May 2011 - MiningFeeds

silver star — In early 2011, silver was the star performer in the commodities markets.

On April 24th, the price of silver reached nearly $50 an ounce before a hasty retreat to $32.32. Ask some, and silver’s impressive move from under $20 an ounce just eight months earlier was a predictable bubble ready to pop. Others, however, say the move was inevitable considering market forces and the devaluation of global currencies.

On April 25th, the day silver began its sharp correction, Hakan Kaya, a commodities portfolio manager at Neuberger Berman an international asset management company with almost $200 billion on the books said, “At current prices, we find it (silver) highly overvalued with no fundamental reasons backing it up.” This sentiment, shared by many, set the stage for a staggering 35% correction in less than three weeks.

But since the dramatic pullback in early May silver has recovered over $5.50 an ounce trading at $38.00. Eric Sprott, the founder of Sprott Asset Management is not surprised. Sprott calls silver “the best recommendation anyone could make this decade”, and sees silver going to $100 an ounce within the next 3 to 5 years. Recently, MiningFeeds.com featured Eric Sprott in, “Sprott still bullish on Silver” – CLICK HERE – to read the article.

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In the early 1970s two brothers from Texas, William Herbert and Nelson Bunker Hunt, began accumulating silver. By 1979, the pair had effectively cornered the silver market. From September, 1979 to January, 1980 the price of an ounce of silver leapt from $11 to $54. Before the collapse a few months later, it is estimated the brothers were up almost $4 billion.

For the Hunt brothers, the silver market’s unraveling hit its nadir on March 27th, 1980, a day that came to be known as Silver Thursday. On that day, the Hunt brothers received a $100 million margin call on futures contracts that they were unable to meet. Facing a potential $1.7 billion loss, the ensuing panic rocked commodities and futures markets and the financial markets in general. The price of silver experienced a 50% one day decline, from $21.62 to $10.80.

Government officials feared that if the Hunts were unable to meet their debts some of the large Wall Street brokerage firms they dealt with might collapse. To save the situation, a consortium of US banks provided a $1.1 billion line of credit to the brothers secured against the majority of their remaining assets.

In late April, with silver approaching the historical record highs attributed to the Hunt brothers, investors and money managers alike were enthusiastically debating the value of an ounce of silver. Silver, it seems, is developing a cultish following similar to gold. “Silver bugs” worldwide are quick to point out that investment and consumption demand is increasing while supply is constrained. Moreover, they advocate that the silver to gold price ratio is forty to one, far from its historical 16 to 1 ratio, so a realignment, by some, is thought to be inevitable. With silver in the headlines on a daily basis we focused our efforts this month on the volatile precious metal and the Canadian listed companies that are exploring, developing and mining silver around the world. We present, in no particular order, 10 companies that we found interesting for various reasons.

1. Silver Wheaton Corp. (TSX:SLW)

Silver Wheaton was established in 2004. It was previously controlled by Goldcorp until December 7, 2006 when the gold miner reduced its ownership to 48%. On February 14, 2008 Goldcorp divested itself completely of Silver Wheaton, selling 108 million shares to net a healthy $1.566 billion.

Today, Silver Wheaton is reportedly the largest silver streaming company in the world. Silver streaming, the process of securing silver from mining companies through long term price contacts, exists because silver is often produced as a by-product of gold and base metals. It is estimated that roughly 70% of the world’s annual supply of silver is produced from secondary sources. The primary benefits associated with silver streaming is that acquiring silver through contracts, as opposed to mining the element, means that growth doesn’t require significant capital expenditure.

Silver Wheaton sells over 19 million ounces of silver annually – silver that’s mined by other companies including Barrick Gold and Goldcorp. In all, the company has 14 silver purchase agreements and expects attributable production to reach 27 million ounces in 2011. As a silver streamer Silver Wheaton enjoys another benefit, its sales are routed through a tax advantageous Cayman Islands subsidiary. In 2010, the company reported revenue of $423.4 million and earnings of $0.83 per share.

Because a large percentage of the company’s revenue is derived from low-cost, long-life mining operations and it does not sell forward its silver sales the rise in the price of silver has been beneficial to Silver Wheaton. In an interview with CNBC, Silver Wheaton’s CEO, Peter Barnes said he believes silver prices could go through $50 in the next two to three years, and that hedging the company’s silver is not on the horizon.

2. First Majestic Silver Corp. (TSX:FR)

Mexico is a country rich in history and in silver. During the European conquest of the Americas, silver was discovered in Mexico in 1546 in what is now the state of Zacatecas. Vast amounts of the shiny white metal were brought into the possession of the crowns of Europe from the area. The Fresnillo mine in Zacatecas, owned by the Mexican silver producer that bares its name, is considered to be one of the world’s largest primary silver mines and it has been in near continuous operation since 1550. And today, Mexico is one of the world’s biggest producers of silver.

Zacatecas, known in Mexico as The Silver State, has a long history of silver production dating back to the 1500s.

An early mover into silver-rich Mexico has proven to be a good strategy for First Majestic Silver. The company has three producing mines in three different states including Durango, Jalisco and Coahulia. First Majestic’s soon-to-be fourth producing asset, the Del Toro Silver Mine, is located in the state of Zacatecas. But the company faced some challenges along the way. In late 2008, during the height of the financial crisis, the company’s shares traded down to a low of $0.88. But since then First Majestic’s comeback has been nothing short of amazing. The company now trades on the NYSE, and its shares are being exchanged of late for $20.00. Today, the company has a market capitalization of over $2 billion.

On May 13th, 2011 First Majestic Silver reported revenue of $55.3 million for the first quarter of 2011, an increase of 211% compared to $17.7 million in the first quarter of 2010 and an increase of 38% or $15.2 million compared to the fourth quarter of 2010. These results were spurred on by a 95% increase in the average realized price of silver, combined with a 13% increase in production. The appreciation in the price of silver went straight to the company’s bottom line. The company, which is considered to be the purist mid-tier silver producer, generated net earnings of $23.9 million for the first quarter of 2011 compared to net earnings of $0.4 million in the first quarter of 2010 and net earnings of $13.7 million in the fourth quarter of 2010. First Majestic Silver currently reports a cash balance of $97.1 million and the company doesn’t carry any long term debt.

With an income statement that might make the most conservative accountant crack a smile and a balance sheet that could even make Jim Flaherty blush we connected with the President & CEO of First Majestic Silver, Keith Neumeyer, to find out what’s on the horizon for the company – CLICK HERE – for the interview.

For 10 Most Interesting Silver Stocks – Part 2 – CLICK HERE.

3. Alexco Resource Corp. (TSX:AXR)

Alexco Resource is Canada’s newest silver producer. The company is focused on the Yukon Territory of Northern Canada. Renowned silver bug Sprott Asset Management is a significant shareholder, reportedly owning a 12.1% stake in the company.

Hills of Silver — The story of Keno's discovery is authored by Yukon mining prospector and geologist Dr. Aaro Aho.

Alexco entered into production at its Bellekeno mine in January 2011. Management forecasts 2.8 million ounces of silver, 18 million pounds of lead and 8 million pounds of zinc production in 2011. In 2008, Alexco reached a financing arrangement with Silver Wheaton to provide the capital necessary to develop the Bellekeno deposit through to production in order to avoid a dilutive equity financing. That call now looks prescient, as in December, 2010 just before the Bellkeno mine was about to enter production, Alexco completed a financing at a price of $8.20, for gross proceeds of $41 million.

Interestingly, Alexco also has an environmental services business in Canada and the United States. The company provides mine-related environmental consulting services, reclamation and mine closure services, and environmental remediation technologies to clients in both the public sector and the private sector.

Alexco’s President & CEO Clynton Nauman attributes the relatively short time frame associated with putting the Bellekeno mine into production to the strategic structure of the organization. “One of the reasons we were able to permit the Bellekeno Mine in a timely manner was the fact that we utilized our expert in-house environmental services team to permit the project.” he said. “As a result, we confidently constructed the mine and mill and related facilities in tandem with permitting stages, enabling fast-track project execution in a modern environmental regulatory regime.”

On the exploration front, Alexco’s primary objective is the Keno Hill silver district in the Yukon Territory in properties near their production facility. Although the Yukon is famous for its Klondike gold rush, the Keno Hill silver deposit, discovered in 1918, actually produced more pay-dirt than the Klondike. This lesser known but very rich precious metals district made the Yukon one of the world’s leading silver producers for decades – Keno Hill reportedly produced more than 217 million ounces of silver between 1921 and 1988. To purchase a copy of Dr. Aho’s book, “Hills of Silver, The Yukon’s Mighty Keno Hill Mine” – CLICK HERE.

4. Silver Standard Resources Inc. (TSX:SSO)

According to the company, Silver Standard possesses the largest in-ground silver resource of any publicly-traded primary silver miner. With a pipeline of 13 projects, ranging from early-stage exploration to production in various countries including Argentina, Peru, Mexico, Canada, Chile, the United States and Australia, the company’s portfolio is impressive.

Silver Standard’s first mine, the Pirquitas Mine in Argentina, achieved commercial production in December, 2009. In 2010 production from the Argentinean mine was 6.3 million ounces of silver and sold 5.94 million ounces at a weighted average price of $20.92 per ounce for total revenues of $112 million. The Pirquitas operation milled 1.26 million tonnes of ore in 2010 with silver grades of 233 grams per tonne at recoveries of 65.2%. Cash production cost per ounce declined throughout 2010 as production volumes and efficiencies increased to $9.47 per ounce in the fourth quarter net of by-product credits. Average cash production cost per ounce of silver, net of by-product credits, are projected to be $9 per ounce of silver in 2011. Factoring out by-products, the average cash production costs per ounce of silver is estimated to be $15.00

But what seems to have captured the interest of investors is not what Silver Standard is doing today but what they might do in the future. The speculative jewel in the Silver Standard crown appears to be the Pitarrilla project in Durango, Mexico. Pitarrilla, a grassroots discovery made by Silver Standard in 2002, now ranks as one of the largest silver discoveries in the world. Currently, estimated silver reserves are 91.7 million ounces, measured and indicated silver resources total 552 million ounces, plus 82 million ounces of inferred silver resources. And as they say in Mexico, eso es grande! A feasibility study on the project is expected to be completed this year.

In January of this year in a note to clients, BMO Capital Markets analyst Andrew Kaip wrote that the Vancouver-based miner boasts an “unrivalled pipeline of projects.” With three development projects in Latin America including the Pitarrilla project in Mexico, Mr. Kaip believes Silver Standard has the potential “to evolve into the fastest growing intermediate silver producer.”

5. Revett Minerals Inc. (TSX:RVM)

Bull Trout — The bull trout, depicted above, and the grizzly bear are the cornerstones of the fight against the Rock Creek mine.

The justice system. An endless fount of interest. On March 29th, 2010, a federal judge rejected the U.S. Forest Service’s approval of a mining operation on the edge of the Cabinet Mountains Wilderness Area in Montana. That project was the Rock Creek mine owned by Revett Minerals.

The court ruled that the Forest Service violated the National Environmental Policy Act and the Forest Service Organic Act in approving the Rock Creek Mine, which would have bored under the Cabinet Mountain Wilderness Area and into the midst of popular recreational areas and key habitat for bull trout, grizzly bears and other environmentally sensitive wildlife species.

In response to the ruling, Jim Costello of the Rock Creek Alliance said, “We’ve said all along that this mine simply cannot be built without contaminating the region’s waters and pushing the Cabinet’s fragile bull trout and grizzly bear population in Rock Creek to extinction. It’s time for the government to stop this merry-go-round and start working to protect our region’s waters, trout and bears.”

The groups that challenged the U.S. Forest Service’s permit for the Rock Creek mine include: Rock Creek Alliance, Cabinet Resource Group, Clark Fork Coalition, Earthworks, Sierra Club, Trout Unlimited, Idaho Council of Trout Unlimited, Pacific Rivers Council, Alliance for the Wild Rockies, Natural Resources Defence Council, Montana Wilderness Association, and Great Old Broads for Wilderness. These groups were represented by lawyers from Earthjustice and the Western Mining Action Project. A long list and considerable opposition. But the U.S. Forest Service continues its claim that the General Mining Law of 1872 leaves them no other choice but to permit the mine.

At the time of the judicial set-back Revett’s management team defended their plans, saying mitigation measures taken by the company would actually improve trout and bear habitat. John Shanahan, Revett Minerals President & CEO reiterated his conviction that the mine could “be an environmentally responsible operation,” adding that “we don’t want to do it any other way.”

MiningFeeds.com connected with Mr. Shanahan for an exclusive interview to determine the status of the Rock Creek mine and to discuss the company’s operations at the company’s Troy mine which is currently in production. CLICK HERE – to learn more.

For 10 Most Interesting Silver Stocks – Part 3 – CLICK HERE.

What’s at the root of silver’s volatile ride in 2011? We can’t blame it on the Hunt brothers so let’s blame it on China. On April 25th, as silver approached record highs, Bloomberg reported that China will buy precious metals to diversify its foreign-exchange reserves. Whats more the country, with more than $3 trillion in reserves, plans to set up new funds to invest in energy and precious metals. Then the bubble popped. Or did it?

The Shanghai Exchange elected to adjust the daily trading limits and margins associated with silver trading four times over two weeks to control speculation. Shi Heqing, silver analyst at Beijing Antaike Information Development, remarked, “Chinese investors have piled into silver as one of the investment choices to hedge against rising inflation,” and that, “The government’s move to increase margins in an effort to curb volatility won’t affect buying interest in physical material”.

Silver is clearly susceptible to quick peaks and plunges. The silver market is smaller than many other commodities markets which, historically, has scared off larger investors who help control market fluctuations. Gold, by comparison, has nearly four times the amount of tradable futures contracts as silver. According to GFMS Ltd., a London-based metals consultancy, the value of new gold supply last year was $217 billion, with 17% of the total supply held by the world’s central banks and multinational financial institutions. In contrast, the new supply of silver amounted to $49 billion in 2010, and less than 5% of silver is held by central banks and institutions.

Lou Forte, a 35-year-old day trader from Westchester County, N.Y, who was interviewed by the Wall Street Journal may have distilled today’s silver market best when he said “The volatility is enough to make you vomit.”

