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A Jug of Wine, a Loaf of Bread...Bob Moriarty A Jug of Wine, a Loaf of Bread--and Thou Beside me. . . from The Rubaiyat of Omar Khayyam Just before Thanksgiving Day I made a lightening visit to Otis Gold (OOO-V) in Idaho. The company has a good gold project in remote Idaho and with a small change would have a great gold project. I didn’t quite know what to expect with the site visit. Company President Craig Lindsay invited me out to Idaho if I could make it before Thanksgiving. I barely made it but couldn’t imagine what we would be able to see since the remote area near Northeast Idaho was knee deep in snow. Little did I expect a gourmet feast in the snow complete with vintage wine. Actually it would have been complete with vintage wine but we had to settle for soda. Otis Gold reported 520,000 ounces of gold in the indicated category in September of 2012 with an additional 300,000 ounces inferred category. The share price had been sleeping at about $.09 a share giving the company a tiny $4.5 million capitalization before the news. Investors began to snap up the shares and a month later they were $.25. The gold project is an epithermal low sulphidation hot spring system associated with a nearby caldera similar to Round Mountain in Nevada. Since October the shares have dropped to a low of $.135 on Monday with the typical “dump the baby with the bathwater” selling of late December. At that price the company is getting the grand total of $8.25 per ounce of gold in the ground. There is both good news and bad news. The project is 100% company owned with no NSR, albeit of low grade, .59 g/t in the indicated category. It is eminently suitable for an open pit. Actually the deposit is on the side of a hill and could be quarried with almost no strip ratio. The project is located in one of the lowest population counties in Idaho, which is hardly known for its dense population anyway. Suitable areas for a leech pad are down the hill in the valley. Management is strong with the recent addition of Dr Roger Norwich, a founding director of Mexican Silver Mines that combined with Rio Alto Mining in 2009. Rio Alto is one of the giant success stories of this mining cycle with production of about 200,000 ounces of gold a year. My only issue with the project or the management would be that of going into production. At $1700 gold, you either need a plan for going into production or you need to be raising moose as a cash crop because that’s all the ground is suitable for. When I asked Craig when they could be in production he said 2016. I told him that was like eternity. $1700 gold is a lot of money for gold. At some price, the market demands production. Investors have gotten gun shy after 10 years of hearing, we are going to do something, someday and they want action now. At $1700 gold, Otis has $1.4 billion dollars worth of gold in the ground. If a company can’t figure out how to make money with $1.4 billion dollars in revenue, they need to change jobs. Craig kept saying, “If we go into production. . . “ I suggested he put it to the board, especially Dr Norwich. Rio Alto got with the program and went from a $.20 stock in late 2008 to a $5 stock today. From a technical point of view, the resource has legs and will expand with more drilling. The problem is just how much more investors will fork over for pure exploration projects. I see gold going a lot higher when the impending bond markets begins to crumble. At that point investors are going to be seeking protection from the financial storm. The companies getting the most benefit will be the companies in production or preparing to produce. I would be an owner of Otis if they made it clear they have a plan for production. They can always add ounces; right now they have the potential for an 8-year mine life. Perhaps Dr Norwich can explain to the board how nice it is to own $5 shares. Buying gold at $8 an ounce is nice but there is nothing saying it couldn’t get cheaper. Otis is approachable so please take the time to do your own due diligence. Otis Gold
### Bob Moriarty 321gold Ltd |
