5 Mining Stocks to Watch in 2012: Part 1

With a volatile and challenging start to the year, many investors are wondering what else is in store for the mining sector in 2012.

With the first quarter of a new year in the books we step back this month, take stock if you will, look towards the future and ponder what’s in store for the balance of 2012. This year has been marked by volatility in both the commodities sector and the equity markets in general. Crude oil is north of $100 per barrel again, natural gas is hitting year lows while metals and minerals are all over the map.

So far, 2012 has been completely unpredictable. For mining stocks, uncertainty reigns supreme and rapid recoveries are marked by quick sell-offs. Already this year, uranium stocks recovered sharply after 2011 tax-loss selling season but have since given back some gains. It hasn’t been much better for the major metals – gold, silver and copper stocks have also seen big capitulations this year.

A new star in the commodities sector, graphite, was born. The emergence of graphite as a strategic mineral and the success of Northern Graphite (Stock Profile – TSX:NGC & OTC:NGPHF) spawned the arrival of new public graphite companies in the first quarter of 2012. MiningFeeds was ahead of the graphite curve. In 2011, we connected with Greg Bowes, President & CEO of Northern Graphite – CLICK HERE – to read the exclusive interview.

The critical nature of the rare earth sector was also back in the headlines to start the year as Barack Obama joined forces with Japan and other nations to oppose China’s policies on domestic rare earth elements with the World Trade Organization. The news solidified a bottom for many rare earth stocks as investor confidence in these enigmatic tech metals was assured.

So what will the balance of 2012 bring investors? Well, we don’t know but we can certainly identify a few companies that are worth keeping an eye on for the rest of this year.

Last year, we featured numerous “Stocks to Watch” on our site and, even though 2011 was a difficult year for the mining sector, there were some great outcomes. A number of companies profiled by MiningFeeds received takeover offers (Minefinders, Lithium One and Grande Cache Coal) while many others reached major milestones (financings, partnerships and buy-ins).

In alphabetical order we feature five stocks to watch in 2012:

1. Balmoral Resources Ltd. (Stock Profile – TSXV:BAR & OTCQX:BALMF)

We first met Darin Wagner over a year ago shortly after the launch of his new company Balmoral Resources. Previously, Mr. Wagner served as the President and CEO of West Timmins Mining from the discovery of a high-grade gold zone in Timmins, Ontario to the acquisition of West Timmins by Lake Shore Gold in an all share deal valued at $424 million in 2009.

Coming off the heels of a successful acquisition, Darin partnered with Henk Van Alphen and his team at the Cardero Group and looked at over 100 properties in not less than 8 countries before they decided to settle on two projects in an area they knew well: Eastern Canada in the provinces of Quebec and Ontario.

Since then, the company has been  actively drilling and developing their project portfolio both individually and through partner programs. Recently, the company announced drill results from their Detour gold project in Quebec including, an intercept of 9.30 metres grading 11.42 g/t gold from drill hole MDE-12-20 from the Martiniere Property. This compared favourably with the original discovery hole MDE-11-16 which returned 9.33 metres grading 12.93 g/t gold.

The ME-16 is the third high-grade gold zone discovered on the Martiniere Property where the Company is outlining a significant new high-grade gold system located less than 50 kilometres from the massive Detour Gold development project. Balmoral controls over 85 kilometres of this emerging gold belt and shares the neighbourhood with Detour Gold (Stock Profile – TSX:DGC) and Osisko Mining (Stock Profile – TSX:OSK).

In addition to an expanding high-grade discovery, Balmoral’s partnership with GTA Resources and Mining Inc. (Stock Profile – TSXV:GTA) created some real excitement earlier this year. Shares of both companies took-off in mid-February when they jointly announced results from a drilling program on the Northshore property near Schreiber, Ontario. Results included 149.5 metres grading 3.21 g/t gold (uncapped) or 1.20 g/t gold (capped).

On the news, GTA Resources and Mining closed the week at $1.22, up 480%, while trading more than 15 million shares – more than the issued and outstanding common shares of the company. Under the terms of the option agreement, GTA can earn a 70% interest in the Northshore project from Balmoral by spending $5.5-million on exploration expenditures, issuing 3.5 million shares to Balmoral and making cash payments totalling $150,000.

Balmoral’s shares are currently trading at $0.75, down from highs of $1.25 that followed the frenzy of the impressive holes from Northshore in mid-February.

BHP's iron ore processing facilities in Port Hedland, Australia. Australia is the world’s biggest exporter of iron ore.

2. Cap-Ex Ventures Ltd. (Stock Profile – TSXV:CEV & OTC:CPXVF)

Cap-Ex Ventures is a Canadian based iron ore company with significant landholding in Labrador, Quebec near the mining town of Schefferville. The company is focused on the development of its wholly owned Block 103 property. And for this junior, perhaps more aptly named the “blockbuster” property.

In October 2011, Cap-Ex announced the results from a step-out drilling program. At the time, the company shares were trading at $0.325. The step-out drilling extended the strike length of the Green Bush high-grade magnetite zone from 3.5 kilometres to approximately seven kilometres. Initially, the Green Bush zone, an intense magnetic anomaly on the company’s wholly owned Block 103 property, was tested by 10 drill holes spaced at 500-metre intervals, over a 3.5-kilometre strike length and a width of at least one kilometre. Including 125.13 m of 30.4% total Fe at Block 103.

Since then, to quote Casey Kasem, “the hits just keep on coming”. The company released a string of results on par with the original step-out program and the progress was reflected in its share price. After reaching a high of $1.25, the shares have since settled back to the $0.85 range.

In December, 2011, Cap-Ex announced an $0.85 per unit financing (share with full warrant at $0.95 for 2 years) for $10,200,000. Mining investment group Forbes & Manhattan (F&M) and its associates agreed to subscribe for the majority of the financing including 2 million units purchased by F&M insiders.

Forbes & Manhattan is a leading private merchant bank with a global focus on the resource-based sectors.  F&M is headquartered in Toronto, Ontario with offices, operations and assets across the globe. Recently, F&M had a substantial win with iron ore. Portfolio company Consolidated Thompson Iron Mines, also with operations in northern Quebec, was acquired by Cleveland Cliffs in May 2011 for $4.9 billion or $17.25 per share representing a return of over 7700% to shareholders. F&M effectively “incubated” Consolidated Thompson from a grassroots exploration stage iron ore company in 2005, raising approximately $1 billion while completing a scoping study and 3 feasibility studies.

The landscape for Quebec iron ore may be improving – indirectly. In late March, the Australian Parliament passed legislation to impose 30 percent tax on iron ore mines. Iron ore prices may see a rise in the global markets impacting margins of steel companies, according to some analysts.

“As far as tax on iron ore is concerned, there may be some kind of price rise globally, as miners will pass on the cost to importers,” said Federation of Indian Mineral Industries (Fimi) Southern Chapter Chairman Basant Poddar.

In the short-run, some feel that with slowing growth in China iron ore prices may ease a bit. According to the Australian Burea of Resources and Energy Economics, “Over the remainder of 2012, iron-ore prices are forecast to ease as production increases from new projects in Australia and growth in Asian steel production weakens (while) further price decreases are expected to be limited by an expected reduction in exports from India.”

For 5 Mining Stocks to Watch in 2012 – Part 2CLICK HERE.

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