Gold may be on a dip right now, but that is what most analysts are calling it: simply a dip.
The common consensus is that the price per ounce is going to continue higher in the future. Even if estimates weren’t forecasting that gold was going higher, savvy investors are still flocking to mining companies based on other reasons; primarily that the cost of operations in gold mining hasn’t escalated proportionately with the rise in the price of gold. The bottom line has increased with regards to profit margins in many instances.
Years ago, mines would be abandoned if it was determined that the cost of any further drilling or mining could not be justified. The modality has changed today as miners spend the time researching quality targets and will drill deeper and spend a bit more time on finding additional gold because it’s worth the effort.
A company that understands this premisely is Vancouver, British Columbia-based Magellan Minerals Ltd. (TSX-Venture:MNM), a well-financed junior exploration company focused on mineral exploration and development in the state of Para in northern Brazil. The Company has interests in a number of properties in the Tapajos region which has a historic gold production estimated at 20-30 million ounces of gold. Magellan is searching for the source of this gold and is primarily focused on the Cuiú Cuiú and Coringa projects.
Magellan has been focused on its Cuiú Cuiú project and has been successful in drilling with significant intercepts in gold recently announced. In November of 2010, the Company reported the completion of three diamond drill holes in which gold mineralization was intersected in all three holes with the best intersection consisting of 105.2m @ 0.60g/t gold in hole 94 including 40.7m @ 1.29g/t gold.
Today, Magellan announced that six additional diamond drill holes which were recently completed at the Central target at the Cuiú Cuiú project in which not only was gold intercepted, but the mineralization was extended to 350m below surface. The goal of the drilling was to test the down-dip continuity of the northern part of the mineralized structure at Central between 50 and 70m vertically below previous drill intersections.
Highlights from the drilling included Drill hole 99, which was drilled 52m SE of hole 55 and returned 108.5m @ 0.93g/t from 199.0m to 307.5m including 53.0m @ 1.63g/t gold. This hole extended the mineralized zone vertically another 55m below the previous intersection. All other drill holes also produced gold intercepts as well. Results are currently pending on an additional two diamond drill holes: 102 and 103, from the Central zone and drilling is scheduled to continue into 2011.
Technically speaking, V.MNM has been on a solid climb since July with the price per share increasing from $0.64 to touch $1.94 last month. A cup-shaped consolidation is currently happening with support at $1.50 while the PPS is holding $1.60 currently.
Technical traders will be on alert for buying pressure during the consolidation as the indicators are resetting.
Gold prices are more than likely going to stay strong as Magellan continues to strike gold while drilling for the source of massive historic gold discoveries in northern Brazil. Mining investors will be keeping a close eye on this junior miner with cash on hand, a solid share structure and gold beneath its feet.
Related Stories
