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Graphite Mine Progressing in Madagascar

Source: Maurice Jackson for Streetwise Reports   05/24/2018

Proven and Probable’s Maurice Jackson interviews DNI Metals Executive Chairman Dan Weir, who discusses his company’s plans for its projects in Madagascar.

Maurice Jackson: Our feature issuer is establishing itself to become one of the world’s leading in graphite producers, DNI Metals. Joining us for our conversation is Dan Weir, the executive chairman of DNI Metals.

Dan, DNI shareholders have been awaiting some company updates, let’s get everybody up to speed because I know that you’ve been working laboriously since our last discussion and want to share the fruits of your labor.

All too often when I talk to speculators, they focus on the tangibles. I’d like to remind our readers that the intangibles are equally important, which leads to today’s press release entitled “DNI sponsors clean water day in Madagascar.”

What can you share with us?

Dan Weir: It’s very important. We take fresh water for granted; we can walk over to our taps, we can brush our teeth, we can drink the water. In most places in the world that’s not what happens. There are approximately 21 or 22 million people that live in Madagascar and, according to U.S. AID, over 11 million people in Madagascar don’t have fresh water.

We started a drilling program in April of last year, and part of that program the government wants you to work with the local community; it’s called CSR or community relationship that they want us to help the community. In fact, they make it mandatory that you do certain things for the local community in order to operate a drill program. As part of that because we had a drill rig there, we drilled a water well for the local village. They had a small soccer field that was built on the side of the hill and kind of sloping; because we had the bulldozer there, we leveled out a whole big field and built them a nice soccer field. When I was there a couple of weeks ago, tons of kids were out playing soccer, so it was really great to see that they were actually using that.

When we were developing the project, we had to put some roads in off the main paved highway and as part of that we took and extended the road right back to the village. So now it’s about a three-kilometer road that goes round the village right out to the paved highway, which they never had before. They always used to just walk back and forth on a small path through the bush.

These people are very poor, they grow fruit trees and basically live off the fruit and the rice that they grow. When we were putting the roads in, we did knock down some of those fruit trees. We planted two or three times as many fruit trees as we knocked down, all along the side of the road; it helps stop the erosion and it also gives them fruit trees. And also we compensated the people for that too, meaning that any fruit trees that we knocked down we paid them for that as well.

We worked very hard with the local people, and I’m very excited in the future to work with the local people and potentially make their lives better with the development of a mine because we can give them jobs and we can help them with all sorts of other things to improve their lives.

Maurice Jackson: I had the pleasure of going to Madagascar twice last year to visit the DNI projects. What a wonderful group of people there in the community and I know they welcome DNI’s initiatives. Just from a personal standpoint because I know you have a very intimate relationship with the community there, how does this event impact you?

Dan Weir: It’s pretty amazing that we were able to sponsor the event, number one, and number two, in being able to give people fresh water. I remember back in February of 2017, we were on the property looking and deciding the route for the roads. One of the routes we looked at was going farther to the north and coming in from the north. We ultimately brought the road in from the south to the main zone and to the village, but we looked at bringing a road in from the north.

A group of us split apart when we were deciding on the route. I wanted to go look over here and see if the road could go that way; a couple of the other people went the other way. We got separated and I ended up back at the village. I didn’t have any water with me; I’d left my water bottle with one of the other people. I went over to a small hut and asked if they had any water.” They had a barrel, they put a cup in the water and handed it to me, and I looked in the cup and it was a reddish color; it almost looked like rust, and I’m thinking, “Oh, my God, these people actually drink this water all the time.”

Now that we were able to drill a well and give them fresh, clean water right in the village, that’s a pretty good feeling, I can tell you.

Maurice Jackson: Kudos to you. Job well done there. What kind of response was DNI receiving from the community?

Dan Weir: The community is very supportive of us coming in and developing this project, increasing their standard of living. Again, they’re looking for jobs. The statistics in Madagascar is somewhere around an 80% unemployment rate. The average person lives off or earns less than 50 cents a day, so if we can provide good jobs for the locals, that is huge, and they welcome us with open arms.

Maurice Jackson: Switching gears, the press release also referenced DNI update, what type of updates do you have for us?

Dan Weir: A couple of things, and let’s touch on about three different things that we’ve been working on. I just spent about a month in Madagascar; I’ve been back a little over a week. The focus of me going over there was to meet with a number of our contractors, get a lot of quotes for equipment and everything else for the pilot plant that we’ll have in operation before the end of the year. 1) I’m going to provide an update about the pilot plant, 2) an update about the bulk sample that we took from the property in November and we shipped it to India and had it tested. 3) And then we’ll talk a little bit about the arbitration with Cougar.

First of all, let’s talk about the pilot plant and getting all of that organized. We’re very lucky; 50 kilometers down the road from our property is a Caterpillar dealership. I’ve been in there getting quotes from them, but there is also Komatsu, there are a number of other companies in Madagascar where we can get all of the equipment that we need. And what I need by equipment, I mean the rolling stock or the excavators, the bulldozers, everything like that. So I’ve been organizing and getting that all ready. The pilot plant itself, we have engineered and designed it.

Let’s start with the big picture. Let’s start with where we are in Madagascar, then we’re going zoom in to where the pilot plant is possibly going to go. We have an opportunity of a couple of different locations where we can put it, and then I’m going to talk a little bit about the components that we got for the pilot plant.

We have two properties, the L-shaped Vohitsara property and the square-shaped property called the Marofody. You can see that the U.S. Geological Survey put maps together that showed where historically there were graphite mines. You can see that there are numerous north-south lines on both of our properties.

Now, we’re 50 kilometers to a port; we always stress this and we make sure that people understand that and also remember that one of the reasons why we were focused in this area that they’ve been producing graphite for 100 years. There is an operating mine just to the south of here, there is another operating mine right here right now, and historical mines throughout this whole area.

Maurice Jackson: This port that you just referenced here, this is a world-class port, correct?

Dan Weir: That is correct. It sits right up here only 50 kilometers away. There was a billion dollars spent on it within the last 10 year,s and there was an announcement by a Japanese firm that they are going to extend it out even farther out to accommodate the newer ships. Currently, it can take the second largest container ships in the world. The biggest ships in the world can’t come in here yet because of depth, but they’re expanding that out. Every day there are container ships that come in and out of this port, so shipping graphite is very simple for us with multiple carriers coming in and out.

Let’s just talk a little bit about saprolite just to remind people why we’re focused on this area because of the saprolitic–type material. It’s a weathered rock. Most of Madagascar is very, very dry. Where we are, the wind comes in off the ocean and as the warm moist air comes in there is a ridge that runs along the coast, it goes up 1400 meters and it dumps all the water in this area. Saprolite is just another term for weathered rock in a climate that is hot and gets lots of rainfall.

The main highway is the line that runs north south. We have the entrance to our second property, Marofody, and an entrance that we built into our first area. When we build the pilot plan, we have a couple of different locations where we can put it. And it will be modular so that over time we may move it to a few different places. Let’s look at the Marofody property, which is that square property. We have a very good gravel road that runs into the property here. There is a nice big river out here because we’re going to need water. When you’re processing the graphite through the plant, it’s about 50% water and 50% of the ore or the dirt that we feed into the plant to make it move through the plant.

These are a bunch or rice paddies. Right next to the road might be one place where we’ll set up the pilot plant. A couple of the other areas where we could set it up out in the Marofody, there are the graphite areas, so this will be a mine, this will be another mine. Again, the road runs up through the middle. We can set up the pilot plants there, put all the tailings down here. We’re still close enough to the river to bring up the water to be able to use it.

People always ask about water. There are two reasons for the tailings ponds. One is to get rid of the dirt once we have taken the graphite out of the ore. The second is we collect the water. When we make a tailings pond where the water settles and all the fine material or the dirt or the dust in the water falls down to the bottom, then we can reuse that water. We will reuse about 90% of the water through our processing plant; we’ll have to make up with about 10% of the water on a daily basis because out in the tailings ponds you get some evaporation from the water, so we’ll have to bring in some clean water in conjunction with that; it’s just called the make-up water.

