March 2011 - MiningFeeds

Snapshot – Encanto Potash (TSXV: EPO)

www.encantopotash.com

To go directly to the Encanto Potash website CLICK HERE.

green globe — Lithium and potash are considered “green metals”.

Not all alkali metals are created equally. All of the alkali metals share similar properties: they are highly reactive metals under standard conditions and are thus never found in their elemental form in nature. The two alkali metals that are of particular value to investors are lithium, due to its high electrochemical potential; and potassium, because of its role in plant nutrition. In the commodity world, lithium is better known as lithium carbonate while potassium is better known as potash.

Everywhere you look these days, food is news. From increasing demand from a burgeoning Chinese middle class that has sent commodity prices soaring to a Tunisian fruit seller sparking a revolution it’s hard to go a day without hearing that the world food situation has entered dangerous territory. The food crisis has sent prices of potash, which replaces soil nutrients, soaring. A few years ago one would be hard pressed to find any junior potash exploration companies. Today, a number of projects are being advancing in Canada and abroad.

Lithium, one of the more unconventional commodity plays, is also one of the most challenging for investors to grasp. As Virginia Heffernan noted, “Lithium is one of the more difficult commodities to assess because economic viability depends so much on the deposit type and the ability to covert resources into a product that can be successfully marketed to end users.” This hasn’t held back junior exploration companies as a number have been quick to react to what they believe will be a battery of future demand.

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The Salar de Atacama salt flats in Chile. Is most of the easily recoverable lithium here already gone?

Read the word lithium and it’s likely not too long before you are reading the word battery. Jon Hykawy, lithium analyst for Byron Capital Markets echoed the sentiments of many recently when he described lithium as “hot and getting hotter.”

Lithium demand is experiencing a “sea change” according to James Calaway, chairman of Australian lithium miner Orocobre (Stock Profile – TSX:ORL & ASX:ORE) in an article by the New York Times. He further enounced, “We are at the front end potentially of a very significant increase in the demand for lithium for the emerging electric transportation sector.” Calaway’s company recently entered into a $100 million joint-ventured lithium project in Argentina with Toyota Tsusho, the material supplier for Toyota.

Investors picturing a massive new demand for lithium unfolding in order to power our lives might be surprised to hear that, in 2008, just 25% of the world production of lithium carbonate was used by battery manufacturers. The majority of the demand for lithium comes from its use to manufacture high performance alloys, ceramics and glass. But it’s the anticipated demand from the automobile and electronics industries, which are increasingly adopting lithium batteries, that has the spotlight on the element. This is because a lithium-ion battery stores two to three times as much energy per pound as a nickel-metal hydride battery.

According to French technology consultancy firm Meridian International Research, the current supply of lithium is so tight and the potential sources are so limited that by 2015 there may only be enough lithium carbonate to power 1.3 million GM volt class vehicles. And, the report goes on to suggest, politics may play a major role in the supply/demand equation. Meridian says that 70% of the world’s lithium may ultimately come under state control. The lithium frenzy was not eased by recent actions in Argentina. The government in the that country’s Jujuy province recently declared it a “strategic” metal, effectively notifying all current and future lithium projects that they must be evaluated by a special commission.

In talking to The Energy Report analyst Merrill McHenry described the structure of lithium pricing as one that lends itself to confusion and speculation. “You take a mineral with no spot market and very obtuse pricing and combine that with a significant distance from here to high future volumes, significant market penetration of hybrids and higher pricing estimates and you have a scenario ripe for volatility.”

But not everyone agrees that there might not be enough lithium to satisfy demand. Lithium consultants Tru Group, who presented at the Lithium Supply & Markets Conference in Toronto in January, pointed out that the world’s current major lithium chemical producers, SQM, FMC Corporation and Chemetall/Rockwood Holdings, have the in-ground resources and ability to meet nearly all market requirements by simply expanding capacity through 2020. Their report further stated, “Only a select few new projects could make it into profitable production and then only as marginal suppliers. Bottom line is if you do have a good resource make sure you also have the strongest possible lithium technical capability to develop it.”

Today, the debate over “peak lithium” rages between those, such as Meridian’s William Tahil, who say that most of the easily recoverable lithium from world-class properties like SQM’s Salar de Atacama project in Chile has already been recovered. While groups like Argonne National Laboratory, a research branch of the US Department of Energy, says that on the other hand “long-term supply should not be a major concern.”

Whichever side is ultimately proven correct issues around the supply, demand for lithium appears to be on the front burner for some time to come. That means volatility in the lithium market and, perhaps, opportunity in the sector. For investors looking to sort the lithium contenders from the pretenders, MiningFeeds.com offers, in no particular order, five lithium stocks with varied stories to keep an eye on in 2011.

1. Lithium One (TSXV: LI)

Other people’s money. Not only does Lithium One (Stock Profile – TSXV:LI) have what might be one of the purest sources of lithium in the world; the company recently reported what it described as favorably low magnesium and sulphate content at their Sal de Vida brine project in Argentina, but some well timed agreements have minimized the company’s requirements for additional fund raising to capitalize on the project.

In early June of last year Lithium One entered into a joint venture earn in agreement with Korea Resources Corporation (KORES) to develop their Argentinian Project. The arrangement required KORES to fund up to US$15 million to complete a Definitive Feasibility Study and to provide a completion guarantee for Lithium One’s share of the debt portion of project development. KORES then brought more to the table when it entered into a consortium with GS Caltex and LG International, two leading battery and energy companies in Korea, to share equally in the 30% ownership stake.

Lithium One - Brine Project - Panorama — Lithium One's Sal de Vida brine project located in Argentina within the famed "Lithium Triangle".

With things in full swing, Lithium One, early last month, reported its first independent lithium and potassium resource statement for its flagship Argentinian project. The inferred resource estimate, prepared by E.L. Montgomery and Associates, includes 5.44 million tonnes of lithium carbonate equivalent and 21.3 million tonnes of potash equivalent. Lithium One’s property is adjacent to FMC Corp.’s lithium brine operation, the source of more than 15% of the world’s production of lithium, in the eastern part of the same Salar.

Lithium One’s second project, a spodumene hard rock project in James Bay, Quebec exhibits a spread-the-risk methodology similar to the one used on their Argentinian property. In February, the company announced a joint venture agreement with Galaxy Resources (ASX: GXY), an Australian listed mining company, whereby Galaxy can acquire up to a 70% interest in project in Quebec through earn-in conditions including $6 million in payments and the completion of a feasibility report. Galaxy owns and operates the Mount Cattlin mine in Western Australia which is currently producing spodumene concentrate. The MiningFeeds.com connected with Lithium One’s President and CEO Patrick Highsmith recently to discuss the company’s future – CLICK HERE – for the interview.

2. Canada Lithium (TSX:CLQ)

On the last day of February of this year, Canada Lithium (Stock Profile – TSX:CLQ) had a surprise for investors. And, in this case, investors didn’t like what was inside the box. At 12:23 p.m. Pacific, shares of Canada Lithium were halted at the company’s request, pending news. A few hours later Canada Lithium announced it had hired Roscoe Postle and Associates Inc. to explore the possibility that its flagship project in northwestern Quebec might not be as large as they first suspected. Canada Lithium management said it was “unable to reconcile the results of the internal review, which incorporated various resource estimation methodologies, with the reported 43-101 resources announced in October, 2010.”

When the stock resumed trading the next morning, the verdict was swift and harsh. Shares of Canada Lithium ended the day at $.89 cents, down 34% from $1.35. The stock lost another $0.17 cents to close at $.72 cents on March 2nd.

Just months before, things were looking much brighter for Canada Lithium. In an interview with BNN on December 20th, 2010 CEO Peter Secker said the company would “be producing by the end of 2012, we’ll produce about 20,000 tonnes of lithium carbonate per year which would make us about 12% of the world market.” Mr. Secker also said that the mine’s life would be “in excess of 50 years” and felt there was “there’s a lot of potential there” for additional reserves being identified having only drilled 50% of the property.

Secker now believes there will be a material reduction in the measured, indicated and inferred resources reported in October. The question for investors now is: just how material? Speculation will no doubt run rampant over the months it takes to produce a new National Instrument 43-101-compliant report.

Canada Lithium believes an historical reserve estimate done by a firm called Nenninger et Chenevert Inc. in 1974 is is “relevant” but should “should not be relied upon” because “they do not meet the current CIM definition standards on mineral resources and mineral reserves adopted in 2005”.

Canada Lithium’s Quebec Lithium Project is located in the Lacorne Township near Val d’Or. Between 1955 and 1965 the mine was a former producer of lithium carbonate, lithium hydroxide and spodumene. Before the internal review, Canada Lithium said the project could be one of the two-or three-largest hard-rock lithium deposits in the world. With all the recent uncertainty surrounding the project, however, some investors might be inclined to take this information with a grain of spodumene.

For Part 2 of 5 Lithium Stocks to Watch in 2011 – CLICK HERE.

In the insular world of potash, power is held in just a few hands.

Unlike lithium, potash is not scarce. The resource, however, is concentrated in a few privileged places on the globe, such as Canada, Russia and Belarus.

This fact, in effect, turns the idea of abundance on its ear. Potash is extremely rare if you live in a “have not” country. The concentration of supply, combined with the prohibitive costs associated with establishing a producing mine, means there are a limited number potash suppliers. In fact, just a handful of producers account for 75% of potash production in the world. The two largest potash producers in North America are Potash Corporation of Saskatchewan (TSX:POT) and The Mosaic Company (NYSE: MOS); a Fortune 500 Company based in Minnesota. Silvinit, which is currently in merger talks with Russian counterpart Uralkali, and Belarusian government owned Belaruskali are the dominant players in Asia. Norway’s Yara and Germany’s K + S Kassell are the major producers out of Europe.

Much like lithium, the price of potash is established by direct negotiation between suppliers and buyers. When potash’s price per tonne reached nearly $1,000 in 2008, the inelasticity of supply became very apparent. This gave rise to the “potash bubble” and there was a temporary standoff between buyers and sellers – not many new supply agreements were announced from 2009 to 2010. Without the soil enrichment that potash provides, however, many crop producers run the risk of losing yield. Clearly, this standoff had a built in timer.

The entrance fee to join the exclusive club of potash producers is typically in the billions of dollars. In 2007, one of India’s largest mining companies Sainik Coal Mining was awarded a mining license to begin potash extraction in the Danakil Depression of Ethiopia. Sainik is planning to invest $1.1 billion in the project.

In the developed world that cost is even greater. Russell Carter, managing editor of World of Mining Professionals, recently reported, that “…a new Saskatchewan conventional mine would require an estimated upfront capital investment of C$2.8 billion, excluding roads, rail lines, utilities, port facilities and other infrastructure costs outside the plant gate. It would take a minimum seven years to generate positive cash flow from a newly built conventional mine”.

In April 2008, Mosaic announced that it would expand its three potash operations in Saskatchewan by five million tonnes over the next 12 years at a cost of US$3.15 billion but less than a year later was forced to lay-off 1,000 workers and reign in production as a result of the economic crisis.

Today, Aussie resource giant BHP Biliton, not one to be discouraged by the minor setback of a takeover gone awry has plans for a new potash mine. The Jansen Project is located 140 km east of Saskatoon, Saskatchewan. The mine is expected to be completed by 2015 and has been engineered to produce eight million tonnes of potash each year, or 12 % of the world’s current demand. This mega project is expected to cost $10 billion. With an estimated potash resource of 840 million tonnes and a mine life of perhaps a hundred years, the project provides BHP with a significant entry into the potash market.

Many believe that the rise of potash is not a bubble, but a genuine realignment of the supply demand equation. In their own second quarter analysis Potash Corporation said their research suggests that “…Chinese potash consumption could rise from less than 10m tonnes a year today to 30m by 2020. Indian consumption could jump from less than 6m tonnes to 15m in the same period.” Other proponents suggest that the BHP bid for Potash was not the frothy sign of a bubble at all, but rather, a sign of the bottom. Most reports suggest global demand will continue to rise by approximately 3% per year.

So with supply tightly concentrated in a few hands and demand steady, it appears potash will be news for some time to come. But where should investors in the sector be turning their attention to today? MiningFeeds.com breaks down five interesting candidates.

1. Potash Corporation of Saskatchewan (TSX:POT)

Location, location, location. Saskatchewan, the once sleepy little prairie province that is home to just over a million people, is home to half the world’s total supply of potash.

Half a decade ago, that fact was a footnote. Today, with the price of potash having risen from $190 to over $500 a metric tonne, it’s headline news. Potash Corp has done very well. Well enough, in fact, that the world came calling in the form of a hostile takeover attempt from BHP Bilington.

In mid-November 2010, after the Canadian government stone-walled the potential deal, BHP announced it had withdrawn its $38.6 billion unsolicited takeover offer for the Potash Corporation of Saskatchewan. Both Potash and the Saskatchewan government fiercely lobbied Canada’s Conservative government to block the deal, citing what amounted to national security concerns. Potash produces about 23% of the world’s supply of the newly important material and generates significant revenue for the Saskatchewan government.

The Canadian federal government, led by Industry Minister Tony Clement formally scuttled the Potash deal because it didn’t represent a “net benefit” to Canadians. The decision, which was made under the Investment Canada Act, was an assessment some felt was too subjective. Clement, obviously feeling the precarious nature of his position, gave the Australian mining giant a thirty day window to restate its case and make any additional representations to Ottawa. But BHP Biliton elected to terminate the offer and forgo the red tape.

Potash’s fiscal 2010 results, released on February 20th, punctuated the reasons BHP Biliton was so keenly interested in Saskatchewan’s largest company. Top line sales were a whopping $6.54 billion and the company was extremely profitable, reporting net income of $1.81 billion, or $1.98 per share.

With one thwarted hostile takeover under its belt, it is clear Potash Corporation of Saskatchewan now plays on an international stage. The company, to its credit, isn’t showing any signs of stage fright. By 2015, Potash expects its annual potash operational capability to reach 17.1 million tonnes, almost twice what it was in 2005 when construction was completed on its first expansion project. Management now says it expects to increase production by almost 70% over the next five years.

