Agoracom

The market for junior resource companies has been nothing short of abysmal for the last six months and it’s just plain tough to get excited about anything. Having said that, I just can’t pass up the opportunity to get involved with a company that has as much potential as Santa Fe Metals. Santa Fe has all the makings of a winning junior resource company with the prospect of near term production. With an excellent set of properties in Mexico (one of which has very near term production plans), a strong management team and an excellent share structure with just over 15 million shares issued, I feel I can come out of the foxhole for this one.

Cuatro Cienegas Project

The recently-acquired Cuatro Cienegas Project, Santa Fe’s flagship property, is located in Coahuila, Mexico and consists of 3,408 hectares in six mineral concessions. The project is believed to host a breached anti-cline of cupriferous “red bed” type sandstones up to 20 meters in thickness, which can contain very large high-grade copper deposits. In the past, these sedimentary formations have accounted for 30 percent of the world’s copper production.

What makes this project such an exciting prospect is not just the potential for high-tonnage, high-grade copper ore, but the potential for near-term production. As part of the agreement, Santa Fe must put the project into production by November 7, 2009. That means that the project must begin producing more than 1,000 tonnes a day of leachable copper oxides within the next 18 months. Santa Fe plans to develop exploration drifts into the flat-lying sandstone beds as part of its overall exploration plan. The resulting material will be crushed, stacked and acid leached.

The resulting pregnant solution will be run over launders containing scrap iron to produce cement copper - simple, old technology that works. This will provide the company with the funds to continue their exploration plans as the proposed mine site is surrounded by blue sky country. This process will not recover any silver, which may remain as a residue in the heap. The vendor has reserved the right to recover this silver but would assume the environmental liability.

The project has excellent multi-element deposit potential. Copper isn’t the only base metal that has been found on the property. Channel samples have yielded values ranging from 42 to 180 grams per tonne silver, three percent to 4.7 percent lead and 4.7 percent to 9.7 percent zinc. It is possible that there could be a carbonate replacement deposit on the west side of the deposit. This requires further evaluation. These sulphides would be treated in a conventional flotation plant which of course would recover silver-more possible upside.

The Cuatro Cienegas project was acquired from Minería Melina S.A. de C.V. for US $500,000. In addition, the company must pay five additional installments of US $100,000 annually (one has already been made) and 3.5 percent net smelter return royalty payable on future production revenues, of which one percent can be purchased for US $1 million at any time. Melina also agreed to subscribe for 500,000 shares of the Company at $0.60 in a private placement valued at $300,000. The shares are subject to a four month plus one day hold, as per exchange regulations.

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On July 30th, Crosshair Exploration and Mining announced its acquisition of a new deposit in the Central Mineral Belt with 6.1 million pounds of uranium and more than 4000 claims.  Along with this new acquisition, the company has also updated and significantly expanded their C Zone-Armstrong 43-101 resource to 11 million pounds of uranium and 27.5 million pounds of vanadium. Based on Crosshair’s in-situ resources, including the newly-acquired Two Time Zone, one could make a case of valuing the company at just over $100 million.  Considering they have less than 100 million shares out, they could be trading a bit over one dollar, not between $0.20 and $0.30.

Taking into account the company’s exploration and development improvements, as well as additions to the management team, including a new CFO, I believe Crosshair is well positioned to fulfill its future development and production goals.

Acquired, Updated and Expanded Resources.

Crosshair’s original property, making up approximately 720 square kilometers, has more than doubled in the last two months with their recent acquisition of all of Universal Uranium Ltd.’s 60% interest in the Central Mineral Belt (CMB), giving them a total of approximately 1935 square kilometers of land holdings. Not only have they increased their claims significantly, but Crosshair also controls the only two NI 43-101 uranium deposits in the western portion of the CMB.

Based on the claim ownership of the CMB properties in Labrador, it is obvious that Crosshair has a dominant land position, including both their original and newly-acquired claims.  By more than doubling their total land holdings and continuing to produce good results, Crosshair proves to be a company to watch.

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Target Exploration has been drilling its uranium project in the Shirley Basin of Wyoming since the beginning of June 2008 and has had nothing but great results.  The Bootheel project continues to prove itself as one of the up and coming great uranium projects.  The key factors behind Bootheel’s and, in turn, Target’s success are:

• being perfectly located in an established and growing uranium district;

• being designed for near term production with its number of pounds and its In-Situ Recovery (ISR) potential;

• having a successful 2008 drill program; and

• having knowledgeable and experienced professionals with both exploration and mining backgrounds.