6. Silvercorp Metals Inc. (TSX:SVM)

If you like China and you like silver then you will probably like Silvercorp Metals. With three projects in China and one in British Columbia, Silvercorp is the largest Canadian listed primary silver producer operating in China and the self-proclaimed lowest cost producer of silver among its industry peers. In the fourth quarter of fiscal year end 2011 which ended Mar. 31, 2011, the company reportedly produced silver at a cash cost of negative $7.61 (factoring in by-product credits) and earned $12.6 million, or $0.07 per share, on sales of $42.4 million which was a 50% increase from the same quarter last year.

Financially, the company appears to be in good shape. The benefits of rising metal’s prices have yielded US$206 million in cash against no long-term debt. With the money, Silvercorp intends to grow its resource base through continuous exploration of existing projects as well as seeking to acquire new development projects in multiple jurisdictions.

Some analysts like the company, on January 18th, 2011 BMO Capital Markets issued a $15.00 target on the stock giving Silvercorp a rating of outperform. While others are not as bullish. On May 13th, 2011, CIBC cut their price target for Silvercorp to $14.00 from $14.50; rating the stock as a sector underperformer. Silvercorp is currently trading just under $11.00 per share.

7. South American Silver Corp. (TSX:SAC)

: Juan Evo Morales Ayma, once a poor working class farmer, became President of Bolivia on December 18th, 2005.

Evo Morales, of indigenous Aymara descent, was born in Isallawi village in the province of Oruro, Bolivia. He was one of seven children born into a poor family; only Morales and two of his siblings survived past childhood. He grew up in an adobe house with a straw roof that was three by four meters.

As a child, he traveled with his father to Argentina to work in the sugar cane harvest. As a youth, he accompanied his father in herding llamas from Oruro to the province of Independencia. At the age of 46 he became the President of Bolivia in 2005 receiving 53.7% of the popular vote.

Morales is a nationalist. During his first term in office, he improved the living standards of poor Bolivians through increased state intervention of the economy by nationalizing oil, mines, gas, and communications. Welfare provisions and old-age pensions were expanded and payments were made to mothers provided their babies are taken for health checks and that their children attend school. Evo Morales is a charismatic leader and although he continues to align himself with other Latin American socialist leaders, he has gained a reputation for being responsible towards foreign business investment. Morales’ decree, “We want partners, not bosses.” And has previously stated that, “The investor has the right to recuperate their investment and to a reasonable profit.”

Earlier this month, Evo Morales overturned certain mining, banking and investment laws in another bid to increase state control over the Bolivean economy. A new mining bill, which has yet to be sent to Congress, isn’t expected to “substantially” change contract conditions for miners.

South American Silver’s flagship project is the Malku Khota silver-indium-gallium project in Bolivia, one of the world’s largest undeveloped silver, indium and gallium deposits. On May 16th, the company updated its economic assessment and resource estimate to expand Measured and Indicated resources 60% to 230 million ounces of silver with an additional Inferred resource of 140 million ounces of silver. In addition to Malku Khota, South American Silver is also developing the Escalones copper-gold project in Chile and we joined up with the company’s President & CEO Greg Johnson to learn more about their projects and the rare element indium – CLICK HERE – for the interview.

For 10 Most Interesting Silver Stocks – Part 4 – CLICK HERE.

8. Pan American Silver Corp. (TSX:PAA)

Pan American Silver is the world’s second-largest primary silver producer and has its sights set on Fresnillo plc, the world’s largest primary silver producer and owner of the Fresnillo mine in Mexico. The company has operations in the United States, Mexico, Peru, Bolivia and Argentina and, as of 2010, provides a NI 43-101 reserve estimate of 233 million ounces of contained silver.

Quiruvilca Miners - Peru — Underground miners at Pan American Silver's Quiruvilca mine in Peru.

Like many other silver miners, 2010 was a record setting year for Pan American Silver. Silver production increased 5% to a record 24.3 million ounces. Cash costs rose 3% modestly to $5.69 per ounce of silver, net of by-product credits. Mine operating earnings rose 90% to a record $239.8 million and net income increased 82% to a record $112.6 million or $1.05 per share. Not bad considering the company was founded 16 years earlier in 1994.

The majority of the company’s 2011 revenues are expected to be derived from the sale of silver (66%). While 13% is attributed to gold, 11% from zinc, 5% from copper, and 4; and 4% from the sale of lead. The company employs 2,000 people around the world.

Pan American Silver has a major project, the Navidad mine, estimated to contain 632 million ounces of silver, and it’s located in the province of Chubut, Argentina. Current laws, however, must be changed in order for the company to proceed with its planned open pit mine. And as is often the case, Latin American elections can be rather “interesting” and the Chubut provincial elections are no exception. Martin Buzzi was elected governor on March 20th, 2011 by a very narrow margin. The results of the election were immediately challenged by opposition candidate Carlos Eliceche. A revote of 6 contested polling stations is set to take place today, May 29th, whereby a new governor of Chubut will be decided along with the potential for future changes to the provincial mining law that are required to support Pan American Silver’s pursuits.

Although the current election turmoil in Chubut could not have been predicted, Pan American chief executive Geoffrey Burns felt confident that the necessary changes to the mining law will occur. In December last year Burns said, “I believe we’re going to see a change in the law in Chubut in the near future.” At the time, Brad Humphrey, mining analyst at Raymond James, agreed. Humphrey, who rates Pan American a “buy”, notes that while there are political risks, he believes the company has the expertise to bring Navidad to market.

9. Bear Creek Mining Corp. (TSX:BCM)

Out of one South American election frying pan and into another. Ollanta Humala is not a name that many outside of Peru are familiar with but on April 10th he won the first round of Peru’s elections with 31.7 % of the vote. Humala is a leftist politician and a former army officer. This set the stage for a runoff which is scheduled for June 5th, against Keiko Fujimori, the daughter of former President Alberto Fujimori who is currently in prison for human rights violations.

Humala’s election success in Peru caught the financial markets off guard. The cost of insuring Peru’s debt against default has jumped to a five-year high relative to neighboring Colombia, on concern that Ollanta Humala may win the presidential vote and expand government control over the economy. Marjorie Hernandez, a currency strategist at HSBC Holdings Plc in New York stated, “While everyone had expected this to be a non-event election, we were proven wrong. The market was not positioned that way. Everyone was long Peru everything.” Since Peru is ranked #5 on the world’s mining exploration list, the political instability spilled over to the mining sector.

Bear Creek Mining, with operations in Peru, was not spared. On Friday, April 8th before the results of the election the company’s shares closed at $10.67. But in the weeks that follwed, Bear Creek’s stock traded down hitting a recent low of just under $6.50 on May 24th. A whopping 40 % decline, this, despite the fact that Reuters reported that Fujimori was leading a poll on May 12, 2011. Before the polls announced Fujimori had taken a slight lead over Humula, the market value of Peru’s stock index plunged by roughly $18 billion in less than three weeks.

Bear Creek’s Chairman is notable mining executive Catherine McLeod-Seltzer. Catherine has been involved in a number of successful mineral companies over the past 20 years, including Arequipa Resources, Francisco Gold, Miramar Mining, and Peru Copper representing $4 billion in corporate transactions. And I’m sure on June 5th, 2011 she, like many investors in Peru, will have her fingers crossed.

10. Endeavour Silver Corp. (TSX:EDR)

In keeping with the theme, Mexico has enjoyed an extended period of relative political stability with the exception of, you guessed it, a few hotly contested elections. Most recently in 2006 involving Felipe Calderón, Mexico’s current President. Calderón’s narrow victory in the July 2006 election and his ascendancy to the presidency was fraught with strife and controversy. The results were contested by his closest opponent, López Obrador, who started what he called a “pacific civil resistance” and held numerous protests. Calderon’s victory was ultimately confirmed months later on September 5, 2006 by the Federal Electoral Tribunal.

Endeavour Silver Mine — Miguel Ordaz, Mario Szotlender, and Bradford Cooke at Endeavour's Guanacevi mine with one of the company's silver dore bars.

With political stability, Mexico has emerged as a power-house in the world of exploration, development and production of silver. And, Canadian mining companies have migrated like geese in search of the shiny white metal. In a political address, the former Canadian Ambassador to Mexico, Gaetan Lavertu, noted, “Well over half of the foreign mining concessions issued in Mexico are registered to Canadian companies. The bulk of these investments are from British Columbia”.

One company that has done well in Mexico is Endeavour Silver, a junior miner based in Vancouver, Canada. Endeavour has, some would say diligently, focused on the growth of its resource expansion and silver production in Mexico. Since the company’s start-up in 2004, Endeavour has methodically expanded its asset base and stable of properties. The company is now reaping the benefits from years of hard work, Endeavour reported first quarter results on April 11th; revenue was up considerable to $35.4 million, compared with $18.2 million last year as production rose 17% and silver prices increased sharply. Earnings were $14.5-million, or 18 cents per share.

The company has two operating silver mines and four development projects in Mexico. MiningFeeds.com recently discussed the price of silver and Endeavour Silver’s prospects with President & CEO Bradford Cooke – CLICK HERE – for the interview.

For 10 Most Interesting Silver Stocks – Part 1 – CLICK HERE.

First Majestic Silver Keith Neumeyer — Neumeyer: "We were lucky enough to have secured our assets back when silver prices were much lower than what we see today."

First Majestic is focused entirely on Mexico. What are some of the strategic benefits of doing business in Mexico and are you looking at additional opportunities within Mexico and/or elsewhere?

Mexico has a long history of being a top producing silver country due to its abundant skilled labour workforce, politically stable environment and modern communications and transportation infrastructure. After NAFTA was signed in 1993 allowing foreign investment in Mexico, there was a surge of acquisitions by Canadian companies for exploration properties. We were lucky enough to have secured our assets back when silver prices were much lower than what we see today. However, we are always looking for additional opportunities within and outside of Mexico in order to grow our business. Management is determined to expand First Majestic’s asset base and thus continues to investigate other interesting advanced stage silver projects in Mexico.

The company has 3 operating mines and 2 development projects, what is your collective NI 43-101 resource estimate? Also, what is your exploration budget for the next 12 months and what milestones do you hope to reach during the period?

First Majestic has a total resource of 346 million ounces silver equivalent (NI 43-101 complaint) and plans to have an updated resource estimate on all five of the assets later this year. First Majestic is investing a total of $12 million dollars on exploration drilling in 2011. Our goal is to drill 36,500 meters and continue to develop ounces in the ground. Previous exploration drilling has been within only a few kilometers from each of the mill sites so there is definately serious exploration upside. A perfect example of this exploration upside can be found at the La Parrilla silver mine where the current land package stretches across 70,000 hectares (approx. 170,000 acres) and we have allocated $2 million for regional exploration drilling within this large land package for 2011.

First majestic is operating in the black, in general terms, can you tell us about the nature of your deposits and what makes them economical?

First Majestic’s strategy from the very beginning was to focus on pure, high-grade silver deposits in Mexico. To date, 85% of the metal defined in the ground is pure silver with average grades of over 200+ grams of silver per tonne. Focusing on pure silver deposits has enabled First Majestic to be deemed the purest silver company in the world.

You are forecasting 7.5 million ounces of silver production for 2011. What are your projected costs of production and what operational percentile does this put First Majestic in relationship to other silver produces?

In 2010, our “direct” cash costs were US$5.85/oz and “total” cash costs were $7.94/oz. We like to publish both of these numbers. The direct cash cost includes all costs associated with mining and milling activities within the gates of the operation. The total cash cost will include direct cash costs plus other costs such as smelter charges, refining charges, transportation, insurance, etc.

You might notice that some US miners publish a $0/oz, and in some cases, even a negative cash cost per ounce because production includes a large percentage of base metals of which the revenues are then added back into the costs of goods sold. This number is often misleading. Since First Majestic is the purest silver producer in the world, our mining costs are less likely to be skewed due to other sources of production. In fact in 2010, 93% of our revenue came from the sale of silver. This compares to US based Hecla at approximately 45% and Coeur d’Alene Mines at 65%.

This interview appeared in 10 Most Interesting Silver Stocks – Part 1 – CLICK HERE – for the article.

Revett Minerals President & CEO John Shanahan: "People want responsible development and jobs, and we have proven that we can do both."

John, Revett Minerals has been involved in legal proceedings concerning the proposed Rock Creek Mine. Could you please provide us with an overview of what the company has been through and where you’re at with the current proceedings?

The process has indeed been long and complicated since our Record of Decision (final permits) was granted in 2003. The groups that are opposed to the project like to make it sound as if the project has been scrapped – but I assure you it is very much alive. If they would have accepted the Federal Courts decision and not appealed to the appellant court, we would have amended the environmental impact statement with the procedural/administrative changes requested by the judge at the time and would be gearing up to start development.

For the most part, we have successfully defended the validity of the Rock Creek project through the Forest Service appeals process, through the Federal Court system, and now as a defendant in the appellant court. We expect a ruling from the 9^th Circuit Court of Appeals, hopefully sometime mid next year. Given how many times we have successfully defended the project, and with the strong support of Federal agencies such as the Forest Service and Fish & Wildlife, we are definitely coming to the end of the road.

Rock Creek is a significant asset, could you tell us about the project: the resource estimate and exploration potential?

Rock Creek is one of North America’s largest undeveloped silver projects as far as we can tell. We have an inferred resource estimate of 229 million ounces of silver and just over 2 billion pounds of copper. Historic resource estimates for adjacent claims that we also control take us up to 300 million ounces of silver and 2.5 billion pounds copper.

Further exploration potential exists throughout the entire Revett Formation, but at this stage we have enough resources in front of us at the Troy mine and Rock Creek to keep us busy for some time.

Revett has been operating the Troy mine for a number of years, could you tell us a little bit about the mine, it’s life, the anticipated production this year and the strategic benefits associated with the project?

The Troy mine, which is an underground room and pillar operation, lies around 15 air miles to the northwest of Rock Creek. We employ 192 people and are looking to produce around 1.3 million ounces of silver and 11 million pounds of copper in concentrate this year. Troy has the same deposit characteristics as Rock Creek and is probably the cleanest, least environmentally impacting mines in North America. Everything we do at Troy, from production experience to an environmental baseline is transportable to Rock Creek. We currently have a 7 year mine life, but recent exploration successes could see that extend well beyond 10 – 15 years.