2. Allana Potash (TSXV: AAA)

Potash is hot. Allana’s potash might be just a little hotter.

That’s because Toronto based Allana Potash’s property is located in the Danakil Depression of Ethiopia one of the lowest places on earth not covered by water, and, with temperatures routinely soaring to over 60 Celcius, the hottest. When Potash was discovered in this basin near the Red Sea in 1918, most wouldn’t blame anyone for simply turning their back on it. But the quality and amount of potash available here, as Allana’s short experience is already proving, means the appeal is simply too lucrative, even in the excruciating heat of the Danakil Desert.

Potash production began in the Danakil in 1918 after a railway was completed from the port of Mersa Fatma in Eritrea to an area 28 km outside of Dallol. But when large-scale supplies from Germany, USA, and USSR came to market after the Second World War the region sat dormant for decades.

But just a few years ago, with Potash high in demand again, Etiopia and Eritrea governments granted a number of licenses. Allana’s property surrounds Sainik’s Crescent Potash Project and is adjacent to BHP Billiton’s holdings in the Depression. When Allana acquired its Ethiopian potash concessions in September, 2008 the transaction was supported by a NI-43-101 compliant technical report from ERCOSPLAN Ingenieurgesellschaft and North Rim Exploration. That report showed an inferred mineral resource of 105,200,000 tonnes of potash mineralization (Sylvite and Kainite) with a composite grade of 20.8% KCl and near surface mineralization was present.

Since acquiring the concessions Allana has been busy developing the project, attracting a $12.3 million strategic investment from Liberty Metal and Mining; 17% ownership stake, and a two million dollar investment from China Mineral United Management. Then, On March 1st, Allana completed a $38 million financing from a syndicate of brokers and an over-allotment option from Liberty Metals.

Recently The MiningFeeds.com talked to Farhad Abasov, President and CEO of Allana Potash about their experience in the Danakil and the 154,000 hectares land position the company holds in the Nequen province of Argentina. For the exclusive interview CLICK HERE.

For 5 Potash Stocks to Watch in 2011 – Part 2 – CLICK HERE.

3. Talison Lithium (TSX:TLH)

With a market capitalization near half a billion dollars, Talison Lithium (Stock Profile – TSX:TLH & OTC:TLTHF) is the biggest lithium mining company listed in Canada, and the largest pure lithium play in the world.

But in a move that speaks to how far the TSX Exchange has matured on the world mining stage, Talison is actually an Australian company with no connection to Canada other than its takeover of Salares Lithium, a TSXV listed junior with properties in Chile. The merger, which was completed last summer, gave Talison exposure to Salares’ lithium brine projects located in Chile, and creates as close to a diversified portfolio as exists in the suddenly burgeoning world of lithium mining. Salares resource in Chile has not be verified through NI-43-101, but the company says there is 394 square km of exploration potential within a number of salares brine lakes.

Meanwhile, at Greenbushes, a mine near Perth in Western Australia Talison mines tantalum concentrates and lithium minerals. The company purchased Greenbushes in 2007, and is already distributing to a well-established global customer base, including China. Production from the Greenbush mine fills 75% of the Chinese demand and a full third of total worldwide demand for lithium.

Talison Lithium Greenbushes Mine — Spodumene at Greenbushes is mined from the pegmatite that's exposed in open pits.

According to Ahead of the Heard’s Rick Mills, Talisun Lithium offers “potential investors many attributes” including “exposure to both mineral and brine sources of lithium… a well established and diversified global customer network… and a low-cost, rapid plant expansion (that is) currently in progress.”

In 2010 Talison sold all the lithium concentrate it produced and did so with high margins receiving an average price of over $300 per tonne (or $2,000 lithium carbonate equivalent). It must be noted that the $2,000 LCE price does not account for any associated end-user lithium carbonate conversion costs estimated to be in the range of $2,000 to $3,000 per tonne.

Talison, straight out of the gate looks like an early leader in the lithium race. The company reports that in a few years expanded operations should reach annual production of approximately 110,000 tonnes of lithium carbonate equivalent. The company is drilling at Greenbush and expects to provide an update on mineral reserves and resources by June, 2011. Talison also plans continued exploration work on their Chilean salars brine properties this year.

Mineral Resources from the company’s NI-43-101 report define a technical grade ore type at a 4% Li2O block cut-off and chemical grade ore type at a 3.2% Li2O block cut-off. Over the 12 year mine life the company expects to produce 4.6 million tonnes of lithium concentrate, or an estimated 700,000 tonnes of lithium carbonate equivalent.

4. Rodinia Lithium (TSXV:RM)

A tale of two projects. Toronto’s Rodinia Lithium (Stock Profile – TSXV:RM), like Talison and Lithium One, is developing lithium projects in two radically diverse geographical areas; Nevada and Argentina. But unlike its counterparts, Rodinia is focused exclusively on lithium brine production. A comparison of Rodinia’s properties reminds investors that geopolitical concerns are never far from the mining world.

Earlier this month, Rodinia announced results from an independent brine resource estimate of its Diablillios Project in the province of Salta in Argentina. As conducted by AMEC Internacional Ingenieria y Construccion, the report is consistent with the standards set out in Canadian Securities Administrators’ National Instrument 43-101 but does not constitute a NI-43-101 report. Nonetheless, the report identifies 4,959,000 tonnes of lithium carbonate equivalent, 19,837,000 tonnes of potassium chloride and 6,194,000 tonnes of B203.

Talking about the results William Randall, Rodinia’s President and CEO said, “This resource represents one of the largest estimated brine resources in the world. In addition to its size, the brine geochemistry is favourable with low magnesium-to-lithium and sulphate-to-lithium ratios.”

Lithium brine refers to lithium that is not mined, but rather, produced from brine, or salt water. To recover lithium this way salt rich brines are pumped from just beneath the surface of the desert and diverted into a series of large, shallow ponds. Areas of Nevada, Chile and Argentina are particularly rich in lithium brine.

At first blush the timing of Rodinia’s resource estimate was not ideal. A few days after the report
the government of neighbouring Jujuy province in Argentina announced a decree making lithium of strategic importance to their region making investors nervous that legislation around lithium in places like Argentina might become more widespread and protectionist. Then on March 11th the Japanese earthquake and subsequent tsunami hit resulting in general and widespread market instability. Shares of Rodinia feel from $0.57 to $.385 in a matter of days.

chevy-volt-plug-in — Demand for lithium batteries for "green cars" like the Chevy Volt is expected to drive future demand for lithium.

Rodinia was quick to point out that its two main projects were unaffected by the decree. President and CEO William Randall calmed fears by pointing out, “Mining legislation and government activity within the mining sector varies dramatically from province to province in Argentina, and the evolution of legislation in one province does not directly impact neighbouring provinces.”

Clearly, the position of the Jujuy province in Argentina has no bearing on the company’s Clayton Valley Project in Nevada which the company believes can offer some strategic benefits down the road.

The MiningFeeds.com sat down with William Randall to find out more about Rodinia Lithium, its strategic partnership with China’s Ningbo Shanshan and the company’s future plans. CLICK HERE for the exclusive interview.

5. Lithium Americas (TSX:LAC)

The Lithium Triangle, the high altitude, semi-arid salt flats at the intersection of Bolivia, Argentina and Chile is where nearly three quarters of the world’s salt lake lithium deposits are found.

It’s also where Lithium Americas’ (Stock Profile – TSX:LAC) Cauchari‐Olaroz property is located. A more specific description of the location of their property – smack dab in the middle of Jujuy province in Argentina – will provide much of the reason why the company’s stock was under pressure for most of March. Shares of Lithium Americas fell from $2.19 on February 28th to a low of $1.33 on March 16th, before recovering ground in sessions that followed.

In early March, Walter Barrionuevo, the Governor of Jujuy Province in Argentina, issued Decreto 7592/11, which changed existing laws for all existing and pending lithium projects. From now on in Jujuy, a ‘special expert commission” will review all projects. Lithium Americas, however, believes the market overreacted to the possibility of troubles at Cauchari‐Olaroz, pointing out that exploration and development permit applications were approved in late 2009 and is fully permitted through final feasibility. The Company is currently working on the environmental baseline and has confirmed that new legislation should not effect the current development program at Cauchari‐Olaroz, but is expected to increase the requirements for the final exploitation permit that will be requested once the final feasibility study is completed and presented to the Government as it is mandatory under the Argentinean law”.

Hernán Zaballa, a partner at Buenos Aires law firm Brons & Salas believes that mining in Argentina, a country in which each province owns its natural resources, gets a bad rap. “I do not think having different approaches to mining is a killer for Argentina and it is probably unfair the country is ranked so low in surveys like the one of the Fraser Institute” he recently told The Engineering and Mining Journal. “If you look at Canada or the U.S., you have big differences between states. Nevada is not California; Alberta is not British Columbia.”

And things aren’t all gloomy for Lithium Americas. Current disruptions aside, the company’s brine based project in Argentina was able to attract Magna International and Mitsubishi Corporation as equity investors. Both have off-take arrangements with the Company.

Salar de Uyuni, Bolivia — A worker at Salar de Uyuni lithium brine deposit in neighbouring Bolivia - part of the Lithium Triangle.

As Lithium Americas President and CEO Dr. Waldo said in an interview with BNN, “Lithium carbonate is not like gold where that you put an ad and you sell it… it has to be sold to a market that needs it. In our case our partners are Magna and Mitsubishi and this is something that gives you the comfort that there is a buy out there on the other side of the deal.”

Lithium Americas is clearly a little further ahead than some of the other junior miners in the Lithium Triangle. In mid-2010 the company engaged ARA Worley Parsons to perform engineering services on the Cauchari project. And on March 7th, 2011, the company entered into an agreement with SGS Canada for the completion of bench studies required for the design and construction of a lithium carbonate pilot plant and hopes, despite the new decree, to produce its first lithium carbonate before the end of 2011.

In late 2010, Lithium Americas released the results from an independent NI-43-101-compliant resource estimate completed under the supervision of Groundwater Insight. The company’s President and CEO Dr. Waldo Perez stated, “With measured and indicated lithium carbonate and potash (KCl) resource equivalents of 5.3 million tonnes and 17.3 million tonnes respectively, we have validated the potential of our resource.”

For a list of publicly traded lithium companies with market caps over $10 million – CLICK HERE.

New Mexico has been synonymous with potash for a century. This photograph was taken in a storage warehouse near Carlsbad in 1938.

3. IC Potash (TSXV:ICP)

All Potash is not created equal. The most common form, called Muriate of Potash, or MOP, accounts for about 95% of all potash fertilizers used worldwide.

Toronto’s IC Potash, however, is concerned with the more rare and expensive Sulphate of Potash, or SOP. SOP is slightly lower in potassium and is used in crops such as tobacco or pineapples, which are more inclined to fertilizer burn. SOP, which is sometimes referred to as “premium” potash, is aptly named because it trades at a premium; the price is normally 20-30% higher than regular potash.

With their Ochoa project in New Mexico, a land position that covers more than 100,000 acres, IC Potash is focused on becoming the world’s lowest cost producer of SOP. IC believes they are sitting on a resource of over a billion tonnes that is, as the company describes, “an average of 5.7 feet thick, and has an 83% grade, a remarkable grade for any resource.”

Shares of IC Potash raced from $.85 cents on December 20th of last year to over $1.70 as the potential of the Ochoa project became verified. The biggest one day leap happened January 5th after an updated preliminary economic assessment by Gustavson Associates of Lakewood, Colorado estimated the net present value of the Ochoa project at $1.4-billion. On March 17th, the company completed a $20 million financing at $1.60 per share. Going forward, IC Potash said their capital cost estimates to develop their mine are $662-million, and projected production cost of SOP will be $164 per tonne.

Investors bullish on IC Potash believe these profit margins will continue to positively affect the company’s share price. Compass Minerals (NYSE: CMP), through its wholly owned subsidiary Great Salt Lake Minerals, is the leading producer of sulphate of potash in North America. In March, that company reported it was selling SOP for roughly $900 per short tonne, up $50 from the company’s December 2010 price.

Equity analyst are paying attention to rising prices, but some perceive a shortage of potash juniors in a sector where properties are scarce and mines can take years to develop. Robert Winslow, an analyst with Wellington West, said IC Potash is “set to benefit from a resurgence in demand.” Because, prices for “premium” potash are still trending up and the acquisition of junior Potash One made remaining Potash juniors more valuable compelling him to “…re-rate all the junior potash stocks we cover with a positive bias.” Winslow recently raised his price target to $2.40 and “sees potential for the stock to trade above $8 by 2015.”

4. Western Potash (TSXV:WPX)

Western Potash, as its name suggests, is developing a potash project in Saskatchewan, the sparsely populated province in Western Canada that produces about a third of the world’s supply of the stuff. The company’s Milestone Potash Project is located in the central part of the province, about 35 kilometres southeast of Regina.

Saskatchewan potash deposits are deep, typically a kilometre or more underground. For deep deposits, a range of factors must be considered over and above the pure economics associated with building a processing facility. Historically, underground mining was not considered feasible if a deposit was deeper than 1100m below surface. Western Potash’s deposit is way underground; the potash rich ore is located at a depth of 1,700 meters.

So what’s the solution for Western Potash? Solution mining. Solution mining is a process used to extract minerals using an aqueous leaching solution. A liquid is pumped into a deposit and makes contact with the ore. The resulting solution is then pumped to the surface and processed. The process was discovered in the 1960’s and is only now being used to mine salts such as potash, copper and uranium. Australia’s Beverley Uranium Mine is the first operating solution, or in-situ mine in the world.

Solution mining can be tricky business. Certain temperature conditions, for example, need to be available in order for solution mining to work. A temperature greater than 50 degrees Celsius is generally required, implying a depth of at least 1,450 meters. Solution mining begins by undercutting the mineralized zone by dissolving an initial cavern below the seam of interest within the potash beds. This is followed by dissolving the salt and potash upward and through the mineralized beds while utilizing a “ceiling cap”. The oil or gas ceiling cap inhibits vertical cavern growth until a large area is undermined. Mining then progresses vertically by raising the cap and dissolving mineralized portions of the roof. The minerals are then recovered from the saturated fluid by recrystallization. After mining the empty caverns may be useful for underground storage, and are sometimes more valuable than the minerals produced during cavern development.