There are a couple of different opportunities on the Marofody property where the pilot plant will be situated. On the Vohitsara property, the property that we have done all the drilling on, we have the main. We built a road that comes into the main zone. The village that I mentioned sits right to the side along with the water well that we built.

There is a smaller river that runs through here but there’s lots of flow through that. We’ll have plenty of water for the property. We’ll put a warehouse in there so the trucks can be loaded and then taken right up to the port; the containers actually on the truck go right up to the port and get shipped out. There is a big area that is currently a rice paddy; it will be a perfect location for a tailings pond.

We’ve drilled off the southwest zone, so there are lots of ore that we can bring from there, and we can bring the ore over down the road from the main zone to put it here where the processing plant will go. As I said before, we have multiple choices whether we want to put the pilot plant on the Vohitsara property first or over on the Marofody property. Those would be one of the two areas.

We’re going switch over here and look at the flow sheet for the processing plant.

As I mentioned, the ore will be brought over to the processing plant; it’ll be stockpiled. It will then go through the processing plant. Graphite is hydrophobic; it hates water. So, think of oil and water, they don’t mix; they try and get away from each other. Graphite is very similar to that; tries to get away from the water.

This looks very complicated, but I’m going to break it down. Just keep in mind the whole purpose of this is to separate out the graphite, which is what we want to sell, and get rid of the dirt or the tailings that go out to the tailings pond. It’s not that complicated, it’s fairly simple, but I’ll break it down through this.

So, it gets fed in. In most operations if this were a hard rock deposit, this would be a massive big area. You’d have multiple crushers, grinding circuits, and this would cost over a third to a half of your project. The cost of all these different grinding mills and everything else in a hard rock circuit can be very expensive., but we’re starting with that saprolitic type material. Think of clay material or sandy type material.

We’re dropping it into a hopper; we put it through a roll crusher, a trammel and then a polishing mill. And really all we’re doing is breaking up the crumbs. We’re adding water to it as we do. There is isn’t this hard rock where we got to crush and grind it; this is simply breaking up some of the crumbs before we put it into the flotation tanks.

Once we get it through the polishing mill, then it gets put into the conditioning tank and into what we call the first set of flotation tanks, which is called a rougher. We use terms like rougher and cleaner; I’ll explain that as we go along.

The rougher is taking the initial ore, separating out some of the graphite, the graphite flows down to a cleaning circuit, and you’ll have multiple different cleaning circuits depending on the purity that the client wants. As we put it through each one of these cleaning circuits, we’re purifying it as it goes. We also have built within the cleaning circuit a secondary regrind circuit because in some cases some of the ore or the dirt, we call it dang, gets caught in between the different flakes. So using a small regrind circuit, we can break apart those flakes and get rid of the material in between, which then gets fed back into a cleaning circuit and away you go.

There are two other flotation cells here. As the tailings are fed out of the rougher, we put them into a couple of different scavenger cells. The scavenger cells are trying to get as much material out of there as i can. It captures much of the graphite, which is then fed back into the rougher circuit and here before it goes out to the tailings pond.

The dirt flows out to the tailings pond, the graphite flows back to the rougher over here, and then down through the cleaning circuits, the purification circuits, and then ultimately out of the last cleaning circuit, it goes into what we call a centrifuge. A centrifuge is simply, picture your washing machine at home for your clothes, once it’s gone through the washing cycle, it spins around really, really fast and tries to get out as much water as it can before you put into the dryers. And we’ll have diesel dryers; it’s a big long cylinder that the material gets feed through as it’s drying, then it goes out into a screening area, gets sorted to different sizes, put into bags and shipped whether it’s to Korea, to India, and United States. Multiple times we’ve talked about those are our primary area that we’re focusing on.

The next chart shows where these all get laid out on the property. So, our pilot plant will be all built in containers. These squares are representing 40-foot containers, so I’m giving you the layout where everything is going be laid out on the property.

The flotation cells that I mentioned, here is the rougher, you have your scavenger circuits here, then you have your different cleaning circuits. Each one of those gets a 40-foot container. Just to let you know, we designed this plant to make sure that it would fit in containers. This is the biggest plant that you could build that would fit into containers.

You basically have seven containers sitting there, the rest of the material including the conveyors and the trammels and some of the polishing mill out the front, they’ll come into container but they’ll be set up on concrete pads out in this area. Stockpile for all the material will go here, then once it’s gone through all the container circuits or the flotation cells, it gets brought out to the centrifuge, the heaters, the dryers, and everything else.

You can see here we need an area that’s about 48 meters by about 60 meters across this way. We don’t need a big area for this, but I really want to show everybody that we have it all engineered, designed exactly how we want to lay all this out, and how we want to proceed with the pilot plant.

So, in conjunction with the information I gave you from all the different flow sheets there, there’s a couple of other points I want to make about the pilot plant. We went out and we’ve already gotten quotes from three different groups in China, one group here in Canada. One of the Chinese groups has said to us that if we go with them that they can build the pilot plant within 60 days. Remember, it all gets put into containers. And it will take about 30 days for shipping. It probably takes another 60 days by the time we clear customs in Madagascar, get it to the property and set all the plants up.

We believe in the timeframe we have here that by the end of the year and hopefully sometime in the fall that we will be producing graphite from the pilot plant. I’m very excited about what we’re doing. As the pilot plant is being built in China or here in North America, we will be preparing the site, everything will be organized and ready. The tailings pond will be built. We’ll probably even have a stockpile of material so that when the containers and everything get over there, we can start going right away.

Maurice Jackson: This is quite exciting news for shareholders and a great combination of tangibles and intangibles.

Before we close, Dan, give us an update on the litigation with Cougar Metals?

Dan Weir: Cougar metals, I’m going to refer everybody to the press release because the information in the press release was put together by our lawyers, so I think it’s better that people just go to our press release and read the wording that we put in there. This will stop me from getting into trouble at all with my lawyers and the whole arbitration process.

One other thing that we didn’t mention was the bulk sample. In October, November we went in and took in a 40-ton bulk sample, 20 tons from the south west zone, 20 tons from the main zone; we shipped 20 tons of it to India. The Indian group is one of the largest producers in India; they’ve been producing graphite for about 80 years. They ran the material through their processing plants and they were very happy with the results. From those results, we have been in negotiations and I’m glad to say that we are in final discussions about them buying material from our pilot plant. That’s going very well. Stay tuned, over the next little while we should have some further news out on that.

Maurice Jackson: Looking forward to hearing about another offtake agreement there. Dan, what is the next answered question for DNI Metals, when should we expect the response and what determines success?

Dan Weir: I think the biggest question that all of us have had, and definitely shareholders keep reminding me of this, is getting the environmental license for both the Vohitsara and the Marofody properties. The other reason why I was in Madagascar was I was working on that as well. We’re very close to completing all of that. I know it’s taken longer than most people expected; it’s taken longer than I expected to complete this. Let’s put this in perspective, from the day that we put a geologist and the biologist out on the site was about 12 months ago to complete the environmental study. That’s taken seven months to do all the field work, create a 500-page report. Remember, we created 500-page reports for each property; they’ve all been filed, all the filing fees have all been paid for all of these, and we’re just waiting for the license to be granted to us.

That whole process has been about seven months. You can see how efficient the Malagasy process is in getting a license. You try and get an environmental license in the United States, you’re not talking seven months, you’re likely talking seven years. So, it’s great and I know all of our shareholders want to see this happen as fast as possible, so do I, trust me. But we are basically at the one yard line here and it is getting done. I assure you that we’ll have this very soon.

Maurice Jackson: What is plan B is plan A doesn’t work?

Dan Weir: Plan A has always been that we wanted to get this project into production. The pilot plant is part of that, is getting samples because we know, and this is what most don’t understand about a graphite project, is that we’ll produce hundreds of different products, the key here is getting clients, it’s getting people that want to buy our material. Getting this pilot plant up and running as soon as possible so that I can provide samples . . and I’m not talking about one kilogram type samples, I’m talking about 20-ton samples that we need to be able to deliver to potential customers. That is extremely important and that’s what we’re doing.

