 Eight Bucket Gold Intercepts
Bob Moriarty
Archives
September 25,
2006
I've heard
it said that when a princess wants to find a handsome prince,
she has to kiss a lot of toads. I know the feeling well. To find
a nice mining project, you have to tromp through a lot of moose
pasture. But every once in awhile, when you wander into what
you think will be a coal mine, you stumble across a bunch of
diamonds in the rough.
I found a handsome
prince a month ago. Or better put, I found a whole herd of diamonds
in the rough. And I felt most astonished because no one warned
me. Let me tell you the story.
A while
back I got a call from Henk Van Alphen of Wealth Minerals and
Cardero fame. As he told it, he had a shell named International
Tower Hill (ITH). ITH would take over the Alaska properties
of AngloGold Ashanti (AU) and manage them. AngloGold would keep
20% of the company. But ITH had to raise something like $11 million.
Did I want to participate in the placement? Well, it was like
buying a pig in a poke but AngloGold probably had something going
for them in Alaska so we did participate.
Time passed
with little news until August 4th when the deal was consummated
and signed. A week later I was on a plane, north to Alaska. By
chance the renowned Bob Bishop of the Gold
Mining Stock Report was on the tour with me and we managed to sit
next to each other on the flight from Vancouver to Fairbanks.
He didn't know very much more than I did about the company. I
knew there were about 30 million shares outstanding. He knew
the price was about $2.90 Canadian. Neither of us could figure
out how a new company with a few grassroots properties could
possibly be worth nearly $90 million especially given
the fact the financing had been done at $1.25.
AngloGold owns
19.99% or 5.997 million shares, Cardero owns 13.33% or 4 million
shares with warrants on another 2 million shares and management
owns 11.96% or 3.6 million shares. Of the total 30 million shares,
over 45% is in the hands of AU, CDU and management. That's pretty
tight.
But I should
mention while I am discussing share ownership, the issue of having
some cash in the kitty was an early question. As part of the
deal AngloGold wanted ITH to be well cashed up. At the end of
two financings, ITH had over $11 million in cash. All warrants
are well in the money and their exercise will bring in an additional
$8.8 million dollars over the next two years.
There is a
bit of an problem with free trading shares. All of the AU shares
and the shares issued in the two placements come free trading
on December 5th. That's some 24 million shares out of a total
of 30 million. You might want to keep that date on your calendar
because the price will be volatile from a month before until
a month after the shares become free trading. There were about
8 million shares issued at $.56 and the price of the stock is
up 500% since then. Read and heed.
AngloGold vended
seven properties into the deal with ITH and entered into an option/joint
venture in two additional properties with a backin right. ITH
has the right to earn a 60% interest in a property called the
LMS project in exchange for exploration expenses of $3 million
over a four year period and a similar right to earn a 60% interest
in the Terra project for a similar $3 million expenditure. AngloGold
retained right of first offer if any property is sold so long
as AngloGold maintains at least 10% ownership in Intl Tower Hill.
For those interested in pesky details, you can read
more here.
With any kind
of deal like this there are two overriding issues. One
is property and the other management. Little did either Bob Bishop
or I suspect what we would find with property side of the question.
I'm not really sure why, I suppose I couldn't understand why
AU would give up really first class properties. I thought they
were dumping unwanted properties on some junior who would pump
them for all they were worth and drill a bunch of holes before
giving them back. Our escort Jeff Pontius did a wonderful job
of explaining the logic.
Big mining
companies do a wonderful job of picking up good properties. But
they almost tend to think in terms of generations when you consider
time frames. Jeff had been running the Alaska program for Anglo
and he may well be the biggest diamond in the pile. He brought
most of his staff over with him. They know these properties since
they have been working on them for years. It's not an issue of
vision, AngloGold put together some remarkable properties, but
it is an issue of focus. AU simply was spread too thin. With
$350 gold it made sense to move slowly. With $600 gold, it doesn't.
That's frustrating
to any dynamic manager and at the least that's how to describe
Jeff Pontius. His frustration at the lack of progress led him
to come up with the plan to spin the properties off into a JV
with a junior and by chance he ran into Mark Cruise of Cardero
at a trade show. Jeff pushed the plan forward and after many
fits and starts, the plan came to fruition on August 4th of this
year.
These properties
are not grass roots exploration projects as Bob Bishop and I
feared, nor are they moose pasture. They represent a wide variation
of properties with everything from grass roots to advanced development
projects.
Two of the
properties, the Chisna and Blackshell projects are at the first
phase prospecting, mapping, and surface sampling stage. Four
more, the Cariboo, West Pogo, Gilles and Coffee Dome have completed
mapping and surface sampling and are ready to be drilled. Three
more, the Terra, LMS and Livengood are at the advanced exploration
and drilling stage.
The Livengood
project is located by road some 75 miles northwest of Fairbanks.
Since 1914 miners have taken out over 500,000 ounces of placer
gold from the immediate area. It's believed the source of the
gold is a hill called Money Knob on ITH's Livengood property.
Eight RC holes were drilled in 2003 and an additional four diamond
core holes drilled in 2004. The best intercept is 133.5 meters
of 1.1 gpt AU. The project looks like a bulk tonnage target with
a potential of 200Mt in the .75 gram range.
The LMS project
is even more advanced stage. In 2005 AngloGold drilled 3200 meters.
The best intercept was that of 15.4 meters of 3.43 gpt gold.
Those results seemed to justify more drilling and ITH is following
up with a 3000 meter 2006 program and 150 deep auger samples.
The mineralization has a low angle structural control similar
to that of the Pogo deposit 40 km to the NW but is a different
style.