Western Potash management believes its potash properties are top notch candidates for solution-mining. A NI-43-101 resource estimate determined the Milestone Project had 41 million tonnes of Measured Resource, 133 million tonnes of Indicated Resource, and 560 million tonnes of Inferred Resource with an average grade of around 30% KCl. The resource estimate, prepared by Agapito Associates, suggests an annual potash production rate of 3 million tonnes for well over forty years.

But building a potash mine is not an inexpensive proposition, the price tag associated with Western’s project is estimated at $2.5 billion. To that end, the company recently completed a $20 unit financing at $1.10 and, with the proceeds, has initiated their feasibility study for Milestone Project, engaging engineering consultants AMEC Americas. The MiningFeeds.com connected with Western Potash President and CEO Patricio Varas for an exclusive interview – CLICK HERE.

5. Amazon Mining (TSXV: AMZ)

The name Amazon Mining will tell you a little about the only Canadian listed potash junior operating in Brazil, but don’t get too attached to it. In the second quarter of this year Amazon, which is currently developing the Cerrado Verde potash project in Brazil, plans to change its name to Verde Potash. And with the year the company has had, why not?

Shares of Amazon rocketed from just over a dollar midway through 2010 to a high of $8.60 on January 21st of this year. The company has other assets, but it’s potash, and the unique opportunity the company has carved out in Brazil, that has investors bidding up the shares of the company.

Verdete Slate - the source of Amazon's potash.

Amazon’s potash project involves a little technology. The company plans on utilizing a relatively new extraction process that heats Verdete, or green slate, to almost 1,100 degrees Celsius to extract the potash. This process results in a new fertilizer, ThermoPotash, that the company believes will be more suited to the needs of the Brazilian marketplace. Brazilian soil is much more acidic than soil in other parts of the world, and the problem has been compounded by the agricultural use of potassium chloride. And potassium chloride, the fertilizer produced in Canadian potash mines, also washes away too easily in Brazil’s heavy tropical rains.

Brazil, which is the largest coffee and sugar cane producer in the world, is the world’s fourth largest user of potash and and the second largest importer. The country produces less than ten per cent of its annual needs. The country is aiming to reduce its import needs to 60% over the next five years.

Things are moving ahead quickly at Cerrado Verde. On March 8, 2010 Amazon received an initial National Instrument NI 43-101 compliant inferred mineral resource estimation of 105 million tonnes at 10.3% K20 Inferred Resource for its Cerrado Verde potash project. The company is currently undertaking a drill program with the hopes of expanding their potash resource. The good news kept rolling for Amazon when a preliminary economic assessment showed the project may have an an estimated life of a hundred years, more than double previous estimates. The assessment also showed that project capital costs are estimated to be between $150 and $250 million which, by international standards, is considered quite modest.

For 5 Potash Stocks to Watch in 2011 – Part 1 – CLICK HERE.

William Randall - Rhodinia Lithium — President & CEO William Randall, "We are developing the potash potential of our current properties".

A tale of two projects. Toronto’s Rodinia Lithium (TSXV:RM), like its peers Talison and Lithium One, is developing lithium projects in two radically diverse geographical areas; Nevada and Argentina. But unlike its counterparts, Rodinia is focused exclusively on lithium brine production. A comparison of Rodinia’s properties reminds investors that geopolitical concerns are never far from the mining world.

At first blush the timing of Rodinia’s resource estimate was not ideal. A few days after the report the government of neighbouring Jujuy province in Argentina announced a decree making lithium of strategic importance to their region making investors nervous that legislation around lithium in places like Argentina might become more widespread and protectionist. Then on March 11th the Japanese earthquake and subsequent tsunami hit resulting in general and widespread market instability. Shares of Rodinia feel from $0.57 to $.385 in a matter of days.

Clearly, the position of the Jujuy province in Argentina has no bearing on the company’s Clayton Valley Project in Nevada which the company believes can offer some strategic benefits down the road. The MiningFeeds.com sat down with William Randall to find out more about Rodinia Lithium, its strategic partnership with China’s Ningbo Shanshan and the company’s future plans.

Rodinia Lithium has properties in both the United States and Argentina – could you tell us about the projects and why the company is focused on two geographically diverse areas?

Rodinia has a project in Salta Province, Argentina, covering the entire Salar de Diablillos. This property hosts a recently announce resource of almost 5 million tonnes of lithium carbonate and 20 million tonnes of potash. Coupled with this very large resource are high grades of both lithium and potassium as well as a brine geochemistry that is amenable to low cost, conventional processing. This project has lots of upside and is well positioned to become the newest lithium carbonate and potash producer. Our second project is in Nevada, United States, and covers 70,000 acres of the only lithium brine producing salt flat in North America. The brines have been harvested since the 1960’s, so it is an asset with proven potential. These two flagship projects have many common elements that we consider important: stable, friendly mining jurisdictions; brine-based lithium and potash source (lower cost than hard rock lithium or conventional underground potash), excellent geochemistry, and very significant land holdings that allow us to control the salt lake. Argentina gives us a significant potential producer in the heart of the South American lithium triangle. To that, the Nevada asset provides geographical diversity and access to a very large domestic market that is supported by investments from the Obama government as well as auto and battery OEMs.

Argentina is a notable mining country but it is also notorious for its archaic bureaucracy – has Rodinia faced any of these issues in Argentina?

Argentine mining law is determined provincially. It is therefore very important to make sure you choose projects that are in mining friendly provinces such as San Juan and Salta. Salta, where our Diablillos asset is located, has a very long and stable mining history, evidenced by the presence of numerous international mining companies including Rio Tinto Minerals. As such, Rodinia has not faced any issues so far and does not expect to in the future.

There has been a lot of talk lately from the Obama administration about energy independence – as supplier of lithium that is based in the U.S. is anything materializing on the front lines or should we chalk this up as more government rhetoric?

This is an avenue that the Obama administration is actively pursuing. In fact, last year the government issued a $30M grant to expand the Silver Peak lithium carbonate production facility, located in Clayton Valley, in a push to secure a domestic supply of lithium. I think we will find the US to be increasing its activity in the sector in a push to gain independence from the oil producing countries.

You recently closed an $11.5 million financing, where do you plan on spending that money and what major milestones are you hoping to accomplish?

We are now well financed to reach major milestones on both properties. In Diablillos we are moving towards a feasibility study. Our work program will incorporate further exploration drilling, an updated and upgraded resource, metallurgical report to demonstrate the brine’s amenability to conventional processing, pump tests to determine the production potential of the salar and seismic profiles. A feasibility study will allow us to prove the excellent production potential of the deposit. In Clayton Valley we will move towards the resource stage by completing an exploration program on the southern claims. We hope to release a resource estimate in the second half of 2011. This area hosts the only brine resource in North America.

I noticed on your website you have an “Other Projects” section that says “Coming Soon”. Is the company looking at other non-lithium projects or will your focus remain Lithium?

We are not looking at non-lithium projects. We are developing the potash potential of our current properties and will devote this section of the website to this. We have 20 million tonnes of potash contained in Diablillos brine. As a co-product during lithium carbonate production, this could be introduced to the market at the very low end of the cost curve. We think the potash company offers upside for the company over other lithium deposits that do not have this advantage, primarily the hard rock facilities.

Can you please discuss the significance of you recent announcement with strategic investor Shanshan?

Shanshan is the largest lithium battery components manufacturer in China. What that means is that they produce the anode and cathode material for the Li batteries. They are a major consumer of lithium carbonate and are trying to secure a steady supply of the stuff for future growth. They estimate huge growth in the sector and have a very aggressive agenda to increase their market participation. The private placement we completed with Shanshan late last year was an indication of their interest in our properties. We are now working on developing a more involved partenership with them and the Institute of Salt Lakes (ISL) whom they sponsor. ISL is a university with over 40 years experience in the brine processing field and will be an integral part of our project going forward.

What sets Rodinia apart from its competition?

Rodinia is well positioned to take advantage of the growth in lithium carbonate and potash demand. With our brine assets, containing what we believe are world class resources, we can project operating costs in the lowest percentile distributed in two mining friendly jurisdictions. We are fully funded to meet our next milestones and have the backing of China’s largest lithium carbonate consumer. We think the company has a bright future!

This interview appeared in 5 Lithium Stocks to Watch in 2011 – Part 2 – CLICK HERE for the article.

Allana's President and CEO Farhad Abasov meets with Girma Wolde-Giorgis, the President of Ethiopia.

Potash is hot. Allana’s potash might be just a little hotter.

That’s because Toronto based Allana Potash’s (TSXV:AAA) property is located in the Danakil Depression of Ethiopia, one of the lowest places on earth not covered by water, and, with temperatures routinely soaring to over 60 Celsius, the hottest.

When Potash was discovered in this basin near the Red Sea in 1918, most wouldn’t blame anyone for simply turning their back on it. But the quality and amount of potash available here, as Allana’s short experience in the region is already proving, means the appeal is simply too lucrative, even in the excruciating heat of the Danakil Desert.

Since acquiring the concessions Allana has been busy developing the project, attracting a $12.3 million strategic investment from Liberty Metal and Mining; 17% ownership stake, and a two million dollar investment from China Mineral United Management. Then, On March 1st, Allana completed $38 million in financings from a syndicate of brokers and an over-allotment option from Liberty Metals.

The Danakil Depression in the Afar Region of Ethiopia is noted as the hottest place on earth and, based on the photos I’ve seen from the area, is one of the most visually stunning. Could you tell our readers a bit about the region and the people who inhabit the area.

The Danakhil Depression is truly one of the most interesting locations in Ethiopia. The Dallol area is very hot and is approximately 125 metres below sea level. In the centre of the Dallol area sits Dallol Mountain which contains active hot springs that spew smoke and sulphur and form terraces with unique geological features. Surrounding the Dallol Mountain, which is really just a small hill, is a very flat white salt plain similar to other salt plains around the world. The area is virtually uninhabited due to the hot climate where year round temperatures average 40°C and lack of rainfall. On the flanks of the depression Afari nomads come to the area in the cooler months with their goat herds and to mine salt and export it to market in camel caravans. Allana currently employs approximately 25 Afaris and we have found them to be reliable workers, keen to learn and very friendly.

From 1998 to 2000 Eritrea and Ethiopia were at war and in 2007 there was a hostage taking by Eritrean militia in the area along the Eritrea and Ethiopia boarder – what is the current political state concerning the disputed border region?

The border is very quiet now although Ethiopia does maintain a military presence near the small village of Hamadela. The border is approximately 20 km from our camp but for the past three years that Allana has been working in the area there have been no incidents whatsoever.

By way of background, could you explain the genesis of Allana Potash and talk about some of the early challenges and successes your company faced?

Allana Potash grew from Allana Resources which was a company formed in Canada. Allana entered into an agreement in 2008 to earn 100 % of the project and began field studies in 2008 and 2009 followed by camp construction and drilling in 2010. The main early challenges faced by the company were related to the poor infrastructure in the region and the climate. Early in the program it was recognized that a modular camp complete with air conditioning, kitchen, showers etc. would be necessary to conduct advanced exploration on the project. While the project had been drilled in the 1950s and 1960s, additional drilling by Allana would be necessary. To facilitate our exploration efforts the government of Ethiopia rehabilitated and modified about 60 km of road to provide good access to the area and allow heavy machinery to make it to site.

The company experienced many successes in 2010 including the completion of the first drill holes in the region in almost 40 years, completion of a seismic program in the evaporite basin and expanding our land position. To date Allana has completed 11 drill holes all of which intersected potash and some at fairly shallow depths, as shallow as 110 metres.

In March last year it was reported that that China Investment Corp and their $300 billion Sovereign Wealth Fund was looking at your Dallol potash project – where is the company at with these discussions?

Allana was actually not directly involved in these discussions. However, we have been actively discussing our project with other potential development partners. We are looking at partners who can contribute to the development of the project either financially or technically. And in the last 6 months, Allana has succeeded in bringing two strong partners to the table to support our project.

Would you mind telling us more about your partners and their value to Allana?

In November 2010 Liberty Metals and Mines, a private equity fund that is a part of Liberty Mutual Group based in Boston, invested over $12 million in Allana and showed a strong commitment to assist Allana at the construction stage financing. And recently, on March 24, Allana announced a strategic investment of $10 million by a very strong group, IFC – part of World Bank Group. IFC is one of the largest multilateral financing organizations contributing to the development of key mining, infrastructure and industrial projects worldwide. In fiscal 2010, IFC invested $18-billion internationally and our board believes the support that IFC can provide to us in Ethiopia is significant.

This interview appeared in 5 Potash Stocks to Watch in 2011 – Part 1 – CLICK HERE for the article.

Patrick Highsmith Lithium One — Lithium One President & CEO Patrick Highsmith with lithium carbonate from the Sal de Vida brine project in Argentina.

Other people’s money. Not only does Lithium One (TSXV:LI) have what might be one of the purest sources of lithium in the world; the company recently reported what it described as favorably low magnesium and sulphate content at their Sal de Vida brine project in Argentina, but some well timed agreements have minimized the company’s requirements for additional fund raising to capitalize on the project.

You have two projects, your flagship brine project in Argentina and a “hardrock” project in Canada, can you share with us some of the key points about each project and what makes them attractive from a development perspective?

Our flagship Sal de Vida brine project is located at Salar del Hombre Muerto in north-western Argentina. This area of South America produces about 60% of the world’s lithium annually, from two commercially productive lithium salars: Salar de Atacama in Chile and Salar del Hombre Muerto where our neighbour, FMC Corporation, produces about 15% of the world’s lithium. So we are developing the eastern half of this dry lake bed, while FMC expands their producing operation the western half.