A lot of other different graphite projects around the world focused on the traditional way of moving a mining project forward where they went out, they bought a project, they drilled it, did a resource study, did feasibility studies, and tried to then go out and raise some money to put it into production. In a graphite project, we have shown that that does not work, you’ve got to basically go out and get a pilot plant, get it going, get samples, build a customer base, and then you can build your final plant and start selling to your customers and work with your customers.

That’s always been plan A. Plan B, I don’t really like plan B. Plan B would be go back, keep drilling, do a resource report, do all sorts of other studies. Plan B really doesn’t work for a graphite project, you want to focus on plan A, get a pilot plan up and running, and with that pilot plant we can have some cash flow as well. That’s the most important thing when you’re building a graphite company.

Maurice Jackson: Last question, what did I forget to ask?

Dan Weir: I think we covered pretty much everything here. I really appreciate the fact that you’ve been to the properties, and I know how excited you were about seeing this being developed, seeing the pilot plant get going here, so you know what? The local people are happy, I love working with all the local people and get going here on this project is absolutely amazing, and having spent a month in Madagascar, I love being there and we’re so excited about getting the pilot plant up and running and ultimately selling to our customers.

Maurice Jackson: Dan, if investors want to get more information regarding DNI Metals, please share the contact details?

Dan Weir: Yes, you can get a hold of me anytime. My email address is Danweir@dnimetals.com or I’ll give you my cell phone, it’s 416-720-0754.

Maurice Jackson: Last but not the least, please visit our website, www.provenandprobable.com, where we interview the most respected names in the natural resource space. You may reach us at contact@provenandprobable.com. Dan Weir of DNI Metals, thank you for joining us today on Proven and Probable.

Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.

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Disclosure:
1) Dan Weir: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: DNI Metlas. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: DNI Metals.
2) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: DNI Metals. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: DNI Metals is a sponsor of Proven and Probable. Proven and Probable disclosures are listed below.
3) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with DNI Metals. Please click here for more information.
4) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
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from The Gold Report – Streetwise Exclusive Articles Full Text https://www.streetwisereports.com/article/2018/05/24/graphite-mine-progressing-in-madagascar.html

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A Takeover, A Court Date and An Equity Raise: Three Buys

Source: Adrian Day for Streetwise Reports   05/24/2018

Money manager Adrian Day reviews updates at three companies, including a rejected takeover bid.

Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT, US$3.45) has rejected a notional C$5 joint-bid for the company from Lundin and EuroSun. Under the bid, shareholders would receive C$2 in cash; C$2 in Lundin shares; and C$1 in EuroSun shares. Lundin would get Timok (and other Serbian properties), while EuroSun would get the Bisha mine and other assets in Eritrea, plus Nevsun’s cash hoard of $150 million.

Lundin clearly wants what is arguably the best undeveloped copper project in the world. It was Lundin that, in trying to buy part of Timok in 2016, set off Reservoir’s right-of-first-offer which saw that company sold to Nevsun. Now it has gone public with its offer for Nevsun after Nevsun apparently rejected the offer after talks throughout this year.

Eritrea complicates issues

The fact that Lundin teamed up with EuroSun, a small Vancouver company, and is prepared to give them all of Nevsun’s cash, shows how eager Lundin is for Timok. It also shows how few companies want the Eritrean assets, whether for legal, PR, or human rights concerns. (Technically, the bid for Nevsun comes from EuroSun, but clearly it is Lundin that is leading the charge.)

Nevsun, saying that the Lundin bid undervalued the company, also said any bid would have to be for the whole company. This sounds very much as though the Eritrean assets are being used as a poison pill to prevent someone taking over Nevsun.

Good offer?

We think the bid undervalues Nevsun (particularly Timok), especially since we do not put much value on the EuroSun shares. However, it is by no means derisory. Clearly, Lundin did not go public with its offer just to annoy Nevsun, and we suspect it will come forward with an improved offer. But if Nevsun rejects the offer structure as well as the price, Lundin will have to go hostile, more expensive, time-consuming and problematic.

There could also be another bid for the company, perhaps from Freeport, which is Nevsun’s partner on the deep Timok. A company might bid to buy all of Nevsun with a plan to spin off the toxic Eritrean assets.

No doubt, if there is not an improved offer, Nevsun shares will fall back; it was at $2.70 before the bid, after moving up from $2 at the beginning of the year. It wouldn’t fall back that far, given the strong PFS released in March, and more recent improvements at the Bisha mine. Worst case would be that Nevsun brings in a partner of some type that reduces the value of Timok to Lundin or a third party. A higher successful bid is not certain, but the risk-reward indicates holding (or even buying) at this level.

Wheaton to get its day in court

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE, US$21.67), notwithstanding somewhat mixed results—slightly lower-than-expected sales but also lower-than-anticipated costs—the outlook is improving. There is forecast 31% growth in “gold equivalent ounces” by 2020, over last year, with additional growth beyond that from the start of Rosemont in 2021 and a possible expansion at Salobo. (Wheaton would have to make an additional capital contribution to maintain its gold stream at the later mine, but in a good market, no doubt would do so.) Near-term growth includes the re-start of the San Dimas mine with its revised streaming deal, and the new pyrite leach project at Peñasquito.

Barrick’s decision to shelve the massive Pascua-Lama project is a blow to Wheaton’s leverage. It has already written down nearly 50% of its investment. And it has the option to end the agreement in mid-2020 and receive $225 million back from Barrick.

The Canadian tax challenge continues to weight on the stock, but a trial date is now set for September, 2019. If Wheaton wins this case, the stock could rally significantly, and we expect it will move steadily higher as we approach this date. A loss, of course, would hurt, though the stock already discounts this to a large extent.

The balance sheet is not as strong as that of the other major royalty and streaming companies, but strong enough with nearly $800 million of available liquidity. The stock has rallied almost 15% since the beginning of March, and we would wait for a pullback to buy more.

Raising more funds to move closer to production…or sale

Almaden Minerals Ltd. (AMM:TSX; AAU:NYSE, US$0.76) announced an equity raise of C$7 million, although it already has a strong balance sheet (C$12 million cash as of March 31). This raise should carry the company through to a production decision on Ixtaca a year from now. Funds will be used to make the final payment on a mill purchase; complete and file an environment report, in June; complete the feasibility study by the third quarter of this year; and complete land purchases and other ongoing work on developing the project.

Of course, we are hoping that another company will acquire this gold-silver project, once the feasibility is released and permits received. In the meantime, Almaden is a buy at these prices.

Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”

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Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Nevsun Resources. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Nevsun Resources, Wheaton Precious Metals and Almaden Minerals. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Wheaton Precious Metals.  Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports (including members of their household) own securities of Nevsun Resources, Wheaton Precious Metals and Almaden Minerals, companies mentioned in this article.

( Companies Mentioned: AMM:TSX; AAU:NYSE,
NSU:TSX; NSU:NYSE.MKT,
WPM:TSX; WPM:NYSE,
)

from The Gold Report – Streetwise Exclusive Articles Full Text https://www.streetwisereports.com/article/2018/05/24/a-takeover-a-court-date-and-an-equity-raise-three-buys.html

Commodity Supercycle Smiling on Energy Metals

Source: Streetwise Reports   05/24/2018

The commodity supercycle could be on an upward curve, and among the commodities, the energy metals could see the most lift, fed by demand for alternative energy going mainstream among consumers, posits Lobo Tiggre of Louis James Ltd. and founder and editor of Independent Speculator, in this interview with Streetwise Reports.

The Gold Report: Lobo, lots of readers know you as Louis James, your pen name for many years. After a long stint with Casey Research, you have gone off on your own, formed Louis James Ltd. and started the Independent Speculator newsletter. Would you tell us a little bit about your new publication?

