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Goldrea Resources and Adanac Moly Corp.Mike Hoy As those of you, who have read my prior articles, know and understand; I want to own companies whose market caps. do not reflect the underlying value of the assets within the companies and have production goals in sight. Below is a brief synopsis of two such companies that fall into this category and could be in production within two years. This article has been in the making for over a month and several important events have and are in the process of happening right now. Both these companies, in my opinion, are undervalued and should give their shareholders a return that anyone could be proud of. It is important for each of you to do your own due diligence; go to the websites and see for yourselves. Goldrea Resources and Adanac Moly Corp. After writing my article titled The Sweet Spot I had hoped to have this article to you before now. That is the bad news; the good news, and also the reason for the delay, is I had an opportunity to take a trip to White Rock B.C. to meet with Larry Reaugh and his organization. I was very impressed with what I saw and the knowledge I gained. Larry Reaugh is credited with three mining discoveries that have become producing mines and I think he may have more rabbits in his bag. For years Larry's name would pop up and I never had the chance to meet with him until now. I felt comfortable with these people from the moment I walked through the door and saw everyone dressed in jeans; my kind of people. I spent three days with these people and I walked away with more than I could have hoped for. Larry has two companies that are of great interest to me. I am very excited about both these companies and I am very happy to share them with you. Many mining companies have suffered severe beatings in the price of their stock over the last several weeks. I personally feel that this creates one of the best buying opportunities that I have ever seen. There is absolutely nothing going on in the world today which can dampen my belief that gold and natural resources are in a long term bull market, especially gold! I find it absolutely intriguing how others get lost in the short term price volatility. I think it is very important to remind you that I want to be buying when I see "blood in the streets" as a result of the selling. To have major weakness in gold stocks, after seeing many companies perform very successful drill programs, in my opinion, is an opportunity that must not be overlooked. We may never have a chance to buy these companies this cheap again. I only hope that I can find the volume of shares available, at current prices, to give me the positions I desire to build.
The first, of Larry's companies, is a company by the name of Adanac Moly Corp. AUA.V. This is a company that many of you will easily recognize. Adanac is a company that has been in the news. Until my visit to White Rock my hot button had just not been turned on. The reason; I simply did not understand the economics of the Ruby Creek Moly Property. This is a very large body of moly with no expensive sulphides to extract from the mining and milling process. In a nutshell this means that the cost to produce this moly will be very low and the milling process will be environmentally friendly. These are two very big factors in bringing profitable production to a body of ore while creating and maintaining a strong and mutually beneficial working relationship with the local inhabitants. With the price of moly having skyrocketed over the last year and a half most analysts fear a pullback in the price of moly; so what? AUA could be in a position to produce moly in the $2-$3/lb. range. If this is the case then a pullback in moly would have very little impact on the long term economics and viability of Ruby Creek. This property would make an excellent return at $5/lb. and as everyone knows, moly is currently above $35/lb. This property has been taken to feasibility twice in the past; with a successful work program having been completed by AUA, Ruby Creek is now 43 -101 compliant and has significantly increased the reserves on the property. The prior drilling completed by Placer Development was only to a depth of 500 feet, as the intentions were to mine Ruby Creek strictly as an open pit mine. The funny thing is that the bottom of all the holes ended in ore. AUA drilled the holes an additional 600 feet deep and continued to find moly with a better grade. As a result of the successful completion of the AUA drilling programs; reserves were increased to 205 million tonnes from 151 million tonnes and 278 million lbs. of moly from 190 million lbs. This is a massive body of ore with at least a 20 year life at 20,000 tons per day. What has impressed me the most about the Ruby Creek project are the people who have left solid and successful careers to become a part of the Adanac team. Ed Lee is the first person to mention, he is Larry's right hand man with a loyalty and commitment to this project, second to none. Then there is Mike MacLeod P.Eng. VP of project development, Frank Halliday in charge of permitting, Jon Belheumer PH.D. socio-economic affairs, John Fisher C. Eng., the list has many more people, each with a commitment to see Ruby Creek into production and giving an excellent return to the shareholders of AUA. After meeting and talking with these people it became very clear that Larry Reaugh is dead serious about taking Ruby Creek to full production. When I analyze a company I look at three things; (1) People, (2) Properties and (3) Financing. All three things are necessary for a company to be successful and I believe the most important ingredient to success is the people. I have no doubt that Larry Reaugh has been highly successful in putting the right people in place to achieve success. The Ruby Creek Moly Property speaks for itself and the property should be one of the first, if not the first, major moly property to achieve production. This gives them a huge edge in reaping the rewards of a moly price that is currently above $35/lb. I have to believe that any major mining company that wants to expand their mining operations to include moly would find the very large body of ore, 43-101 compliant, valued in excess of $10,000,000,000 at current moly prices, a very attractive joint venture partner or a buyout. AUA has no short term financial problems as there are investors standing in line to finance this company at higher prices. The real question is who will be the winner to have the rights to take Ruby Creek to production. Upon completion of the feasibility study it is anticipated that the financing of a 20,000 ton/day operation will yield 32,000 lbs. of moly per day for the first five years and 25,000 lbs. per day after that. All produced in an environmentally friendly way. The jobs to be created will be a major boost to all the locals in the area. The enthusiasm and excitement that surrounds Adanac Moly Corp and Ruby Creek continues to build each and every day. With the stock trading at $.65 Canadian with roughly 55,000,000 share outstanding on a fully diluted basis and a market cap of $36,000,000 I believe that an investor will see that a body of ore with a $10 Billion market value, at current prices should be able to see how there just might be a little room for the stock to appreciate. Most of us recognize the Adanac Moly Corp. name but up until now have not understood the fact that these are committed people who are going to put Ruby Creek into production. In my opinion, to not own this stock, in my own portfolio, is a big mistake, especially at these prices.
