- consider what it would have meant to you. So I am quite excited
to see how this gold price reaction rolls out to completion both
in time sequence and in form.
We are approaching the "Window of Opportunity" for
the resumption of the upside in the gold market. I can't state
strong enough how important it is that gold actually performs
within this period of time as that would confirm the validity
of very long term proprietary studies. In terms of timing, KA
and I see us as being only days away from being vindicated in
our positive outlook toward both gold shares and gold."
END.
Conclusion: As long as the bull market in Gold continues great
buying opportunities lie ahead whenever Gold shares do correct
to their 200 dma.
So the big question remains:
"Has the bull market in Gold ended yet or has it hardly
started?"
In my opinion the price of Gold still has a long way to go for
reasons well documented in my report "Gold Drivers 2004"
which can be found here.
Some Expert notes confirming the current bull run in Gold:
Jim Sinclair: I am a "believer" in the magnitude of
the gold move that started at $342 and has had, as I have said
often, a $480 plus number on it from the day it started.
Richard Russell: In the meantime, Russell advises subscribers
to hold cash and gold, which, at $400 an ounce, is "as cheap
as dirt." Eventually, he sees the yellow metal topping $1,000
an ounce -- and the Industrials and Transports plummeting. For
this Dow Theorist, it's the perfect set-up -- for the next bull
market.
Jim Puplava: The bull market in gold and silver has barely begun.
It is still in its infancy as gold and silver move into their
rightful role as real money. (read)
Pierre Lassonde: Newmont president, Pierre Lassonde, is certain
that the gold bull market remains in its infancy, and points
investors to the 1970s to understand how events might unfold
in gold's favour in an era of a "manic depressive dollar."
"We haven't even started to correct the US financial imbalance
of the last three years. Don't tell me that the gold bull market
is over. It has hardly even started," Lassonde told the
audience at the 2004 BMO Nesbitt Burns Global Resources Conference
in Tampa, Florida. (read)
Conclusion: Gold Shares do represent a great buying opportunity
right now!
Declining Gold
Reserves:
In my piece "Declining Gold reserves benefit Juniors"
April 2003 I wrote: The gold Industry faces a tremendous challenge.
Gold reserves are running dry coming years and not enough funding
has been taken place for sufficient Exploration in order to replace
existing Gold reserves. It takes at least a couple of years of
exploration in order to find new Gold reserves. After a discovery,
it takes another 5 to 8 years to bring the property into production.
So big mining companies are facing fewer Gold reserves coming
years which leads to fewer ounces of Gold reserves per share.
Adding Gold reserves by means of acquisition inevitably leads
to the same result, fewer ounces of Gold reserves per share.
This works as an unwanted gravity which pulls the share price
of the company down. Eventually the big companies will turn to
the better Junior Exploration Companies in order to help find
new Gold reserves. So from an investor's point of view it makes
more sense to invest in Junior Companies which are increasing
their Gold reserves substantially than investing your money in
big companies which are facing a decline in Gold reserves and
thus a decline in valuation. Let's repeat one sentence:
"So big mining companies are facing fewer Gold reserves
in coming years which leads to fewer ounces of Gold reserves
per share."
That was April of last year! So where are we now? Did the ounces
of Gold reserves per share actually declined?
Well, the answer is yes! This is exactly what happened. Gold
production per share for the Majors such as Newmont, Barrick
and AngloGold have fallen from 6.4 ounces per share in 2000 to
4.2 ounces per share in 2003.
Few Headlines
regarding declining Gold production.
Barrick Gold Production 10% lower in 2004
NEW YORK -- Barrick Gold's [ABX] low-profile chief executive,
Greg Wilkins, today told attendees of the Merrill Lynch mining
conference in Toronto that production will be 10% lower in 2004.
A fund manager with intimate knowledge of Goldstrike describes
it as Barrick's flagship asset and says the trends have been
disturbing for several years. Grade has been falling precipitously,
aggravated by lower recoveries that resulted in steadily declining
gold output.