Location, Location, Location

When developing a uranium mine, location obviously plays a huge role.  Bootheel, Target’s flagship project, is located in uranium-mining-friendly Wyoming.   Wyoming has already produced close to 200 million pounds of uranium and currently has two producing ISR mines.  Several more deposits are in the permitting stage and slated for production within the next couple of years.  Target couldn’t be better situated!

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There’s an awful lot of written commentary available about what the latest moves by the United States government bailout and interference in publicly-traded markets means, so I’m going to be short and sweet. You all know that last October I urged you to sell all stocks except those related to precious metals and to short the S&P 500. As I explained in my October 14, 2007 and Janauary 9, 2008 posts,  (especially read the section I entitled “Sub-Crime Fiasco”), the credit crunch was going to become a nightmare for the financial markets and the economy. We literally came close to a total financial meltdown last week.

I want you to totally appreciate that while they saved the stock market for now, I believe there are no more silver bullets and the world will soon realize exactly how costly these moves will be both in dollars and how we will be perceived as a nation. I’ve often said America is “robbing Peter to pay Paul and Peter is broke.” I have urged you to watch this 60 Minutes interview of former US Comptroller of the currency (and head bookkeeper), David Walker http://www.grandich.com/video/60min.162mb.wvx (for Internet Explorer users only, sorry.)  I can only imagine what Mr. Walker would say about all these bailouts and how much worse his outlook would now be.

I’m lowering my original target for the DJIA from 10,000 (it still will be a support level for a while before it breaks) and believe sometime in the next 12-24 months the DJIA can fall to 7,500-8,000. I now believe we will have one of the worst recessions in U.S. history in this time frame as well. I see the U.S. Dollar Index hitting 60 and gold $1,300-$2,000 (depending how bad things get). You should remain short and if you’re not, short first thing Monday morning. Look for a super bull run in metal stocks sometime in this timeframe as well. Do all you can to get out of debt and lower your lifestyle as it’s going to be greatly lowered for most Americans, anyway.

Important Note –

I’m delighted to be engaged again by Geologix Explorations (GIX-TSX-V $.96). I had a long and extremely fruitful update last week and believe the current share price doesn’t come close to representing not only what has been done so far, but what the company could have in the not-too-distant future. I know there’s some concern on how the company will pay what they owe to Silver Standard next year, but in every conceivable way the current share price does not reflect whatever they do. I rarely urge all readers to do this, but I do want to urge all of you to contact the company and get a complete update of where they are at and what they feel is coming down the road. I highly anticipate a major bump up in the resource in October.
http://www.geologix.ca/s/Home.asp
Toll Free # 1-888-694-1742

Editor’s Note: Among the terminally ill and battered junior resource sector, Eastmain Resources (ER-TSX $1.08) is quite healthy. As you can see from their third quarter report, they are not only well-financed but continue to have great success on the drill front. I have often spoken of management’s methodical way of developing its assets and that has paid off nicely, especially when you look at other juniors. Other than a sharp decline in metal prices and something unforeseen on the corporate front, the only real concern I have with ER is one of its corporate partners could make a takeover move before one could see the full potential reward. I guess in this market that should only be the case with the rest of one’s holdings.

In one of the most successful quarters to date your Company increased its treasury to over $20M. Through private placement investments, Eastmain has received endorsement for its exploration efforts once again from it’s major partner Goldcorp, and from several significant institutional banks and investment funds. By choosing to improve Eastmain’s financial position while higher gold prices sustained higher share price and volumes, we have secured our ongoing exploration plans for the next several years. Drilling at Clearwater continues to uncover more gold, while exploration of other earlier stage projects provides our shareholders with opportunity for new discoveries.

Clearwater Project- Eau Claire Deposit
Our near-term objective at Clearwater is to “drill under metal” to discover new deposits and add near surface, high-grade, quality ounces that can be mined at low cost. In an effort to expand the lateral and vertical extent of the gold deposit and to define high-grade measured resources, which might be extracted by open pit methods, diamond drilling is on-going at Eau Claire.