The Troy mine is generating nice cash flow at the moment which enables us to continue to do our permitting and exploration work in the region. We are an important tax base in the community and receive great support from the state and counties in which we operate.

In 2008 during the economic downturn you were considering closing the Troy mine. What steps did you take to ensure the mine would continue to operate and did you hedge any of your production when metal prices recovered?

2008 and early 2009 was a very tough time for us. But looking back, it was a time period that defined what this company is all about. Employees and management came together, voluntarily took pay cuts, and worked on ways to reduce costs and increase efficiencies. We emerged a stronger and more focused company, every employee is a shareholder through our employee option program and there is a great sense of community in what we do.

We have hedged approximately 25% of our 2011 silver production at $19 an ounce and around 50% of 2011 copper at $3.55 per pound. This covers around 75% of our direct operating costs. We did this in mid 2010 when the economy wasn’t looking as strong as it is today, we wanted to make sure we weren’t in for a repeat of 2008, but also, we realize that Troy is our “bridge to Rock Creek” and so being in position to weather another potential economic downturn was very important. Looking back, we are ecstatic to see metal prices where they are today and we still get to share in the majority of these strong prices.

Let’s assume a positive outcome for Rock Creek, what would be the lead up to putting the project into production and how many ounces of silver and pounds of copper might be produced annually?

Rock Creek is to be developed in two phases. Phase 1 is an evaluation audit which will take around 2.5 years and will lead to a full bankable feasibility study. Phase 2 is the construction of the mine and will take a further 2.5 to 3 years to complete. Total development costs will be around $300 million. We expect to produce around 6 million ounces of silver and 50 million pounds of copper per year over the 25 plus years of mine life. Given our experience at the Troy mine, our confidence level is very high on available resources at Rock Creek and our ability to operate efficiently.

It’s important to note the strong and unwavering support we get from the federal agencies, state and local government. They know the Troy mine and know that Rock Creek can and will be developed to the highest standards. The “doomsday” scenarios painted by groups like the Rock Creek Alliance that are in opposition to the project are, in my opinion, unwarranted. People want responsible development and jobs, and we have proven that we can do both.

This interview appeared in 10 Most Interesting Silver Stocks – Part 2 – CLICK HERE – for the article.

Greg Johnson South American Silver — Greg Johnson was appointed President & CEO of South American Silver in April, 2010.

South American Silver’s flagship project is the Malku Khota Silver-Indium deposit in Bolivia. Can you give our our readers an overview of the project? And, what impact do the other metals have on the economics of the project?

Malku Khota is our most advanced project. With an NI-43-101 qualified Measured and Indicated resource of 230.3 M ounces of silver, plus an additional Inferred resource of 140 M ounces, Malku Khota is already one of the largest silver resources in the world. In addition to an abundance of silver, Malku Khota also contains one of the largest known resources of indium at 1,481 tonnes Indicated and 1,001 tonnes Inferred. Only about 30% of the 50 square kilometre property at Malku Khota has been drill tested and the deposit shows excellent potential for expansion. At this point in time, we are focusing on expansion drilling to move forward into the pre-feasibility process during the remainder of 2011 and into feasibility in 2012.

Our recently filed updated Economic Assessment showed robust economics for an open-pit heap leach operation. The study predicts that Malku Khota could be one of the world’s largest primary silver producers with annual production of some 13.2 million ounces of silver, 80 tonnes of indium, and 15 tonnes of gallium for the first five years of operation’s 15 year mine life. The additional production of several million pounds of by-product lead, copper and zinc contributes to the project’s low operating costs, which are projected to be in the lower quartile of primary silver producers.

I’m sure many of our readers are not familiar with indium – what is indium used for and, once produced, what does the market look like for the product?

Indium is a rare strategic, high-technology metal with unique electrical and optical properties. Demand for indium is being driven by applications such as touch screens, solar panels, LCD displays, and LED lights. While demand for indium is rapidly increasing, primary production and recycling levels remain low. Because indium is most commonly produced as a by-product of zinc smelting, slow growth in overall zinc production limits overall growth in indium production. Demand for indium, on the other hand, has more than doubled in the past several years and has increased more than ten-fold over the past decade. Projections indicate substantial growth in overall indium consumption that will likely need to see new primary sources of indium production developed to meet increased demand levels.

Recently, Bolivia was in the news when it was reported that officials might make changes to mining legislation, particularly regarding certain previously state owned and operated mines. South American Silver reported in May that you received assurances that these changes would not impact the company. Please expand?

Recently, the media had reported that the Bolivian Government might increase state control over certain mines. This caused quite a stir in the market, as it was initially unclear whether this was a broad change in government policy for mining. We have since received clarification that the government is considering changes to legislation from 1985 that had allowed for the privatization of the operation of some specific mines owned and operated by the Bolivian State Mining Corporation, or COMIBOL. Bolivian government officials have confirmed that these changes will only be focused on 4 specific COMIBOL-owned mines and that private investments in mining will continue to be respected.

As South American Silver’s Malku Khota project does not have government involvement and has always been a privately owned project, we have been assured that our project will not be impacted by the proposed changes for government-owned mines. In addition, government officials have made statements of support specifically on the Malku Khota project. The government has also clearly stated that it wishes to attract foreign investment in mining. Mining is a key area for economic development in Bolivia, currently representing over 40% of the country’s GDP.

What is it like working in a developing country like Bolivia?

Working in emerging countries like Bolivia has both its challenges and opportunities. The South American Silver management team has over 16 years of experience working in Bolivia and other parts of Latin America, with significant combined experience in the global mining industry.

Bolivia offers significant opportunity for resource development because of its rich endowment in silver and other metals. In fact, it is one of the largest historic producing regions for silver. We have been able to identify exceptional mineral opportunities that have the scale potential to become world-class mines, and our team has the experience and expertise in the exploration and development process to advance our projects toward feasibility and production. In addition, the management team looks for ways to further mitigate development risks. In particular, we are working closely with local communities and indigenous people to develop respectful, mutually beneficial relationships that we believe can greatly facilitate the development of our projects.

Under the Morales administration, Bolivia has experienced much positive growth. A key area of reform has also been a focus on bringing benefits from resource development to local indigenous and rural communities. As we advance the Malku Khota project through to production, we will continue to look for infrastructure development and job creation opportunities to further stimulate the local economy.

You also have a development project in Chile, what about the project captured your interest and what’s been happening there recently?

The Escalones copper-silver-gold project located in Chile shows excellent potential to become a large-scale asset. Our exploration has revealed grades and widths of mineralization that indicate the presence of a strong mineralizing copper-silver-gold porphyry system. We have completed initial geological modelling and target definition and are developing an exploration plan to include additional surface sampling, mapping, deep sensing geophysics, and diamond drilling to test the strength and scale of the mineralized system. With the exploration program underway, we are aiming for an initial copper-silver-gold NI-43-101-qualified resource estimate to be completed later this year.

You completed a $32 million financing at the end of 2010, where do you plan on spending the money?

The $32 million financing put us in a very strong financial and operational position to move forward with the rapid development of our Malku Khota silver-indium project to feasibility and to advance our Escalones copper-silver-gold project to the resource definition stage. With our current plans and budgets we have working capital for the next 18-24 months. As the company advances each of our projects through the various stages of development, we will also look to continue to build on our skilled and experienced management team and our work with our local communities to support the company’s rapid growth.

This interview appeared in 10 Most Interesting Silver Stocks – Part 3 – CLICK HERE – for the article.

Bradford Cooke, Guanajuato Mine — President & CEO Bradford Cooke inside Endeavour's Guanajuato mine with silver ore in hand.

Mexico has enjoyed an extended period of relative political stability with the exception of a few hotly contested elections. Most recently in 2006 involving Felipe Calderón, Mexico’s current President. Calderón’s narrow victory in the July 2006 election and his ascendancy to the presidency was fraught with strife and controversy. The results were contested by his closest opponent, López Obrador, who started what he called a “pacific civil resistance” and held numerous protests. Calderon’s victory was ultimately confirmed months later on September 5, 2006 by the Federal Electoral Tribunal.

There is a “silver rush” in Mexico these days but Endeavour Silver has been operating there for some time. Please tell us about the history of the company in Mexico?

By 2002, the price of gold had clearly entered into a new secular bull market but the silver price was still flat on its back. Given that historically, where gold goes, silver follows, I thought it might be a good time to get into the silver business so I founded Endeavour. We started off by looking at numerous, high grade, narrow vein prospects marked by small historic Spanish diggings up in the heart of the Sierra Madre mountains. However, we just were not seeing properties that had company-building potential so in late 2003, we changed course and started looking at operating silver mines in established mining districts with process plants that were fully built and permitted but were up for sale and about to close for lack of ore. That led us to our first major acquisition in early 2004, the Santa Cruz mine and Guanacevi process plant located in Guanacevi, Durango, the fifth largest historic silver district in Mexico. In 2007, we made our second major acquisition, the Guanajuato mine and Bolanitos process plant located in Guanajuato, Guanajuato, the second largest historic silver district in Mexico. Thanks to these two key acquisitions and our successful organic expansion programs, Endeavour has grown its silver resources, production and cash-flow every year.

What differentiates Endeavour Silver from other operators in Mexico?

I think our track record for doing what we say we will do and delivering growth every year is what sets us apart from the rest of the pack of junior silver producers in Mexico. We also offer investors some of the best leverage to silver and to growth because we timed our financings so that they were accretive rather than dilutive to shareholders. For that reason, we have only 83 million shares issued, amongst the lowest in the silver sector.

You’ve been a “silver bug” for many years. What is your take on the recent spike in the price of silver and what is your outlook?

The recent run-up in silver since August 2010 is just a taste of what lies in the future for silver bugs. Clearly the explosive growth of demand for silver as an investment helped fuel the latest rise. When you look at the ugly financial condition of western economies such as the US or Europe, one has to conclude that we are nowhere close to bottom in terms of the falling value of western currencies. Therefore, we are nowhere close to the top in terms of the rising $US price for silver. However, nothing goes straight up forever and when silver went ballistic in March-April, it was obvious that a correction was likely. We are now in that correction but do not be surprised if silver moves up to new highs before year-end.

Would you ever consider hedging any of your production?

The short answer is no, not in a bull market. The purpose of a hedge is an “insurance policy” to protect your self from falling prices. Therefore a hedge may be useful in a bear market but it can be very damaging in a bull market, as Barrick found out the hard way.

You have two mines in production right now and four exploration/development projects. Which of your projects is the most advanced and which has the best exploration potential?

Our Parral project is the most advanced, thanks to our recent drilling programs. Endeavour almost doubled the resource at Parral last year to about three million tonnes of polymetallic mineralization grading 50 to 60 grams per tonne silver, 0.7 to 0.9 grams per tonne gold and 5 to 6% combined lead-zinc. We estimate the Parral resources have a net smelter return of about $140 USD per tonne at current metal prices, very positive for the economic development of the Parral project. A preliminary economic assessment is now underway to advance the Parral project to a development decision. Another exploration project we are very excited about is the San Sebastian Project in Jalisco State. We acquired it one year ago and recently commenced drilling on the property. San Sebastian is an historic silver-mining district which stopped production during the Mexican revolution in 1910. Virtually nothing has happened on the property since that time. We love the district, because it has all these veins where you can sample high grades on surface. And I mean a dozen veins on the San Sebastian property. It has the potential to be our next Guanacevi or Guanajuato. Our exploration team hopes to define an initial resource by year-end.

This interview appeared in 10 Most Interesting Silver Stocks – Part 4 – CLICK HERE – for the article.

drought in china — In 1996, doughts affected 100 million hectares of farmland across China. Source: China Daily

The World Meteorological Organization predicts global food output may be impacted as climate change brings more extreme weather over the next decade. China, the organization says, is likely set for harsher droughts and North America will get heavier rain.

Extreme weather in the US, the world’s largest agricultural exporter, likely attributed to record highs of global food costs in February, 2011. The UN Food and Agriculture Organization’s World Food Price Index, which tracks 55 food-commodity items, rose nine times in the past ten months.

“Extreme events will become more intense in the future, especially the heat waves and extreme precipitations,” Omar Baddour, a division chief at the United Nations’ agency. “That, combined with less rainfall in some regions like the Mediterranean and China, will affect crop production and agriculture.” China’s Office of State Flood Control and Drought Relief Headquarters announced recently that drought there has affected 6.5 million hectares of farmland. Huang Xiangbing, a village committee official from China’s drought stricken Hubei Province pointed out, “An old saying goes ‘a bowl of water now will bring a bowl of grain in harvest’. Right now is the vital time for spring irrigation, but we have not seen a drop of rainfall.”

Global demand for major grains such as maize, rice, and wheat is projected to increase by nearly 48 percent from 2000-2025 according to research presented by Mark Rosegrant, Director of Environment and Production Technology at the International Food Policy Research Institute. Rosegrant, presenting at the AG Innovation Showcase held in St. Louis, Missouri this week, said “Climate change, high-and-volatile food and energy prices, population and income growth will put intense pressure on land and water and challenge global food security as never before.”

As for spinoff effects of this grim scenario, a report from the International Potash Institute says “Future demand for food is enormous and the limited availability of land and water, climate change and the need to adhere to environmentally-friendly practices – all present a huge challenge to the world’s agriculture in the coming years. Hence increased production will be achieved by both increased productivity and additional land under cultivation. In both scenarios, increased consumption of nutrients is inevitable.” The bottom line? Bad news is good news for potash stocks.

Shares of Potash Corporation of Saskatchewan (TSX:POT), the world’s largest potash supplier, are faring well. Rebounding from a mid-May low of $49, the company’s shares are currently trading at $53.66. On May 6th, Potash released their Q1 2011 results, which showed record gross margins and record earnings attributed to high sales prices for all nutrients and increased demand for potash.

