To say that the China Moly IPO was over-subscribed in Hong Kong could be a gross understatement. New interest in molybdenum stocks, especially near-term moly producers, has jumped since the beginning of 2007. There are a good number of North American 'potential' molybdenum producers which could attract your eye.
Because of the new wave of primary molybdenum 'near-term producers' knocking on investors' doors, we though it would be a great idea to help the wiser identify the winners and avoid the losers.
Drill Doctor
What we had in mind was finding a new molybdenum company for our readers. But first, the company's property was required to meet our basic criteria: (a) advanced exploration work previously done in the previous bullish cycle, (b) good drilling results and previous progress toward production made before the moly price fell during the last cycle, (c) being developed by a proven technical team, and (d) current progress being made to move the project forward.
Other key elements included provident metallurgical samples, accommodative infrastructure and an absence of environmental complexities. We also wanted a company whose star was rising and in the good graces of an institution, presumably one which owned 10 percent or more of the company's shares.
Having previously mentioned United Bolero's Bald Butte molybdenum project, we believed this company merited a deeper review.
In late April, Dow Jones newswire reporter Brian Truscott featured United Bolero's molybdenum properties in an article entitled, "United Bolero's Molybdenum Gambit." We liked what we read and phoned the company's chief executive Bruce Duncan to inquire about the company's ongoing plans.
United Bolero fell out of favor a year ago during a transition phase. Since then, it has successfully rebounded. The company's shares have strongly held up while many other molybdenum juniors have slid off their highs.
This may have something to do with an announcement made by Pinetree Capital on May 14th. Pinetree is one of the favored few companies, repeatedly endorsed by uranium guru James Dines. Pinetree has made some very astute investments in uranium and other sectors. The publicly traded company, which Mr. Dines often refers to as a 'closed-end' mutual fund, announced it had acquired nearly 7 million shares of United Bolero.
As of April 16th, United Bolero had nearly 66 million shares outstanding. Depending on the exercise of convertible securities, Pinetree could own between 11.8 and 12.2 percent of United Bolero. This element met one of our key coverage criteria: institutional support. The criteria, found below, may also serve our readers by providing a more advanced methodology when researching molybdenum development companies.
Coverage Criteria
1) Previous exploration summary. Both Amax and Gulf Minerals previously explored the Bald Butte molybdenum property, located about 28 miles northwest of Montana's capital, Helena, and 6200 feet above sea level. The 350-acre property, comprised of 22 patented claims, was well-explored by the above major companies. This included the basic geological surveys, trenching and sampling. But, the two majors also diamond drilled more than 54,000 feet and proceeded with extensive costing and feasibility studies.
Gulf Mineral Resources donated extensive files and reports about its previous work at Bald Butte to the Montana Bureau of Mines and Geology. United Bolero's geological team has reviewed all of this data. A Gulf Minerals drilling program in the early 1980's suggested the possibility of molybdenum mineralization grading higher than 0.1 percent. This could be the results United Bolero hopes for, during the present drilling program.
Bald Butte is a quartz vein stockwork hosted molybdenite deposit, about three miles southwest of an historic gold mining district. It is also located relatively close to Apollo Gold's Montana Tunnels historic open pit gold and base metals mine, which restarted operations this past March.
Historically speaking, Bald Butte reportedly could host nearly 165 million pounds of moly equivalent. For now, the company publishes a National Instrument 43-101 inferred resource of 105 million tons graded at 0.071 percent molybdenum. The inferred resource was calculated using the commonly used polygonal method and demonstrated the potential of 250 million pounds MoS2, or 150 million pounds of molybdenum.
2) Current Exploration plans. This weekend, the company should commence a 16-hole drill program of 1000- to 1200-foot holes to test the deep mineral potential of the property. According to chief executive Bruce Duncan, this will be comprised of step-out and infill drilling. This is a follow up to an April 2006 exploration hole which yielded 14 feet of 0.611 percent MoS2, of which eight feet hit 0.686 percent MoS2.
Duncan told StockInterview, "The first hole will probably be about 100 to 150 feet from the exploration hole and then stepped out every 200 feet." He added, "We are cautiously optimistic." Duncan's geologists hope to get a better idea of the geological model with the four- to six-week drilling program.
3) Environmental Progress. Sooner or later, environmental permitting is going to rear its unpleasant head in any North American mining project. In an April 2007 audio interview we conducted Adanac Molybdenum Corp's executive chairman Larry Reaugh, he warned of difficulties a mining company can have if you don't have a good transparent relationship with the locals. We've seen hurdles and time delays when companies fail on this step.