Lobo Tiggre: Yes, I’m very happy to. I have worked with and learned from Doug Casey of Casey Research for almost 14 years. I would say he taught me everything I know, except that I had other teachers like Rick Rule and many famous geologists, who all gave generously of their time and understanding. I’ve gotten to the point now where I want to do it on my own, and have started the Independent Speculator.

I feel it’s important to have skin in the game. I like it when, in evaluating a resource company, I look at the ownership and see that management has put a significant amount of their own money in the stock, that they will suffer or celebrate the same ups and downs that their shareholders will. So I thought it was important for me to be able to offer the same thing to my readers, which I wasn’t able to do under my previous employment.

This is one of the main ideas of my new service. I write about what I’m investing in. I’m active as a speculator. I’m applying everything that Doug and company taught me. And I am very happy at this point in the commodity cycle to be able to put my own money into the market, to benefit from what I think is coming. And I want to have skin in the game with my readers, to be in the trenches with them.

TGR:Let’s talk about the commodity supercycle—where is it and where do you think it’s going?

LT: The commodity supercycle is interesting because it’s such a strong pattern. You see commodities moving together in big waves. They go down and up, and they all seem to move together. But if you look at what drives any particular commodity, it seems completely unrelated to anything else. Oil is up recently because of the Iran nuclear deal being scrapped by the U.S. administration. What does that have to do with the price of industrial metals? And yet, most are up this year.

I don’t have a really great explanation for why this is, or should be so, but it is a fact. The correlations are extremely high. And gold bugs should beware—silver bugs too—that the correlation between precious metals and other commodities is extremely high. I agree that they are also monetary metals and safe-haven assets, different from pork bellies and coffee. And they do diverge under moments of stress in the global economy, which is what they should do. But apart from those moments of acute stress, gold and silver tend to move with the other commodities.

That’s good news for us right now because the commodity supercycle is in an upward curve. I personally think that all that we saw from 2001 to 2011 was a warm-up. We’re going to see a bigger cycle and a bigger mania blow off at the top. It will take a while to gather steam, but I do think that’s what’s coming.

Why? It’s not just the supercycle. It has to do with my macroeconomic view. All the money printing that governments around the world have done is going to show up in real stuff, including commodities. Things are going to respond to all of the liquidity that has been created since 2008. So I’m very, very bullish. On the exact timing, I don’t have a crystal ball. But I do think it’s coming. And I do think that while the markets are still languishing in the remaining grips of the bear, it’s a great time to be buying. I’m very glad to be able to be doing that myself right now.

TGR: You said that in the supercycle commodities run generally in correlation, but do you see some doing better than others in this next cycle, this bullish cycle?

LT: I do. I’m particularly bullish on the energy minerals, excluding oil. Oil is the old energy mineral. The new energy minerals are set for a stellar run. This is driven by a true paradigm shift out of burning fossil fuels for energy and into renewable energy. That is big and real and powerful and gaining steam. It used to be the pet project of a few people with an ideological axe to grind. Then governments started putting in incentives, pushing to make it happen sooner than the market would have adopted it. But it’s gone beyond that now.

There’s really been a tidal shift. Consumers want these new products and services. Consumers want electric cars now. Before, EVs used to be like golf carts, right? Nobody wanted really an electric car unless they were really hard-core environmentalist types. But now, Tesla Motors Inc. (TSLA:NASDAQ) has smashed the old image of what an electric car could be. The change is not just about Tesla. Everybody’s getting into this because they realize that customers want these new products.

It used to be that solar power was very inefficient and expensive. It was just something for ideologically motivated people. But now it pays for itself, even without government subsidies in some areas, and there are government subsidies in many areas. If you go with a Tesla roof, you can even get financing. You don’t even have to cough up all the money up front and hope to get it back over decades of free electricity. Add a solar roof to home electrical storage, and you can have electricity at night or when there’s no sun for a couple of days. That changes the equation. It makes going solar much more desirable.

So this is a big tidal shift. I see this as supportive for the related minerals and metals for decades to come. Everybody’s talking about lithium for lithium-ion batteries. But lithium is not rare, and the big producers can and are ramping up production. So I’m cautious about lithium.

Fortunately, there are other necessary minerals for which production is not so easy to ramp up. I’m particularly keen on nickel, which goes in those batteries. Cobalt, of course, has been making headlines. I think cobalt has a long way to run. Even if the amount of cobalt in batteries is cut, it’s still necessary, and the number of batteries is increasing and the supply is very constrained there. I’m a copper bull as well.

There is one energy mineral I want to highlight, and that’s silver. Many people don’t think of silver as an energy metal, but solar panels use a lot of silver. I understand from sources in Silicon Valley that a Tesla solar shingle uses about one-third of an ounce of silver. Conventional panels use even more. The average single-family home in the United States would have more than a kilogram of silver on its roof to go solar. That’s a lot of silver that isn’t part of the market today. If you add that demand in, it gets quite interesting.

I’m bullish on commodities in general. But we live in a crazy world that’s good for safe-haven assets, so I’m still bullish on precious metals. And I’m also bullish on most of the new energy minerals.

As silver falls into all these categories, I’ve been joking that I’m a silver bug this year. It has multiple ways to win. And it is prone to going on little mini-manias of its own. You may remember that back in April of 2011, silver really took off ahead of gold. And that’s not the only time it’s done that. So we might have a silver mini bull run here that could be just spectacular. And even if not, it’ll go along with the other energy commodities and/or the precious metals. I like silver a lot these days.

TGR: Hasn’t the silver-gold ratio been at some fairly historic highs for a while now?

LT: It has. But what does that mean? I’m not sure that I want to draw too many conclusions for two reasons. One is that compared to the natural ratio, it has been in an unnatural ratio for many years. But does that mean that silver has to rise to meet gold? No. It could mean that gold could fall to meet silver. Or it could just stay out of whack. Gold and silver tend to move together as precious metals, there’s no doubt about that. But silver’s also much more of an industrial metal. It has other supply-and-demand factors influencing it. So the gold-silver ratio is interesting, but for me it has never been an argument for preferring one metal over the other.

TGR: Please talk about a couple of companies that you want to discuss.

LT: Segueing from silver then, I would say that there are some silver companies out there that I’m watching. I don’t own these at this time, but I’m paying attention to them. One of those is Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), which is becoming a gold-silver company. Its big growth project is called Lindero, in Argentina, and it’s more gold than silver by far. But it’s still a profitable silver play, with growth on tap. I like it.

If I’m right about silver going into a mini-mania of its own, then any of the big silver names could deliver a big win. SSR Mining Inc. (SSRM:NASDAQ) could be interesting, and Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ), of course, the big boy.

Personally, I like to focus on the juniors, however. I’m at a stage in my life where I’m more interested in wealth generation than wealth protection, so the bigger companies, while of interest to me, are not at the top of my shopping list. I’m still working through my due diligence process on the silver juniors.

On the energy minerals, there is something to be said, again, for some of the big diversified miners. I think Teck Resources Ltd. (TCK:TSX; TCK:NYSE) is doing a great job. It’s a solid company positioned to do well in the new energy environment.

Any of the big copper companies, such as Southern Peru Copper Corp. (SCCO:NYSE), should also do well. I like all those. And there are some smaller copper plays out there. Again, I’m still doing my due diligence.

One copper junior that I don’t own, but it’s interesting to me, is called Atico Mining Corp. (ATY:TSX.V; ATCMF:OTCBB). It’s run by the same group that runs Fortuna. They are well known for delivering on their promises. So I like that one.

In the gold space, we’ve talked before about Atlantic Gold Corp. (AGB:TSX.V). That’s a company that has done well building phase 1 of its Moose River consolidated gold mine on time and on budget. The important thing there is that was phase 1. It has more gold in the area within easy trucking distance of that mine, and it’s proving that up now.

If you want a big, steady, high-performance gold producer, I like Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE). That team does a great job.

Another that I like the most in the upper echelons is the new kid on the block, Kirkland Lake Gold Inc. (KL:TSX; KLGDF:OTCQX). It has some tremendous assets. The Micassa mine in Kirkland Lake is one of Canada’s highest-grade operating gold mines. The Fosterville mine in Australia has been hitting it out of the ballpark. Every year, that mine gets bigger and higher grade and more profitable. And the company has other projects on tap for development in Canada and Australia, both of which are good mining jurisdictions.