Junior potash miners are also feeling the love. Allana Potash (TSXV:AAA), a potash exploration company working on exploration and development of a potash resource in Ethiopia’s Danakil Depression has responded in kind. Shares of Allana Potash are currently trading at $1.88 up over $0.20 from last week. And shares of Western Potash (TSXV:WPX) are also on the move. The company’s stock is up eight cents today currently trading at $1.31 with over a million shares already trading hands. Western, as the name suggests, is developing a project in Saskatchewan, the home of the world’s largest supply of potash in Western Canada.

Lithium and Potash was the focus of MiningFeeds.com’s May Issue. In the issue, we connected with Allana’s President & CEO Farhad Abasov for an exclusive interview – CLICK HERE – to read more. We also discussed the future of Western Potash with Patricio Varas the company’s President & CEO – CLICK HERE – for the interview.

After reaching a recent high of $1,577 on April 30th, the price of an ounce of gold reversed course and dropped dramatically, hitting a low of $1,462 on May 4th, a decline of 7.3% in just four days. But since then gold has been trending upward, gold is currently up over $7 to $1,526 an ounce.

In the days leading up to Rapture and Judgment Day, as predicted to occur on May 21st, 2011 by American Christian radio host Harold Camping, one could be excused for believing that gold might have rebounded even more sharply in the face of complete and total global upheaval. When the world did not end on Saturday in accordance with his predictions, a bewildered Camping’s response was “Give me a day, no interviews today … I’ve got to live with it, I’ve got to think it out.”

Doomsday predictions were the subject of media ridicule in the weeks leading up to May 21st, and they seem to have been held in little regard in the world of high finance, to boot. At least one high profile U.S. investor was decidedly not in Camping’s camp. On May 16th, 2011 it was reported that U.S. investment billionaire George Soros, through Soros Fund Management, sold nearly $800 million of gold during the first quarter, as the precious metal surged to record highs. This roughly accounts for 5.3 million ounces of physical gold and caused some to openly question if this was the transaction that signaled, not the end of times, but perhaps the end of the bull market in gold.

But not so fast. A little digging shows that Soros’ fund actually added gold equities to their holdings including Barrick Gold (TSX:ABX), Eldorado Gold (TSX:ELD), Freeport-McMoRan Cooper & Gold (NYSE:FCX) and Goldcorp (TSX:G) during Q1 2011. The fund, most notably, purchased 301,300 shares of Freeport-McMoRan, a transaction worth $15 million. Soros believes that gold equities should benefit directly from the marked appreciation in the price of gold by generating strong cash flow from ongoing gold sales. In turn, shareholders of gold equities should enjoy the rising capital value of their shares alongside any dividend streams flowing to those shareholders; although Soros does not have blind faith, he did sell off some gold miners such as Kinross Gold (TSX:KGC) and Novagold Resources (TSX:NG).

Seeking Alpha contributor Brian Wills took a utilitarian approach when looking at the gold market. He says the gold bull market will end when the world’s governments and their Central Banks become fiscally responsible. Wills reasons that until interest rates move from negative to positive there will be no opportunity cost to holding gold. Reversing this process will therefore reverse the process from accumulating to liquidating gold and drive the price lower. Brian’s advice: until then stay long gold.

So, on Saturday, a tornado in Reading, Kansas killed at least one person and destroyed twenty homes. Iceland’s most active volcano, Grimsvotn, erupted. And more than forty people were killed in dust storms and thunderstorms in Uttar Pradesh, in northern India. But the world didn’t end in a day of fire and brimstone judgment.

When the Canadian markets resumed this morning it was business as usual for gold, meaning a resumption of its upward trend. And two Canadian listed gold equities, in particular, are leading the way on the TSX Exchange. Novagold Resources (TSX:NG), which is partnered in the Donlin Creek gold deposit in Alaska and the Galore Creek deposit in BC, is up $0.74 to $10.89 despite Soros’ stamp of disapproval. While Extorre Gold Mines (TSX:XG), an emerging producer in Argentina, has tacked on $0.70 and is currently trading at $10.59.

On March 19th, 1997 Michael de Guzman, the exploration manager for would-be miner Bre-X, jumped from an Alouette helicopter flying eight-hundred feet above the Indonesian jungle. The official version of the events state that de Guzman was suffering from hepatitis B and a tormented conscience. He left behind a few hastily scrawled suicide notes, a Rolex watch and a slew of unanswered questions and speculation – his body was never found.

In the days that followed, it was revealed that de Guzman had carried out the biggest mining fraud in modern history. Shares of Bre-X surged from just pennies to more than $280 a share. But when the Indonesian government brought in mining giant Freeport-McMoRan to confirm the deposit, they found nothing. In all, investors were swindled out of $6 billion.The Busang deposit in Borneo, Indonesia, which at the time was rumoured to be the largest gold deposit in the entire world, contained only trace amounts of gold.

The irony in the historic Bre-X swindle is that Indonesia actually does boast the world’s largest gold mine. The Grasberg Mine, located in the province of Papua, Indonesia, is the largest gold mine in the world. And the Grasberg mining district is believed to contain the world’s largest recoverable gold reserve. It is majority owned through a subsidiary by Freeport-McMoRan Copper & Gold (NYSE: FCX). Annual production from the Grasberg Mine is estimated at over 58,000,000 grams of gold; along with 600,000 tonnes of copper; and 170,000,000 grams of silver.

These days, a regulatory overhaul of Indonesia’s mining industry in early 2011 is likely to weaken the financial performance of companies operating there and it may also make the Asian nation less attractive for foreign investment. Instated in January, the new law aims to squeeze more revenue from the mining sector and secure domestic supplies of minerals such as coal and metals for their home market where demand is expected to surge.

The Indonesian government has set domestic coal consumption targets at 75 million tonnes for this year, which is thirty percent of total Indonesia coal production. It is yet to be determined which metal products will be included for the domestic market obligation. The new mining law, however, will require miners to process mineral products domestically by setting up their own smelters or using independent domestic smelters. There is a lack of processing capacity in Indonesia so, either way, the process is expected to slow output.

Recently, Xavier Jean, a Standard & Poor’s credit analyst stated, “Some (of the new) regulatory provisions have direct implications for the revenues, profitability, capital expenditure, and cash flows of mining companies in Indonesia.” He also said, “Besides increasing operating uncertainty for Indonesian mining companies, we believe the new regulations may also make the industry less attractive to foreign investors.”

Following a 10-year exodus of junior mining companies from Indonesia in the aftermath of the Bre-X scandal, Southern Arc Minerals (TSXV:SA) was one of the first Canadian junior exploration companies to return to Indonesia in 2005. Southern Arc management saw the mass departure from Indonesia as a unique window of opportunity. The company currently has four projects on the islands of Lombok and Sumbawa. Three of the projects are located on Sumbawa which hosts Newmont’s Batu Hijau mine. Newmont Mining (TSX:NMC) recently sold the final 7-per-cent divestiture stake in PT Newmont Nusa Tenggara subsidiary to an agency of the Indonesian government’s Ministry of Finance as required under the terms of the contract of work with the Indonesian government.

Intrepid Mines (TSX:IAU) is an Australian-based precious metals development and exploration company with primary operations in Indonesia. The companies lead project, Tujuh Bukit located on the island of Java, is reported to contain an inferred resource estimate of over two million ounces of gold and nearly eighty million ounces of silver. Another junior actively exploring a number of prospective prospects in Indonesia is East Asia Minerals (TSXV:EAS). The company owns a majority interest in 6 epithermal gold and porphyry copper-gold properties scattered throughout the island nation.

Challenger Deep Resources (TSXV:CDE) is an Alberta-based junior miner focused exclusively on coal in Indonesia, specifically in East Kalimantan. The company was established to take advantage of what management believes is “an under-exploited opportunity” in the region.

Eric-Sprott-Silver — Eric Sprott - The Canadian Silver Bull

Eric Sprott, founder of Toronto-based investment firm Sprott Asset Management, is generally considered to be of Canada’s best investment managers. More recently, Sprott has carved out an international reputation as The Canadian Silver Bull.

Originally entering the investment industry in 1981 as a research analyst at Merrill Lynch, he founded Sprott Securities (now called Cormark Securities), which is one of Canada’s largest independently owned securities firms. After spinning-out Sprott Asset Management in 2000 as a separate entity, he divested his entire ownership of Sprott Securities to focus solely on the investment management business. At that time, Sprott was one of the few asset managers to openly state that mining, and the mining of gold in particular, was the place to be. Sprott staked the future of Sprott Asset Management on these beliefs.

In 2009 Sprott began to shift his attention from gold to silver, and has since been a vocal advocate of silver investing. On November 3rd, 2010 Sprott Asset Management launched the Sprott Physical Silver Trust (TSX:PHS.U), a closed-ended fund that invests only in physical silver bullion via an IPO that raised US$575 million. The trust is inter-listed on the TSX and the NYSE Arca.

Despite the recent spike in silver where it peaked at almost $50 an ounce, Eric Sprott still considers the metal to be “the best recommendation anyone could make this decade”. Silver was hit hard after its high on April 24th and reached a low of $32.32 on May 12th, a dramatic decline of 35% over three weeks. Sprott’s response to the sharp decline was somewhat pragmatic, “Last week’s dramatic drop in the price of silver was perhaps due to some unnatural circumstances. My personal feeling is that it was manipulated. The price went down six dollars in 13 minutes.”

On that same day that silver found its recent bottom, Eric Sprott connected with fellow silver stalwart and fiat currency critic Max Keiser for an interview. In the interview, Sprott reiterated his love affair with the shiny white metal. Silver is currently trading at $34 an ounce.

From the Keiser Report:

Eritrea Mining — Eritrea is emerging as a proactive African mining country.

Eritrea, a funnel shaped country that borders The Red Sea, was, because of its unstable political history, a bit of a mystery to the international mining community. But an unprecedented era of peace and stability is changing things quickly.

Eritrean society is ethnically heterogeneous. The Tigrinya people and the Tigre people together make up about 80% of the country’s total population. The rest of the country consists of various other Afro-Asiatic groups. Like its demographic makeup, mining deposits in Eritrea are also heterogeneous; since the Eritrean government embraced mining development in the 1990’s a number of unique deposits have been found in the country that consist of a combination of gold, silver, copper and zinc.

Eritrea’s government, however, is a stark counterpoint to the country’s diversity. Eritrea is a single-party state. The government is run by the People’s Front for Democracy and Justice (PFDJ). No other political groups are currently allowed to organize, although the Constitution of 1997, which has not been implemented, provides for the existence of multi-party politics. In 2008, the government of Eritrea made it more attractive for foreign companies to prospect and develop projects when they set their stake at 10 percent with an option to buy a further 30 percent. Industry analysts consider this to be a relatively small claim compared to other countries in North Africa like Egypt which mandates a 50 percent stake or Sudan at 60 percent. And as a result, some industry experts predicted an impending mining boom in Eritrea.

A video released in 2009 focusing on the Eritrean mining industry provides an excellent overview of the country and its approach to mining:

The bottom line for international miners? The Eritrean government is proactive and pro-mining. The Ministry of Energy and Mines carried out modern technology-backed study and exploration activities in 2010 with a view to reinforcing the ongoing mining endeavors in the country. Alem Kibreab, director general of the Mining Department, explains the mineral resources in the country are owned by the people themselves and that the Government shoulders the responsibility of their management. Since the 2008 policy that encourages mining investment in Eritrea, Mr. Kibreab notes that twenty foreign companies are now engaged in studying, exploring and mining in the country.

Eritrea’s most advanced project is the Bisha mine operated by Nevsun Resources (TSX:NSU). Its 27 million tonnes of ore reportedly contain 1 million ounces of gold, 11.9 million ounces of silver, 800 million pounds of copper and over 1 billion pounds of zinc. The Bisha mine went into full commercial production in February of this year and Nevsun recently reported the mine produced 105,000 ounces of gold from January to April. Within the deposit, gold and silver is found in the top 35 meters and will be mined over the first two years. During last week’s sell-off in commodities shares of Nevsun faired extremely well and were actually up $0.08 on the week closing at $5.25.

Another company developing gold, silver, copper and zinc projects in Eritrea is Sunridge Gold (TSX-V:SGC). Sunridge has four projects with a combined NI 43-101 resource of 1.05 million ounces of gold, 31.8 million ounces of silver, 1.28 billion pounds of copper and 2.05 billion pounds of zinc. The company’s Debarwa deposit has similar geology to Nevsun’s Bisha mine. The company has been relatively quite of late on the news front but drill results are expected soon from Emba Derho (one of the company’s three northern deposits); and, an updated resource calculation is expected this month from their flagship Debarwa deposit factoring in drill programs conducted in 2009 and 2011. Sunridge Gold also survived the recent correction unscathed closing the week unchanged at $0.95.

NGEx Resources (TSX:NGQ), a diversified international mining company that boasts Lukas Lundin as its Chairman, also has a foothold in Eritrea. NGEx’s Hambok project is located near the Bisha mine and in January, 2009 the company reported a NI 43-101 indicated resources estimated of 231 million pounds of copper, 530 million pounds of zinc, 2.3 million ounces of silver and 68,000 ounces of gold. The mini-mining meltdown was less kind to NGEx Resources, shares of the company were down $0.13 to close the week at $3.36.

Halfway through May, every materials component of the S&P TSX60 has lost ground.

Blink and you may have missed it. If the recent downturn in commodities is coming to an end, as some suggest, it was a brief correction. While the recent slump actually contained the worst week for commodities since the recession of late 2008, many believe it’s a mere blip. Hussein Allidina, head of commodity research at Morgan Stanley in New York, said “The declines exhibited last week provide a good entry point for both investors and consumers.” Allidina belives the macroeconomic environment remains positive for commodities in general.

Long term mining bulls will find bargains this week. Silver prices have fallen from a recent high of $48.48 an ounce to near the $35 dollar mark. The 30 day spot price on copper fell from $4.38 on April 21st to $3.91 on May 11th. Platinum’s recent high was $1873 on April 29th, it fell to $1750 on May 12th. And after storming to a high of $1565 gold promptly fell back under the $1500 mark, before a modest recovery.

The TSX, which lists 55% of the world’s public mining companies, has fallen more than 4% in May. The exchange is clearly a commodity driven one, and is particularly influenced by mining stocks. Of the components of the S&P/TSX 60, twelve stocks are miners. Are there bargains to be had amongst this group? Do a little digging, as we have, and you will find that all twelve have retreated this month. We sort through the red ink, and show you how much each stock is off, from worst in first.