The second company of Larry Reaugh's that I want to share with you is a company by the name of Goldrea Resources GOR.V. This is a company with a very exciting joint venture in Rushan, Shandong Province of China with Shandong Daye Mining Co. This venture allows Goldrea to earn a 74% interest for 5,000,000 shares of stock and $2,000,000 expenditure over four years. Shandong Daye Mining would earn 26% or receive a 10% carried interest if they choose to let Goldrea finance everything. I spent 3 hours with Richard Shoe, who is President of Goldrea's China Division and I was very impressed with his knowledge and his connections. Richard's affiliation with Goldrea is crucial and will deliver big rewards for the shareholders of Goldrea. China Rushan, if they choose, has offered to sell Goldrea an existing 65,000 oz./year producing gold mine with a 4 year remaining life along with an existing 1750 ton/day mill at fair market value. If China Rushan chooses to sell, this could put Goldrea in a position to be a producing gold company. Goldrea also has all its permits and business license to operate in China. This 65,000 oz. gold mine is an open pit mine with tremendous potential to go underground. This property has not been drilled below 100 meters. Practically all producing gold mines in China are open pit producing gold mines. Historically, the money and technology has not been available, from the Chinese Government, for underground mining and deep drilling; until now. Changes have been taking place in China and foreign money and technology are welcome. China's growing and insatiable demands for natural resources has opened the door for joint ventures in China with foreign companies. This new and emerging policy, for joint ventures, has created terrific opportunity for companies with the foresight to see, recognize and act; Larry Reaugh and Goldrea Resources have taken full advantage of the opportunity and the shareholders should be very pleased with the outcome. Personally, I am very excited to see what the drill results will show from future drill programs drilling to deeper depths. Currently, drill results are pending on some drilling that is complete. As I analyze, companies like Goldrea and Adanac, at current prices, I see these two companies building and creating wealth for their shareholders. I see management teams totally focused on creating true long term wealth through exploration, development and production of their assets. Both of these companies are well into the development stage and could be into production within the next year and a half to two years. To see Goldrea trading in the $.25-$.27 Canadian price range with a market cap. of roughly $6,750,000 Can. I get real excited about what the future holds for this company; especially when I consider the possibility of additional inferred resources, from prior shallow drilling, by the Chinese on the Shandong Province joint venture property. I think the possibility exists for future drilling programs to increase reserves substantially. I have been acquiring stock in both these companies and in the case of Goldrea Resources I have acquired more than 500,000 shares and I am still buying. It is very important for all of you to do your own homework and due diligence. What may be an appropriate investment for me may not be so for you and I am not recommending that you do what I have done. After my trip to White Rock I am a paid consultant with both these companies. Am I biased, you bet; and I plan on owning these stocks for the next several years with the hope that these companies may treat me as well as NovaGold Resources. Remember, do your own homework, go to the websites of Goldrea Resources and Adanac Moly Corp., website links below. If you have any questions or would like to hear more; I encourage you to call me or e-mail me your telephone number, with a good time to call, and I will call you. For all you accredited investors there may be additional opportunity for you to participate with private placements. I plan on giving regular updates on my thoughts and the stocks in my portfolios and those I feel will be of interest to you. I believe that sharing my ideas and investments with you will make us all better investors. At the same time I believe that the more investors know and understand about their investments the easier it will be to ride through times of uncertainty and recognize that weakness is truly the key to success as it gives the knowledgeable investor an opportunity to build positions at cheaper prices. When an investor understands the underlying value of what he or she owns the 'Weakness is your Friend," as this is an opportunity to build and not a disaster in which to make mistakes, panic and sell. As corrections come along in the market the cleansing of shares from weak stockholders into the hands of informed investors, who understand the underlying events and progress of their companies, can only be viewed as a very positive long term event. As I have repeatedly stated in the past; gain knowledge of your investments, once you have the confidence to understand that you know more, about your companies, than those who are giving their stocks away at dirt cheap prices, then you will find that losses will turn into profits. As proof of this I want to take you back to May and August of last year when I wrote two articles, Half Price Sale Follow-Up and No Prisoners Follow-Up; in both these articles I stated that NovaGold Resources NG was dirt cheap at $3.50/sh.. No question that NG was dirt cheap as NG moved to a high of $9.75. Many of you took advantage of NG and made a very prudent purchase and as a result I have one question to ask you, which, I already know the answer to; do you fear NG pulling back to the $3.50 range? Absolutely not! In fact many of my readers, who bought NG have called to ask me whether they should now be taking advantage of the current weakness to build positions. This is exactly the thinking that 25 years of investing experience has taught me and I am so glad to see so many of you adopt the same principals; Congratulations! These are very dangerous times we live in and it is so important to not lose sight of our long term goals because of short term volatility. My next article which I will mail out to the people on my e-mail list will be an update on NovaGold, Admiral Bay, Golden Phoenix and Win-Eldrich. For those of you not on my "free e-mail list" who would like to receive these updates please email me. -Mike Adanac Moly Corp. website Mike
Hoy 321gold Inc |