Previous drilling outlined a substantial gold-bearing “footprint” for a length of 1.5 kilometres and to a depth of 900 metres. Current drilling is systematically testing the deposit over a length of 600 metres and to a vertical depth of up to 300 metres, utilizing large-diameter HQ core in closely-spaced drill holes.

To date, this definition drilling has demonstrated excellent continuity of the main group of veins both laterally and vertically. 29 holes (ER08-113 to ER08-141) have been completed for approximately 5,400 metres. Visible gold has been observed in over 50 veins from 23 different holes. Similar visible gold intercepts observed in 55 veins drilled during the 2007 program contained an average of 70.74 g/t gold or 2.07 ounces per ton. Typically gold occurs as a fine dusting within the veins, ranging from isolated grains to multiple clusters from < 1mm to 2 mm in size. The current program has also been successful in the discovery of a new vein series (T Vein) containing visible gold, which lies north or footwall to the deposit.

Results to date demonstrate that the larger diameter core combined with closer-spaced drill holes has delineated more gold. Drilling completed during the 2007 program intersected 100 vein intersections containing an average grade of 28.03 g/t gold or 0.82 ounces per ton over 1.25 metres, including 50 vein intersections with an average grade of 50.01 g/t gold or 1.46 ounces per ton. Highlights from 2007 included hole ER07-87, which assayed 79.76 g/t gold or 2.33 ounces per ton across 3.5 metres and ER07-98, which intersected a metre-wide vein at 1,313 g/t gold or 38.35 ounces per ton, including one halfmetre sample at 2,540 g/t gold or 74.2 ounces per ton.

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About a year ago, I sounded the alarm just days after the Dow Jones Industrial Average made a new all-time high. I entitled the newsletter “Man Your Battle Stations.” In that newsletter, I envisioned (actually, all anyone can do is make an educated guess at best) a very sharp sell-off and suggested holding no equities except those related to precious metals. (Since then, mining shares have been killed, proving I put my pants on one leg at a time, too, and those speculators who only buy those stocks are likely not sending me anything for Christmas). But, if you followed my advice back then, the lion’s share of your capital would have been in cash, so the metals hit should not have been as devastating (unless you’re a gold bug, hello).

Widespread losses of anywhere from 25 to 50% or more are not uncommon. Certain sectors like the financials, housing and the like have been hammered and have even seen the wipe out of a company’s entire equity. While that is not likely to continue at the same pace, it is still far too early to go back into the water. Investors should remain on the sidelines for the most part and only peek out of their fox holes as we get closer to 10,000 on the DJIA.

Calling All Buyers

There are enough fundamental problems in the stock market to last for quite a while, but one that hardly gets any play these days is the great wealth transfer. Nearly 80 million Baby Boomers have begun reaching retirement age and these folks were going to sell their equities and move into fixed income or the like creating a bonanza of business opportunities (at least that’s what was hailed within the financial services industry). Also, these folks had financial plans (my readers already know why I don’t believe traditional financial planning doesn’t work, and this is living proof) that had assumed rates of returns in the 8 to 10% range. Not only have these Baby Boomers not seen such a return in years, but they are now facing a two-headed monster: falling equity prices and far lower fixed income rates of return. In addition, those in the work force under age 65 are in it up to their necks, trying hard to stay afloat, and are in no position (don’t have the disposable income) to take these shares off the Boomers’ hands even at today’s prices. This will be another weight on the stock market for a considerable period ahead.

Points of Interest

• The FDIC problem list of banks spiked 30% in the past quarter. Banks remain off limits still in my book (but can become buying targets down the road). Unless many white knights come riding to the rescue, banks in general will likely have to dump assets to maintain satisfactory capital levels for regulators and creditors. Commercial banks are likely reluctant players as this unfolds. Keep in mind that on average, commercial banks attempt to hold about $1 of capital for every $10 of assets they own (investment banks are about $20). Another big loss this quarter or next could see large scale fire sales once again.

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Anooraq Resources (ARQ-TSX-V $1.58 ANO-Amex $1.56) - The merger should finalize soon and I think we can see a sharp rebound here.