1. Eldorado Gold Corporation (TSX:ELD) -16.8%
Price on April 29th:$17.61
Price on May 13th: $14.65

2. Teck (TSX:TCK.B) -12.8%
Price on April 29th: $51.43
Price on May 13th: $44.85

3. Goldcorp (TSX:G) -12.5%
Price on April 29th: $52.89
Price on May 13th: $46.28

4. Agnico-Eagle Mines (TSX:AEM) -9.8%
Price on April 29th: $65.92
Price on May 13th: $59.44

5. Barrick Gold (TSX:ABX) -9.7%
Price on April 29th:$48.32
Price on May 13th $43.63

6. Agrium (TSX:AGU) -9%
Price on April 29th: $85.76
Price on May 13th: $78

7. First Quantum (TSX:FM) -8.7%
Price on April 29th: $134.83
Price on May 13th: $123.10

8. Kinross Gold Corporation(TSX:K) -7.9%
Price on April 29th: $15
Price on May 13th: $13.81

9. Potash Corporation of Saskatchewan (TSX:POT) -6.6%
Price on April 29th: $53.45
Price on May 13th: $49.92

10. Iamgold Corporation (TSX:IMG) -6.2%
Price on April 29th:$19.41
Price on May 13th:$18.21

11. Yamana Gold (TSX:YRI) -5%
Price on April 29th: $12.06
Price on May 13th: $11.46

12. Inmet Mining Corporation (TSX:IMN) -4.6%
Price on April 29th: $66.40
Price on May 13th: $63.36

Jack Lifton of Technology Metals Research says a recent report from Goldman Sachs predicting a near-term surplus of rare earth metals is "nonsense".

Is rare earth metals mania another bubble that is about to pop, or a genuine shift in the supply demand curve?

That question is the crux of a heated debate this week after Goldman Sachs analyst Malcolm Southwood said the back-story on rare earths, which have rocketed to more than ten times their value in just a couple years, is about to change dramatically. Southwood says the supply deficit of rare earth metals will peak at 13.2%, or just over 141 thousand tonnes this year, but will actually reach a surplus of 3.2% as soon as 2013.

Demand for rare earth metals has risen, in part, because they are used in a variety of technologies that didn’t exist when the price of the metals was depressed, which was much of the latter half of the last century. Rare earths are used in iPods, GPS navigation systems and plasma televisions.

Economically, the importance of rare earths became a source of razor sharp public focus when China began to restrict their export. In July 2010, that country announced a 72% year over year reduction in exports. China’s hold over the rare earths -the country still controls more than 95% of the market- meant a flurry of activity in looking for new sources worldwide.

In Canada, rare earths stocks joined the global party. Canadian investors, like their counterparts worldwide, clearly see political motivation behind the lessening of China’s stranglehold on rare earth supply as a long term booster.

Toronto’s Avalon Rare Metals (TSX:AVL) has five Canadian rare earths projects underway. Encouraging results from their flagship project, the Nechalacho Rare Earth Element Project located at Thor Lake in Northwest Territories, has helped shares of the company rise from a low of $.38 cents on December 24, 2008 to a recent high of of over $9 in mid-April.

Ucore Rare Metals (TSXV:UCU), which changed its name from Ucore Uranium last summer has seen a lot more success since the name change. Drilling on the company’s Bokan-Dotson Ridge rare earth project in southeast Alaska showed what management said was “an unusually high skew in the Dotson zone toward heavy rare earths”. Ucore’s rise, although not on the scale of Avalon, was perhaps more dramatic, Ucore bottomed at just three cents in late 2008 before hitting a high of $1.10 in early March of this year.

And 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. Great Western has built up a portfolio of rare earth properties in Canada, the US and South Africa. 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. Shares of Great Western hit a high of $1.06 on February 4th of this year, and could be had for just three cents in late 2008.

So are Canadian rare earths stocks about to come crashing back to earth? Not so fast says rare metals expert Jack Lifton of Technology Metals Research. Lifton says the Goldman Sachs report is “nonsense” because, he says, bringing rare production online is a much more complicated process than the report suggests.

Lifton doesn’t believe that “….world demand for high-purity rare-earth metals and alloys, for use outside of China, will be met by non-Chinese production by 2013” he says “because until there is a high rate of production of commercially pure separated rare-earth chemical compounds, there will simply not be enough feedstock to gamble on continuous large-scale production of these high-tech materials, by those who have never before done such high volume processing of such complex materials.”

Those investors who agree with Lifton’s take on rare earths have had the opportunity for some bargain hunting of late. Shares of Avalon Rare Metals lost more than 7% on Wednesday to close at $7.29. Great Western Minerals was also down just over 7% to $0.77. And Ucore Rare Metals gave back 5%, to close at $.74 cents.

gitanyow totem pole — The Northwest Transmission Line passes through seven different First Nations territories including the Gitanyow.

On May 8th, 2011, just two days after the federal government gave the environmental thumbs-up on the Northwest Transmission Line (NTL), two B.C. First Nations say they will join forces to fight against the major power line.

The NTL is slated to run through seven different First Nations territories, four of which have yet to sign agreements with B.C. Hydro. About one-third of the line would pass through territory belonging to the Gitanyow and Lax Kw’alaams, who claim that B.C. Hydro has been inflexible in negotiations about their participation and compensation. The bands, subsequently, are threatening blockades. The Chiefs of the respective bands have said they will not accept B.C. Hydro’s one-time cash offer, comparing the offer to “beads” in exchange for land.

On April 11th, after over a year of attempting to negotiate with BC Hydro regarding the proposed NTL to be constructed through Gitanyow Territory, the Gitanyow Chiefs received a “No” from BC Hydro’s representatives concerning the outstanding issue of revenue sharing. This response was delivered to the Gitanyow First Nations despite the directive from the BC Utilities Commission to BC Hydro in early February 2011 to engage in revenue sharing discussions with Aboriginal Nations whose rights will be impacted by transmission line projects.

In 2008, The Mining Association of BC commissioned a study that evaluated the economic benefits of establishing a high-voltage transmission line in northwest British Columbia. According to the study, the NTL would result in at least $15 billion in new investment in mining and power generation for the remote region. The study said the NTL has the potential to create more than 10,000 new jobs, allow new green power projects to link to the provincial transmission grid, and generate $300 million in new tax revenue annually.

Last year, the Northwest Powerline Coalition released a video highlighting the various benefits associated with the Northwest Transmission Line:

A number of mining companies have been patiently waiting for power in the region. Imperial Metals (TSX:III) is developing the Red Chris copper/gold project and the operation is dependent upon completion of the Northwest Transmission Line. Red Chris anticipates being able to connect to the NTL’s Bob Quinn hydro station approximately 120 km from the proposed mine site.

At least two other junior miners are also relying on the development of the Northwest Transmission Line. Copper Fox Metals (TSXV:CUU) and Hard Creek Nickel (TSX:HNC) are also very much dependent on the project. In a recent interview with MiningFeeds.com, Copper Fox President & CEO Elmer Stewart noted, “The NTL is fundamental to the development of the large copper deposits located in northern British Columbia including Schaft Creek. Without this supply of electricity, the capital and operating costs would increase which directly impacts the economics of these deposits.” And Mark Jarvis, President of Hard Creek Nickel, said the NTL was “the key infrastructure element we need to advance our Turnagain Nickel project to a reality.”

Within the mining community, Panamanian President Ricardo Martinelli is gaining a reputation for throwing "curveballs".

On February 11th, Erin Ventures (TSXV:EV), a Victoria based junior miner, reported a mysterious website had surfaced belonging to a company called Mineral Mining PLC. In the website the company claimed to own a number of mineral properties that were already owned by Erin Ventures; namely, the Santa Rosa Mine in Panama. In fact, at the time of publication, some of the information on the company’s website appears to have been taken directly from Erin’s website. Without their knowledge, Erin Venture’s mineral concessions for the Santa Rosa Mine in Panama had secretly been awarded to a third party, despite the company’s claims to the assets.

Today, Erin Ventures General Manager Blake Fallis reported that, in the opinion of Erin’s management, there is clear evidence of inappropriate actions by certain government departments giving this third party an improper and unfair advantage in the concession process. In light of these developments, and coupled with what Fallis describes as an “anti-mining” attitude developing within Panama, management felt it was prudent to abandon all activities in Panama until further notice. Shares of Erin Ventures closed down half a penny today at $0.10 on a half a million shares of volume.

On March 3rd, 2011 Panamanian President Ricardo Martinelli asked lawmakers to repeal a recent law that allows foreign government investment in mines within the country. Martinelli, who originally championed the new law, made the surprise announcement about the repeal during a meeting with the Ngabe-Bugle, an indigenous community in Western Panama. To say the group strongly protested against the legislation is an understatement: “Down with mining! The Ngäbe-Buglé people will fight with their lives to prevent the exploitation of mining! Murderers!” was their reported war cry. The following is a report from TeleSUR at the time of the protests – habla español?

The day after the repeal was announced, Inmet Mining (TSX:IMN) was the biggest loser on the TSX. Share gave back 7.4% or $5.12, to close at $64. The law, which was passed just a month earlier, was considered crucial to the company’s plans to partner with Singapore’s state investor Temasek and with Korea Resources Corp. to finance and build its $4.3 billion Cobre Panama copper-gold project in the country. Then on March 22nd, 2011 the company was thrown another curveball when the Panamanian government rejected Inmet’s plan to use coal-fired power at its proposed Cobre Panama mine site. This decision effectively derailed Inmet’s planned merger with Lundin Mining (TSX:LUN).

Fortunately for Inmet, on March 24th the company received a letter from the Panamanian government confirming that its copper-gold project will not be affected by the recent repeal. The statement said the repeal “does not affect the contracts or concessions granted to companies to develop metallic or non-metallic mining projects in Panama.” But in the eyes of many investors the damage was already done. Shares of Inmet have yet to fully recover.

President Martinelli, who founded Panama’s Super 99 supermarket chain, cast himself as a right-of-center counterweight to Hugo Chavez, the radical Venezuelan leader. Recent US government State Department cables that were exposed on WikiLeaks were not at all kind to Martinelli. They describe him as a man of “limited attention span” who “makes strong impulsive decisions with minimal information.” The documents cast him as a vindictive authoritarian, a sentiment that is almost certainly shared by certain members of the mining community today.

copper pipes — Base metals are invaluable to the global economy because of their utility and ubiquity.

In mining and economics, base metals are often referred to as non-ferrous metals. Non-ferrous metals is a broad category that includes the likes of aluminum, molybdenum, tantalum and magnesium. However, ‘The Big 5’ in the group are copper, zinc, lead, nickel and iron.

When investors think of base metals they probably think of China as well. China’s metal capacity continues to rise, 2010 was a record production year for all base metals and China is ranked number one in the world for output of aluminum, lead, zinc and tin. It is also the leading copper and nickel consumer.

Base metals oxidize, tarnish or corrode relatively easily when exposed to air or moisture. Base metals are widely used in commercial and industrial applications. They are more abundant in nature and therefore far cheaper than precious metals such as gold, silver and platinum.

The term “base” metals arose because these materials are inexpensive and more commonly found than “noble” metals such as gold and platinum; however, base metals are invaluable to the global economy because of their utility and ubiquity.

Copper, a leading base metal, is often called the “metal with a Ph.D. in economics” because its widespread use makes its price very sensitive to global economic trends. For this reason, many call it “Dr. Copper”.

MiningFeeds.com

Base metal mining companies have, for many years, operated in the shadows of precious metal miners. But with increasing demand from China and developing nations around the world, base metal miners may finally be getting the respect they deserve. Patricia Mohr, commodities specialist at Scotiabank, recently went so far as to call copper the ‘new gold’. Mohr says “Copper is much more profitable than gold. Considerably more, even with the record gold prices we’ve been seeing recently. That’s why I’ve been calling copper the new gold.”

Lately, other base metals have also fared well. Prices for nickel, zinc, iron and lead have rebounded dramatically from 2008/2009 lows and since stabilized. Unlike copper, however, other base metals have not reached new highs as the world recovers from the economic downturn.

Tom Whelan, head of mining and metals research at consultancy firm Ernst & Young notes, “Statistics from the Chinese government indicate demand (for copper) will grow to 12 million tonnes over the next 10 years on an annual basis. But the world’s supply won’t expand fast enough to keep up with the demand. It’s not like mining companies can just flip a switch.” China currently consumes 7 million tonnes per year or almost 40% of world’s supply.

grasberg-mine-indonesia — The world's largest gold mine, the Grasberg Mine in Indonesia, is also the world's third largest copper mine.

One need look no further than Barrick Gold’s takeover offer of Equinox Minerals to illustrate that precious metals miners are becoming increasingly more comfortable with copper. Copper is of natural interest because it’s often found in deposits with gold.

The Grasberg Mine, located in the province of Papua, Indonesia, is both the largest gold mine and the third largest copper mine in the world. And the Grasberg mining district contains the world’s largest recoverable copper reserve and the largest gold reserve. It is majority owned through a subsidiary by Freeport-McMoRan Copper & Gold (NYSE: FCX). Annual production from the Grasberg Mine is estimated at over 600,000 tonnes of copper; 58,000,000 grams of gold; and 170,000,000 grams of silver.

Gold, and lately, even silver have gained cultish disciples that the less glamourous base metals cannot hope to match. But those looking for dependability in their investments can be assured of one simple metric; as the world grows, so too will the demand for industrial metals. To some, the dynamic between supply and demand for base metals in emerging markets can only mean one thing: good news for miners in the medium to long-term.

1. Lundin Mining Corp. (TSX:LUN)

On February 28^th, 2011 Equinox Minerals launched a hostile bid for Lundin Mining that left Symterra blowing in the wind. Symterra was the proposed name of a new entity resulting from the friendly merger between Lundin Mining and Inmet Mining – a transaction valued at $9 billion.

