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A Tale of
Two Mines:
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Sterling Mining Announces Surface Exploration Program at the Sunshine Mine WEDNESDAY, AUGUST 27, 2003
10:00 AM Geochemical and geophysical surveys are planned for areas between the Sunshine Mine and the Silver Summit Shaft (on what was formerly the Con-Sil property) with the intention of identifying surface drill targets and, ultimately, of expanding mineralized tonnage and reserve estimates. |
Hmmm, so you think this is an old, tired mine? That area "between the Sunshine Mine and the Silver Summit Shaft" is exactly the place the geologist was pointing out to me on the map. Suppose they find another 100 million ounces there. Suddenly we have a fully permitted and environmentally sanctioned operation - complete with access, power and equipment. It's situated two miles off a major interstate highway in one of the most productive mining districts in the world, all of which is located in a country that boasts a stable government, enforceable legal system, favorable exchange rate, and a ready and able workforce of experienced miners living nearby! It's not as romantic as slogging through some Argentine wilderness, or dodging mosquitoes in the jungles of New Guinea, or 'outbacking' on a camel south of Kalgoorlie. But it's not Bre-X either. It's real very, real.
What if silver goes to $6.00 an ounce or $7.00 or ? That's the kind of leverage I am looking for. This mine can make money at these prices, and that's before taking into account Sterling's nine other claim groupings in the Silver Valley. Ray DeMotte has positioned Sterling for a prominent position in any silver run over the coming decade. There is plenty of depth and breadth to this company. As a "non-expiring option" on silver, and given its small float (3.5 million shares which are now in strong hands), it is basically a first class junior play on silver, with some exposure to gold, copper and other metals.
 Snapshot
of Sterling Mining Company:
An aggressive exploration and holding company with primary focus
on silver. The Sunshine Mine (leased with option to purchase)
is the newest and largest addition (10 square miles) to Sterling's
portfolio. Sterling also holds nine other claim groupings in
the Silver Valley totaling 2,450 acres. Additionally, it holds
five claim groupings in Idaho and Montana containing principally
gold, silver, copper and platinum, with additional claims in
Arizona and Nevada. Estimated 3.5 million shares in the float,
10 million shares fully diluted.) |
"But the price of SLRM just exploded by 500 percent," you moan. "Sure, maybe you got in at fifty-five cents, but I didn't, and now that horse has left the barn!"
Well, maybe so, but my expectation is that SLRM will be trading at another 5x multiple to its current price at some point in the intermediate future. And besides, you still have a second chance, and its name is Golden Phoenix.
Touring Mineral Ridge
Driving over hard ground near the top of the ridge that bears the mine's name, I gradually came to realize how large Mineral Ridge Mine is and how little of it has been explored. Guiding me was Steve Craig, VP of Golden Phoenix and its chief geologist. He's a guy with 23 years experience finding gold for Kennecott. He left the security of that huge company to join Mike Fitzsimonds in developing Mineral Ridge and other properties. He gave up his corporate security in large part because of Mineral Ridge and the opportunity and challenge it presents.
As we drove over rough ground, Steve talked about the land the way a maestro might conduct a Mozart concerto. He pointed out the various deposits, dating each one in terms of millions of years, and described the geologic forces that formed them. We examined some of the 58 miles of existing tunnels. We walked through the open pit operations. We visited the leach field and preg pond, and I watched the gold-laden leach solution as it was processed for extraction. I was genuinely surprised by the excellent condition of the roads, the power lines, the outbuildings, and the processing equipment. Mineral Ridge is a vibrant place, and it is being methodically brought back into production by two very determined guys. Two guys whose seriousness of purpose is matched only by their drive to expand and succeed.
At half a dozen points along our journey, Steve would stop the truck and outline the areas that were never explored. He described in detail the prospective reasons for test drilling here, and there, and there, and there. Later, talking with one of the mine's most experienced supervisors, I was told "The exploration potential of this property is absolutely mind boggling."
Is there a lot more gold in them thar hills? Mike and Steve are certainly convinced there is. While that remains to be proven to the marketplace, for me as an investor, the significance of Mineral Ridge is that it can be proven, and without too much effort or cost. Basically, all that's needed is a drill rig. Through a series of well designed step out programs, guided by a steady hand, this property can be unwrapped like a birthday present, revealing what's inside. All the outward evidence tells us that there's a whole lot inside. So if and when new deposits are located and measured, little stands in the way of their rapid, low cost exploitation. The existing pad has capacity to handle several million more tons of ore.
What doesn't need to be proven is that Mineral Ridge is a well-developed mining property with the infrastructure needed to operate, the permits to do so, the $2.7 million bond posted, cyanide injected into the leach field, and gold being poured. There is enough measured gold in its existing leach pad alone to fund its current operations for years. The leaching circuit is just now settling into routine operation and gold recovery is rising.