AngloGold saw reserves fall by 9.2-m ounces last year
Thursday February 12, 2004
AngloGold's Geologists failed to replace all the ounces it
produced last year.
Ashanti Announces Gold Production Lower Than Forecast
Monday February 16, 2004
SA gold output 4,9% lower in 2003.
Tuesday March 2, 2004
Gap in Gold Production Looming
Friday March 12, 8:10 pm ET
RENO, NV--(MARKET WIRE)--Mar 12, 2004 -- AXcess News (www.axcessnews.com)
released a story highlighting gold mining companies that are
having a banner year. The story points out how there is a gap
in gold production looming and that investors should be watching
these stocks more closely to see which companies will be outperforming
their peers.
Harmony Gold cuts production by 6%
Friday April 2, 2004
JOHANNESBURG (Mineweb.com) -- Harmony Gold has finally given
in to the pressures of the stronger rand, announcing today that
it was considering cutting 5,000 jobs and 6 percent of its production
at loss making South African operations, in an effort to widen
its operating margins.
END.
You think shareholders will be cheering a declining Gold production
in a rising Gold environment? No, of course not, so the pressure
on the senior Gold producers will be huge in order to replace
their dwindling Gold reserves. It's not only a matter of satisfying
shareholder demand but also a matter of survival. In his latest
Essay "Open the Checkbooks - Buy the ounces" Jim Puplava
of Financial Sense Online quoted Geologist H.R. Bullis who said:
"It is no longer a question of finding ounces anymore. It
has become a question of survival. According to geologist H.R.
Bullis, today's VLGP's are unlikely to survive at current production
rates over the next decade. It is time to open the checkbooks
and go get the ounces." So from an Investor's point of view
it makes sense to invest in high quality junior exploration companies
which are on the verge of discovery. We're entering a time where
discoveries will be rewarded tremendously. A good example we
saw on Feb 26 when Victoria Resources (CDNX:VIT) announced good
drill results. The company was trading at 0.99 CAD$/share at
that time. Next morning its share price took off by 100% and
never looked back!
So what do you think? Are the Senior Producers waking up? Are
they going after new Gold Deposits? Well, it seems they are!
On Jan 27 Barrick announced that they had opened a new office
in Vancouver in order to monitor junior exploration projects.
Barrick Gold's New Office Tracks Junior Exploration Cos.
"Barrick Gold Corp. (NYSE:ABX) has opened a Vancouver office
to monitor junior exploration projects, executive vice-president
Alex Davidson said at an exploration conference. Davidson said
two or three employees in the office are tracking junior projects,
and visiting managers of companies and their exploration sites.
The local office also handles Barrick's exploration efforts around
Eskay Creek, its 100%-owned gold mine in northern B.C."
AngloGold CEO Bobby Godsell recently said:
"It is the end of big picture gold consolidation; there
is no compelling logic to combining anymore. The real challenge
now is how to replace your ounces for the future." The race
to replace ounces is about to begin. It will take the form of
takeovers of small producers with long reserve lives and high
quality junior mining companies with large in ground reserves
that can be mined economically."
People like Bobby Godsell publicly speaking about takeovers of
high quality junior mining companies and Barrick tracking junior
mining companies leads to only one single conclusion:
Juniors on the verge of Discovery will be in the spotlight soon!
So how to select a good junior explorer? Well, good question,
ask 10 experts and you'll get 10 different answers, the only
thing I can do is to share my thoughts on this.
First of all I like the junior explorers which survived the worst
years of the bear market in Gold (Late 90's). This is important
to me! Why? Because it tells me two important things:
- Those companies were and are
true believers in Gold and its future potential. If they weren't,
they would have quit the Gold market and transformed themselves
into something else, into something fancy which was hot at that
moment. Didn't we see many of the juniors making desperate moves
and started financing all kind of E-commerce projects or other
fancy hot-stuff? Well, we know the end result by now! For me
it's quite simple. Most juniors without promising properties
left the Gold arena in the late 90's, the ones with promising
properties were hanging on and went into hibernation mode in
order to survive. They did because they were/are true believers
in Gold and its future potential and knew that hanging on would
be rewarded somewhere in the nearby future.