Although Lundin pushed hard to complete the merger with Inmet Mining and thwart off the unsolicited bid from Equinox, Symterra was ultimately derailed after Panama imposed development rules that affected the proposed power supply to Inmet’s Cobre Panama mine. Panama’s government opposes the construction of a coal-fired power plant to supply electricity. Inmet CEO Jochen Tilk pointed out the mine would not face delays if the plant isn’t built because the project could rely on power from the national grid in the first few years of operation. At the time, Peter Campbell, a Toronto-based analyst at Jennings Capital Inc., said Lundin may be preparing to back out of its deal with Inmet, citing “material adverse change” in relation to the Cobre Panama project.

The merger and acquisition saga became even more convoluted when Barrick Gold, the world’s biggest gold producer, announced on April 25^th, that it planned to buy Equinox for US$7.3 billion. Barrick President and CEO stated, “The acquisition of Equinox would add a high-quality, long-life asset to our portfolio and is consistent with our strategy of increasing gold and copper reserves through exploration and acquisitions.” Equinox’s main asset is the Lumbwana mine in Zambia, one of the largest copper mines to be developed globally in the last few years.

Prior to Barrick’s offer, Equinox was in the process of defending against its own unsolicited US$6.3 billion bid from China’s Minmetals Resources. But a substantial offer from Barrick was enough to scare off Minmetals and they promptly withdrew their offer. CEO of the Hong Kong Unit of one of China’s largest mining companies Andrew Michelmore noted, “Competing with Barrick at these prices would, in our view, be value destructive for MMR’s shareholders.”

With the Equinox board in support of Barrick’s offer, which included, that they terminate the Lundin offer or let the offer expire, this could be the third time a high-profile takeover has fallen apart for Lundin. In 2008, HudBay Minerals’ bid for Lundin was unsuccessful after its own shareholders objected to the deal.

So what’s next for Lundin Mining? For now, the company is neither hunter nor prey – or is it? On Friday April 29th, it was leaked to the press that a buying group headed by one of China’s largest base metal miners, Jinchuan Group Ltd., and includes the country’s giant sovereign wealth fund, China Investment Corp. was “in talks” to buy the company. Shares of Lundin Mining traded over 21 million shares on the day and closed at $9.26 up $0.92 on the speculative news.

2. Canada Zinc Metals Corp. (TSXV:CZX)

Zinc, the fourth most used metal on the planet trailing only iron, aluminum and copper, has a worldwide annual production of roughly ten million tonnes. Zinc’s primary use is in the galvanizing process of steel and in making alloys including brass and bronze. Although zinc doesn’t get anywhere near the same amount of attention as its sexier cousin copper, that may begin to change. China’s refined copper imports fell 43 percent in March year over year due to high stock piles and strong international prices while their Zinc imports surged 108 percent over last year.

In November 2006, Zinc prices hit a record high of US$4,580 tonne. At the time, analysts cited that the growing demand for zinc in China could increase by 56% by 2010 which certainly helped fuel the fire. China became a net importer of zinc in 2004. With the onset of the “Great Recession” in 2008 the price of zinc declined dramatically to just above $1,000 per tonne, far below the bullish projections a few years earlier. But in the first quarter of 2009, as marginal zinc mines were being shut down all over the world, zinc began a swift and steady recovery, reaching US$2,560 per tonne by the end of the same year, just slightly higher than where it currently trades.

Today, China produces about a quarter of the world’s zinc and consumes a third of it. And overall, Zinc consumption in China has tripled since 2000 – China consumes more zinc than USA, Japan, India, Germany, Italy and Belgium combined. Some analysts, however, believe this time China’s demand for zinc will continue unabated. This, coupled with demand from other emerging nations around the world is expected to push consumption to 15.5 million tonnes per year by 2020.

Tongling Smelter — Smelter workers employed by Tongling Nonferrous Metals Group - one of China's largest mining companies.

Peeyush Varshney, President and CEO of TSX-V listed Canada Zinc Metals is solidly in this camp. In August, 2005 Canada Zinc Metals entered an earn-in option agreement for 65% of its Akie property. A few years later, in 2007, the company acquired 100% of the Akie property and their entire claim package pursuant to a takeover. The next year the company completed its first NI 43-101 report on the Akie property. Soon after, China came calling in the form of Tongling Nonferrous Metals Group which subsequently made a substantial investment in Canada Zinc Metals. MiningFeeds.com sat down with Peeyush Varshney, President & CEO of Canada Zinc Metals to find out more about the company’s Chinese shareholder and what else is in store for 2011. CLICK HERE – for the interview.

For 10 Base Metal Stocks to Watch in 2011 – Part 2 – CLICK HERE.

Disclosure: at publication Canada Zinc Metals is a client of MiningFeeds.com.

3. Mirabela Nickel Ltd. (TSX:MNB)

By the end of 2008 Nickel prices had fallen by 80% from their May 2007 high of just over (US) $52,000 per tonne. In the first half of 2009, in the midst of the economic crisis, around a quarter of all nickel production from 2008 was suspended. Major producers such as Norilsk Nickel, BHP Billiton, Vale Inco and Xstrata all had to curtail production. Since then, prices have stabilized; nickel currently trades on the London Metals Exchange for US$26,605 per tonne.

Mirabela Nickel’s focus is its Santa Rita project in Bahia, Brazil. The company says the mine is expected to be among the largest open-pit nickel sulphide mines in the world, with an estimated life of 23 years. Proven and probable reserves are reported to be 121 million tonnes at 0.60% Ni (726,000 tonnes of contained nickel); and, the company’s nickel sulphide concentration plant produces metal concentrate (nickel-copper-cobalt) containing approximately 14% nickel.

Mirabela has off-take agreements covering 100% of its nickel production until December 2014 with Votorantim Metais, a Brazilian mining company that is the world’s sixth largest nickel producer worldwide. In addition, the company has an agreement with Norilsk Nickel, the world’s largest producer. Votorantim takes delivery at the mine site and then trucks the concentrate to its Fortaleza de Minas smelter in Brazil. Mirabela ships the concentrate to Norilsk CIF Rotterdam where it is then transported to Norilsk’s Harjavalta refinery in Finland. Payment is determined based on the metal content of the nickel concentrate produced and market metal prices.

Unfortunately, Santa Rita’s slower than expected production ramp-up led Mirabela back to the equity market. On April 15^th, 2011 the company announced the closing of a US$395 million of 8.75% senior unsecured notes. Once released from escrow, Mirabela intends to use the net proceeds to pay down its senior and subordinated debt facilities, to make prepayments in connection with the termination of certain commodity call options, interest rate hedging and foreign exchange hedging, to provide further general working capital and for general corporate purposes.

Standard & Poor’s rated the notes ‘B-‘ whereby S&P credit analyst Thomas Jacquot said, “The ‘B-‘ corporate credit rating reflects our view of Mirabela’s lack of geographic and revenue diversity, which stems from the operation of a single site in Brazil that is almost exclusively focused on the extraction of nickel, a product that has historically experienced high price volatility.” He went on to say, “We believe, however, that the combination of performance to date in the ramp-up of the Brazilian mining operations, the company’s adequate liquidity, and the experience of the management team will partially offset those weaknesses. In addition, we expect performance and profitability to improve during 2011, provided nickel prices are maintained at current levels and the company is able to deliver its remaining capital expenditure on time and budget.”

In response to improving performance at the Santa Rita mine in 2010, Argonaut Securities analyst Troy Irvin said, “…the improved plant recoveries demonstrate that the ramp-up challenges presented by the transitional ore can be overcome, with the longer-term prize intact, that is, a low-cost, long-life, large disseminated nickel sulphide asset.” While BMO Capital Markets analyst David Radclyffe was a little less optimistic, saying that Mirabela’s improved operational performance was encouraging but that consistency really needs to be demonstrated over several quarters.

4. Rathdowney Resources Ltd. (TSXV:RTH)

Are we on the cusp of a zinc shortage? Around the world, almost 2.4 million tonnes per year of zinc mine production will close between 2011 and 2016. The Skorpion mine in Namibia, the Tara and Lisheen mines in Ireland, the Perseverance and Brunswick mines in Canada and the Cerro Lindo operation in Peru, and several others, are soon to be exhausted and closed. With increasing demand projected by many industry experts, some think the zinc market profile may become very tight, particularly from 2012-2016.

Hunter Dickinson (HDI), the largest private mining group in Canada, shares that opinion. HDI, based in Vancouver, is a diverse operation with experience around the world. Over its quarter-century of existence the group has explored for mines, developed them, and has gained expertise in project engineering, project financing and partnering.

In 2007 HDI subtly shifted its corporate development strategy. The new strategy focused on building and maintaining a value-added interest in a portfolio of mineral companies. After the briefest of pauses during the economic downturn, the strategy was fully implemented last year. From the top down, Hunter Dickinson is bullish on base metals. HDI President & CEO Ronald Thiessen recently noted, “While many continue to temper optimistic views on the global economy with a sense of caution, it is hard to argue that copper and other base metal commodity prices are strengthening at a surprisingly fast rate – exceeding predictions of pundits and investors alike.”

HDI now has five companies under management, including a 30% interest in Heatherdale Resources (TSXV: HTR); a 23% interest in Curis Resources (TSXV: CUV); a 41% interest in Northcliff Resources (private); a 41% interest in Constantia Resources (private); and, an 11% interest in Rathdowney Resources. In 2007 Hunter Dickinson invested $7 million privately in Rathdowney which, at the time, had secured a large prospective lead-zinc land package in Ireland.

Rathdowney’s property in Poland is located in the Upper Silesia industrial district near the government owned Boleslaw zinc smelter.

When the economic crisis hit in 2008, Rathdowney’s management team realized that a pure exploration play would likely not attract much attention from the investment community. Instead, the company set out to secure a more senior project. Already established in Europe, Rathdowney turned its attention to Poland, and its well know Upper Silesian lead-zinc bearing zone. The company was able to secure in mid-2010, after considerable effort over a two year period, the concessions for an advanced stage project with substantial historical resources of lead and zinc from the Polish government.

On March 17, 2011 Rathdowney completed its reverse takeover of Coreland Capital, a shell company (CPC) listed on the TSX Venture Exchange. Concurrent with the takeover and in association with HDI, Rathdowney raised just over $34 million privately at $1.00 per share to develop their projects. The company has drill targets ready in Ireland and a work program established in Poland to maximize conversion of historical resources into NI 43-101 compliance. MiningFeeds.com connected with Rathdowney President & CEO John Barry from his office in Ireland to find out more about their projects – CLICK HERE – for the exclusive interview.

5. Western Copper Corporation (TSX:WRN)

When, on April 25th, Barrick announced an all cash offer of $8.15 for Equinox Minerals many, including Barrick’s shareholders, were more than surprised. In the two trading days following the announcement Barrick’s shares lost over five dollars, falling from $53 to $47.75, an amount that equaled $5.3 billion in valuation. Investors and analysts alike have expressed concerns about the Equinox acquisition. Some fear that adding copper will dilute the premium investors pay for gold stocks. Analyst David Christie at Scotia Capital, however, believes that Barrick will not lose its premium if the deal goes through. “We do not view 30 percent non-precious metals as an issue for a gold producer to retain its gold multiple.” The market still remains nervous since Equinox, on the surface, is primarily a pure copper deal and, if completed, the acquisition doubles Barrick’s anuually copper production to about 600 million pounds.

So why is the world’s biggest gold mining company interested in copper? Barrick cited scarcity of opportunities of this size and quality (Equinox’s Lumwana Copper mine contains 4.5 billion pounds of copper reserves and another 5.5 billion pounds of inferred copper resources); and, the acquisition maintains the company’s gold exposure per share when factoring in Equinox’s Jabal Sayid copper-gold project which has estimated grades of 2.3% copper and 0.3 grams per tonne gold.

Apparently size does matter in mining. One company with a big asset is Western Copper with its Casino deposit in the Yukon Territories. The Casino deposit hosts 4.7 billion pounds of copper (M + I) and another 5.2 billion pounds of inferred copper resource; 7.9 million ounces of gold (M + I) and another 8.7 million ounces of inferred gold resource; along with substantial amounts of silver and molybdenum. In addition to the Casino Project, Western Copper has two other projects of merit in the Yukon and one in British Columbia.

CIBC World Markets analyst Ian Parkinson did an extensive review of TSX & TSX-V listed junior copper producers looking at 160 companies and more than 200 projects. The aim was to determine which players are most likely to draw the attention of large mining companies from China, India, Brazil and other developing economies. Mr. Parkinson ranked Western Copper 3^rd on his list citing, “It holds significant gold, copper and molybdenum resources and reserves”.

F. Dale Corman, Western Copper’s chief executive officer is banging the same big drum. In an article by Bloomberg Businessweek last September Mr. Corman stated, “There’s a limited number of large deposits that are in the range the big mining companies are interested in. I expect to see a lot of people walking through our doors.”

Well the world’s largest gold producer certainly walked through Equinox’s door – more accurately crashed through it – some believe this is only the start of merger and acquisitions activity in 2011 and that this year will be another record-setting year for mining M&A.

For 10 Base Metal Stocks to Watch in 2011 – Part 3 – CLICK HERE.

Iron is the most commonly used of all metals and accounts for the majority (est. 95%) of the world’s total annual metal production. China continues to be the main importer of the mineral and driver of global demand. China’s daily crude steel output rose to a record 1.945 million tonnes in mid-March, as steel mills banked on a pickup in demand when construction activity generally picks-up in April. In July last year India banned iron ore exports from Karnataka state, which supplies 1/4 of India’s iron ore, in a move to preserve supplies for domestic steelmakers. Recently, however, the move was recently overturned by India’s top court. Brazil, Australia and India are the world’s three biggest iron ore exporting nations.

itabira-iron-ore-mines-vale — Vale's Itabira mines in Brazil host some of the world’s largest iron ore deposits.

Mining and steel analyst Rafael Weber, from brokerage firm Geraçao Futuro in Brazil, believes iron ore prices could increase by approximately 22% in the first half of 2011. He noted that Brazilian miner Vale, the world’s largest iron ore producer and exporter, has already set a price hike of 7-8% for the first quarter. The world’s top three iron ore miners: Vale, BHP Billiton and Rio Tinto, switched to a quarterly iron pricing system in 2010 replacing the benchmark arrangement in which iron prices were negotiated each year. Higher spot iron ore prices this February, which recently approached the record levels set in 2008 (just over $200 per tonne), have prompted some miners including BHP Billiton to advocate a monthly pricing scheme. With increasing market transparency and increasing prices, 2011 is certainly shaping up to be another interesting year for iron producers.