From our work to date, the Sal de Vida brine is emerging with all the positive characteristics of the world-class commercial brine deposits in the region, including a large volume of near-surface brine containing high concentrations of lithium and potassium, with low concentrations of impurities such as magnesium and sulphate. This was quantified in our recently announced NI 43-101 compliant inferred resource estimate, totaling 5,440,000 tonnes of lithium carbonate equivalent and 21,300,000 tonnes of potash equivalent, placing the project as one of the largest and highest grade undeveloped lithium and potash projects in the world. Furthermore, the resource covers only about two-thirds of the project area known to contain high-grade brines at surface, so we have significant expansion potential to the north and south, as well as at depth. The project is road-accessible with a gas pipeline, rail, and power line nearby. Importantly, we also have joint venture partners who are funding up to US$15M to complete the bankable feasibility study in the next year, plus securing the project debt facility for mine construction including Lithium One’s share, and who have committed to purchasing at least 30% and up to 50% of lithium production.

Our James Bay project is a spodumene pegmatite lithium deposit in north-western Quebec. Last fall we announced our first open pittable resource estimate including indicated resources of 11.75 million tonnes at 1.30% lithium oxide and inferred resources of 10.47 million tonnes at 1.20% lithium oxide. While the project has significant growth potential, the indicated resource is already similar in size and grade to Galaxy Resources’ Mt. Cattlin lithium pegmatite deposit in Australia, which recently began producing lithium concentrates and selling them into the rapidly growing Chinese market. In fact, the similarities between the deposits and the success Galaxy has had in developing Mt. Cattlin led us to form a joint venture that sees Galaxy earning a 70% interest in James Bay in exchange for both cash and funding the project through bankable feasibility within two years. Galaxy are aggressively expanding their operations to include lithium carbonate production in China and potentially even lithium battery production, so we believe they will make for strong partners in the development of James Bay, which will allow us to focus even more attention on our Sal de Vida project.

Your Sal de Vida brine project in Argentina is adjacent to FMC Corporation’s Fenix operation – how does your project compare?

FMC’s Fenix operation is a fully permitted lithium operation. The western half of the Salar del Hombre Muerto basin has been host to the Fénix lithium brine operation for about fifteen years. Our Sal de Vida project occupies the eastern half of the salar basin, in a 100% controlled land package of about 385 square kilometers. And while our side of the basin differs somewhat geologically from the FMC side, we are seeing the chemistry and scale of the brine emerge as very similar. The average grade of 695 mg/l lithium reported in our recent resource estimate is very close to the average reported by FMC, and while they have estimated reserves of approximately 4 million tonnes of lithium carbonate equivalent, we currently have an inferred resource of just over 5.4 million tonnes contained lithium carbonate equivalent. We have confidence that as we further define the key economic parameters this year they will continue to be similar to this neighboring project.

It’s obviously a little premature to try and determine the exact cost of production for each project but could you comment on the economics?

All indications to date are that the Sal de Vida Project will have very positive economics due to its favourable chemistry, large scale, and strong jurisdiction. Our plans for Sal de Vida are to recover lithium carbonate and potash from the brine using a solar evaporation circuit, which is typically the lowest cost method of commercial lithium production and allows for the recovery of by-product potash. The adjacent Fénix operation historically recovered only lithium and therefore used an ion-exchange method; however it is now adding evaporation ponds that will allow the recovery of potash.

We recently announced the start-up of the year-long on-site evaporation testing to produce lithium carbonate at a pilot scale and validate the process as designed by our consulting engineers. We have already recovered several batches of lithium carbonate and potash from the pilot plant. Results show that we are well on the way to matching the bench-scale tests that indicated our evaporation circuit could result in concentrations of 2% lithium and more than 4% potassium in the evaporation ponds, well beyond that necessary to recover lithium carbonate and potash from conventional commercial processing plants. The pilot plant is also achieving good separation of the waste products, including magnesium, sending a good signal that the evaporation upgrading will exceed expectations and result in a low-cost process design. It’s important to note that some the world’s largest lithium deposits are uneconomic mainly due to very high concentrations of magnesium relative to those of lithium, but at Sal de Vida we are fortunate to have much lower concentrations of magnesium. In fact, Salar del Hombre Muerto is known for having one of the lowest magnesium to lithium ratios of any salar in South America. And finally, our high concentration of potassium in the brine translates to the recovery of potash (as potassium chloride) which we will look to market locally to achieve a significant by-product credit. Given the considerable size and quality of the potash resource, we are even examining the potential economics of larger-scale potash production.

For hard rock projects like James Bay the processing, and therefore the economics, are completely different. These deposits use fairly conventional mining and milling to produce a concentrate, which then requires several steps including roasting and leaching to produce lithium carbonate. The results are that total costs to market as lithium carbonate can be as much as twice those from brine operations. However, with a good combination of low-cost attributes, the right hard rock project can certainly be economic; and at James Bay we believe we have many of these attributes. To start with, the project lies in one of the most favourable mining jurisdictions in the world. Quebec is a world leader in incentivizing mineral exploration and development and it boasts some of the lowest cost power and best infrastructure in the mining world. James Bay is located on a paved highway and cross-cut by a major power line. The deposit is at surface and amenable to open-pit mining, and the large grain size of the lithium minerals and lack of penalty elements contribute to lower-cost processing. The deposit is also higher grade than others recently going through feasibility. In addition, our new partners, Galaxy Resources, have demonstrated that the James Bay deposit may be amenable to lower cost dense media separation instead of flotation. We have already produced battery grade lithium carbonate from James Bay samples at the lab scale, and we are taking advantage of a wide array of expertise and Galaxy’s recent lithium mine commissioning experience to aggressively focus this project on commercial success.

All the stakeholders in the project, including the First Nations communities, are taking a keen interest in nurturing us to success. Given such broad support and favourable technical characteristics, we are confident the James Bay Project can be commercially successful.

What are the estimated capital costs associated with building a lithium brine processing facility in the area?

Well, FMC built the neighboring Fénix Project in the mid 1990’s with somewhat different technology, and with less infrastructure in the area, for approximately US $150 million. An evaporation based processing plant for recovering lithium and potash, similar to Salar de Atamaca in Chile or Silver Peak in Nevada, would function differently than FMC’s lithium-selective ion exchange process, but we believe the capital costs would be similar. We have seen capital cost estimates for other lithium and potash brine projects ranging from US $140 million to US $250 million. We haven’t published a PEA or Scoping Study yet but we expect to issue guidance on capital cost estimates for Sal de Vida towards the middle of the year and we believe the numbers will be consistent with that range.

You have already assembled some impressive partners for the Sal de Vida project – could you talk a little bit about these relationships and what they mean to Lithium 1?

A key component of the economics of any new lithium production is securing a buyer. Lithium is not traded on an open market; like many industrial minerals it is sold by contract. Therefore, without having customers arranged a project is unlikely to move forward. Historically there has been a very small group of large companies controlling the production and sale of lithium products. However, there is a forecast increase in demand for lithium in 2020 of between 2 and 5 times that of today, driven mainly by the growing lithium battery market. There appears to be a lack of confidence in the current supply chain with respect to its ability to adapt to a world with large scale lithium powered electric vehicles and still provide lithium when and how it is needed. As a result, several major end-users of lithium sought us out to explore a relationship that could give them stability of supply while at the same time deferring risk for our shareholders. These types of relationships open the door to this complex closed market for potential new producers by entering into off-take agreements in exchange for funding at the resource and feasibility stages.

In June we announced just that kind of strategic partnership for the Sal de Vida project with three Korean companies: LG International, Korea Resources Corporation (KORES), and GS Caltex. Korea has committed to the aggressive development of its lithium battery industry, so we are thrilled to be partnering directly with the government and leading international battery and energy players. LG International is the trading arm of the giant LG Group, which includes one of the largest batter makers in the world, LG Chem. GS Caltex is a 50% Chevron owned joint venture company with the Goldstar group; they are one of Korea’s leading energy companies and have recently announced direct entry into the lithium battery sector themselves.

The earn-in agreement includes an estimated US $15 million to advance Sal de Vida to feasibility, which means we don’t have to go to the market for those dollars. More importantly, we have structured an off-take agreement for a minimum of 30% and up to 50% of our lithium products, which as I mentioned is a key component of moving the project forward. Furthermore, our agreement includes a provision for securing the debt financing when we get to the mine construction phase. Being able to secure these high-caliber partners under these terms for only a 30% stake in the project, at a time when we hadn’t yet completed a resource estimate, spoke volumes about the quality of the Sal de Vida project. With this agreement in place we are able focus on advancing the project with the confidence that given a positive feasibility study, we will be able to develop the project and market our product.

Are you standing pat in 2011 or are you looking at any additional partnerships in 2011 for either of your projects?

We aren’t a big enough company to “stand pat” on anything. We are moving faster and faster every day it seems. But, in regards to the project partnerships, we believe the stakeholders in the Company and the projects are well served by the existing relationships. Both projects are funded all the way through feasibility. We have secured off-take of up to 50% of the lithium production from Sal de Vida, and we have excellent market access for the James Bay lithium through Galaxy Resources. Our focus is now on delivering the results at Sal de Vida, where we are the operator and will maintain 70% project ownership, and lending support to Galaxy as they get their feet on the ground in Quebec.

It is true, though, that we always have our eyes on the market. It is not many junior companies that are on the cusp of mine building decisions on two of their projects almost simultaneously. I would say that some of the most exciting opportunities for us may be with regard to the potash production from Sal de Vida. We have already been approached by some groups with interest in our potential low-cost potash production. We retain all the marketing rights for the potash component of production, so we will certainly be looking at the best way to extract value from the world’s need for fertilizer. We are also continuously looking at new opportunities in the so-called energy metals, but so far, we have elected to stay focused on these two sector-leading projects.

How is the feasibility study progressing at Sal de Vida?

When you ask yourself, what constitutes a successful feasibility study; you have to say we are faring very well. We’ve made exceptional progress over the last 18 months. We have defined high-grade lithium and potash in near-surface brines over an area of more than 260 square kilometres. We subsequently delineated one of the largest and highest grade lithium and potash resources in the world – potentially economic in grade and scale – over just two thirds of that area. We have demonstrated the amenability of that resource to conventional processing technology. We have even completed a small scale “test mine” by pumping a continuous bulk sample from one of our wells into our pilot plant, which is producing both lithium carbonate and potash at a small scale. That will continue through the third quarter, providing information on lithium and potash recoveries and product quality. Over the next quarter, the pump tests will provide critical information on the behavior of the aquifer and constitute our large-scale test of extractability of this brine, which will be used to model the long-term production scenario. Given success there, we will have all the major technical components required to accurately assess the engineering and costs of a major mine development. The preliminary economic assessment and/or scoping study due in the next three to four months will be a good progress report for us, and we expect to see very “good marks” when that progress report comes out.

This article appeared in 5 Lithium Stocks to Watch in 2011 – Part 1 – CLICK HERE for the article.

PatVaras office — President & CEO Patricio Varas describes the company's May, 2008 IPO as "impecable timing".

So what’s the solution for Western Potash? Solution mining. Solution mining is a process used to extract minerals using an aqueous leaching solution. The solution is pumped into a deposit and makes contact with the ore. The resulting solution is then pumped to the surface and processed. The process was discovered in the 1960’s and is only now being used to mine salts such as potash, copper and uranium. Australia’s Beverley Uranium Mine is the first operating solution, or in-situ mine in the world.

Solution mining can be tricky business. Certain temperature conditions, for example, need to be available in order for solution mining to work. Generally a temperature greater than 50 degrees Celsius is required, implying a depth of at least 1,450 meters. Solution mining begins by undercutting the mineralized zone by dissolving an initial cavern below the seam of interest within the potash beds. This is followed by dissolving the salt and potash upward and through the mineralized beds while utilizing a “ceiling cap”. The oil or gas ceiling cap inhibits vertical cavern growth until a large area is undermined. Mining then progresses vertically by raising the cap and dissolving mineralized portions of the roof. The minerals are then recovered from the saturated fluid by recrystallization. After mining the empty caverns may be useful for underground storage, and are sometimes more valuable than the minerals produced during cavern development.

Western Potash went public in 2008 just before the financial crisis hit the markets – can you tell us a bit about that experience?

It certainly was an exciting period for Western Potash. We raised a significant amount of capital ($20 million) privately prior to our ($23 million) IPO in May 2008. With hindsight we had impeccable timing as the markets fell apart a few months after. So we were able to weather the financial storm and begin the exploration work that the project demanded. We were able to discover 3 new and distinct potash deposits. 2 in Manitoa and 1 in Sasaktchewan. We settled on the best potash address in the world- Saskatchewan Canada. We were offered a plethora of potash projects, from Alberta to Africa during this period. Our philosophy ws simple – if we found a beter project we would snap it up. We never found anything to match our Milestone Sk. project. We have a stable supportive government , a clearly defined potash industry, predictable and manageable environmental permitting and regulation, an independent and large Tier 1 NI 43-101 potash resource and a solid technical and financial team behind it all. So far it’s been a great experience.

At the depth of the crisis shares of Western Potash traded all the way down to $0.15 but it has been a slow and steady recovery since the beginning of 2009. Apart from the rebound in the overall markets – what do you attribute your success to during the period?

I certainly believe it’s due to the slow recoginition of the quality of our Milestone project and the steady progress we made developing it. Today, we have clearly established a significant and unique Tier 1 NI 43-101 compliant potash resource that is gaining attention from a variety of global fertilizer, mining and state owned enterprises.

Another key component is that Western Potash has a great depth of exploration and development experience that we have been able to drawn on. Each one of our top 4 mining executives has spent time with Rio Tinto and has been involved in the process of bringing a mine into development. Whether it be 0ur discovery of diamonds at Diavik, gold at Lahir or copper at Sto Domingo Del Sur our exploration team has proven it can deliver results. The Western team knows what needs to be done and, perhaps more importantly, we also understand what the majors are looking for. That’s why we parked our claim on top of a geothermal heat anomaly. This one factor should contribute enormously to lowering our cost of production as a viable solution mining operation; and, low cost production is major factor for Tier 1 companies looking for new project entry points. Our Scoping Study does a good job of encapsulating this fact.

Could you tell us about the current status your project?