- These companies are well run
financially. So many juniors went bankrupt during the late 90's,
only the ones with an iron financial discipline survived. So
investing in a survivor makes me confident that management will
spend my precious investment capital in a proper way!
The next step is to try to
identify juniors with potential multi-million ounce deposits.
This isn't easy, we investors aren't geologists, and we can't
verify multi-million ounce deposit claims. Please be aware that
only a very few multi million ounce Gold deposits do exist. According
to Alex Davidson (Vice President Exploration Barrick) only three
major deposits (5+ million ounce) have been discovered since
1999. So I would say select Junior Explorers with good Exploration
Geologists with proven track records. Building a team of good
Exploration Geologists requires good management. Therefore I
consider good management as the greatest asset a Junior Explorer
can have. A well managed company will find good properties.
So go for good management, but how you wonder? What is good management?
Can you give me some characteristics of good management? Well,
to be honest I can't! Yes, I can look at management's track-record
as I've said before but just that single fact isn't sufficient
for me to determine it's competence. In the end it's just a matter
of trust and faith. Some people you trust and some you don't!
Simple, it's all people business. So if I can't determine management's
competence myself what should I do? Again, ask 10 experts and
you'll get 10 different answers but again I'm happy to share
my thoughts on this. Let's say you just spoke to a CEO of a junior
mining company who says to be on the verge of a major discovery.
It sounds good but you're wondering about the CEO's credibility.
Let's say that this particular CEO was telling the truth, what
do you think their shareholder base would look like? Wouldn't
smart money already piled in you think? Don't you think that
major producers would show some interest in this company for
reasons well documented earlier? What I'm trying to say is that
no matter what kind of potential discovery claims a junior makes,
if it doesn't have a strong shareholder base I simply won't buy
it. Even better, if you'll notice that some major producers took
an interest in the company as well, which underscores of course
the real possibility of finding major Gold Deposits. (I assume
you agree with me that major producers aren't that stupid to
invest in some empty drill holes with a liar on top of it)
I want to introduce a company right now that in my opinion meets
the selection criteria mentioned above.
Canarc Resource
Corp. (CCM.TO)
Canarc Resource Corporation (TSX:CCM - OTCBB:CRCUF) (website)
is a growth-oriented gold exploration and mining company focused
on building shareholder value through the discovery and development
of large gold mines in North, Central and South America.
The Company owns interests in one small producing gold mine in
South America, two large gold deposits ready for development
in North and Central America, and several strategic exploration
projects that have the potential for significant new mineral
discoveries.
Canarc's New Polaris and Benzdorp projects in particular offer
investors multi-million ounce gold potential. Most junior gold
companies offer investors either production cash flow or a development
opportunity or an exploration play. Canarc is unique in that
is has all three: annual income, the largest undeveloped gold
deposit in western Canada, and one of the most exciting exploration
projects in South America.
A quick summary of Canarc's properties:
Benzdorp
Property Suriname (80% option)
Benzdorp is historically the most prolific gold producing region
in the Republic of Suriname with alluvial production exceeding
1 million oz. gold. Canarc recently announced an exciting new
gold discovery on its Benzdorp property in Suriname. This target
is a large, open pittable gold porphyry prospect with multi-million
ounce potential.
Deposit Potential:
Several million oz. gold and several 100 million lbs copper geologically
similar to the 10 million oz. Boddington mine in Australia (Newmont)
and the 15 million oz. Cadia Hill deposit in Australia (Newcrest).
Current Status:
A 38 hole drill program has been completed on the JQA discovery
area which has confirmed the existence of a large gold-copper
porphyry deposit. An aggressive exploration drilling program
is now underway to delineate an initial gold-copper resource
in 2004. Management believes Benzdorp is potentially Canarc's
next major gold discovery.