6. Labrador Iron Mines Holdings Limited (TSX:LIM)

Along with having the longest name on our list, Labrador Iron Mines is set to become Canada’s next iron miner. The company has a collection of iron ore properties in western Labrador and North-Eastern Quebec within close geographical proximity. The properties collectively contain approximately 150 million tonnes of iron ore resources (historical estimate of which 40 million tonnes has now received NI 43-101 compliant status) grading between 56% and 58% iron. The ore will be processed for shipping (crushing-screening-washing) at the companies centralized Silver Yard plant which is currently in development.

On April 26th, 2011 the company completed a $110 million offering ($12.50 per common share and $15 per flow-through share). The intended use of the financing is to upgrade and expand the Silver Yard plant, payments under the company’s rail transportation agreements, exploration and development and general working capital. When talking with MiningFeeds.com, analyst Geordie Mark notes, “Labrador Iron Mines is set to become Canada’s next iron ore producer coming into production this month. The company intends to deploy the cash from its recent financing and cash-flow from operations to expand output over the next few years so the timing looks perfect to take advantage of elevated iron ore prices.” The Haywood analyst has a 12 month price target of $17.70 per share. His firm, Haywood Securities (or an Affiliate), managed or co-managed or participated as selling group in a public offering of securities for Labrador Iron Mines in the past 12 months. Shares of Labrador Iron Mines have been recently trading between $12.50 and $13.50 per share.

Consolidated Thompson Iron Mines (TSX: CLM) was the last Canadian iron ore company to reach production. On January 11th, 2011 the company announced that it was to be acquired by Cliffs Natural Resources for $17.25 per share in cash representing a transaction value of approximately $4.9 billion.

7. Copper Mountain Mining Corp. (TSX:CUM)

What does an experimental electronic music band from the UK called The Shamen have to do with Copper Mountain? Admittedly, that is a very difficult question. The Shamen’s first (and only) top 40 hit in the U.S. was released during the summer of 1991 and could very well be the perfect theme song for Copper Mountain. That song was “Move Any Mountain” and that’s what Copper Mountain is about to do – all the way to Japan.

The company owns 75% of the Copper Mountain mine, and their Japanese partner, Mitsubishi Materials Corporation, owns the other 25%. The 18,000 acre mine site is located 20 km south of the town of Princeton in southern British Columbia. The mine has a resource of approximately 5 billion pounds of copper and the project is fully financed and nearing completion. Pre production mining activities are underway and the mine is set to enter production next month to produce approximately 100 million pounds of copper each year. Shares of Copper Mountain have performed well over the past 12 months moving from $2.70 last May to $6.78 per share today.

The mine will utilize conventional crushing, grinding and flotation processes and equipment. Once the copper concentrate is produced, it will be shipped to one of Mitsubishi Materials’ existing copper smelters in Japan. First, by rail to the port of Vancouver, and then by ship across the Pacific Ocean. B.C. Minister of Transportation and infrastructure Shirley Bond recently stated, “This really shows how the Pacific Gateway is the best transportation route for Asian businesses.” And, “Mitsubishi Materials Corporation invests in the B.C. Copper Mountain Mine to get the copper concentrate they need, knowing that the best way to ship it is through the Port of Vancouver.”

MiningFeeds.com connected with Jim O’Rourke, Copper Mountain’s President & CEO and 2005 recipient of the Edgar A. Scholz Medal for Excellence In Mine Development in British Columbia and the Yukon to find out more about the company as it nears production. For the exclusive interview – CLICK HERE.

For 10 Base Metal Stocks to Watch in 2011 – Part 4 – CLICK HERE.

8. Invernia Inc. (TSX:IVW)

Dead Birds — Thousands of birds died from lead poisoning in the Australian port city of Esperance in 2007 (source – ABS News).

April showers do not always bring May flowers. On April 5^th, 2011 Ivernia’s shares were halted and the company announced that its wholly owned subsidiary, Magellan Metals, discovered mud on the bottom of a shipping container that was transported from the company’s Magellan mine to the Port of Fremantle. Mud on the bottom of a shipping container doesn’t sound like such a big deal – right?

Not so. The results of isotope testing found the presence of lead. And confirmed there was a high probability that the lead came from the Magellan mine. The company did suggest that the source of the lead was likely not from the bagged lead carbonate concentrate within the shipping container. However, during the transport process, shipping containers rest on the ground both at the Magellan mine site and at a rail yard in Leonora. Recent heavy rainfall in Australia has produced wet ground conditions at both locations and is considered to be the likely source of mud.

The company regarded the discovery of Magellan lead in the mud sample as unacceptable and initiated a full investigation and steps to cleanup the lead-bearing mud, regardless of its origin. Magellan Metals immediately informed Western Australia’s Office of the Environmental Protection Authority (OEPA) and voluntarily stopped the transport of lead concentrate from the mine site and halt operations to undertake a comprehensive end-to-end review of all its activities related to the Magellan mine.

Ivenria’s shares lost six and a half cents on the day of the announcement to close at $0.325 and have since fallen to $0.24 on the heels of more troubling news. On April 7^th Invernia announced it was putting the mine site under full care and maintenance and could not provide any further guidance on when the company will restart operations at the Magellan mine.

Lead is toxic to everyone, but unborn babies and young children are at greatest risk for health problems from lead poisoning – their smaller, growing bodies make them more susceptible to absorbing and retaining lead. It is distributed throughout the body just like helpful minerals such as iron, calcium, and zinc. Most ingested lead ends up in the bone where it can interfere with the production of blood cells and the absorption of calcium that bones need to grow. Symptoms are widespread and treatment is with a medication called a chelating agent, which chemically binds with lead, making it easier for the body to get rid of it naturally. Contaminated soil is of particular concern because it can result in lead dust in the air.

In 2008 it was originally reported that a Queensland metal mine owned by mining giant Xstrata could face lawsuits over lead poisoning. Xstrata’s Mount Isa mine was cited as Australia’s biggest emitter of several heavy metals and that testing showed one tenth of local children had high levels of lead in their blood. On February, 20^th, 2011 a $1 million lawsuit was launched on behalf of a 6 year old boy who is reportedly suffering from “severe lead poisoning”. If successful, the case may open the floodgates for additional lawsuits from other children in the area who are also allegedly suffering from lead poisoning.

For shareholders of Invernia the news of the mystery lead-containing mud and subsequent shutdown was undoubtedly very disappointing since the death of thousands of birds from lead poisoning at the port of Esperance in March 2007 resulted in a two and a half year halt in exports from the Magellan mine. Not to mention Invernia just delivered a record year in 2010 resulting in revenue of $100.8-million compared with $25.2-million in 2009 and net income of $17.1-million (eight cents per common share) compared with a net loss of $3.3-million in 2009.

9. Copper Fox Metals Inc. (TSXV:CUU)

You’ve probably heard or peak oil but have you heard of peak copper? The difference between peak oil and peak copper is that copper is recycled and reused. It has been estimated that at least 80% of all copper ever mined is still available above ground. Peak copper, in theory, is the point in time when the maximum global copper production rate is reached. Since copper is a finite resource, at some point in the future new production from the earth will diminish. When this will occur is very much a matter under dispute but, lately, the debate over peak copper has been adding fuel to the copper frenzy. One Canadian listed company that plans on adding to the global supply of copper is Copper Fox Metals.

Copper Fox listed on the TSX Venture Exchange in June 2004 to explore the potential of the Schaft Creek deposit in Northern British Columbia, Canada. Schaft Creek deposit is an undeveloped copper-gold-molybdenum-silver that was owned by Teck-Cominico (now Teck Resources) that was optioned by Guillermo Salazar, the company’s founding president and CEO, in 2002. Pursuant to the option agreement, Copper Fox can earn a 78% interest (23.4 % of the deposit) in Liard Copper Mines Limited by completing a “positive” feasibility study. Teck maintains certain earn-back rights on receipt of a “positive” bankable feasibility study.

The recent approval of the Northwest Power Line by B.C.’s Provincial government was always considered a key component of the projects viability. BC Hydro performed technical studies on the project for years and advocated the new line would provide a reliable supply of clean power to potential industrial developments in the area. But, as is often the case with such mega-projects, environmental opponents were vocal.

Finally, on February 23rd, 2011 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 and the company’s shares made a dramatic move from $.96 cents on February 11th to $2.70 a few months later. Shares of Copper Fox have subsequently pulled back from their April highs to the $2.00 range. MiningFeeds.com recently connected with Copper Fox boss Elmer Stewart to discuss the significance of the Northwest Power Line and the company’s future – CLICK HERE – for the exclusive interview.

10. First Quantum Minerals Ltd. (TSX:FM)

Winston Churchill once said, “Those that fail to learn from history, are doomed to repeat it.” Perhaps First Quantum’s Chairman and CEO, Philip Pascall is a student of Mr. Churchill.

On April 29th, First Quantum held a groundbreaking ceremony for their Trident project in Kalumbila, Northwestern Province, Zambia. The ceremony was attended by Zambia’s President Rupiah Banda, traditional leaders led by Senior Chief Musele, government officials, and local residents. In his speech, Mr. Pascall reaffirmed First Quantum’s long-term commitment to the Government and people of Zambia and the project’s positive impact to the country’s economy through the creation of more than 2,000 direct jobs and by providing a catalyst for large-scale infrastructure development in the region.

Zambian President Banda was also given the floor and during his speech highlighted First Quantum’s status as the country’s largest single taxpayer, its investment in several social projects, and the positive impact of the mining industry on the country’s economy. President Banda also reiterated his government’s commitment to making Zambia a preferred destination for capital investments by international investors.

This ceremony marks the one year anniversary of the Congolese Supreme Court decision to annul First Quantum’s rights to two copper mines (Frontier and Lonshi mines) in the south of the country. Less than a year earlier, in 2009, the Government of the Democratic Republic of Congo closed First Quantum’s Kingamyambo Musonoi Tailings mining project. First Quantum is seeking international arbitration on these disputes that put, collectively, $1 billion of investments are under legal action.

Despite the company’s issues in the Congo, on January 25th, 2011, First Quantum provided a development update and expects to hit production of 470,000 tonnes of copper per year by 2015 from the addition of new projects like Trident in Zambia. Following the production update, BMO analyst David Radclyffe called the company “one of the strongest mid-term growth stories in copper, albeit this assumes delivery of one new project each year.” In a TD client note, analyst Greg Barnes referred to First Quantum as “the next copper major” stating the company’s “copper growth profile is one of the most attractive in the global mining sector – both for investors and potential acquirers.” Shares of First Quantum closed today, Friday, May 6th at $123.72 a share.

For 10 Base Metal Stocks to Watch in 2011 – Part 1 – CLICK HERE.

Elmer B Stewart — Copper Fox President & CEO Elmer Stewart believes the Northwest Power Line is a key component of the company's feasibility study.

Finally, on February 23rd, 2011 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 and the company’s shares made a dramatic move from $.96 cents on February 11th to $2.70 a few months later. Shares of Copper Fox have subsequently pulled back from their April highs to the $2.00 range. MiningFeeds.com connected with Copper Fox boss Elmer Stewart recently to discuss the significance of the Northwest Power Line and the company’s future.

You joined Copper Fox as Chief Executive in 2009, when you were doing your own due dilligence what was it about the Schaft Creek project that caught your attention?

I joined Copper Fox as President and CEO in July 2009. Prior to that I was a director of the Company and non-executive Chairman of the Board. I have always been excited about the size of the resource, its polymetallic nature, metallurgical recoveries and the general setting of the deposit. The reported low grade nature of the Schaft Creek deposit was clearly a function of the low cut-off used to report the resource which I saw as a positive. Using a higher cut-off grade clearly reduced the resource, but provides higher average metal grades. The ability to balance average grades and resources is fundamental in mine development. Another aspect was that developing mines and specifically open pit mines in mountainous terrain depends on the ability to have space for the infrastructure and waste piles associated with mine development. Schaft Creek possessed all these features.

In February the British Columbia government approved the “Northwest Transmission Line” which, when completed, will provide you with the power reguired for the project – tell us a bit about what this means to Copper Fox?

The NTL is fundamental to the development of the large copper deposits located in northern British Columbia including Schaft Creek. Without this supply of electricity, the capital and operating costs would increase which directly impacts the economics of these deposits. The NTL is also good for the residents of northern British Columbia in that it brings environmentally friendly energy to the region and opens the area up to development for other business enterprises as well.

The company has a relationship with Teck, Canada’s largest diversified mining company, can you explain the significance of this relationship to our readers?

Teck has an earn-back right pursuant to the Option agreement entered into in 2002. We have been working with the senior technical people from Teck since early 2010 when we announced that we were proceeding to complete a feasibility study on Schaft Creek. The purpose of engaging Teck early on in the process of completing the feasibility study was to have their input into the feasibility study that is required to allow Teck to make their decision as to their participation in the Schaft Creek project. Teck’s experience in operating open pit mines of the size of that contemplated at Schaft Creek is valuable information that helps makes the feasibility study a realistic and practical study in the contexts of developing the deposit.

In terms of comparables, are there other projects in Canada that compare to the Schaft Creek project in terms of size, grade and composition?

Schaft Creek is a very large project and possibly the largest one in Canada that is undergoing a feasibility study. The work completed in 2010 suggests that a substantial portion of the Schaft Creek deposit has not been tested by drilling. In addition the nature of porphyry deposits suggests that there should be other similar deposits within the same general area. The two large zones of copper mineralization exposed on surface and the large untested chargeability anomaly may represent one or more deposits. Of course exploration will need to be completed to confirm this interpretation. At this time, we do not know what the ultimate resource could be at the Schaft Creek property so it is difficult to make a comparisson with other deposits. But given the geophysical and geological information, I suspect that Schaft Creek may be much larger than the our resource estimation completed in late 2006 suggests.

With a deposit containing copper, gold, molybdenum and silver, please comment of the econimic associated with the project?

