Hello folks, it is good to be back after a long but very good trip to the Philippines. It never fails though, whenever I go away for a week or more, it seems a lot happens.
I will update you on what I found in the Philippines in the next week, but for now I want to touch on the major developments while I was away.
Paramount Gold OTCPinks:PGDP Recent Price US$0.90 Entry Price $1.35 Opinion - strong buy, average down
Paramount was the one gold stock on our list that got hit harder than most in this dip in gold stocks. Perhaps because it had run up quite a ways and also trading on the Pinks, stocks can be more volatile. Market makers tend to swing the stocks farther and increase spreads, this is how they make their money and it also helps to panic investors to drive volume.
The company put out 3 excellent news releases while I was away that should have supported the stock well over $1.00. Perhaps the fact that I got concerned the stock would keep going higher was a good signal that a correction would soon happen, Regardless, the current price offers an excellent buy level if you missed the stock earlier and if you paid $1.35, now would be a good time to average that buy price down towards $1.00.
First the company announced a former senior geologist from Barrick as Exploration Manager for South America. Alain Vachon, P.Eng., Geologist has 30 years of experience. Since 2002, he has worked as an independent Consulting Geologist and Exploration Manager. From 1997 to 2001 he was Exploration Manager for Sulliden Exploration, where his work on the Mario property in 2000 led to the nomination for the prestigious "Prospector of the Year" award in Peru. Prior to these accomplishments, Mr. Vachon worked as a Senior Geologist for both Barrick Gold (NYSE:ABX) and the recently renamed Noranda Falconbridge.
I spent some time with Mr. Vachon when I was last in Peru, doing some property visits and this guy is very well connected and a true expert in his field.
After this appointment, Paramount announced a joint venture with Barrick Gold on a large property in Peru, know as the Linda property, totaling 45,000 hectares. It is located within a mining district which is currently being explored by several junior and major companies including Newmont Mining (NYSE:NEM) and Southern Peru, some of the most important exploration companies and mining operators in Peru.
Previous work carried out on the Property led to the discovery of a kilometric low grade gold system within Cretaceous sedimentary rocks. In Paramount's view, the system may be suitable for hosting a low grade large volume heap leached deposit. As of today, the genetic model of such mineralization has not been clearly identified but it presents several similarities with porphyry, skarn or Carlin type. Mineralization and alteration (silicification and decarbonitization) are spatially associated and controlled by NW and NE trending faults and hydrothermal breccias.
Detailed sampling (chip and channel) have been completed over an area covering approximately 1.5 km x 1.0 km. Outside of this zone, the sediments are covered by young unaltered volcanic rocks. A total of 928 surface samples has been collected, of which 263 (28%) have returned gold values greater than 300 ppb (0.3 g/t) Au, including 169 with values greater than 500 (0.5 g/t) and, 59 with values greater than 1000 ppb (1 g/t) Au. Of note, the arithmetic average of these 263 samples stands at 0.93 g/t Au. Paramount believes that this value compares very well with head grades of several small and large gold mines in Peru. In 1996, a junior company drilled 8 holes on the property: 4 holes cut oxide gold mineralization with a high value of 1.5 g/t Au over 26 m in hole 4.
The JV agreement calls for a two-year work commitment including a total of 6000 meters of drilling, of which 2000 meters is a firm commitment during the first year of the deal. Once Paramount has completed the above requirements, they will have acquired a 51% interest in the Property and will remain the operator. Barrick has been granted a back-in right to reach a 65% interest, exercisable at any time after Paramount acquires its 51% interest in the Property, if exploration work uncovers a gold resource greater than 2 million ounces. To earn its 65% interest, Minera ABX (Barrick) will reimburse Paramount an amount equal to two times all exploration expenditures incurred by Paramount.
While I was in Toronto, a week before I went to the Philippines, I met with Alain Vachon and went over a geological report and data on the property provided by Barrick. I can tell you that this is an excellent property and Alain Vachon is the likely reason that Paramount got this deal. The other factor is the project has a couple of differences from the typical exploration model that Barrick is looking for and by farming out, Barrick down loads some of the exploration risk. Barrick's own report has a target on this project of greater than 2 million ounces and this is likely why they retained the back in right. For Paramount, it would still be huge to have a 35% interest in a multi million ounce discovery, should it happen and a partner like Barrick. This Linda property is a typical target in Peru that has potential for a 10 to 15 million ounce discovery.
The surface sampling shows a distinct trend and Alain has some good ideas already on where to target drilling.
While the average of the surface samples is just 0.93 g/t and may seem low, this is typical and within range of the huge gold mines in Peru. Lets have a look at some of the large mines in Peru to get an idea. Barrick's 9.1 million ounce Lagunas Norte mine in Peru is about 1.2 g/t, Barrick's other Peru mines: Pierina - 2.5M ounces is about 1.2 g/t. Pascua-Lama's 17.6M ounces is about 1.5 g/t. Veladero at 12.8M ounces is about 1.0 g/t.
Newmont's largest mine, Yanacocha in Peru has a whopping gold reserve of about 32 million ounces and the grades run under 1 g/t, about 0.8 to 0.9 g/t.
Paramount's challenge is to find a higher grade section of 1.5 to 2.0 g/t and to find enough gold (over 2 million ounces) to make the development of a mine feasible. I think the odds are very good, but only time and drilling will tell. We know the gold grade on the surface is there, the key - is to find the 3rd dimension, at depth, some longer holes than hole #4 that ran 1.5 g/t Au over 26 metres will be a good start.
Further positive news was a financing announced at a 37% premium to today's market price of the stock
Last Thursday, Paramount announced that it has concluded arrangements for a US $750,000 private placement financing of 1-year restricted stock. The transaction is based on a per share price of US $1.26 with no warrants attached or finder fees. The price is calculated on the basis of the average closing price of Paramount's common stock over the past 10 trading days. Haynes Capital Corp., a global capital management company that enhances issuer access to the investment community, arranged the financing.
All forecasts and recommendations are based on opinion. Markets change direction with consensus beliefs, which may change at any time and without notice. The author/publisher of this publication has taken every precaution to provide the most accurate information possible. The information & data were obtained from sources believed to be reliable, but because the information & data source are beyond the author's control, no representation or guarantee is made that it is complete or accurate. The reader accepts information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Because of the ever-changing nature of information & statistics the author/publisher strongly encourages the reader to communicate directly with the company and/or with their personal investment advisor to obtain up to date information. Past results are not necessarily indicative of future results. Any statements non-factual in nature constitute only current opinions, which are subject to change. The author/publisher may or may not have a position in the securities and/or options relating thereto, & may make purchases and/or sales of these securities relating thereto from time to time in the open market or otherwise. Neither the information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futures or options contract mentioned herein. The author/publisher of this letter is not a qualified financial advisor & is not acting as such in this publication. Struther's Resource Stock Report is not a registered financial advisory. Investors are advised to obtain the advice of a qualified financial & investment advisor before entering any financial transaction.
Struther's Resource/Tech Report & MicroCap Report PO Box 1020, Owen Sound, Ont. Canada N4K 6H6 519-374-9332 Editor: Ron Struthers Email resource*bmts.com Web "http://www.playstocks.net " Investment Opportunities & Strategies in the Markets for Tomorrow
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This guy knows his gold stocks, but I don't think PGDP is going to run too high without actual numbers, but hopefully they will be out soon and then.....boom!
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