New
Polaris BC Canada (100% Canarc)
A small high grade, underground past producing mine, New Polaris
has become one of the largest gold deposits in Western Canada
as a result of Canarc's successful exploration programs. The
geological resource estimate is currently 1.3 million oz. ( not
NI 43-101 compliant) at US $325 gold, but the mineralization
is wide open along strike and at depth and could easily double
with further drilling.
Deposit Potential:
Three million ounces plus, similar geologically to Placer Dome's
Campbell Red Lake Mine (10 million oz.) high grade refractory
ore body. Canarc's immediate goal is to develop a 700,000 oz.
reserve suitable for a 600 ton per day mine, producing over 65,000
ounces of gold per year.
Current Status:
Polaris is an advanced stage exploration project, requiring infill
drilling to further define proven and probable ore reserves followed
by a full feasibility study. A scoping study is now underway
to access the potential to develop a 65,000 oz. /year, over the
next 3 years.
Bellavista
Mine Costa Rica (18% Canarc)
Bellavista is a large, open pit, heap leach, epithermal gold
deposit currently under construction. Canarc owns an 18% carried
interest (after payback) and receives US$117,750 in annual preproduction
cash payments.
Deposit Potential
1 million oz. plus, similar geologically to other volcanic-hosted
epithermal gold deposits.
Current Status
The mine is currently under construction and Glencairn Gold Corp.
anticipates its first gold pour by the end of 2004.
Endeavour Gold Corp. (EDR: TSX-V) (website)
(Endeavour is an affiliate of Canarc, and Canarc has a significant
shareholding (15%) and helps manage the affairs of EDR.)
Endeavour is a small-cap resource company focused on the discovery
and development of high grade silver and gold mines in Mexico.
With the recent acquisition of the Santa Cruz silver mine, Endeavour
has become a new silver producer with extraordinary growth potential.
Deposit Potential
Great exploration potential is evidenced by a recent new discovery
along strike from the mine and a historic paucity of exploration
drilling. An independent report recently identified 2.8 million
tonnes of potential ore reserves (not NI 43-101 compliant) in
the SC vein, wide open along strike. The property covers over
3 km of known vein and the structure has been traced for more
than 6 km.
Current Status
Endeavour is now targeting a 4-fold increase in production to1.8
million opy silver over the next year by developing the new discovery
for mining. An additional rise in production up to 4 million
opy silver is possible within three years by developing the other
two known high grade ore shoots. That would make EDR a top 5
primary silver producer in North America.
Survivor of the worst bear market in Gold:
Canarc was founded 17 years ago by its CEO Brad Cooke. The worst
years of the bear market in Gold (late 90's) weren't that pretty
. So many juniors ended up with a less inspiring chapter 11 scenario
and of course these dark days had its influence on Canarc as
well. In order to survive Canarc virtually went into hibernation
mode. Brad Cooke was determined in bringing Canarc through these
dark days. Why? Simple! Because the properties Canarc owned would
almost guarantee great upward potential for the company in a
coming bull-market in Gold.
Management
As I've said before I consider management as one of the greatest
assets a junior mining company can have. Here's what Jay Taylor
(website) had to say
about Canarc CEO Brad Cooke:
"Your
editor (Jay Taylor) has known President, CEO and Director Brad
Cooke since the early to mid 1980s. Nothing is more important
than management and I believe Brad is about as capable as any
junior mining company CEO you will find. Not only does he himself
possess solid geological skills but he also has good business
sense and people skills. As such he as assembled a team of competent
folks around him.