The preliminary feasibility study completed in September 2008 showed a -$0.32 to produce a pound of copper net of the sale of the gold-molybdenum-silver credits. This was based on metal prices of $3.12/pound copper, $692/oz gold, $33.00/pound molybdenum and $13.09/ozs silver. The current metal prices for three of the four metals are substantially higher than those used in the 2008 calculations and this increase/decrease will be included in the feasibility study currently underway. The sale of four metals from each tonne of rock processed show the economic impact on the cost to produce a pound of copper which substantially impacts the overall economic performance of Schaft Creek.

What major milestones is Copper Fox working towards completing in 2011?

Our near term major milestones are; to complete the updated resource estimation which is expected to be completed shortly, commence the 2011 program at Schaft Creek before the end of May and complete the balance of the work required to complete the feasibility study as soon as possible. A substantial amount of work has already been completed on the feasibility study to date. Due to the large amount of technical data and studies that need to be performed it’s not easy for the independent contractors working on the feasibility study to give Copper Fox a specific date on which the study would be completed. One of our main objectives at Schaft Creek in 2011 is to test the three targets identified above – any one of which we believe could be another previously undiscovered deposit.

This interview appeared in 10 Base Metal Stocks to Watch – Part 4 – CLICK HERE – for the article.

Mining Trucks — Copper Mountain Mining is literally about to move a mountain.

The mine will utilize conventional crushing, grinding and flotation processes and equipment. Once the copper concentrate is produced, it will be shipped to one of Mitsubishi Materials’ existing copper smelters in Japan: first, by rail to the port of Vancouver, and then by ship across the Pacific Ocean. B.C. Minister of Transportation and infrastructure Shirley Bond recently stated, “This really shows how the Pacific Gateway is the best transportation route for Asian businesses.” And, “Mitsubishi Materials Corporation invests in the B.C. Copper Mountain Mine to get the copper concentrate they need, knowing that the best way to ship it is through the Port of Vancouver.”

After years of development you are quickly approaching your June target to have the mine in production. What does the production schedule look like?

The commissioning of processing equipment is progressing well. The primary crusher and conveyor system to the coarse ore stock pile has been tested and is also operating well. The commissioning team is currently active in the concentrator building and the start up is on schedule for production in June.

Preproduction mining is advancing well with major equipment fully operational and stock piling ore for the concentrator start up in May. We are currently mining at a rate of 100,000 tonnes per day with the planned mining rate to increase to 160,000 tonnes per day.

Once the copper concentrate is produced you plan on shipping it to your partner Mitsubishi’s smelting operations in Japan – how does one go about shipping 100s of millions of tonnes of ore half way around the world?

Copper and precious metals are contained in a concentrate which are produced at the mine for shipping to Mitsubishi. The 185,000 (annual) tonnes of concentrate is trucked to the port of Vancouver at a rate of approximately 500 tonnes per day. The concentrate is then stored at the Vancouver Port and shipped in approximately 12,000 tonne lots to the smelters in Japan.

Have you determined the costs per pound of copper associated with shipping the concentrate?

Total offside cost for moving concentrate to the smelters in Japan is approx. $110 per 1 metric tonne of concentrate which equates to about $0.18 per pound of Copper.

What are your overall costs factoring in the silver and gold net precious metal credits?

Our published cost is estimated at $1.30 per pound of copper, net of precious metal credits which vary depending on metal prices and foreign exchange rates.

In what month will Copper Mountain see cash flow from operations?

Because of our favourable agreement with Mitsubishi Materials Corporation, we expect to have a shipment in late June or early July and receive a provisional payment for 90% of the concentrate shipped.

After you put your first and only project into production, what’s next on the horizon for Copper Mountain?

We continuously take an entrepreneurial approach to evaluate other potential projects, companies, and mergers and acquisitions that may add shareholder value.

This interview appeared in 10 Base Metal Stocks to Watch- Part 3 – CLICK HERE – for the article.

peeyush varshney canada zinc metals — Peeyush Varshney, President & CEO of Canada Zinc Metals.

Your main project is the Akie zinc-lead-silver deposit in B.C., Canada. Could you give us an overview on the region?

The Akie deposit, and in fact all of our property holdings, are located in the highly prospective Kechika Trough which is the southern-most portion of the Selwyn Basin. This basin is host to several of the world’s largest zinc-lead deposits and is one of the most prolific zinc-lead districts on the planet.

What is the existing infrastructure in the region and how might this benefit the company down the road?

The infrastructure around our Akie deposit is relatively advanced. Akie is situated just above B.C.’s largest lake, Williston Lake, home to the largest hydro-power plant in the province. In 2008, we completed the construction of a road to the deposit. The roads connect to the town of Mackenzie (260 km to the south) where there is an existing rail line which could be utilized to haul concentrate. From Mackenzie we could transport the concentrate to Trail, British Columbia, where Teck Resources has a zinc smelter; or, transport the concentrate to the deep sea port of Prince Rupert on the west coast of B.C. From there, the concentrate could be loaded on to ships and transported to smelters in Asia.

You finished your NI 43-101 resource estimate in 2008, what is the resource estimate on the project and do you see further exploration upside?

Using a conservative 5% zinc cut-off grade, the deposit has an inferred resource of 23.6 million tonnes of 9.1 % combined zinc + lead (7.6% zinc, 1.5% lead) and 13 grams per tonne silver, this equates to 3.95 billion pounds of zinc, 780 million pounds of lead and 8.95 million ounces of silver. The resource calculation from 2008 only includes the drilling we did until the end of 2007. It does not include the drilling done in 2008 or 2010. The Akie deposit remains open in all directions so the resource could certainly be much larger than our current 43-101 calculation.

You have some notable shareholders in the company, could you tell us about them and what it means to the company?

Tongling Nonferrous Metals Group currently owns approximately 35% of the Company. Based in Tongling, Anhui Province, Tongling is a state-owned company and one of China’s largest copper smelting companies. Tongling is involved in exploration, mining, ore processing, smelting and refining; and, processing of copper, lead, zinc, gold, silver and other non-ferrous and rare metals. We were contacted by Tongling in the summer of 2008, they visited the Akie deposit and made an investment in the Company.

Lundin Mining is also a strategic shareholder of the Company – they have participated in several of our private placements and hold approximately a 5% equity interest.

Along with the Akie deposit, our significant prospective land package in the Kechika Trough represents a potential long-term development opportunity for both Canada Zinc Metals and major mining companies. Our properties could potentially provide zinc-lead concentrate for several decades to come.

What are your plans for the remainder of 2011?

Our primary objective this year is to continue doing the work required to advance the project to the completion of a preliminary economic assessment and pre-feasibility study. Currently, a geotechnical drilling program is taking place on the Akie property. From this information, we will submit an application to the government to allow us to proceed with an underground exploration program. We also anticipate a new surface drill program to test some very high priority targets elsewhere on the Akie property.

On a corporate level, we are continuing discussions with several large base metal mining companies that have shown interest in our Company and our extensive property holdings.

This interview was featured in 10 Base Metal Stocks to Watch – Part 1 – CLICK HERE for the article.

Disclosure: at publication Canada Zinc Metals is a client of MiningFeeds.com.

Rathdowney Drilling — Rathdowney President & CEO John Barry (left) on site in Ireland.

When you started Rathdowney, could you tell us why did you target zinc? And why did you focus on Europe, particularly Ireland and Poland?

It was early 2007 and the price of zinc was soaring. Some major zinc mines were slated to close in the medium term and the Chinese appetite for zinc was becoming ravenous. This year China will consume 44 per cent of world zinc mine supply. In the past China was a “swing” player in supply demand for the metal, quickly switching from net importer to net exporter depending on price. As the emerging economies grow and become richer and more sophisticated the raw need for copper and iron for infrastructure shift to second-cycle metals such as zinc as the middle-class expands and its main use for galvanising steel in construction increases with growing demand for cars and white goods (appliances). In Ireland, Rathdowney staked a large land position second only to Boliden and Teck. The best place to find a new mine is near an old mine and Ireland has world-class zinc mines such as Navan (5th largest in the world) and Lisheen (10th largest).

Hunter Dickinson (HDI) in Vancouver welcomed the idea of gaining a foothold in the exploration and development of base metals in Europe and became an early investor. Then in September 2008 Lehman Brothers collapsed and triggered the greatest global economic convulsion in living memory and the appetite for exploration risk almost completely evaporated. We had assembled a crack team which was amply funded and we had the support of HDI so we had to react quickly and find more advanced projects which had much less exploration risk. It so happened that our Chief Geologist Mike Mlynarczyk was Polish and Duncan Large our technical adviser based in Germany could provide insights into the advantages and opportunities for a first-mover into the Upper Silesian zinc-lead district of Poland.

Your project in Poland is clearly your lead horse, can you talk about the history behind the project and what the non-compliant 43-101 resources estimate looks like?

Zinc has been mined in Upper Silesia in southern Poland since the 12th century. The USGS estimates that it is the largest carbonate-hosted zinc district in the world in terms of total zinc metal endowment which is a measure of the total amount of metal ever mined and still in the ground. Since World War II and particularly during the 1970’s and 1980’s Polish geological surveys delineated zinc-lead deposits, with resources under a Soviet-era classification system some of which would be considered historic estimates under Canadian standards, northwest of the historic city of Krakow in Upper Silesia. State mining companies exploited some of these resources moving northwards in a serial or piecemeal fashion. Resources supported long-life mines and a customised zinc smelter was built. You have to understand the command-economy mind-set. Why would you need to explore and develop new mines when your existing mine could supply your smelter for forty years or more? Also, Poland has a quite bureaucratic permitting process based on Polish administrative law and acquiring exploration ground particularly containing major resources which have been officially gazetted is not a trivial process. Rathdowney staked exploration ground over the footprints of substantial deposits to the north of the Pomorzany Mine and nearby concentrator-smelter complex at Boleslaw. It took about 15 months to permit the first exploration concession. Poland is not a place where you can fly in and acquire quality exploration assets. A sustained presence and patience is required and Rathdowney committed to this process early on by assigning Mike Mlynarczyk to a full-time posting in Krakow. It was worth it because Rathdowney investors have 100 per cent exposure to exploration success with no equity held by any third-party vendor. Some 180 kilometres of diamond drilling had been completed but evidence is only in the State archives. The replacement value of the historical drilling is probably close to C$40 million. Rathdowney has electronically captured this vast amount of historical drilling in a project database and having raised C$34 million – on St. Patrick’s Day it so happened – the team is soon to embark on an aggressive resource verification drilling program on the Olza Project with an exploration target of 20 million tonnes to 120 million tonnes at around 6% Zinc equivalent. The State-owned Pomorzany mine will be exhausted in the next few years and is scheduled for closure in 2016. The sustainability of this historic mining district now depends on Rathdowney’s aggressive resource delineation program and there is no time to lose.

What type of infrastructure is available in the area (Poland)?

It could not be better. The best remaining historical resources are now within Rathdowney’s concessions and are located only 30 kilometres from the State-owned concentrator and zinc smelter. The concentrator can process 2.5 million tonnes of ore and the smelter can refine 100,000 tonnes of refined zinc metal. Also there is a rail spur from the main Warsaw-Katowice rail line which runs through the concession area right to the Boleslaw concentrator-smelter.

Your Irish concessions are spread throughout Ireland, and I noticed, strategically located either adjacent to existing mines or development projects. What is happening in the region and who else is operating there?

New Boliden operates the Navan Mine about 45 kilometres northwest of Dublin produces about 200,000 tonnes of zinc in concentrate and 40,000 tonnes of lead – there are no zinc smelters in Ireland. In Tipperary, Vedanta now operates the Lisheen Mine where some 1.5 million tonnes of ore are mined per year at an average grade of 12 per cent zinc and nearly 2 per cent lead. Lisheen is expected to close in 2014.

In recent years in the Pallas Green area of southern Ireland Xstrata in partnership with Junior explorer Minco has delineated an inferred resource of 24.1 million tonnes averaging 7.85% zinc and 1.35% Pb. There are some 23 drill rigs operating on the Pallas Green project. Nearby at Stonepark Teck in partnership with Connemara Mining are very optimistic about a new zinc discovery. Six drill rigs are churning through a 25,000 metre diamond drill program planned for this year. In County Clare, Lundin Mining in partnership with Belmore Resources is exploring the Kilbriken zinc-lead discovery where five drill-rigs are in operation. Drilling continues to cut thick high-grade zinc-lead-silver sulphide mineralisation. Rathdowney’s Mallow and Galway project areas are in this district straddling know mineralised structures.

It takes good people to develop good projects. Could you tell us about your team and also your relationship with Hunter Dickinson?

Yes people are as important if not more important than a particular project itself. If you back good people they will generate quality projects and that is exactly what happened with Rathdowney. I was having a pint of Guinness with David Hall in a Dublin pub and we came to the realization that there was only a handful of junior zinc explorers but lots of companies out looking for the next big discovery in copper. To the west and south lay the Midland Ore Field which, although small in area, is acre for acre one of the richest exploration districts in the world for zinc. There was some quality exploration ground available but we realised we would have to focus the best minds in the business to discover the next generation of concealed carbonate-hosted zinc deposits. I had worked on exploring the peripheral parts of the Navan resource back in 1988 and I joined the exploration team at Lisheen shortly after discovery in 1990 so I knew my way around the Irish zinc-lead district. David and I asked Dick Sillitoe one of the world’s foremost copper exploration geologists and Duncan Large an internationally respected expert on carbonate-hosted zinc-lead to help as technical advisors. Then Ron Holman, a retired octogenarian and discoverer of the Ballinalack zinc-lead deposit near Rathdowney’s Westmeath project areas, joined the team. Bill Fisher who at one stage was Boliden’s VP for Exploration also agreed to become technical advisers to Rathdowney. When Hunter Dickinson took an interest Mark Rebagliati was able to add his considerable experience to the mix. So we have a highly experience international team with a track record of discovery. This is why I like to say that with Hunter Dickinson and its pool of expertise that Rathdowney has the muscle of a major with the flexibility of a junior. The team has regular technical review sessions which support and provide guidance for our very talented team of geologists in Poland and Ireland. We have regular brain-storming sessions and now that the drill targets have been selected we look forward to engaging and passionate discussion and of course exciting results.

This interview appeared in 10 Base Metal Stocks to Watch – Part 2 – CLICK HERE – for the article.

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