To me, the
most interesting project we saw on this tour was the Terra property
located some 210 km WNW of Anchorage and available only by air.
The project consists of a series of ultra-high grade quartz veins.
The weather was iffy the day we went out but cleared up long
enough for us to get in. We saw sections of 1-2 meter thick quartz
veins literally laced with tiny pinhead size gold. This project
had the only small scale hard rock mining I have ever heard of
in the US or Canada and it was quite remarkable. As was the 10-20
opt gold.
The vein we
took samples off was called the Ben vein. AngloGold had an agreement
with the original claim holder, named Ben, where he is allowed
to mine on a small scale while they/ITH conduct their drilling
and surface sampling. We can and did take samples from the vein.
Every sample showed massive numbers of tiny pin head size gold
pieces. I wanted to see the "mill" in operation so
Ben's partner put two 3 gallon buckets of hand cobbled ore (about
70 pounds) through his crusher.
Jeff Pontius
and I joked in the plane on the way back to Anchorage after our
tour of the Terra property that in the future, he would be issuing
press releases showing gold intercepts from Terra in terms of
buckets of ore per ton. Since the ore we saw was 10-20 ounces
per ton, that would be called an eight bucket intercept.
To say the
operation was primitive would be to understate the obvious. I
was kinda surprised at the tiny scope of the operation, Ben and
his partner couldn't have had $10,000 in the entire operation
and they were taking out probably 10 ounces of fine gold a day.
But every miner runs his own operation and the fact I would have
put more into the machinery doesn't mean he had to. Obviously
the mine was paying off for the two of them, no matter how primitive
it was.
I have seen
the good, the bad and the ugly in terms of camps. In some of
them you have to carry big caliber automatic weapons to keep
the mossies at bay. In others, you yearn for some nice rare cooked
road kill for brunch before eating another bite of camp food.
The Terra camp has to take the all time Moriarty's Fine Dining
award for food. We ate fresh salmon cooked to perfection with
a side dish of garlic roasted fried shrimp that was to die for.
If Jeff had been sandbagging us and trying to pull an Alaskan
version of Bre-X on us, salting the food was ten times more effective
than salting gold proved in Indonesia a decade ago. The food
was simply superb. Should those multiple veins of multi ounce
gold not pan out, Jeff can always open a wilderness restaurant
and be sure of making a killing.
On a mining
tour, nothing indicates the presence of gold quite as well as
gold does. Before we did our airborne tour of the properties
around Fairbanks, we looked at core at ITH's core storage in
town. We saw something in a drill core from the LMS property
which I had never seen before: Visible Gold (VG) in the form
of a half ounce crystalline nugget in the drill core. One of
the other fellows on the tour pointed to the gold and I casually
offered that anything that big was definitely pyrites or fool's
gold. Actually, I should have gotten a clue from the grin on
Jeff Pontius' face. After all, he had brought out a small drill
core box which had a top screwed down with a dozen screws.
The JV between
AngloGold and International Tower Hill is not your bog-standard
business model. Actually it doesn't resemble any other deal that
I am familiar with so you can't compare them to anyone else.
More than anything else, it's an exit strategy for AngloGold
with an option to take the properties back should they wish.
As a shareholder in ITH, I really like the deal. Jeff Pontius
is the sharpest guy I have run into since I stumbled across NovaGold
five years back. He is a manager, he knows Alaska and he's going
to move those projects ahead at Mach 5, there will be
no 'big company screwing around.'
If I had had
any idea of how advanced the 3-4 most advanced projects were,
I would have been buying with both hands anywhere below $2 a
share. ITH is fully funded for at least 18 months of operation
even at Mach 5. They will be drilling on LMS through the winter
and there will be important work at Livengood yet this year so
it's not one of those typical Alaska/Yukon stories where you
get a bunch of information once a year. I expect significant
news from Alaska and ITH on a regular basis. I cannot say enough
good things about the company, the management is triple-strong,
the projects are first class, there are no political issues beyond
the fact it's based in a country where the President thinks torturing
people he doesn't like is a real good idea. The company has lots
of cash and we all expect gold to go higher from here.
This is going
to be a trading stock similar to NovaGold. If you bought and
sold NovaGold once a year or so, you could have an easy double
every year for the last five years. There are no issues about
whether or not NG will continue to advance, they will, every
year. But stocks go up and stocks go down and if you buy cheap
and sell strong, you can make a lot of money.
ITH will go
up and down. Should AU decide to take their money and run, there
may be a once in a lifetime opportunity to pick up ITH cheap.
Certainly with 24 million shares coming free trading in early
December, some of those shareholders are going to want to take
profits anytime between about the 1st of November, well into
December. Buying shares at $.56 and selling them four months
later for $2.50 or higher makes sense for the seller but ITH
is one of the best managed and best positioned stocks I have
seen in five years. I have no issue saying I intend for it to
be a core stock for me. It's worth buying with both hands. At
a price.
Today ITH lacks
liquidity. That isn't the same thing as lacking value. It will
take some time after the 24 million shares become free trading
on December 5th for the market to settle down. But between now
and then astute and value conscious investors should be watching
ITH closely. It's a must own stock.
We own shares,
we participated in both placements, Intl Tower Hill is an advertiser
and we can be reasonably expected to be biased. We are biased.
I love the company and the management. Buying and selling shares
on your behalf has to be your responsibility and you should make
it only after conducting your own due diligence.
Written in
East End, Grand Cayman on September 24, 2006.
International
Tower Hill Mines, Ltd
ITH-V $3.10 Canadian (September 22, 2006)
ITHMF-OTCBB
30.0 million shares outstanding
International Tower Hill website
Bob Moriarty
President: 321gold
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321gold Inc
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