We have begun the Feasibility Study Process. We have engaged AMEC Americas Ltd as the lead consultant for this process. Headquartered in Saskatoon they are completing expansion work at Potash Corp’s mines and understand the potash sector and know saskatchewan intimately. We are now in the process of updating our NI 43-101 resource calculation (41 M t of measured, 133 Mt Indicated and 560 Mt of Inferred) to plug into the study. In Februaray we completed a small 2 well program to gather geotechnical information and expand the resource. In addition we have brought considerable new land into the resource area which will definitely enhance our Measured and Indicated resource estimates. We are also conducting trade-off studies with regards to water, energy, process technology, etc. Considerable focus is on our water, we have just signed an MOU for delivery of the water with the city of Regina. Fresh water for solution mining is critical and this new option will lower our CAPEX and potentially our OPEX.

In December last year the company completed a $20 million financing – do you have sufficient money to complete your feasibility study?

We have raised enough money to complete the prefeasibility study portion of the Feasibility Study Process and, with the execution of outstanding warrants, will bring in the remainder required to take us to Feasibility.

Given your strong financial position, is the company considering partnering as a mechanism for fast-tracking the project? If so, what type of capabilities would an ideal partner have to compliment Western Potash?

We are definitely actively pursuing a partner to work with to capitalize the project. Unlocking the value is a major part of the process with a project of this size and scope. The attributes of the “ideal partner” would be a purchaser of potash as a consumer or trader, project development and engineering expertise, and have the financial ability to cooperatively finance a $2.5 billion project. However, it is more likely that each one of those components will be spun out of the project and developed in association with the other components. Regardless of the partnership structure, going forward there will be a debt and equity component, an enormous EPCM contract; and, a long term secure supply of potash. Our mangement tean has just returned from a 2 week trade mission with the Saskatchewan government in India and we are our continuing to build our strategic relationships in China with yet another road trip to Beijing and Hong Kong next week. There is plenty of global interest in the Milestone project and we hope to convert that into long term shareholder value.

This interview appeared in 5 Potash Stocks to Watch in 2011 – Part 2 – CLICK HERE for the article.

Platinum, among the rarest and costliest of metals, is also one of the most green. Platinum is so rare that all of the metal ever mined would fill a room measuring less than 25 feet on each side. The metal has many critical commercial uses, but the primary demand driver today is the automotive industry. Catalytic converters that control harmful automobile emissions now account for 60% of the annual demand for platinum. What makes platinum greener still is that its use as a catalyst is, in theory, all reclaimable and recyclable.

Catalytic converter legislation is spreading quickly. In the past five years both Brazil and Chile passed legislation mandating their use. Hong Kong, Malaysia, Singapore, Taiwan and Thailand are already on board. Higher North American, European, and Asian automobile emission standards are also expected to add pressure to automotive manufacturers to increase the use of platinum in catalytic converters.

Adam Collins, an analyst at Liberum Capital, estimates that the gradual roll-out of heavy duty diesel vehicle legislation alone could result in a 20 per cent boost to existing levels of platinum demand by as early as 2015.

Platinum catalysts are also a core component for fuel cells, a power generation technology that combines oxygen and hydrogen to form water and electricity. Fuel cells are an environmentally friendly power generation source and are viewed to be yet another key green source of future platinum demand.

Today, 75% of the world’s production of platinum comes from South Africa. It’s estimated that as much as 90% of all platinum deposits in the world are located there or in Russia. But output from South Africa has been relatively flat of late, for a variety of reasons. Closure of platinum mines, cutbacks on capital expenditures, inflation and cost pressures, ever-deepening depths of mining operations and lower grades of the ore produced have put a squeeze on the supply side of the equation. Industrial action by the labour unions has also had a negative effect on the level of production from South African producers. Platinum Australia (ASX: PLA) Managing Director John Lewins recently noted, “South Africa will obviously still dominate this area, but electricity, inflation, safety, depths and industrial unrest remaining as big issues.”

For all these reasons, the past decade has been very good for platinum, the price of the metal has increased from $588 to $1773 per troy ounce. And that premium has clearly spilled over into the equity markets.

Eastern Platinum (TSX:ELR), whose shares could be had for as little as $0.25 in 2008 have rebounded to the $1.40 mark. Late last year the company closed a massive $348 million financing and early returns suggest the money was invested wisely; Eastern Platinum recently announced a a net profit of $5,041,000 in the fourth quarter of 2010. Platinum Group Metals (TSX:PTM) closed a $125 million equity financing in late 2010 and is currently working towards putting their Western Bushveld Joint Venture platinum deposit into production. Anooraq Resources (TSXV:ARQ) is in the middle of an operational turnaround at their 51-per-cent-owned Bokoni platinum group mine in South Africa. The company reported sales of $148 million in 2010, up from $63 million in 2009. Although shares of Anooraq are trading well above 2008 lows the company’s stock has not fared well recently; it’s down roughly $0.75 from its 2010 high of $1.80. But some think Anooraq may, ultimately, shine bright. In October, 2010 Peter Grandich called the company a “sleeping giant” with “many of the ingredients needed to benefit greatly in a sector that looks like it has lots of upside.”

As society looks at better choices for the environment, long term, tighter emission regulations appear to be fueling momentum for catalytic converters. But bullish calls from equity analysts, which are appearing with increased frequency, have investors in platinum stocks thinking of a different kind of green.

Tsunami Inflation — A ship washed up on the shores of Northern Japan after the tsunami. Is this the sign of pending inflation?

These days, mining companies worldwide are getting hit by soaring costs. The price of raw materials, energy and labour have all experienced steep and recent increases. Barrick Gold (TSX: ABX), the world’s largest gold miner, recently increased capital expenditure estimates for two of its projects in the Dominican Republic and Chile by between 10% and 20%. Last month, TD Newcrest analyst Greg Barnes said, “cost inflation appears to have returned to the mining industry with a vengeance.”

All this should come as no surprise to Barrick shareholders. Some may have seen the writing was on the wall in 2009 when Barrick announced a bought deal public offering for gross proceeds of approximately $3.0 billion ($36.95 per share). At the time, Barrick said it intended to use $1.9 billion of the net proceeds to eliminate all of its fixed priced gold contracts (gold hedges) and another $1.0 billion to eliminate a portion of its spot price gold contracts (floating contracts). Barrick cited an increasingly positive outlook on price of gold and the risk of higher inflation. A $5.6 billion charge to earnings then hit the books.

In February, Barrick reported an excellent fourth quarter. The company earned $.95 cents a share and declared a $0.12 cent dividend while posting $2.95 billion in revenue. And although cash costs are expected to be about 10% higher next year, Barrick’s total costs when factoring in all the company’s expenses, not just those associated with production, are estimated at $750-$800 for 2011.

The key question for Barrick shareholders, and for all investors in gold equities, is “Can the price of gold outpace inflation?” Perhaps the answers lie in defining whether gold is more of an asset than a commodity.

A commodity, any economics professor will tell you, is a good that is purchased in order to be permanently removed from the market. An asset, on the other hand, is a good that is purchased in order to be held. Because people hold on to and accumulate assets the demand exceeds the annual production volume, sometimes by a large margin. In the case of gold, the ratio of the world’s “above ground gold” to annual mine supply is about 100:1. For most other commodities that ratio is less than 1:1. In other words, there is less than one year’s total production in storage reserves for most commodities because everything that is produced is sold and everything that is purchased is consumed within the year.

For gold, the size of existing stockpiles and the large daily trading volume in bullion makes annual mine supply (est. 2,500 tonnes) more or less a non-factor in determining its price. To quantify the impact of mine supply on the market consider the trading volume on the London Bullion Market Association (LBMA) on any given day. The LBMA can actually absorb the world’s annual mine output in about six trading days. And the LBMA is just one of several bullion markets worldwide. In fact, an entire year’s worth of global mine production turns over in the physical market in just a few days. Because gold is an asset, the real demand for gold each year is equal to the total world supply of gold, which is about 150 million tonnes.

Over the past decade the price of gold has fared well against inflation, and gold miners have done especially well. Economic uncertainty, global crisis of various lengths and geographic origin, and an increasing money supply have served investors well who look at the shiny metal as a stable store of wealth.

Is it possible, however, that what we have experienced in the last couple of years is merely the beginning of global inflation? Some feel that the US Federal Reserve will ultimately have to work much harder than they have to date to ward off inflation. The Obama administration, over the past three years, has injected billions of dollars in stimulus into the US economy. And immediately after the devastation of the Sendai earthquake and tsunami the Bank of Japan injected $184 billion into money markets and eased monetary policy to support the economy. So the question remains, if costs of production continue to rise will the price of gold outpace inflation?

Emma Simon, in a recent editorial for the UK’s Telegraph about inflation in that part of the world, said that with “inflation now running at twice the Government’s target it is not surprising that gold hasn’t lost its lustre.” Adding “given our current economic situation, it’s not hard to see why there is increasing demand for an asset that appears to offer inflation-proofed returns.” With the removal of its hedges, investors bullish on Barrick think the company might be the equity issue set to benefit most from an increase in government spending, worldwide.

Did you enjoy this article? Check out MiningFeeds.com’s feature story 10 Gold Stocks to Watch in 2011.

Robert Archer, President and CEO of Great Panther Silver

A pretty picture. That’s what Vancouver’s Great Panther Silver (TSX:GPR), which today reported record earnings and revenue for fiscal 2010, has presented to investors. A few years ago, a pretty picture might just have been the downfall of the company.

That’s because one of the primary uses of silver, which the company mines at two locations in Mexico, used to be photography. In 1998, nearly 31% of all the silver used in the world was for photography; silver nitrate is a key component of consumer color film. By 2007, however, the advent of digital photography was dealing what looked like a crippling blow to the demand for the metal, as the photographic sector accounted for just over 14% of demand. The price of silver languished for years at $5 an ounce as demand waned even for its use in cosmetic jewelery.

So, end of story for silver miners right? Not quite. Since late 2008 the price of silver has been on an absolute tear, rising from under $10 an ounce to north of $35 today. The reason? New uses for the metal, which might make the prior demand from photography look like a blip on the radar.

According to the Silver Book, a comprehensive look at the silver market published by VM Group/Fortis Bank of the Netherlands, demand for silver from the energy, medical and water purification sectors is “likely to quadruple in the next 10 years.”

Silver’s sharp and sudden turn is good news for any company that can produce the metal, but it’s especially good news for Great Panther. That’s because while about eight per cent of all silver mined in the world comes as a by-product of other mining operations such as gold or copper mines, those with the best leverage are the companies with primary silver mines. Great Panther says it can produce silver, net of byproducts for (US) $6-7 per ounce.

As late as 2006, Great Panther’s goal of becoming a “profitable mid-tier silver producer” might have seemed a stretch. That year, the company scratched out revenues of just over $6 million and, in doing so, lost $15 million, or $0.25 cents a share. The numbers Great Panther reported today, however, make the company’s vision seem more than plausible.

Great Panther saw a 33% increase in mineral sales revenues in fiscal 2010, boosting their revenue to $42.2-million compared to $31.7-million for 2009. The company earned $5 million.

Great Panther’s management says it is in year two of a three year plan to accelerate production to 3.8 million silver-equivalent ounces, putting the company on the cusp of its coveted mid-tier producer status. Many investors weighing the evidence of the company’s suddenly rosy future versus its hardscrabble past are now clearly on board. Last July, shares of Great Panther Silver could be had for as low as $.71 cents. Earlier this month, the stock hit a high of $4.39.

Interested insilver? CLICK HERE to Check out our recent article on International Northair Mines (TSXV:INM)

Will the crisis in Japan curb a renaissance in nuclear energy?

Shares of Saskatchewan’s Cameco (TSX:CCO), the world’s largest publicly traded uranium company were, predictably, walloped after the Sendai earthquake and tsunami of March 11th. On Monday, March 14th, the first day of trading after the Japanese catastrophe, shares of Cameco were down $4.62 to $31.70. The stock hit a recent high of over $43 in mid-February.

Canadian uranium stocks such as Mega Uranium (TSX:MGA), Paladin Energy (TSX:PDN) and UEX Corp. (TSX:UEX) were part of a worldwide sector selloff. Investors were no doubt taking stock of the fact that Japan accounts for more than 10% of the world’s uranium demand, but also that the event could slow the worldwide growth of nuclear power.

Uranium is a radioactive element and a critical component in the production of electricity through nuclear power. Cameco is the world’s second largest uranium producer, accounting for 16% of world production, and it sells 10 to 15 percent of that uranium to Japan.

In light of the fact that Japan soon had eleven of its fifty-four reactors off-line, the perceived effect on demand was swift. But a near-global reassessment of nuclear power as a safe energy source was not far behind. Germany and Switzerland decided to immediately freeze the development of nuclear power facilities while they assessed safety procedures. Venezuela, on Tuesday, halted its nuclear program outright.

Germany, Switzerland and France are, alongside Japan, the nations that rely most on nuclear power for energy. Germany has seventeen nuclear plants that provide about a quarter of the country’s electricity. Switzerland currently has five nuclear reactors that generate about 40 percent of the country’s electricity. France generates a whopping four-fifths of its energy from its fifty-eight reactors. On Monday, France joined Germany in urging the G20 nations to launch a worldwide nuclear safety push.

But despite the fallout of negativity affecting nuclear energy, some say it will pass. Analyst Peter Strachen says the situation will “…basically blow over in the next 12 to 18 months, as people realize that there’s no real alternative in the short to medium term, for large, baseload power supply.” Strachen points to a number of new plants being built in India, China and Brazil.

Analysts with The Bedford Report agree. They say that China is currently in the process of quadrupling its uranium consumption to fifty to sixty million pounds a year, and says it plans to build ten nuclear power plants a year for the next decade. Even as the Japanese crisis hit its darkest hour, with the crisis at the Fukushima Daiichi nuclear power plant still not contained, the Obama administration said that “nuclear power will remain a key component of America’s energy mix, despite worldwide anxiety over the safety of reactors.” The US currently has 104 reactors in 31 states.

Nuclear energy hasn’t been around for very long. The UK’s Calder Hall, which was the first station to deliver nuclear power in commercial quantities, connected to the grid in August, 1956. Despite this brief history some note that nuclear energy has a reputation for being quite cyclical.