ATW Ventures (ATW-TSX-V $.36) – The following commentary on ATW was received from Doug Beiers of The Simple Investor Ltd.  www.thesimpleinvestor.net

ATW currently has approximately $9.7 million cash and needs/commitments are as follows:
-          a $3million payment is due in 2009 for Gullewa
-          a $1million Bond and $800,000 Stamp Tax are also due at Gullewa before they go into   production
-          $3.5 is budgeted to get Burnakura into production
Graham Harris commented “we may look to raise the $3.5 million for Burnakura in debt thus freeing the cash for exploration at Gullewa. Any good numbers from drilling the gravity extensions will confirm our belief Gullewa is a multi-million ounce deposit.”

Burnakura Gold Mine
Current drilling is focusing on the NOA2 deeps where recent drilling returned 11m of 9gpt. A batch of drill results will likely be released in a couple weeks or so. A modified mining plan is underway partly based on recent and new drill results.

Gullewa Gold Mine
Gullewa has the potential to be on a MUCH LARGER scale than Burnakura, with multi-million ounce potential and larger scale production. Also, Gullewa is proving up to be bigger and better than they originally hoped for, and will likely be primarily an underground mine. This mine is thought to go into production sometime in the next 12-24 months, possibly 12-18 months. The Company’s position at this time is that it is premature to comment on a mining start date until more numbers are crunched. Also from Mr. Harris “…the company has submitted the previous Snowden feasibility to Mining Plus in Perth to be viewed in light of current metal prices and utilizing an underground vs open pit mining plan.” I expect the company to comment on this in the fairly near future.

Misc:
-       Diesel energy as an overall cost on both projects works out to about 5% (not significant)
-       RAB Fund blew up and they hold (held) 1.7 million shares which are currently being dumped on the market
-       President Brent Butler is getting together with key staff for a planning session this coming Monday. I expect news release preparation and advanced stages of mine planning will be on the agenda. The AGM is September 30th.
-       Management and key staff own approximately 20% of outstanding shares

With a MC under $18 million, 2 gold mines producing (likely) within 2 years plus considerable cash on hand, I am quite bullish. I expect that a substantial update will be worked on in advance of the September 30th annual meeting so we should be much better informed sometime over the next 2-3 weeks.

Continental Minerals (KMK-TSX-V $ .77) – By being a Hunter–Dickinson managed company, one can have higher confidence that any funding needed even in tough markets is likely to be obtained, as HD is a world-class operation with long arms and deep pockets worldwide. Like so many others, the stock is deeply undervalued but with HD at the helm there should be far less fear of the company running out of gas.

Crosshair Exploration (CXX-TSX-V $.26, CXZ-Amex $.25) – Although Crosshair’s share price has had the tar beaten out of it, the Company is still one of my favorites.  They have completed everything they set out to do this year.
1) They completed the acquisition of a new deposit in the Central Mineral Belt with 6.1   million pounds of uranium and more than 4000 claims.
2) They updated and significantly expanded their 43-101 resource to 11 million pounds   of uranium.
3) They have appointed a new president (from Barrick) and full-time and very   experienced CFO.
4) They are on the ground drilling and continuing to improve their projects.

With the new acquisition and the recent resource update, Crosshair controls just over 17 million pounds of uranium, making them the clear go to company in the Central Mineral Belt.  We all know this isn’t enough to go into production, but remember that these resources come from three different areas within the Central Mineral Belt and they are just a start.  All three areas are still open for expansion, but one of Crosshair’s goals was to prove multiple deposit potential, which I think we can all agree, they have done.  And they’re not done yet.  They will be drilling several new targets this year, including the huge, underexplored, southern portion of their property.

In addition to the positive results from the ground, Crosshair has also undergone several management and director changes these last few months.  They started the ball rolling with a new president and COO at the beginning of the year, who is, for the lack of a better word, a mine-builder.  Paul Hosford is a mining engineer from Barrick Gold Corporate with experience in mine design, operations and project management.  Crosshair also appointed new General Managers with real exploration and development experience.  Crosshair then added Rick Gill to the board, who has an obvious successful track record at managing Government and First Nations relations in Newfoundland and Labrador.  Rick was a senior executive officer of Voisey’s Bay Nickel Company and nailed the deal for Voisey’s Bay, one of the most profitable mines today.  Most recently, Crosshair hired a full-time and very experience CFO.  Add these new players to the existing team and you have, what I believe to be, an unbeatable team. 

Notwithstanding the current share price, significant value has been added to the company with the new team additions and with the exploration and development improvements on the ground.  Crosshair seems to have the right team and the right projects to be successful.