Brad is a professional geologist, with more than 20 years of
experience in geology and mineral exploration. He holds two university
degrees in geology and has worked with the Ontario Department
of Mines, Noranda, Shell and Chevron. Between 1983 and 1987 he
owned and operated Cooke Geological Consultants, which found
and developed several gold vein deposits for clients, and effectively
reactivated interest in the Bralorne gold district -- historically,
the largest gold producing region in British Columbia. In 1987,
with the private management company ARC Resource Group, he founded
Canarc and has overseen the growth of the company since that
time, participating hands-on in the acquisition and exploration
of strategic gold properties throughout the Americas."
END.
In an interview with Business TV on January 30 Jay Taylor said:
"I'm
extremely bullish on Canarc...whenever I analyze Junior mining
companies the first thing I look at is the management and as
far as Canarc is concerned management is as strong as any junior
company that I know of. I've known Brad Cooke since the early
1980's...he is a geologist, an honest man with great integrity
in my view and he is very sharp in terms of finding out good
properties and also selecting good people to work with him. Nothing
is more important for any company than it's management whatever
industry you are in...So overall, I think Canarc has the very
very strong prospects of becoming a very successful mining company
especially in light of a rising Gold price."
Interview can be watched at:
www.b-tv.com/i/videos/canarc.ram
END.
Shareholder Base
As mentioned earlier I consider a strong shareholder base as
a must before I even start to think about investing in a junior
mining company. Brad Cooke tells me that almost half of all Canarc
shares are in strong hands. The list of shareholders is impressive
and includes:
Barrick Gold
Kinross Gold
Another prominent supporter
and shareholder of Canarc is Frank Veneroso.
Frank Veneroso is a highly esteemed financial market consultant
of international stature. For those still unfamiliar with Frank
Veneroso, here's a quick introduction:
Frank Veneroso is Market Strategist for the Global Policy Committee
of Allianz Dresdner Asset Management and is responsible for alternative
asset product development at Dresdner RCM. From 1991 to 1994
he was at the hedge fund Omega Advisors were he was the partner
responsible for global investment policy formulation. From 1995
to 2000 and prior to 1991, through his own firm, Mr. Veneroso
was an investment strategy advisor to global money managers and
an economic adviser to institutions and governments around the
world in the areas of money and banking, financial instability
and crisis, privatization, and development and globalization
of securities markets. His clients have included the World Bank,
the International Finance Corporation, and The Organization of
American States. He has advised the Governments of Bahrain, Brazil,
Chile, Ecuador, Korea, Mexico, Peru, Portugal, Thailand, Venezuela
and the United Arab Emerates. Frank is a graduate from Harvard
and has authored many articles on the subjects of international
finance.
Frank Veneroso runs the ABNAMRO Gold Certificate fund nowadays
and also owns 'privately' a significant stake in Canarc.
Frank Veneroso has a good reputation of 'stock-picking'. Readers
of LeMetropoleCafe know that Bill Murphy took a large holding
in Golden Star Resources. Why? Because Frank Veneroso liked it!
Here's what Bill Murphy had to say about Frank V.
"Golden
Star Resources - My favorite gold stock and represents much of
my gold share holdings. The reason is simple. It is Frank Veneroso's
favorite gold stock. When I met Frank in 1980, he was best known
as a Wall Street Whiz Kid stock picker. Frank has stated publicly
that he believes that Golden Star is one of the most successful
small gold exploration companies ever, having found 5 or 6 valuable
properties in the Guyana Shield."
END.
Well, I don't think Bill Murphy has any regrets listening to
Frank Veneroso regarding Golden Star Resources since it appreciated
by more than 1200% since early 2001!
I think no further explanation is needed for reasons why I'm
so excited to see Frank Veneroso as a major Canarc supporter.
Canarc share price:
Canarc shares are trading currently for approximately CAD$0.90.
It traded as high as CAD$1.30 last year. Does CAD$0.90 cents
represents a good buying opportunity?
We already saw (on the HUI chart) that shares approaching the
200dma were presenting a good buying opportunity. So let's take
a look the chart of Canarc itself and see where we are right
now.