TGR: Any parting thoughts for our readers?

LT: I want to encourage everybody to come and check out my new website, IndependentSpeculator.com, of course. But fear not: we have an anti-spam policy. I hate getting unwanted commercial e-mails all day long, and so I don’t want to do that to my readers. There’s a free letter you can sign up for as well as the monthly newsletter. I’ll only send you the information you asked for, no spam.

TGR: Thanks for your insights, Lobo.

Lobo Tiggre, aka Louis James, is the founder and CEO of Louis James LLC, and the principal analyst and editor of IndependentSpeculator.com. He researched and recommended speculative opportunities in Casey Research publications from 2004 to 2018, writing under the name “Louis James.” While with Casey Research, he learned the ins and outs of resource speculation from the legendary speculator Doug Casey. A fully transparent, documented, and verifiable track record is a central feature of IndependentSpeculator.com services going forward. Another key feature is that Mr. Tiggre will put his own money into the speculations he writes about, so his readers will always know he has “skin in the game” with them.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new interviews and articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Patrice Fusillo conducted this interview for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this interview are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Lobo Tiggre: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I, or members of my immediate household or family, are paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this interview: None. I determined which companies would be included in this article based on my research and understanding of the sector. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

( Companies Mentioned: AEM:TSX; AEM:NYSE,
ATY:TSX.V; ATCMF:OTCBB,
AGB:TSX.V,
FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE,
KL:TSX; KLGDF:OTCQX,
PAAS:TSX; PAAS:NASDAQ,
SCCO:NYSE,
SSRM:NASDAQ,
TCK:TSX; TCK:NYSE,
)

from The Gold Report – Streetwise Exclusive Articles Full Text https://www.streetwisereports.com/article/2018/05/24/commodity-supercycle-smiling-on-energy-metals.html

An Idiot’s Guide to Investing in Junior Resource Stocks

Source: Bob Moriarty for Streetwise Reports   05/24/2018

Bob Moriarty of 321 Gold discusses a Canadian explorer with a project in the Yukon he is putting his money on.

About this time two years ago I was sitting in a friend’s chalet in Switzerland waiting for Barbara to fly over. It takes dynamite to move Barbara so I sat around for a long time. I got bored. And since the chalet was the same place I had written The Art of Peace a year before, I figured I should give another book a go. That was the origin of Nobody Knows Anything.

It was written more out of boredom than brilliance even though it still sells well. According to Amazon, they have sold 200 books this month. The book took me eleven days to write. The average book on Amazon only sells 50 books total ever.

For the longest time people have suggested I write a book about investing in junior resource stocks. The topic is one that has been rocks and shoals for many a poor writer. Lots of books abound, few sell well. I’m made major progress on the book; I’ve come up with a title. I’m going to call it An Idiot’s Guide to Investing in Junior Resource Stocks.

Don’t be offended by the title. I’m the idiot, not you. I have been investing in junior resource companies since gold hit a bottom in August of 1999. If there is a mistake I have not made, please feel free to point it out. I believe I have made just about all of them. So I’m ok sharing my stupidity with you in the hopes it saves you time and money.

The resource market is about as active as maple syrup in January right now. I’m bored again so perhaps this time I will write the bloody thing in pieces rather than pound on my computer for another eleven days.

You will know you are near a bottom in resource stocks when you can’t give them away. When everyone wants to buy them, you are near a top.

My experience is that most writers make investing look way too complicated. At any given time you can find fifty different explanations for everything that happens.

But can you make money out of those complex solutions? After all that’s what it should be about. You want to remove yourself from the herd and the 95% of people who will always lose money. You want to be in the 5% who make money. At least I do and I hope my readers do.

Investing is simply but not necessarily easy. You need to find out what the mob is doing and do the opposite. If you can figure out what is popular you should sell. Figure out what is hated the most and buy. It really is no more complex than that.

I looked around at our sponsors to determine who was the most boring right now and I discovered White Gold Corp. (WGO:TSX.V; WHGOF:OTCBB). As of May 24th, the stock traded on only one day out of the last seven and that was for a blazing 23,950 shares.

Another rule for investing in junior resource shares is to buy low and sell dear. I know that sounds too simple, I thought the same thing the first time I heard it. But it really is that simple. I have had people ask me, “How can you tell if it’s cheap?” That’s pretty easy, you can always look at a chart. I have pulled up the Stockwatch chart for White Gold.

WGO Chart

A year ago White Gold was selling for $2.30, today $0.80. Gold is about the same price. Nothing has really changed but the shares are down 65%. Now we don’t know if WGO will go much lower, it might. But you can see clearly that it was $2.30 then and $0.80 now and it’s cheap relative to what it was a year ago.

The company has 1.24 million ounces of gold in a 43-101 resource. How low can it go? At $0.61 a share that made ounces of gold in the ground worth about $30 an ounce USD when deals were being done for $175 an ounce.

Buy cheap, sell high. Look at a chart and see what it tells you. Don’t look for the most complex answer, find the simple one.

But what about the location and the management and the projects?

What about them?

Some of the biggest piece of crap stocks run by the biggest idiots will make the largest moves higher in a bull market. I don’t suggest looking for idiots to invest in, there are far too many of them to go around. But some idiot will be running a company that will go from $0.05 to $2.00 in a roaring bull and you can retire.

Shawn Ryan vended his Yukon projects into White Gold. They include a total of 390,000 ha in the Yukon, about 40% of the district. His prospecting and soil work helped find the White Gold project, the Coffee deposit and the QV property. That’s over 7.5 million ounces of gold.

Kinross owns 19.9% of White Gold Corp. Agnico Eagle owns a similar 19.9%. You don’t need to be an expert if you are smart enough to know who the experts are. The majors are consuming their young. They must replace the ounces of gold they are producing. Right now they are not.

Kinross and Agnico Eagle have staffs of trained people who do nothing but look at juniors to invest in. You don’t need to become a pro. See who the best companies are investing and follow them.

White Gold has started a $9 million dollar exploration program for 2018 planning on drilling over 100 RAB drill holes and a 22,000-soil sample survey.

Everything in life deviates from the mean and eventually regresses to the mean. Resource shares are the unloved red-headed-stepchild right now. Investors are throwing their money at Tesla and Bitcon. If you insist on losing money rapidly, don’t invest in Tesla and Bitcon. It will take far too long for them to collapse, perhaps a year or so. Take you money out of the bank in 100-dollar bills, buy some gasoline and start a fire in your front yard. It gets rid of your cash a lot faster.

White gold is an advertiser. I own shares. I like them a lot. With $9 million, Kinross and Agnico Eagle behind them, they ought to be able to find something.

And sentiment says we are near a bottom in gold and probably all resource stocks.

Do your own due diligence, it’s your money, not mine.

White Gold Corp.
WGO-V $0.80 (May 24, 2018)
WHGOF-OTCBB 88.5 million shares
White Gold website.

Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: White Gold. White Gold is an advertiser on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

( Companies Mentioned: WGO:TSX.V; WHGOF:OTCBB,
)

from The Gold Report – Streetwise Exclusive Articles Full Text https://www.streetwisereports.com/article/2018/05/24/an-idiots-guide-to-investing-in-junior-resource-stocks.html

Explorer Drills 387 Meters at 0.78% Copper in Argentina, But No One Cares

Source: Peter Epstein for Streetwise Reports   05/24/2018

Peter Epstein of Epstein Research makes the case for a South American copper project with what he views as excellent mineralization that is open at depth and in all directions.

On April 20, Centenera Mining Corp. (CT:TSX.V; CTMIF:OTCQX) reported a strong partial drill hole result at its Esperanza copper-gold porphyry project in San Juan Province, Argentina. Excitement over this assay was running high. Management believed that the core looked good, so they rushed the top 166 meters (166m) to the lab.