Shyam Saran of Business Standard pointed out today that “In the 1980s, two-thirds of all nuclear power plants, mainly in Europe and the US, were canceled under the impact of the Three Mile and Chernobyl accidents.” Countries like Italy have abandoned nuclear, only to revive these programs in the recent nuclear renaissance.

Cameco, meanwhile, is taking a long view of the incident. The company’s soon to be outgoing CEO Jerry Grandey said the drop in share price of Cameco is “largely driven by emotion right now”, and that “growth in nuclear capacity in China, India, Korea and elsewhere -certainly China experiencing the largest expansion -has tremendous momentum and we expect it will continue.”

Check out our recent article: “Canadian uranium stocks slide in sector meltdown” CLICK HERE

japan reactor — A state of emergency has been called by the Japanese government at the Fukushima Daiichi nuclear power plant in Okuma.

The potential for a nuclear reactor meltdown in Japan has caused a meltdown in the uranium mining sector.

Although the impact of the increasingly unpredictable situation has not yet translated into a decrease in the price of uranium (the price of uranium oxide, or U308, is set on a weekly basis by two independent companies, TradeTech and UxC), investors aren’t waiting around for that weekly update. Instead, they are aggressively selling off uranium stocks.

Uranium prices reached an all-time low of (US) $7/lb in 2001, but made an unprecedented move shortly thereafter. In April 2007 the price of Uranium on the spot market hit (US) $135.00/lb, a high point for U3O8. The massive move in the price of uranium was attributed to, in part, flooding of the Cameco (TSX:CCO) Cigar Lake Mine in Saskatchewan which is one of the largest undeveloped high-grade uranium ore deposits in the world. It has taken Cameco years to resolve the situation and the company is currently undertaking restoration work at the mine after is was finally dewatered in February, 2010. The Cigar Lake Mine flooding created uncertainty about the short term supply of uranium. This, coupled with rising oil prices and a general increase in demand for nuclear energy resulted in an astonishing move in the price of Uranium.

The price resurgence in uranium spurred expansion of current mines, construction of new mines, reopening of old mines and a wave of new prospecting. The price of uranium, however, has been volatile since peaking. Lately, the price of U3O8 has been flat out moving in the wrong direction for those long the element or companies that mine it.

On March 7^th the U.S. authorized transfers of the nuclear fuel to fund accelerated cleanup operations at a former government owned enrichment plant and caused a US$3.75/lb drop to US$66.75. Then, on March 11th, Japan experienced the worst earthquake disaster in its modern history. The earthquake, which has since been upgraded to a 9.0 on the richter scale, was followed by a deadly tsunami that resulted in near complete destruction of the infrastructure in northern parts of Japan.

Initially, it seemed unlikely that such an event would dramatically impact the uranium sector. But Japan has a relatively high dependence on nuclear energy and, thus, many nuclear reactors. As the aftermath of the destruction hit the newswire, Japan declared a state of emergency in 5 reactors at two separate power plants The population is now bracing for what some say may top the Three Mile Island crisis of 1979, which was the worst nuclear event in US history.

Nuclear energy is of national strategic importance to Japan as the nation is heavily dependent on imported fuel. Japan, as an island nation with scarce energy resources, must rely on importing the vast majority of its primary energy requirements. In 2008, after the opening of seven new nuclear reactors, Japan became the third largest nuclear power user in the world with fifty-five nuclear power plants providing 34.5% of Japan’s electricity.

Anxiety over Japan’s quake-crippled nuclear reactors has re-sparked the “nuclear debate” in the U.S. as lawmakers are being pressured by activists for a review of U.S. energy policy as they demand that the government put the brakes on the expansion of domestic nuclear power. Opponents believe that nuclear power poses many threats to people and the environment and that the risks are not worth the benefits. Proponents of nuclear energy contend that nuclear power is a sustainable energy source that reduces carbon emissions and increases energy security by decreasing dependence on imported energy sources.

A perfect storm has, quite literally, hit the uranium market over the past week. The vast majority of uranium miners are now feeling the effects. Uranium One (TSX: UUU) is the top traded stock on the TSX today with over 33 million shares trading hands as of noon eastern time down a whopping $1.74 (-29%). Denison Mines (TSX: DML) isn’t fairing any better, shares are down $0.80 so far on the day currently trading at $2.39. The juniors are also taking it on the chin, shares of Hathor Exploration (TSXV: HAT) are down $0.74 (-26%) to $2.12.

To read the related article, “What will demand for Cameco’s uranium look like, post Japan?” CLICK HERE

The Danakil Depression is a geological depression in the Horn of Africa that includes three areas: the Afar Triple Junction; part of the Great Rift Valley where it overlaps Eritrea; and, the Afar Region of Ethiopia and Djibouti. About 1200 km² (463 sq mi) of the Danakil is covered by salt, and salt mining is a major source of income for many of the area’s local tribes. But it is not salt that has attracted the attention of the international mining community – it is potash.

The Dallol Desert is the lowest point within the greater Danakil Depression and the hottest place in the entire world at 100 meters below sea level. Potash was discovered there many years ago and production began in 1918 after a railway was completed from the port of Mersa Fatma in Eritrea to an area 28 km outside of Dallol. Potash production ended after World War I when large-scale supplies from Germany, USA, and USSR came to market. Activity in the region sat dormant until just a few years ago when a number of licenses were granted by both Etiopia and Eritrea governments.

In 2007 one of India’s largest mining companies Sainik Coal Mining was awarded a mining license to begin potash extraction in the Danakil Depression – the largest project in the region (estimated at 160 million tonnes). Sainik plans to invest $1.1 billion in the project.

Then on July 18, 2008 Bloomberg reported that the Ethiopia government granted a 17,000 square kilometre permit to BHP Billiton. In the same report, the Mines Ministry also confirmed that three Canadian companies were granted potash exploration licenses in the area.

In neighbouring Eritrea, South Boulder Mines, a company listed on the Australian Stock Exchange (ASX: STB), announced in July, 2009 that it was granted the Colluli Potash Project exploration licence by the Eritrean Ministry of Energy and Mines. Then it became more interesting when it was reported in March, 2010 that China Investment Corp and their $300 billion Sovereign Wealth Fund was looking at Allana Potash (TSXV: AAA) and their Dallol potash project.

And it’s not cooling down yet, yesterday Ethiopian Potash (TSXV: FED) emerged as the latest entrant on the scene and staked its claim on the area with the reverse takeover of G & B Central African Resources. Shares of Ethiopian Potash hit the market with a fervour trading seven million shares closing at $0.75 up nearly $0.60 on the day.

It is clear that the Horn of Africa is open for business. Gebre Egziabher the director of mineral operations for Ethiopia’s Mines Ministry recently stated, “The sector has seen a dramatic change, seven years ago, the West didn’t know about our mineral resources.” Ethiopia’s government is aiming to license 50 mineral-exploration projects every year and more than double exports from the industry to $1 billion in five years.

With the acquisition of Ventana Resources, Brazilian billionaire Eike Batista is making a major bet on Colombia.

Colombia may not be as well known for mining as some of its more established neighbors in South America such as Chile and Peru, but recently, two TSX listed gold miners, Greystar Resources (TSX:GSL) and Ventana Gold (TSX:VEN) have done their best to bridge the historical gap.

Greystar has been trying, largely in vain, to gain support from local residents and officials for its Angostura gold project near Bucaramanga, in the Colombian province of North Soto. But on March 4th, during a public hearing on the project held by the Ministry of Environment, Housing, and Territorial Development, confrontations resulted in the early cancellation of the hearing after only 28 of the inscribed 470 statements had been heard.

Steve Kesler, Greystar’s President and CEO said “The spirit of respectful dialogue necessary to understand concerns so that they can be addressed was missing at this hearing. Clearly there are divisions within communities and within authorities on this project. Greystar will only develop a project with the support of both.”

Meanwhile, at the Prospectors & Developers Association of Canada (PDAC) conference in Toronto that wrapped up yesterday, Colombian mining minister Carlos Rodado Noriega told reporters the environmental study on the Angostura gold project is not acceptable and Greystar may be required to rethink the project design. Greystar had proposed developing Angostura as an open-pit mine using a heap-leach process, in which a cyanide solution is used to extract the ore.

Shares of Greystar fell from $3.97 on March 1st to a low of $2.55 yesterday, before gaining back $.31 cents to close at $2.86 today.

The news from Colombia has been better for shareholders of Ventana Gold. On November 17, 2010 Brazilian conglomerate EBX Group announced an all-cash offer to acquire all of the issued and outstanding common shares of the company at a price of $12.63. EBX Group is controlled by billionaire Eike Batista, currently ranked as the 8th richest man in the world by Forbes Magazine.

Ventana’s board was clearly hoping another suitor would emerge when they rejected a $1.2-billion hostile takeover and hired Goldman Sachs and TD Securities to dig up other options. When no other buyers immediately stepped up the company caved and, in February, began negotiating a friendly takeover.

At the time, Loewen Ondaatje McCutcheon analyst Michael Fowler commented, “I think it’s a low bid, but it’s obvious that they haven’t got anyone else at the moment.”

With no other bids on the horizon, Ventana seemed to be negotiating from a position of weakness. But the board managed to add a small premium to the initial offer, receiving a $13.06 per share offer, from AUX Canada Acquisition, one of Batista’s companies. Shares of Ventana were as low as $6.44 last summer.

According to Ventana Chairman Richard Warke, Batista is intent on building a gold company focused on Latin America. Ventana’s La Bodega project lies next to Greystar’s Angostura project in Colombia. While some may speculate the potential for a consolidation in the region is now higher with one of the world’s richest men entering the scene that feeling is clearly being tempered by the difficulties faced by Greystar.

Ucore Rare Metals Bokan property in Alaska. — Ucore Rare Metals Bokan property in Alaska

What’s in a name? A lot, apparently. When Ucore Uranium last summer changed its name to Ucore Rare Metals (TSXV:UCU) shares of the company were floundering. Today, the company’s stock is five times higher, and it’s one of the heaviest traders on the TSX Venture Exchange. But other companies thinking a name change could be a cure all tonic should note that Ucore added something else to the mix. Drilling on their Bokan-Dotson Ridge rare earth project in southeast Alaska showed, as management reported, “an unusually high skew in the Dotson zone toward heavy rare earths”.

Just last year Ucore was, to the uninitiated, in the business of looking for Uranium at their Bokan property. Today, they are looking for dysprosium and terbium. Scratch the surface a bit and you’ll find the name change is somewhat academic; uranium and rare earth metals are often found together. The bigger change is the what has happened outside of Alaska; an renewed awareness of the importance of rare earth metals that is approaching a frenzy.

Rare earth metals came to the public’s attention when China begin to restrict their export. This past July, that country announced a 72% year over year reduction in exports. With 97% of the world’s current supply under their control, China’s hold over this sector is making people nervous. Despite the fact that China says it won’t use rare earths as a bargaining tool, concern about the global supply and demand balance of rare earths has driven their prices through the roof. One report said as much as 20,000 tonnes or one third of total exports of them were smuggled out of China recently.

In the US, there is increasing concern over the supply of rare earths to the defense industry. Rare earths are critical to the production of things such as night vision goggles and guided bombs. A recent report by the U.S. Government Accountability Office says that “rebuilding an independent U.S. supply chain to wean the country off that foreign dependency could take up to 15 years”

So with a heightened awareness of the importance of rare earth metals, an increasingly political environment and a property located on US soil delivering promising results, does Ucore sound like the perfect takeover target for a major mining company? Not exactly, says John Kaiser, editor of the Bottom Fishing Report. Kaiser, who recommended the stock in 2009 thinks a more likely candidate might be defence contractor proxy for the US Department of Defence, who could see the property as “valuable from a strategic perspective.”

Lamarque — Lamaque Miner – photo by Patrick Sanfaçon. From the related article addressing “A Case of Problems” in Montreal’s La Presse.

When Century Mining, (TSXV: CMM) early last April, announced a final release agreement to eliminate royalties and future payments associated with their Lamaque gold mine with Teck Resources, it looked like the company was moving in the right direction.

On April 28^th, 2010, just a few weeks later, Century then reported its mill facility at the Lamaque project located in Val d’Or, Quebec was fully operational and processing 900 tonnes to 1,100 tonnes per day of ore from current production and existing stockpiles. The company stated they were “fully financed and on budget for the ramping up of the company’s Lamaque gold project, and is preparing for its first gold pour within the next week, nearly one month ahead of schedule.”

Investors responded to the company’s decisions and reported progress. Shares of Century moved from $0.41 on the day of the Teck announcement to $0.73 in late April. But the winds of change were beginning to blow through the historical mine shafts of the Lamaque mine where mining had first started in 1937. Just two weeks in, the British Columbia Securities Commission issued a cease trade order against Century Mining for failing to file audited financial statements and MD&A on time which, in hindsight, may have cast a prognostic cloud over the Lamaque project.

As 2010 progressed it was becoming evident that Century was experiencing both production and profitability setbacks. The company was forced to complete a number of private placements as stop gap measures. Today, the company issued a news release that summarized the delays and the need for additional financings.

The losses in mill throughput resulting from a crusher failure in February, 2011 had an adverse impact upon the company’s cash flow and available finances. This severe constraint on finance availability forced management to halt the operations and put all other capital projects on hold. Shares of Century Mining are currently trading at $0.57 down $0.13 on the day.

Clearly, this is crunch time for Century Mining. Operations at the mill are suspended and management is scrambling to, as they say in today’s release “meet obligations associated with debt repayment and continuing working capital payments”.

There is no good time to have the kind of problems Century is having, but early March may be more favorable than any other time. The company’s management is at Toronto’s Prospectors and Developers Association Conference, or PDAC, the largest gathering of mining industry financiers and professionals in Canada. The conference is known for creating opportunities -and financings- in bunches following the show. Investors bullish on Century are betting the company can pull an iron from the fire and get things rolling again in Quebec. Company management believes that existing proven and probable reserves and measured and indicated resources at Lamaque exceed 2.4 million ounces of gold.

