|June 21, 2011|
If At First You Don't Succeed
|The sell in May and go away crowd are having their usual effect on markets. Seasoned market participants are off sunbathing as they wait to see if commodities correct further, with an ounce of gold above $1500.|
This is also the time of year when those speculators that have an appetite for high risk and are betting on a fall rally, look to accumulate those junior exploration companies that offer a well thought out strategy with an attractive price point. In the world of junior exploration, a good starting point is considering companies following an old adage that "the best place to look for a gold mine is where there already is one"
Garibaldi Resources Corp. (TSX.V-GGI) is an exploration company with a large strategic land package in Mexico and an exploration model that is novel, methodical and systematic. The company controls over 2000 sq. kms of concessions in the Sierra Madres which were acquired based on remote sensing technology sophisticated enough to differentiate alteration zones, a feature common to many mineral deposits discovered in Mexico. Garibaldi is exploring multiple anomalous target areas within its concession boundaries, from regional surveys to drill testing targets with the company owned NQ diamond drill. There are no guarantees in the exploration business, but this approach is an attractive consideration to shareholders seeking multiple opportunities for discovery.
Garibaldi is testing the Socorro gold target with the company drill at its Morelos project in Chihuahua State and continues to develop and prioritize additional drill targets. The company's land package is within the vicinity of a number of high profile deposits including Goldcorp's El Sauzal mine near Morelos. Garibaldi's Iris claims sit on the northwest corner of Gammon Gold's Ocampo mine and is surrounded by concessions owned or optioned by Gammon or Agnico-Eagle with its nearby Pinos Altos deposit now in production. The sale of Garibaldi's option on Temoris, surrounding Coeur d'Alene's Palmarejo mine to Paramount Gold and Silver for $400,000 and 6 million shares of Paramount is a key example of this strategy adding value for shareholders.
In Sonora state, Garibaldi's Tonichi concession surrounds the Cuatros Hermanos Copper/moly deposit on three sides and borders the Cerro Verde copper deposit on its northwestern border while the San Antonio gold deposits straddle the company's border to the northeast. The company is searching for extensions of these deposits and continues to assess these and a multitude of anomalous target areas that have been discovered as a result of the company's hyperspectral survey. The district scale projects of Badesi and Rodadero north of Tonichi in Sonora State are large regions previously unexplored by modern exploration methods that are currently undergoing evaluation.
In Durango State, Garibaldi's Sianori concession shares the district with Chesapeake's Metates project, the largest undeveloped Gold deposit in Mexico and La Cienega, which Penoles claims is the highest grade gold mine in Mexico. Great Panther's Topia mine is adjacent to Sianori's eastern border and Aurelio Resources Gavilanes project is a large tonnage gold target on Sianori's southeast claim boundary with a significant alteration zone that continues on to Garibaldi's ground. The scale of Garibaldi's land position, the prolific history of the local mining districts and the nearby location of a number of large deposits are reasons why over a million dollars worth of outstanding warrants were exercised in May by investors including Sprott which owns just under 20% of Garibaldi.
There are a number of metrics that are critical to the potential for a junior exploration company to be successful including management, project viability, ability to finance, commodity prices, company structure and country risk to name a few. There are many reasons why some companies are more likely to be successful in the process of discovery, not the least of which is the ability of their management to cost effectively generate projects that add value with minimum dilution.
Garibaldi is one of the few junior exploration companies that has a large land package, a multitude of potential drill targets, its own diamond test drill and is well financed.
The company's strategy will rely very much on another old adage, "if at first you don't succeed, try, try, try again."
Peter Grandich is the founder of Grandich.com and Grandich Publications, LLC, and is editor of The Grandich Letter which was first published in 1984. On his internationally followed blog he comments daily about the world's economies and financial markets and posts his views on social and political topics. The result is an insightful and intuitive look at business, finances and the world, set in a vernacular that just about anyone can understand.
He is a member of the National Association of Christian Financial Consultants, and a long-standing member of The New York Society of Security Analysts and The Society of Quantitative Analysts.
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