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Special Mining Sector Advisory:
Large Upside Probability
Metanor Resources Inc.
(TSX-V: MTO)
North America's newest gold producer
offers exceptional upside opportunity -
undervalued, unhedged, and debt free
Advisory Dated July 29/08: It is not
often a new gold mine comes online in a stable
jurisdiction, especially offering as much near
term operational value and future potential as
Metanor Resources wraps up bulk sampling and
commences commercial production at it's 1,200TPD
(upgradeable capacity) Bachelor Lake Gold Mill.
The
current market cap of MTO.V is approximately
half the replacement value of their
infrastructure alone, ignoring the ~1M oz gold
resource, significant exploration potential and
substantial revenue projections. Jay
Taylor, mining expert, has made MTO.V his top
pick in 2008 saying "This is a story of
production, exploration, and building ounces".
Production in 2008/09 should conservatively come
in at 25K - 35K oz gold and ramp up from there
to 55K - 65k oz in 2009/10. The mill is configured to
produce dore bars of gold, with a small
component of silver. MTO.V has ~1,000,000 oz of
Gold (NI-43-101 measured and indicated)
available from their three properties and the
ongoing exploration drill program at their ever
expanding Barry
deposit is just one of many venues to expand the
resource base that is exceeding expectations
(new drill results expected soon). Metanor Resources' gold milling facility and
infrastructure has a replacement value of ~$140M
and sits geographically as the only mill located
within 200 km in a gold rich district that
possesses additional resources exceeding 1.5M
oz. Metanor is also amassing properties within
this area, near their Bachelor Lake Gold Mine &
Mill, and will play a central role mining the
resources in this region for decades. Their
forward projected EPS will likely be very
significant as a debt free unhedged gold
producer and the current market cap relative to
expected revenues is disproportionate (analyst
report pegs $3+ per share price and no need for
dilution). With approximately 73M shares
outstanding and currently trading under
CDN$1/share, the present valuation of MTO.V
provides exceptional opportunity for investors.
Over 50% of Metanor's outstanding shares are
held by institutional interests, amongst them
Dynamic Mutual Funds (managed by Goodman & Co.). |
Market
Commentary/Article: July 29, 2008 [see
Terms of Use].
abridged version
Review
of last Seven Years Suggest Gold Nearing Summer Lows
Prior to Rallying Strongly into Autumn
NY Spot close July 29, 2008: Gold $917.30, Silver $17.32.
Commonly known as "the Summer Doldrums", this years
occurrence is no different. Astute investors would do
well to make their selections of precious metals related
stocks prior to anticipated, historically supported,
autumn rally.
A review of the last seven years gold price action shows
a seasonal pattern that often results in lows in July or
August prior to strong rallies into year end:
Factors supporting gold prices:
·
High crude oil, inflation and dollar concerns are centre
stage.
The gold/oil ratio is now at the lowest
levels seen for decades – although comparing the two is
becoming more a scenario of comparing apples and oranges
since oil is driven more by industrial demand whereas
gold is driven more so by investor demand - recent
trading activity suggests gold is detached accordingly;
even though oil has sold off moderately, gold has not
relatively.
·
Global growth has been able to progress as it has
detached from the United States which is braced for
further fallout from the crisis in credit markets caused
by problems in the U.S. high risk mortgage sector.
·
Growth in demand, particularly from an expanding middle
class in the developing world, would continue to be a
main driver of gold prices in the long run.
·
Additional supply of 200-300 TPY gold
production is likely to be absorbed by a combination of
wealth creation in China, petrodollars in
Russia/Mid-East, and ETF inflows. Total demand for gold
is around 3,600 metric tons but global miners produce
only around 2,450 metric tons annually, with the deficit
compensated by central bank sales and recycling. The gap
between demand and supply is likely to continue.
·
Currently strong jewellery and industrial
demand may diminish nominally in 2008, however a
willingness to decrease dollar dependence by the central
banks in Russia, China and the Arabic region will
increase; a small shift of the percentage of petro
dollars into gold investments will cause gold market
prices to seek a higher trading range.
·
Geopolitical risk from U.S. and Israel
militarily confronting Iran is wild card and most
volatile catalyst for gold.
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