Eric Sprott: "I will be the least surprised person in the world to see the price of silver go to $100." — Eric Sprott: “I will be the least surprised person in the world to see the price of silver go to $100.”

The tortoise and the hare. There’s no doubt which is which when you’re talking about gold and silver, but the slow steady rise of silver has accelerated to a jackrabbit’s pace. Silver is up 113% since the end of 2009, while gold’s gain over the same period is just over 30%.

While some believe that silver may be due for a correction, others believe that perceptions of the metal are changing significantly. Forbes Jason Raznick says investors are “clamoring for silver as a hedge against inflation and geopolitical risks, and in the current environment it is working wonderfully.”

Famed investment manager Eric Sprott, CEO of Sprott Asset management thinks silver is actually “the new gold”. He says he thought gold was the investment of the last decade, but that this decade will be dominated by silver. “Quite frankly, in the next three to five years, I will be the least surprised person in the world to see the price of silver go to $100.” he told BNN recently.

Vancouver’s International Northair Mines (TSXV:INM) is, to a large degree, focused on silver. But the company is clearly not chasing trends. Northair is part of the stable of the Northair Group, a consulting firm whose roots in exploration go back to 1966, and boasts decades of experience in Latin America. Northair has been in Mexico for decades with mixed success. On one hand the company is a respected junior, having partnered with majors such as Teck and Mexican giant Peñoles. On the other hand, the lack of a major discovery has meant a sliding share price and weak balance sheet. Northair was over a dollar in early 2004, but has been on a steady decline for nearly five years.

On February 24th, however, International Northair proved that persistence pays, delivering solid results from from the first two holes of the current phase II core drill program at the La Cigarra silver project located in north-central Mexico. The numbers included 80.45 metres of 123.5 grams per tonne silver in hole CC-11-002 at the San Gregorio zone.

The La Cigarra Project located in the same mineral belt that includes Silver Standard’s Pitarilla and Pan American Silver’s La Preciosa project. NorthAir says until these drill holes, there had been no modern exploration or drilling on the site.

The results from La Cigarra have tripled the price of International Northair in weeks, from a low of $.105 cents on February 7th, to a close of $0.335 on March 7th. Importantly, it also allowed the company to shore up a weak balance sheet, as it closed a $4 million private placement last week. International Northair will use its bolstered war chest to further explore La Cigarra, a property that company President and CEO Fred Hewett says “has the potential to host a significant silver deposit.”

Great Western Mineral's Steenkampskraal rare earth metals site in South Africa

A cell phone the size of a shoe. A laptop that weighs more than a truck tire. If it weren’t for rare earth metals, a collection of seventeen chemical elements in the periodic table that are generally found in ore deposits, technology as we know it today would be whole lot different.

Rare earth metals are used in iPods, GPS navigation systems and plasma televisions. A single Toyota Prius uses 25 pounds of the stuff.

Rare earths came to the public attention when China begin to restrict their export. This past July, that country announced a 72% year over year reduction in exports. With 97% of the world’s current supply under their control, China’s hold over this sector is making people nervous. Despite the fact that China says it won’t use rare earths as a bargaining tool, concern about the global supply and demand balance of rare earths has driven their prices through the roof. One report said as much as 20,000 tonnes or one third of total exports were smuggled out of China recently.

Great Western Minerals Group (TSXV:GWG), is a Saskatchewan based company that says its goal is to be one of the first vertically integrated rare earth producers outside China. Until recently, investors might have thought this was a more than audacious statement, but the company’s activity of late has turned some skeptics into converts.

Great Western Group’s revenue has approximately doubled every year since 2006, from virtually nothing to nearly $12 million in fiscal 2009. With $14.66 million in revenue on the books for the first three quarters of fiscal 2010, the company appears on track to do it again.

Over the course of its long history, the company was founded in 1983, Great Western has built up a portfolio of rare earth properties in Canada, the US and South Africa. It’s the company’s recent pursuits in South Africa, however, that has ended a long losing streak for shareholders. Last year, when Great Western began to acquire its South African joint venture partner Rare Earth Extraction Company, or Rareco, a move that would allow them to take full control of the Steenkampskraal rare earths property, the company’s stock started to rise. Last June, shares of Great Western could be had for under $.16 cents. On February 3rd of this year, the stock closed at $1.14. Great Western now owns 92.6% of Rareco, and believes it has cleared the path for a 100% ownership.

Investors clearly think the property has potential. The Steenkampskraal mine, which is located 350 km north of Cape Town, was originally operated through a subsidiary company of Anglo American Corporation from 1952 to 1963, and during that time was actually the world’s largest producer of thorium. Rareco took control in 1989, but depressed prices for rare earth metals made ownership of the property a tough slog. With the current frenzy in rare earths and Great Western’s experience and financial backing -in addition to completing a $35 million raise, the run in the company’s stock meant it pocketed nearly $8 from warrants exercise- Great Western now believes it can now make full use of a corporate infrastructure that is already in place.

Great Western’s US subsidiary, Great Western Technologies, is a Troy Michigan based company that converts elemental rare earths into metal alloy castings and powders for U.S. magnet production and other manufacturing purposes. While showing the plant to Michigan Congressman Gary Peters in January, Great Western’s President and CEO Jim Engdahl said the company offers an “alternative to China in U.S.-based production capacity, for a wide range of applications such as electronics, hybrid cars, energy systems and defense networks.”

Peters tour of the plant came on the heels of an April 2010 report by the U.S. Government Accountability Office that warned of an impending rare earths crisis, especially as it relates to homeland security and national defence.

passport potash core drilling — Passport Potash: drill rig.

Food, these days, is headline news. The 2007 Mexican tortilla riots, which came after a sudden and sharp rise in the price of corn, seemed an isolated incident at the time, but were actually the beginning of something much larger. From Algeria increasing wheat supplies after food riots in that country, to to the suicide of a Tunisian fruit seller sparking a revolution, what we eat and how much we pay for it has become political.

The prices we now pay for most any food item are, by most accounts, higher than they have ever been. The UN’s Food and Agriculture Organization reported that in February their Food Price Index rose for the eighth consecutive month.

So where is this heading? Last month, The Economist speculated that food production “will have to rise by 70% by 2050 to keep pace with population growth, the explosion of developing countries’ megacities and the changes in diet that wealth and urbanization bring.”

Canada has not experienced food riots, but one word puts us squarely into the center of any story concerning food worldwide: potash. Potash, a mined salt that is especially high in potassium, is used to improve the nutrient value, yield and water retention of most any crop. The price of potash has skyrocketed of late, from under $100 a ton in 2004 to near $500 a ton today. Much of the rise in the price of potash is because of China. China, the world’s largest consumer of potash, has twenty-two per cent of the world’s population but less than ten per cent of its arable land. Canada, as anyone who followed the BHP Billiton saga lay out on parliament Hill will know, is the world’s largest producer of potash.

Just months ago, Vancouver’s Passport Potash (TSXV:PPI), a company based in Vancouver but acquiring properties in the US, might have seemed an unlikely candidate to factor in the potash story. Passport, as late as three quarters ago, was almost comically under capitalized. The company’s financial statements for the quarter ended May 31st of last year showed a cash position of just $291. Still, Passport owned mineral property options in The Holbrook basin of Arizona, a shallow Potash deposit in Navajo County Arizona that was first identified in the 1960’s, but never developed due to low Potash prices at the time.

In late December Passport intercepted Potash on its first drill hole at Twin Buttes Ranch, an area that had never been drilled before. The success the company had in Arizona turned a proposed $5 million private placement in January into $7 million offering that was completed in February. Passport now controls over 70,000 acres of land in the Holbrook Basin, an area it estimates could contain 2.5 billion tons of potash. Shares of Passport, which could be had for $.06 on October 22nd of last year, hit a high of $.98 on February 25th.

Recently, BMO Capital Markets analyst Joel Jackson told the Financial Post that Passport is part of a larger phenomenon in which “the most speculative, early-stage (potash) companies are performing the best.” Jackson suspects some juniors will ultimately disappoint as more information becomes available about their properties while others will become takeover candidates.

BC Environment Minister Murray Coell (above) and Forests, Mines and Lands Minister Pat Bell granted the environmental assessment certificate to the Northwest Transmission Line, which terminates 90km from Copper Fox's Schaft Creek property.

Copper Fox (TSXV:CUU) investors are use to playing the waiting game, but the company’s management just might be experts. Copper Fox listed on the TSX Venture in June 2004 to explore the potential of Schaft Creek, which the company believes is one one of the largest undeveloped copper deposits in North America. Guillermo Salazar, the company’s founding president and CEO actually secured the rights to the project in 2002.

Most of the uncertainty around Copper Fox has revolved around infrastructure. Shares of the company fell as low as $0.05 in late 2008 as investors were no doubt leery that the success of the company’s project was entirely dependent upon the BC Government’s approval of the Northwest Power Line, an approximately 344 km, 287 kV that terminated at Bob Quinn Lake, about 90km from Schaft Creek.

The approval of the Northwest Power Line was no slam dunk. BC Hydro had performed technical studies on the project for years and, although they said the new line would provide a reliable supply of clean power to potential industrial developments in the area, environmental opponents were vocal.

And then, on February 23rd, 2011 Copper Fox’s wait was over. The BC Environmental Assessment Office announced that the Northwest Transmission Line was finally granted an Environmental Assessment Certificate. Copper Fox put out a press release applauding the decision. Investors, in turn, applauded Copper Fox; shares of the company moved from $.96 cents on February 11th to $1.75 today.

The approval was a major win for Copper Fox, and long time investors must now feel like they were paid to wait. In 2002 the price of copper was $.60 cents a pound. On Friday, March 4th the base metal closed at $4.48 a pound.

Copper may be the textbook case for Chinese demand moving markets around the world; experts now estimate expecting a supply shortfall of about 500,000 tonnes next year. As CIBC World Markets analyst Ian Parkinson told the Globe and Mail last September 14th “In very simplistic terms, we believe if you’re long what China’s short, you’re in a good position.”

Cooper is in high demand in China because it has a wide range of applications in the construction and electronics industries. The metal is used in circuitry, wiring and contacts for computers, televisions and phones. Cooper Fox estimates that there are 7.8 billion of lbs measured and indicated copper at Schaft Creek.

Can the price of gold keep rising? Talk to gold bugs and they will tell you key drivers such as political instability and inflation are bigger issues today than when the yellow metal began the stellar rise that tripled its price in half a decade.

But gold has its critics, and their rebuttal was crystallized by Warren Buffett who said he would rather own “all of the farmland in the United States, 10 Exxon Mobils, plus have $1 trillion of walking-around money” instead of all the gold in the world. In the meantime, gold bugs have been gaining adherents from the world of economics. Former Fed Chairman Alan Greenspan, for instance, believes there is increasing evidence that economies do better when pegged to a gold standard, as the US was from 1870 to 1914.

The Economist’s Edward George takes a more practical view of gold’s rise. He doesn’t “…believe the price can fall below U$800/troy oz for long, as over half of current gold mining operations are only profitable at a price of at least US$1,000/troy oz. If the price falls below this level for a long time they will simply stop producing, reducing supply and ultimately driving up the price again.”

The rising tide of gold prices has lifted most all the boats in the public markets. Some gold miners, candidly, aren’t sure the price is sustainable. Others have delivered huge margins by behaving as though the price of gold hasn’t moved, making smart acquisitions, removing hedge and keeping their cost of production down. As we approach the Ides of March it appears gold and gold companies are set to have very interesting 2011.

Canadian listed gold mining and exploration companies are enjoying an unprecedented funding environment. Investors, consequently, are anticipating that a number of discoveries will hit the street in 2011 as exploration and mining companies deliver results from substantial drill programs.

A booming market also offers challenges; many companies are now managing the consequences of their past achievements and dealing with a bevy of complications spawned from what has undoubtedly been the biggest gold rush in recent history. The MiningFeeds.com examines, in no particular order, ten Canadian listed gold stocks that are poised to have very interesting years in 2011.

1. Gold Reserve Inc. (TSX: GRZ)

Political risk. Investors in Gold Reserve knew what they were getting into in Venezuela, or they should have. Gold Reserve’s Brisas deposit is directly adjacent to Crystallex’s Las Cristinas deposit, which, after suffering through years of stonewalling, had its mines operating contract “officially canceled” by the Venezuelan government. Crystallex now claims it is owed $3.8 billion and is appealing to the World Bank’s International Settlement of Investment Disputes (ICSID). Shares of Crystallex were near $6 in 2006, but have plummeted to pennies as many investors determined that doing business with Venezuela’s socialist leader Hugo Chavez, who recently called foreign miners “crazy people”, was no business they wanted to be in. Gold Reserve’s story may be less well know to investors in the area, but the company is no neophyte in Venezuela. Gold Reserve began developing the site in 1992 and has invested close to $300 million in the gold and copper project, which is located in the historic Km 88 mining district of the State of Bolivar in the southeastern part of the country.

Gold Reserve, at this point, may be a play better suited to those with legal backgrounds as opposed to geology, but the reward for either could be staggering. When the Bolivarian Republic of Venezuela arbitrarily and, almost predictably, revoked their previous authorization to proceed with construction of the Brisas Project, Gold Reserve filed a claim against the country, valuing its damages at a minimum in the amount of $1.92-billion, equivalent to approximately $30 a share. The Company’s market cap, as of February 25, 2011, was a less than $100 million. The stock has been exchanging hands of late on the TSX for around $1.75.

The Brisas deposit, which is one of the largest undeveloped gold/copper deposits in the world, contains proven and probable ore reserves of 10.2 million ounces of gold and 1.4 billion pounds of copper.

So is Gold Reserve doomed to suffer the same fate as Crystallex? Maybe not. There is increasing economic pressure on Venezuala spearheaded from multinationals like Exxon to cooperate on a worldwide scale. The Venezuelan government has previously settled a number of ICSID claims against them with various oil companies from Norway, France and Italy by voluntarily paying compensation in the billions of dollars.

All this adds up to an interesting year for Gold Reserve – written submissions on the Brisas case are scheduled to be made throughout 2011 and the Tribunal has currently scheduled the Merits Hearing for February 6^th, 2012.