Sometimes when expectations are elevated, actual news can disappoint. . .not in this case! The plan was to punch down to 500m, but drilling difficulties ended the hole at 387m. Esperanza remains open at depth and in all directions.

Mineralization was excellent through the 166m mark. On May 8, Centenera put out the full drill hole assay, covering 387m (from surface). Before jumping into the details, let me put into perspective the historical work that Centenera has access to. Prior drilling returned the following highlights:

http://epsteinresearch.com/wp-content/uploads/2018/04/Screen-Shot-2018-04-30-at-3.15.16-PM.png

Mineralization outcrops at surface with a pyrite halo extending over a 1,400m x 850m area, drill holes generally intersected mineralization at surface and the deposit is open in all directions. The majority of holes terminated in mineralization, the deposit is open at depth. Several holes demonstrated increasing grade with depth.

These are solid numbers: The best interval was 88m weighing in at 0.69% copper equivalent (Cu eq). The goal with this year’s drilling is to find more results like these through prudent step-out drilling. When exploring porphyry targets, one needs to find both wide intervals—100+ meters—plus high-grade—say 0.60–1.00% Cu eq.

Having said that, the depth of a porphyry target matters a lot. All else equal, at and near-surface deposits can be viable at lower grades because prestripping (mining waste rock, or overburden, to reach an orebody) is expensive and time-consuming. That’s why this first full assay from Centenera’s 2018 drill program is so exciting; a wide interval, plus a strong grade, plus continuous mineralization from surface.

Drill hole 18-ESP-025 collared in mineralization that continued to the bottom of the hole at 387m (hole abandoned due to drilling difficulties). Mineralization remains open at depth.

http://epsteinresearch.com/wp-content/uploads/2018/04/Screen-Shot-2018-04-30-at-3.15.16-PM.png

There are a number of porphyry exploration and development projects around the world with 0.30–0.40% Cu eq orebodies. The lower the grade, the smaller the margin for error, and the greater the need for abundant size. Centenera’s May 8 announcement places it well on the way to establishing economic grade. Now it’s a matter of delineating a large-scale deposit. A surface expression of 1,400 x 850 meters is a good start.

http://epsteinresearch.com/wp-content/uploads/2018/04/Screen-Shot-2018-04-30-at-3.15.16-PM.png

The east-west cross-section shows complete results from 18-ESP-025 and a few previous drill holes. The exploration vector to higher grade Cu and gold (Au) is interpreted to be west, where two targets are highlighted. All drill holes are open at depth, and there’s significant untested ground to the west & east. In the image, green = Cu grade and red = Au grade.

By large-scale I mean >3 billion pounds Cu eq. This year’s drilling will be testing for bulk tonnage potential. Readers please note, the company might not be able to identify that large a number in a maiden resource estimate, but perhaps management can do so over time.

According to the company, drill hole 18-ESP-025 would have ranked #3 among top global Cu intersections drilled in Q1/2018 (intersections ranked by Cu portion only, x interval width in meters). Despite a very promising Cu-Au project, and several other properties in Argentina, Centenera’s market cap remains at CA$10.2 million / US$7.9 million.

http://epsteinresearch.com/wp-content/uploads/2018/04/Screen-Shot-2018-04-30-at-3.15.16-PM.png

The above ranking is of projects where Cu is the primary metal and does not take into account other commodity credits. For example, Esperanza has meaningful gold credits that are not included. In addition to being at surface (versus an average depth to the top of interval of 437m), the Esperanza project is in a favorable mining province in Argentina, in fact the single best province—San Juan (as measured by the latest annual Fraser Institute of Mining Survey).

A 0.40% Cu eq. NI 43-101-compliant resource estimate would mark a robust outcome. Although there’s limited evidence of large scale to date, management’s goal is to find at least 500 million tonnes of mineralization (by no means a sure thing). Five hundred million tonnes at a grade of 0.40% would equate to nearly 4.5 billion Cu eq pounds. Management’s stated goal for its projects is to “drill, add value and advance to JV or sale.”

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I expanded the above chart from a prior article I did on Centenera Mining to include higher grades along the left side. This does not mean I believe an overall mineralized grade will be up to 0.70–0.75% Cu eq, but in a constrained open-pit scenario (a subset of the entire deposit), perhaps a Cu Eq of 0.40%+ could be achieved.

Near-term catalysts

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Centenera has several catalysts worth watching for. First and foremost: another drill result in June. That hole was completed to a depth of approximately 450m. Also, a possible update on its 100%-owned Organullo epithermal gold project in Salta province—the best province in Argentina.

A study conducted in 2012 (using historical drill data) resulted in potential tonnages & exploration target grades of gold. These potential exploration target quantities and grades are conceptual in nature; insufficient exploration and geological modelling has been done to define a mineral resource.

The conceptual (initial) target is between 600,000-960,000 ounces gold, grading between 0.92-0.94 g/t Au. Management acknowledges that Organullo will require a lot of drilling.

Another important catalyst is the upcoming closing of Centenera’s CA$3 million capital raise. Once fresh capital has been banked, investors will stop worrying about that perceived overhang.

In the second half of 2018, there’s a decent chance cash burn will decrease as management finds partner(s) on one or both main projects. Partnerships typically involve giving up partial ownership in exchange for being free-carried (partner pays 100% of project costs) for a number of years, through key exploration and possibly development milestones.

It’s not hard to speculate on prospective partners. For instance, here’s a list of 20 companies that are major or mid-tier copper and gold miners and project developers, with assets in Argentina and/or Chile, Peru and Ecuador. The top nine players by market cap would probably not look at Centenera without evidence of the possibility of finding >10 billion pounds Cu eq. The bottom three are small compared to the others, but could certainly come up with a relatively modest amount of upfront funding required to get the Esperanza project into robust, active exploration.

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I believe that Centenera Mining’s valuation at CA$10.1 million / US$ 7.8 million is too cheap given the portfolio of projects and properties in Argentina that it owns or controls. Savvy natural resource stock investors point out that there are dozens of copper-focused porphyry targets in the hands of juniors that have >1 billion pounds Cu eq. That’s true, I’m tracking about three dozen.

However, there are red flags associated with many of these other prospects. For example, several projects are in higher-risk (than Argentina) or even dangerous jurisdictions in countries including the Philippines, Russia, Mongolia, Indonesia, the Democratic Republic of Congo and Namibia. Even Peru, the second largest copper-producing country, a jurisdiction with at least five major copper projects held by juniors, is facing increasing challenges on the community relations front.

And the largest copper-producing country by far, Chile, has prospective projects at elevations above ~4,000 meters, which introduces a whole new set of risks, expenses and challenges. In part due to high altitude, Chile is also much more sensitive to water issues. I’ve been told that Chile has become considerably more expensive to operate in than other South American countries.

Other potential red flags: Some projects have preliminary economic assessments or preliminary feasibility studies with very mediocre to poor economics; capex figures that are twice or more the size of a project’s after-tax net present value (NPV), or internal rates of return (IRRs) below 15%, assumed copper prices above US$3/lb, payback periods >6 years, grades <0.35% Cu eq, and strip ratios >3:1.

Finally, infrastructure and project logistics: Bulk mining operations require favorable access to transportation options, roads, rail, ports, power, water, a reliable work force and mining services / equipment providers.

Centenera Mining’s Esperanza project is probably in the middle of the pack on this score compared to the three dozen global juniors I’m tracking, but better than that among assets in South America due to its being in San Juan province and having a very low strip ratio and high grade. Esperanza is just 35 kilometers from power lines and enjoys year-round road access. But we still need to see further evidence of large-scale potential. . .

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis, and he is a Chartered Financial Analyst (CFA). He holds an MBA degree in financial analysis from New York University’s Stern School of Business.

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from The Gold Report – Streetwise Exclusive Articles Full Text https://www.streetwisereports.com/article/2018/05/24/explorer-drills-387-meters-at-0-78-copper-in-argentina.html

Gold Producer’s Asset Sale to Bolster Balance Sheet

Source: Streetwise Reports   05/24/2018

CIBC reported on this Canadian company’s latest business deal.