As said before, Junior shares
tend to drop faster in a correction compared to their senior
brothers. This is just a perfect example of what I mean, as we
can see here Canarc shares are way oversold (shares hitting 200
dma, MACD and RSI indicator way oversold) and therefore represents
imo a great buying opportunity at current levels (approx: 0.90
CAD$)
Canarc's
future share price potential
OK, so if buying Canarc shares at current price levels represents
a good buying opportunity what kind of share price seems to be
reasonable within a year?
Well, that's almost impossible to say because a lot depends on
the price of Gold. Although I strongly believe in higher prices
for Gold next year this is not the main reason for investing
in Canarc. As I said, the junior exploration sector is supported
by two pillars, one is the price of Gold the other is declining
Gold reserves. So if you're able to find a junior which is on
the verge of discovery you will be rewarded anyhow, with or without
higher Gold prices. I showed you the Victoria Resources example
which share price doubled over night on Feb 26. Of course this
hadn't anything to do with the price of Gold but rather with
a good drill result!
The fact that Canarc is in my opinion on the verge of a major
discovery on it's Benzdorp Property in Suriname South America
can make Canarc a winner! CEO Brad Cooke makes a quick straight
forward calculation, he says: " When you invest in Canarc
you already own some real assets due to our 1.3 million ounce
geological resource on our New Polaris property in BC Canada.
These resource ounces alone already justify a share price of
1+ CAD$. So from an investors point of view you don't pay anything
yet for all other Canarc properties including Benzdorp."
Canarc already mentioned that they believe to be on the verge
of discovery of a multi-million ounce Gold deposit on its Benzdorp
property. I asked Brad Cooke to be a bit more specific regarding
which 'time-frame' he thinks Canarc can announce a new long awaited
World Class Gold Deposit and its size.
Brad Cooke: " We're confident we have a new World Class
Gold prospect with potential for 5 million ounces of Gold and
we hope to make a definitive resource estimate before year end."
END.
Well, let's see, if 1.3 million ounces at the New Polaris property
already justify a share price of 1+ CAD$, it ain't difficult
to make an estimate for Canarc's share price at current Gold
prices if they succeed in proving a 5 million ounce Gold deposit
on its Benzdorp property in Suriname.
It's therefore my strong belief that once investors start to
realize what kind of potential the Benzdorp property really has
they will want to get in but it won't be that easy because half
of all company shares are in strong hands.
Some smart market observers already took notice:
Jay Taylor - www.miningstocks.com
"The
Benzdorp Could be a Monster Gold Deposit- The company's Benzdorp
property, where the English and Dutch first mined gold in the
late 1980s, is a huge claim area. There are four exploration
concessions measuring 42 km x 31 km, totaling 138,000 hectares.
Canarc holds an option to acquire a 100% interest (subject to
a 20% NPI or 1% to 6% NSR) in the subsurface mineral rights from
Grassalco, the state-owned mining company. Of course, more important
than the size of the company's property are the prospects for
discovering gold reserves. I believe the prospects for outlining
one or more major gold deposits on the Benzdorp are excellent.
. . Brad Cooke. . . noted that Canarc has already identified
twelve gold targets, two of which are large tonnage gold/copper
porphyry targets and the remaining ten are high-grade vein targets."
- J.Taylor's Gold & Technology Stocks
END.
Small Cap Media reports:
Canarc's
Drill Results Indicate Potential For A World-Class South American
Gold Discovery.
END.
Chris Temple (2/18/04) - The National Investor:
"In
my determination, Canarc is one company that the market place
has generally not discovered.Valuations for some of the gold
exploration companies touted the most aggressively in recent
months remain rich (if not, in some instances, absurd) even after
the latest correction in the sector. In Canarc's case, however,
its valuation given the nature, potential and progress of its
properties thus far is more like I'd have expected to see two
years ago as this new metals bull market was getting started.
Thus, it stands out as one we need to take a position in."
END.