Like Sunshine Mine, Mineral Ridge is both proven and prospective; it has an established past and a promising future. Isn't that what prudent investors need to prepare for uncertain times? Plus Golden Phoenix has two other significant properties, Borealis with its 1.4 million ounce gold resource, and Contact with its one billion pound copper resource. This provides the foundation for a powerful hedge against inflating commodity prices and general economic uncertainty.
Best of all, while SRLM has already broken out to the upside and is trading as of this writing at $3.95 a share, GPXM is currently trading below 40 cents.
 Snapshot of Golden Phoenix Minerals: An aggressive mineral-property development
company focused on advanced-stage projects. Its three principal
properties are (1) Mineral Ridge Mine in Silver Peak, Nevada
(4.2 square miles) with a measured reserve of 502,000 ounces
of gold and a three-phase development plan currently in Phase
One with gold being poured; (2) Borealis Mine near Hawthorne,
Nevada (10 square miles) with a cumulative resource of 1.4 million
ounces of gold and 6.9 million ounces of silver, currently under
development in joint venture with Gryphon Gold; (3) Contact Mine
in Elko County, Nevada (11 square miles) with an indicated and
measured resource of 1.05 billion pounds of copper. Estimated
30.6 million shares in the float, 89.1 million shares outstanding. |
When Bad News is Good News
First the bad news:
Golden Phoenix has been bound in a 30-to-40 cent trading range for some time. It is public knowledge that one of its founding investors (a proven supporter with impeccable credentials for whom I have great respect) has been routinely selling shares. SEC records indicate that, during the past 12 months, over 2.6 million shares under the control of this one individual have been announced in 45 separate filings. From this, I infer two things:
1). By the piecemeal nature of the sales announcements, the seller is reluctant to part with shares until absolutely necessary and then only in the smallest amount needed at the time;
2). Denied the luxury of choosing only to sell into strength (which Jim Sinclair espouses so strongly), these sales could amplify any downward momentum in the stock price, especially on those days when trading volume is thin.
Now the good news:
It is my opinion that such on-going selling may have helped to extend GPXM's normal period of accumulation, allowing investors, like myself, the chance to continue to buy-in at prices which no longer reflect the dramatic progress that has been made at Mineral Ridge over the past twelve months.
By my calculation, Golden Phoenix's asset base, including mining claims, properties, improvements, reserve and resource, permits, bond, and its joint venture with Gryphon Gold at Borealis Mine (which deserves a whole separate essay) should be valued today at $1.25 a share. And that's before any further exploratory drilling occurs. I urge you to do your own research and come to your own conclusions.
Why would a dedicated investor who provided essential support to Golden Phoenix at critical stages in its development want to liquidate shares so early in the game? The answer, in my opinion, is that they don't want to, but they may have to. For, in addition to supporting GPXM, they are deeply committed to a new technology venture that most likely has required on going infusions of start-up capital. Perhaps their GPXM shares have been sold, reluctantly, to help support this new venture, either directly or indirectly.*
If this is correct, then GPXM is, in effect, carrying two companies forward, not just one. In light of that, its stock performance has been exemplary. When the selling stops, GPXM could uncoil rapidly, rising 100-200-even-300%, much like SRLM did this past summer.
Now for the best news:
A recently-published report states that the new venture has achieved a gross profit on a consolidated basis during the second quarter for the first time in its history. So as the new venture grows financially stronger, it is reasonable to expect this potential source of GPXM sales to taper off and then cease.
By the time it does, whether that occurs next week or next year, I believe that GPXM will have demonstrated - through its asset base, its increasing gold production, its growing reserve metrics, and its many expansion activities - that it is worth three or four times the current price, with much, much more to come.
Seize the Day
Every junior faces challenges, and neither Sterling nor Golden Phoenix is an exception to that rule. There remain the typical funding issues and technical hurdles that are part and parcel of the small-cap mining industry in general. I do not seek to make light of these challenges, but rather to put into perspective the sizable advantages both companies have when compared to most others seeking to open mines. My point is simply this: If it is true that a rising tide in precious metals lifts all ships, these two companies appear particularly well positioned to get underway with a full head of steam.
So keep an eye on Sterling Mines and Golden Phoenix Minerals. Consider using them as bookends to your junior mining portfolio. If the price of Sterling moves out of reach, think about taking advantage of this current situation to accumulate GPXM at discount rates, while one still can.
And always remember: The road to the future may get pretty rough, but the smoothest parts will be paved with gold and silver.
Robert Martin
September 23, 2003
Sterling Mining Company SRLM website
Golden Phoenix Minerals GPXM website
P.S. Anyone wishing to comment on this report, or share information or observations, is invited to contact me at subman@gte.net.
* For the record, I have no argument
with either long-term investors or company principals trading
smaller blocks around their core position, and I presently do
the same.
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321gold Inc ref: 08328