In previous interviews, it became apparent that the state of Montana's Department of Environmental Quality (DEQ) was a no-nonsense agency when it came to following environmental regulations. We asked Duncan about this. "Our geologists have a great working relationship with DEQ," he told us. "DEQ has come to the property several times, and they've helped us by supplying us with important geological data."
How about the environmental studies? "We've already begun the basic baseline studies, including water quality, flora and fauna, and environmental," Duncan explained. "Right after this particular drill program, we'll be going at the baselines with hammer and tong." He feels that because 90 percent of the company's property is on private land, 'the permitting process will go fairly quickly.' Duncan added, "We are cautiously optimistic we can have this fully permitted in a couple of years."
4) Metallurgical Quality. United Bolero provided material to G & T Metallurgical Service in Kamloops, British Columbia, which was intended to represent the entire deposit. In an October 2006 report, the metallurgical service reported that molybdenum in the ore body could be recovered into rougher concentrate at a rate of between 90 and 95 percent. United Bolero reported the rougher concentrate could be processed into a marketable moly concentrate with an overall molybdenum recovery of about 80 percent.
Duncan told us, "What that means is there is no arsenic, no mercury, no cadmium or any of the show stoppers in the deposit." He explained, "In essence, this is a benign deposit."
In a previous article, metallurgical engineer David Michaud told us, "Liberated grains of molybdenite were 91 percent captured into the final concentrate. Approximately 11 percent of the molybdenite bearing binary composites were captured - predictably these composites contained significant amounts of molybdenite, probably accounting for their enhanced floatability." Although Michaud no longer consults for the company, he recently told us, "It's a good moly property."
5) Infrastructure. Bald Butte is accessible by a dirt road. Duncan pointed out, "It literally goes all the way up to the property and is maintained all year around." He joked that one could back a pickup truck to the drill targets from the road. Eight miles away is a rail siding. The Butte-Mullan power line crosses a portion of the property and two existing flotation mills are within 80 miles from the property.
6) Technical Team. United Bolero has assembled an impressive geological and engineering staff. This may explain the company's ready acceptance by Montana DEQ, which at first puzzled us (having heard numerous horror stories).
In early May 2006, Bruce Parker rescued United Bolero, during the company's transition phase. Parker is a registered professional engineer in Montana, Idaho, Nevada and New Mexico. He assumed responsibility for United Bolero's mineral properties, and became head project manager. According to our research, he is well respected in Montana's mining industry and, over the years, has developed good relations with the state's regulatory agencies.
One mystery is Dr. John Childs, who will be leading United Bolero's exploration efforts on Bald Butte and the company's sister property, Cannivan Gulch. Our independent investigation found him quite productive exploration and discovery in Montana. As a consultant he previously worked with Pegasus Gold and several others. But, we also found his photo on the highly regarded Montana State University geology faculty list, noting his expertise in economic geology. This could explain why Bruce Duncan appears confident and relaxed about his company's six-week infill and step-out drilling program. Dr. Childs comes with the type of history to which many geologists hope to aspire.
Overseeing the company's progress from United Bolero's technical advisory board is Gerald Rayner. His geological expertise has taken him throughout Western North America, Australia and the South Pacific. During his tenure with Kennecott, Rayner ran the exploration in Papua New Guinea and his efforts resulted in several porphyry copper deposits including the Ok Tedi Mine. At one time, this was thought to be the largest copper deposit in the world.
7) Cash. On this item, United Bolero falls short, but only on the face of it. Duncan told Dow Jones, a month ago, "We want to let the drill bit tell the story before we go looking for money." The company has more than sufficient cash in its treasury to complete the current drill program. Duncan told us yesterday his company has about C.7 million in the bank. All in, his drilling campaign should cost up to C.6 million.
Ongoing warrant exercise has brought fresh cash in, and according to the company's website, there is the potential of C.5 million which can be raised by the exercise of options and warrants. Duncan's experience in Toronto's financial circles is a plus for future fund raising. As with others we previously began coverage on, the cash comes when the project moves forward. The company's drilling program - which Duncan hopes would move the inferred resource to a higher category - might become the trigger which brings stronger interest into the company's shares.
Conclusion
United Bolero could also extend its drilling program to include Cannivan Gulch. Duncan considers this nearby Montana molybdenum the company's 'crown jewel.' It could become that, but that is not the focus for this article.
In conclusion, we hope to have provided helpful advanced tips when proceeding through the due diligence stage of evaluating the potential strength of a molybdenum company's shares. We have depended upon such guidelines when reviewing other favorite molybdenum companies.
To summarize, look for a company which has a strong technical team developing a previously explored and ready-to-go deposit in an area accompanied by an encouraging environmental climate with sufficient infrastructure. These seven advanced tips should provide some basic guidelines to separate the highly probable success stories from those which offer your home future wallpaper.
COPYRIGHT© 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.
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