In a May 17 research report, CIBC analyst David Haughton noted that Centerra Gold Inc. (CG:TSX; CADGF:OTCPK) agreed to divest of noncore assets for $200 million to Triple Flag Mining Finance Bermuda. These assets, which Centerra had acquired from AuRico Metals late last year, include AuRico’s royalty portfolio, 0.5%, 2% and 2% net smelter returns (NSRs) royalties on Kliyul, Chuchi and Redton, respectively, and a Kemess project silver stream.

The transaction, slated to close in Q2/18, “helps strengthen Centerra’s balance sheet, and further supports the ramp-up of Mount Milligan and advancement of projects (Öksüt, Gatsuurt, Greenstone and Kemess),” Haughton added, which “are expected to carry the weight for a rerating of the stock. As of March 31, 2018, Centerra had $120 million in cash and $335 million in undrawn credit facilities.

According to the deal terms, for the royalty portfolio and the NSRs, Triple Flag will pay $155 million in cash up front. This price exceeds the value that CIBC had previously placed on AuRico’s royalty portfolio, which was $127 million, reported Haughton.

For the stream of 100% of silver production from the proposed mine at Kemess, Triple Flag will pay $45 million in advance, in tranches of $10 millin, $10 million, $12.5 million and $12.5 million on certain project development dates, along with 10% of the market price for each silver ounce produced. Haughton indicated that Cowen values Kemess “at $380 million using spot at 5%.”

CIBC has a Neutral rating and a CA$9 per share price target on Centerra, whose stock is currently trading at around CA$7.25 per share.

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from The Gold Report – Streetwise Exclusive Articles Full Text https://www.streetwisereports.com/article/2018/05/24/gold-producers-asset-sale-to-bolster-balance-sheet.html

Copper Explorer Gearing Up for Significant Project Expansion

Source: The Critical Investor for Streetwise Reports   05/23/2018

The Critical Investor examines a company that has been diligently exploring a copper-zinc project in British Columbia.

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Kutcho project, VP Exploration Rory Kutluoglu

1. Introduction

After entering the markets with a big splash in December 2017, on the back of an almost monumental deal (for a nano cap) with Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE), Kutcho Copper Corp. (KC:TSX.V) has been working quietly but diligently behind the scenes, to set up everything for further development of their high grade copper-zinc Kutcho project in British Columbia.

Their goal is to advance the deposit to ultimately double the current size, and by doing this improve current 2017 Pre Feasibility Study (PFS) economics when the Feasibility Study (FS) will be completed a year from now. In this article I will discuss proceedings for this year, revisit economic potential and valuations, and will have a more in-depth look in the WPM stream, in order to show it is in fact a good deal for Kutcho Copper compared to others.

All presented tables are my own material, unless stated otherwise.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

2. Current status and plans

Before I continue with current activities, let’s have a look at a few basics first. Kutcho Copper has $4.5M in cash at the moment after receiving the first US$3.5M payment from WPM on April 4, 2018, and C$20M in debt. The second payment of US$3.5M is expected in August of this year. As a reminder, management and Board controls 10% of shares which counts as above average skin in the game. Wheaton Precious Metals holds 13% and Capstone Mining is the largest shareholder with 16%.

As of May 18, Kutcho Copper has a share price of C$0.59 and a market cap of C$28.18M, with only a very tight 47.77M shares outstanding (fully diluted 70.1M, all options and warrants out of the money at C$1.00, expiry in 3 years). The average daily volume of last month is 43k shares, which is about 10% of the average of the first 2 months.

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Share price over 1 year period

After the big entry in December, the stock gradually went down lower as everybody that was interested took a position in these first months, and buying pressure and volume decreased. When looking at the chart it seemed that the C$0.45-50 level functions as a solid bottom and an indicator of minimum fundamental value the market was willing to pay for Kutcho, as there were no strong catalysts or marketing since Dec 2017-Jan 2018. As the summer drill program is about to start and further catalysts are expected, I expect investor awareness for this company improving again, facilitating a second wave of new entrants.

As a reminder, Kutcho Copper management has planned the scale of the upcoming field program such that they can achieve all the technical data collection for the feasibility in one field season. The easy field season up there is May 21 to October 31. Outside this window, things are not impossible, just more expensive, and therefore the company is looking to complete all drilling requirements within this period.

All kinds of equipment, supporting the upcoming field program, is being transported to location at the moment. Camp construction and commissioning is anticipated to be completed by June 1st, and drilling with two rigs will commence on June 15th. According to COO Duncan, if needed the number of rigs will be scaled up to four in order to finish before the winter break. The 2018 field program will look to expand resources through infill drilling for inclusion in the FS, and to provide data for the optimization of metallurgical recoveries and geotechnical parameters.

Under the engineering lead of Ausenco, the recently hired engineering firm to do the FS, the team consists of: Sim Geological Inc. for resource modeling, Holland & Holland for metallurgical engineering and process design, Terrane Geoscience Inc. for geotechnical engineering, and SRK Consulting for open pit and underground mine design among others.

I am not too familiar with the other names, but Ausenco is a worldwide operating firm, worked for majors like BHP, Glencore, Newmont, Vale and numerous others like copper/base metal focused Hudbay, Las Bambas, Teck, and also did a good job at Atlantic Gold’s Moose River project. I am happy to see SRK, which I regard as one of the top two or three in the mining business, doing the mine design. This will probably generate a lot of confidence in the quality of this study and its economics.

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Exploration camp used by Kutcho Copper

Although the upcoming drill program will focus on infill drilling, several priority drill ready targets prospective for additional resources have also been prepared. These prospective targets include, as mentioned in the corresponding news release:

– Mineralized drill intersections along strike and down plunge to the west from the Esso deposit (one of three VMS deposits comprising the Kutcho project) including 7.1 metres @ 1.96% copper, 5.24% zinc, and 18.0 g/t silver in DDH 94-B3. These intercepts could represent extensions to the high-grade Esso deposit or a potential new deposit.

– The FWZ, a relatively narrow sulphide lens (2 to 5 metres thick) which lies beneath the Main zone and which was subject to an historic estimate prepared as an internal document for Esso Minerals in 1979, of 230,000 tonnes averaging 1.47% copper, 5.52% zinc, 0.4 g/t gold and 43.7 g/t silver. The FWZ may have potential along strike and down dip for additional mineral resources. This mineralized zone demonstrates that additional horizons across the property are productive for VMS style mineralization:

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– Main mineralization is open down-dip along 800 m, or 57%, of the total strike for this deposit, indicating potential for resource expansion down-dip.

– Esso mineralization is open down-dip along 300 m, or 50%, of the total strike for this deposit, and is open up-dip along 125 m or 20% of the total strike, indicating potential for resource expansion both up- and down-dip.

– Favorable untested stratigraphy east of the Main Zone, and on the southern portion of the property where the Kutcho time equivalent sulphide horizon is repeated by folding.

After asking management about the timeline of these targets, it seems that none of them will be explored this year: “Esso and Esso West are deep targets, so unlikely to get to them this summer (more likely to be targeted once underground). Also, the FWZ and Main down-dip targets would be higher priority than the repeated sulphide horizons on the southern portion of the property, as targets proximal to and along trend with mineralized lenses tend to provide a higher probability of finding more of the same.”

Working with the First Nations is also a priority for management, and in addition to reaching a Communications Agreement with the Tahltan Central Government on October 26, 2017, the company also signed an Exploration Agreement on April 17, 2018. As the Kutcho project is also located on land involving the Kaska First Nations, the company is engaging them too. The Kaska FN relationship is progressing and management is working towards completing of the agreements at the moment.

I like to see the First Nations having a prominent place early on in the process, this is addressing potential risks at the right time. With a well-known expert like Alison Rippin Armstrong things seem to be in very good hands. She has also re-initiated baseline studies for environmental assessments on February 14, 2018.