2. Osisko Mining Corp. (TSX: OSK)

Perhaps one of the most interesting mining stories from 2010 was the man who literally lived on top of a gold mine and refused to leave. Ken Massé was the lone holdout from a relocation project that saw Osisko buyout 204 of 205 homeowners in his neighbourhood, which happened to sit right on top of Osisko’s Malarctic mine in Quebec. Massé reportedly turned down a $350,000 offer from Osisko for his house, which was valued at $14,000. According to court documents, the family had been seeking $1 million from the mining company when a judge awarded Osisko possession of Massé’s home after the company requested an emergency court decision. As for compensation, Massé received market-level value for the old house, as determined by a provincial tribunal, and moving costs.

osisko masse — Ken Masse, who reportedly turned down a $350,000 offer from Osisko Mining for his $14,000 house.

Displacing residents may have been the most exciting aspect of Osisko’s 2010 from the media’s perspective but the company delivered much more compelling news for shareholders including the acquisition of Brett Resources, solid drill results for the company’s Duparquet project and great results from the drill program targeting the Barnat extension from the company’s Malartic property.

Chris Beer, a fund manager with RBC sees value in Osisko. He notes that while the company is only trading at “about 10 times cash flow “, the company will see its Canadian Malarctic gold project come on stream by mid-2011. A time when Beer believes the Malarctic project is “going to hit the sweet spot at these high gold prices”. He says the company also has another project called Hammond Reef in Ontario that the market is not currently pricing in.

For 5 Gold Stocks to Watch in 2011 – Part 2: Click Here

3. Centamin Egypt Ltd. (TSX: CEE)

When the world changes, the market changes. While financial concerns naturally take a backseat to those concerning human rights, the uprising in Egypt and subsequent demonstrations throughout Northern Africa illustrate that the two are inextricably linked. When the civil unrest that ultimately led to the unseating of President Hosni Mubarak began in Egypt the price of gold began to rise. It then continued to rally for five straight weeks.

Taken in isolation, this would have been good news from Centamin Egypt, a mining and exploration company founded in Australia in 1970 that subsequently listed on the London AIM and the TSX. But there was no way to isolate the rise in the price of gold from unnerving investors, who were no doubt concerned that the unrest in Egypt would disrupt operations at the company’s Sukari Gold Project, which is located in South Eastern part of the country. In a press release on February 24th, the company quelled at least some of these fears, noting that the project experienced “mild disruptions with port authorities and supply lines which led to some inventory levels being drawn down”.

While the the ousting of Mubarak does not guarantee complete political stability, it looks like a transition that may have been extremely disruptive did not result in the worst case scenario. Shares of Centamin Egypt are, for now, on the rebound as investors can once again focus on the potential of the Sukari project, which the company says will produce 6.2 million ounces of gold over a 15 year period annual cost of production will average US$425 per ounce.

4. European Goldfields Ltd. (TSX: EGU)

Part of the appeal of European Goldfields, a Whitehorse based miner that now counts London, England as its home, has always been political safety. Halfway through 2010, the company’s shares had already begun to percolate off 2008 lows, but when European Goldfields submitted the final Environmental Impact Study (EIS) for its project in Halkidiki in North-Eastern Greece, it shares began a rise that saw its stretch to an all time high of over $17 earlier this month. In a world of increasing geopolitical uncertainty, investors clearly like the fact that the company boasts 10 million ounces of gold reserves within the European Union.

Early in February however, shareholders of European Goldfields found out that bureaucracy is bureaucracy and sometimes mining regulations anywhere can seem like they are written in Greek – literally in this case. On February 24th, a Reuters report regarding the status of the company’s Greek permit rattled the nerves of some investors. Before European Goldfields could respond its stock had traded 4.5 million shares on the TSX and and shed $3.22 to close at closed at $11.18 on the day. When The Company halted its stock and issued a press release stating that the company had “not been officially notified by the Greek authorities that there is any issue regarding the permitting process or the timing of such” and that the “the final Environmental Impact Statement (“EIS”) conformed with all technical requirements under Greek and EU environmental legislation”. It appeared to be enough to calm the nerves of shaky investors. By March 1st the company shares had seemed to resume their upward trajectory, closing at $13.18. Perhaps investors had shaken off the permit scare to focus on the merits of the company, which has been winning environmental approvals in other parts of Europe.

5. Oceanagold Corporation (TSX: OGC)

On the surface, 2010 appeared to be a pretty good year for Oceanagold, a TSX listed Australian gold producer. The company reported record gold sales of $305.6-million, which was a 29-per-cent increase over 2009 and produced 268,602 ounces of gold at the average cash cost of $570 per ounce. The year also saw the company secure $115-million in equity financing for the development of the Didipio gold-copper project in the Philippines. Scratch the surface just a bit, however, and you’ll find that 2010 was a challenging year for Oceanagold.

chr_oceanagoldmining01[1] — CHR chair Etta Rosales and Commissioner Jose Mamauag said the commission’s finding is a “wake up call” to other mining companies operating in the Philippines.

Oceana’s experience at Didipio, located 250 km north of Manila, has been nothing short of a PR nightmare. As the company prepares construction of the project they have faced stiff opposition from international human rights groups, such as Oxfam Australia who say that local indigenous peoples are being forced off their land for the project. The opposition actually began in June, 2008 when local residents filed a complaint with the Phillipino Commission on Human Rights (CHR), accusing Oceana Gold Philippines of setting on fire and bulldozing off cliffs 187 houses in the village without a court order. Despite the affair, OceanaGold posted a record 2010 that saw the company earn $44.43 million, mostly from established mines in New Zealand, where the company has no such legal troubles. With shares of the company trading near historical highs, investors are clearly believing the company’s claims that it is moving forward with the project, despite an apparently leaked report from the CHR calling for the cancellation of its mining permit and affirmation from the press.

For 5 Gold Stocks to Watch in 2011 – Part 1: Click Here

How do you go from zero to sixty in record time? Whether you’re a Nascar driver or a gold miner the answer is the same – experience. Balmoral Resources, a fledgling Canadian gold miner, got a good head start because of who they had behind the wheel.

Balmoral President & CEO Darin Wagner spent his first ten years as a project generator and exploration geologist with two of Canada’s largest exploration and mining companies Noranda (now Xstrata) and Cominco (now Teck). More recently, he served as President and CEO of West Timmins Mining through the discovery of a high-grade gold zone in Timmins, Ontario to the acquisition of West Timmins by Lake Shore Gold in an all share deal valued at $424 million that was completed in November of 2009. As a result, Darin was able to attract a raft of notable industry professionals that a normal mining start-up could only dream of, including Canaccord founder Peter Brown and Haywood boss John Tognetti.

Today, Balmoral is putting their money to work and they are currently drilling the Fenelon and Martiniere properties in central Quebec. We sat down with Balmoral’s President & CEO to find out more about the genesis of Balmoral Resources and the company’s future plans.

Darin thanks for joining us, could you tell us a little more about how Balmoral Resources was founded?

Coming off the heels of the sale of West Timmins our team was looking for a scalable opportunity in the precious metal space to found our next venture around. Through one of our current directors – Gordon Neal – we had been introduced to Henk Van Alphen and his team at the Cardero Group and agreed to join forces on this new venture with them. Having assembled a veteran and market savvy team, with a number of successful ventures to their credit including West Timmins, MAG Silver, International Tower Hill and Cardero Resources, and having located a vehicle which we could acquire and finance readily we set out to locate a prospective package of assets for Balmoral which would allow us to quickly gain market traction and asset value for our shareholders.

How many different projects did you look at before you decided on the package of 5 properties?

Lots! In total I think we reviewed well over 100 individual opportunities and examined prospects in no fewer than 8 countries. We were looking for the right mix of advanced assets with clear upside, a resource base to provide a basis for market valuation and earlier stage projects with exploration upside. It was important to us that these assets be located in favourable – read safe, mining friendly and financeable – jurisdictions and that the package or property be drill ready so there would be no lengthy delays getting the projects up and running quickly.

Why did you elect to pursue two different property acquisitions in two separate areas?

Balmoral’s assets came to together in two transactions, both announced and completed in conjunction with each other in order to assemble a district scale opportunity along the Detour Lake trend in central Quebec. One of the transaction, a purchase of non-core assets from a copper-gold developer American Bonanza, allowed us to acquire the high-grade Fenelon and Martiniere gold projects along the Detour trend, the N2 project in Quebec and the Northshore Property in Ontario. Collectively these assets host over 935,000 ounces in historic gold resources (non 43-101 compliant as the resources were drilled out prior to the implementation of NI43-101) which we purchased for roughly $6.3 million in cash and shares, our roughly $7.0 per in-situ ounce. We combined this purchase with an option to earn a 60% interest in the large Detour East project in Quebec to assemble our asset base giving us the dominant land position along the Detour Trend in Quebec, a good resource base for a start up and massive exploration upside.

Can you share with us your exploration program for 2011?

We launched our first drill program with two drills, one on each of our Martiniere and Fenelon projects, on January 20th, 2011, just over two months from the date we came public with the asset package. To date we have completed 21 holes and another 35 are planned in this phase 1 program which we hope to complete by early April. This is the first phase of the program which will see drilling on at least 4 or our five projects in 2011 and, everything according to plan, resource updates on at least three fronts over the next 12-14 months. The current market in gold is very strong and we believe that when conditions like these exist explorers need to be as aggressive as possible in driving their assets forward. Our 2011 exploration budget is $7.5 million and that may expand as warranted by results.

Is the company looking at additional projects within Canada or outside of Canada?

In this business you are always on the lookout for opportunities. In the case of Balmoral we continue to look for additional acquisition or corporate opportunities and would consider opportunities in any of the major North American gold districts if they fit with our growth plans and drill focused exploration model. Our most recent hire, Exploration Manager Richard Mann, has spent several years with a major Canadian based gold producer and in that role has had the opportunity to review and examine a number of prospective gold projects worldwide. We will certainly draw on that experience and our own industry contacts and experience in trying to identify the next valuable piece of the Balmoral puzzle.

Exploring for gold in Peru.

Technology. According to Vancouver’s Dorato Resources new technology, specifically modern geophysical techniques could be the “game-changer” for the company actively exploring in Peru. The area the company is focused on is the Cordillera del Condor Gold District. Adjacent to the Ecuadorian border, a number of world class gold and copper deposits have been discovered in the region including Kinross Gold’s Fruta del Norte gold deposit. Fruta del Norte is a 13.7 million ounce gold deposit which was acquired by Kinross in July, 2008 via the acquisition of Aurelian Resources.

While the Ecuadorian side has been a source of gold since Incan times, and has therefore had centuries to be discovered through on the ground exploration, the area that Dorato is exploring in Peru is less developed and absolutely massive (1,050 square kilometers) and therefore needed a faster and more cost effective approach. Enter advanced airborne geophysical survey, geological mapping, and geochemical sampling and exit 13 new targets that the company just identified for exploration. We recently connected with Keith Henderson the Company’s President & CEO for an exclusive interview on Dorato’s progress.

By all accounts the Cordillera del Condor Gold, Copper District along the Ecuador border in Peru is a huge area to explore, does the company have a strategy in place to expedite exploration?

Yes, this is a large land position and efficient exploration required an efficient approach. Systematic on-the-ground exploration could take decades and was quickly ruled out! Airborne geophysics is the approach that has been taken and it has been fast, cost-effective and successful. If readers are interested in the details of the technique, Dorato has provided an explanation of techniques on the Company website. In short, a helicopter makes a series of low-flying passes over the block, collecting data on magnetic, electromagnetic and radiometric properties of the rocks. Geologists and geophysical experts then review the data and identify a series of targets based on anomalies. These targets are approximately 2 km by 2 km in size and are small enough to allow systematic on-the-ground evaluation. This is done by collecting geochemical data on ground and by geological mapping and sampling. By collecting this data, the geologists can continually re-prioritize the targets as data is received from the lab. The process of re-prioritizing means that you are always drill testing your best targets first, increasing the chances of an early success. Geophysical data cannot directly detect gold mineralization, but the data does point to certain physical properties of the rocks at surface – it gets you into the right area fast.

The company released some very encouraging trenching results (188 metres of 2.08 grams per tonne) from the Lucero target and the shares of Dorato essentially doubled from $0.70 to $1.40 – how are things progressing at Lucero?

Minera Afrodita’s exploration at Lucero is progressing extremely well. The initial discovery of surface mineralization was in a completely virgin area and was achieved after interpretation of airborne geophysical data. This is important as it bodes well for screening of additional geophysical targets through the remainder of 2011. In the case of Lucero, the geologists who initially checked the anomalies on the ground were able to quickly find gold mineralization and massive magnetite and sulphides associated with skarn mineralization. If the other geophysical anomalies can be relied upon in this way, the geologists will have a great chance of finding a significant deposit in the near to medium term.

The drilling intersected thick mineralization and results have been received for the first 12 drillholes. Three types of mineralization have been intersected to date: skarn mineralization, sediment hosted mineralization and porphyry mineralization. The drilling intersected up to 150 metres of skarn mineralization on the edge of the anomaly – interpretation of the data points to potentially higher-grade gold mineralization to the west and drilling is currently testing this interpretation. The real prize at Lucero though, is the potential for a large copper-gold porphyry at depth. Drillhole 19 is currently testing this target for the first time and results are pending.

What’s the next target at Cordillera del Condor and when do you begin work?

A final decision on the next target to be tested will be made in the coming weeks, but it is likely to be Cobrecon, where geologists have identified a gold skarn target and two large porphyry targets. These targets are located just a few kilometres from Santa Barbara and El Hito in Ecuador – two existing porphyry deposits in Ecuador. Each of the porphyry targets is greater than 1km across and therefore have potential to host sufficient tonnes.

There is a lot of mineralization in the area but the geologists are not focused on drilling a series of small, high-grade gold intersections. This might look good in a news release, but it would not bring the Company any closer to a potential acquisition. Real size potential is an important criteria in prioritizing targets and the focus is very much on discovery of a 3 to 5 million ounce (or equivalent) deposit. It is important for investors to know that this is the focus of the program.

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