Well, enough said regarding Benzdorp and its potential. The bottom
line is this:
When you invest in Canarc you already own some real assets due
to their 1.3 million ounce proven geological resource on the
New Polaris property in BC Canada. With 56 million shares fully
diluted and a price of approximately 0.90 CAD$ a share, the market
values the known resources at New Polaris at a tiny $32 per ounce.
Even at today's Gold price I consider this cheap. Think about
it, you'll buy real assets for $32 per ounce Gold reserve and
you'll get Benzdorp and Canarc's interest in Endeauvour Gold
(12%) for free. Benzdorp hosts a potential new world class gold
deposit while Endeauvour Gold has the potential to become a top
5 primary silver producer in North America. Still very few investors
have picked upon it, hope you will!
Disclaimer:
The author maintains an investment position in Canarc and is
not a professional investment advisor. Although this analysis
is written upon request from Canarc the author hasn't been compensated
upon his own request. This analysis is not a solicitation to
buy or sell and no responsibility can be had for losses on the
basis of this analysis. The reader should be aware that investing
in Gold mining equities is a risky endeavor with a very real
probability of substantial losses. Before making any investment
decision, do your own research and consult a professional investment
advisor.
Summary
High Quality Junior Exploration Companies will be in the spotlight
soon due to:
- Gold price
- Declining Gold reserves
Gold Price:
We saw during 2001-2003 higher Gold prices lifting the entire
Gold sector, so the big question remains:
"Has the bull market in Gold ended yet or has it hardly
started?"
Jim Sinclair: I am a "believer" in the magnitude of
the gold move that started at $342 and has had, as I have said
often, a $480 plus number on it from the day it started.
Richard Russell: In the meantime, Russell advises subscribers
to hold cash and gold, which, at $400 an ounce, is "as cheap
as dirt." Eventually, he sees the yellow metal topping $1,000
an ounce -
Jim Puplava: The bull market in gold and silver has barely begun.
It is still in its infancy as gold and silver move into their
rightful role as real money.
Pierre Lassonde: Newmont president, Pierre Lassonde, is certain
that the gold bull market remains in its infancy, and points
investors to the 1970s to understand how events might unfold
in gold's favour in an era of a "manic depressive dollar."
"We haven't even started to correct the US financial imbalance
of the last three years. Don't tell me that the gold bull market
is over. It has hardly even started," Lassonde told the
audience at the 2004 BMO Nesbitt Burns Global Resources Conference
in Tampa, Florida.
Declining
Gold reserves:
Major producers will face a tremendous challenge in order to
replace their dwindling Gold reserves. This is a direct result
of the cut backs in Exploration budgets by 67% over the 1997-2002
period. Even with a Gold price of $1000, it still takes 4-7 years
to open up a mine Pierre Lassonde (CEO Newmont Mining) said.
Eventually the major producers will turn to the better Juniors
with promising Gold properties in order to replace their depleted
Gold reserves.
In his latest Essay "Open the Checkbooks - Buy the ounces"
Jim Puplava of Financial Sense Online quoted Geologist H.R. Bullis
who said:
"It is no longer a question of finding ounces anymore. It
has become a question of survival.
According to geologist H.R. Bullis, today's VLGP's are unlikely
to survive at current production rates over the next decade.
It is time to open the checkbooks and go get the ounces."
We saw that the major Gold producers are facing a decline of
ounces per share. That obviously means a decline in value as
well. In order to compensate for this value-decline the producer
needs a higher price of Gold. So investing in senior producers
is betting on higher Gold prices. In other words, the only pillar
carrying a major producer forward is a higher price of Gold!
So from an investors point of view it makes sense to invest in
Junior Exploration companies with potential discoveries. Why?
Simple! We saw how desperate the major producers are in order
to replace their dwindling Gold reserves. We saw that new discoveries
are rewarded tremendously by the market. So compared to their
senior brothers the Juniors are being carried forward by two
pillars instead of one.
END.
Please feel free to send comments at ehommelberg@planet.nl
Eric Hommelberg
April 9, 2004
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321gold
Inc Miami USA
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