The current timeline for the Kutcho project looks like this:

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As can be seen when comparing the timelines in my last analysis, the FS, permitting and construction decision has been moved into the future. The FS moved a half quarter, the permitting a quarter and the permit review over one year. The guidance was 30 to 36 months, and has now been extended to 41 months. According to COO Rob Duncan, the Federal and Provincial governments are re-vitalizing their permitting processes to increase the importance of social aspects of resource projects to better their efforts with respect to their duty to Consult with First Nations on a government to government basis. The results of these changes should be greater surety earlier on in the permitting life of projects in successfully receiving all permits required to mine. While updates to the permitting process have not yet been officially rolled out, Kutcho Copper has adjusted its project timeline, in part to incorporate the anticipated changes, and also as a result of extensive interaction with government offices which provide guidance on permitting timelines using the Kemess and Brucejack underground mines as real world examples.

3. Stream Comparison

In my last analysis I mentioned that Kutcho Copper closed a stream deal with WPM on industry standard terms, illustrated by an example of the ongoing cash payments for silver coming in at 20% at the Glencore-Wheaton deal (US$900M upfront cash). Since then I read some comments on ceo.ca about the Kutcho/WPM stream basically being expensive and at the expense of Kutcho economics, and although I already knew by asking experts that this wasn’t the case, I decided to look a bit further into this.

A way to look at the profitability of streams, as indicated in those comments on ceo.ca, and a much more comprehensive way compared to cash payment percentages, is to analyze the Internal Rate of Return (IRR) for the stream owner. In order to compare the profitability of the Kutcho stream, I analyzed several other streams for IRR, after normalizing metal prices for all streams (gold US$1250/oz, silver US$17/oz). Here we go, first up is the Kutcho/WPM stream, both NPV and IRR for all cases presented are pre-tax as taxes on these streams can be complex and isn’t needed to illustrate the comparison:

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See Full Size Image

Then we have the Golden Star/Royal Gold stream:

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And the NewGold/Royal Gold stream:

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Followed by the Yamana/Sandstorm stream:

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And the Lydian/Orion stream:

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Next up is the Panoro/WPM stream:

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See Full Size Image

And the Glencore/Franco Nevada stream:

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And last but not least the Taseko/Osisko stream:

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See Full Size Image

When I put all NPVs and IRRs in one table, it looks like this:

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As can be concluded, Kutcho Copper/WPM doesn’t have the lowest IRR on its stream of all peers, but it is below average, and certainly in line with or below comparable streams regarding pre-tax NPV. The IRR seems a direct indicator for risk on the project, for example Lydian has a jurisdictional risk, and Panoro a financing risk (and according to an influential blogger also a local risk but I don’t know the details on this), as it needs a pretty high copper price (US$3.25/lb Cu for a post-tax IRR of 19.5%) in order to be economic (I estimate post-tax IRR of 18% as a threshold for this mid sized project).

4. Copper revisited

Talking about copper, let’s have a quick look at the latest outlooks on the red metal by 4 of the biggest producers/traders in the world. The usual chart (for example Rio Tinto has used the same chart for years) describing copper supply/demand looks more or less like this, as illustrated nicely by the Visual Capitalist:

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First Quantum Minerals has the following view on supply/demand developments:

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Personally I find the surplus in 2021 remarkable, as we are supposed to be deep into a deficit by then. Codelco, the Chilean state-owned giant and largest copper producer in the world, has this view:

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Freeport McMoran has the following outlook for copper, but doesn’t provide a forecast on demand or pricing, just like Codelco:

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Glencore, a combined producer/largest trading house on the other hand foresees a consistent increase for copper demand, and has an interesting story to tell in their presentation about over-investment in the years before 2016, and makes statements about the influence of the increasing electrification of our society on metal demand, an interesting read. This is their view on demand for the next few years:

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However, they avoid to come up with a comparable outlook for global supply. I do agree with the central thesis of new and sufficiently large deposits not being discovered fast enough, capex at very low levels and very few new projects in the pipeline, and fancy the long term outlook on copper a lot.

5. Potential Economics & Valuation Revisited

As a reminder, the base case scenario of the 2017 PFS generates an after-tax NPV8 (8% discount) of C$265M and an after-tax IRR of 27.6%, using metal prices of US$2.75/lb copper, US$1.10/lb zinc, US$17.00/oz silver and US$1,250/oz gold and a currency exchange rate of 0.75 USD/CAD. This is all based on a modest initial capex of C$220.7M which is well below base case NPV8, which is a strong feat for a base metal project in general. Especially the larger projects have a capex often outscoring NPV8 by 20-50%.

Although the Kutcho project already has a much higher NPV8 compared to the current market cap (C$265M vs C$28.18M), there is clear appeal in doubling the resource and improving economics. There are several ways like lowering the cut-off from 1.5% to 1% for the Main zone (which could add up to 5Mt to the mine plan), convert Inferred to M&I or later on to Reserves for the Sumac Zone, as this would add about 4Mt, and add tonnage through drilling at depth, which could add another 1.3-3.6Mt. This could definitely generate tonnage in the realm of 20Mt. Other opportunities are improving recoveries of copper and zinc, FX rates, higher metal prices and further optimization of for example mine plan and opex. On the longer term there is a lot of exploration potential, and even further out there is potential for new discoveries at the newly optioned TCS property not too far away.

All opportunities considered, and as a reminder, when I would use a 20Mt scenario, an 80% Zn recovery rate, a 1.25 exchange rate, a US$2.75 base case copper price and a fixed US$1.10 Zn price, a 2,500tpd throughput scenario for a LOM of 22 years, and a 4,500tpd throughput scenario for a LOM of 12 years, this would be the resulting, familiar, hypothetical sensitivity table:

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By running the numbers it shows why developing the 4,500tpd scenario probably is the most economic scenario, followed by potential delineation of more resources (and eventually into reserves) for a longer LOM through exploration.

I updated the peer comparison, despite incredible variation in typical metrics, notwithstanding stage or jurisdiction, at least it represents a brief overview of copper projects:

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And:

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As a rule of thumb and always the case with peer comparisons, every company has its own story with very specific details, causing valuations the way they are, therefore making it impossible to take comparison results at face value. Without going too deep into different peers, I must say I was pretty impressed with the recent PFS delivered by Rick van Nieuwenhuyse’s Trilogy Metals; its post-tax IRR of 38% is unheard of for a copper project. As it is very Nordic, they really needed something special, and it very much looks like they succeeded. A P/NAV of 0.12 is almost ridiculous in my opinion, and keep in mind they have two projects. It is on top of my watchlist.

Again, it is very hard to pinpoint towards a value of a developer before it is fully financed and ideally built and commencing production, as there isn’t particularly strong comparison material to work with, but in my view the Highland Copper P/NAV of 0.2 (down from 0.3 in my last analysis as the share price of Highland lost 1/3 the last month by big selling out of the blue) provides us with a realistic and conservative guidance at FS/permitted stage. With the current base case NPV8 of C$265M @US$2.75/lb Cu, this could roughly result in a potential double for Kutcho arriving at the same stage, and when using the 20Mt scenario in a potential triple or more.

6. Conclusion

After a winter of preparations, Kutcho Copper has finally arrived at the start of their field program, and will start drilling in about a month from now. Doubling the resource in Q1 2019 seems to be a very realistic target, and if this milestone is achieved, economics will improve even more, with the NPV increasing quite significantly. In mining, usually nothing goes smoothly, but in this rare case I expect Kutcho Copper to sail pretty effortlessly to a potential double in a bit over a year from now, when the FS comes out.

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Kutcho project

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The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

Disclaimer:

The author is not a registered investment advisor, currently has a long position in this stock, and Kutcho Copper is a sponsoring company. All facts are to be checked by the reader. For more information go to http://www.kutcho.ca and read the company’s profile and official documents on http://www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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Charts and graphics provided by the author.

( Companies Mentioned: KC:TSX.V,
WPM:TSX; WPM:NYSE,
)

from The Gold Report – Streetwise Exclusive Articles Full Text https://www.streetwisereports.com/article/2018/05/23/copper-explorer-gearing-up-for-significant-project-expansion.html