Gold and silver continue to stay on the forefront of the news as economic recovery on international turmoil toss the precious metal prices around. Analysts continue to squabble and offer their two cents' worth about the direction of resources and contributing factors to a surge one way or the other. The rise in gold prices to top $1,500 U.S. per troy ounce was forecasted by the majority of analysts and gold experts globally in the latter part of last year and certainly in the first quarter of 2011.
While silver has taken a bit of a whipping recently after reaching multi-decade highs, gold tumbled a bit as well, but is demonstrating resurgence after only a minor dip below the $1,500 U.S. benchmark as silver struggles to regain traction.
That by no means is an implication that silver will not return to glory and test the $50-U.S.-per-ounce mark again in the near future. The fact of the matter is that a technical correction was becoming overdue after a searing pace upward. The prevalence of exchange traded funds and stop losses certainly had something to do with the downward drive, but as has been well-documented, silver has the ability to rise; and rise quickly. It’s really the difference between short-term trading and long-term investing.
Many investors are seeing the recent drop as a valued opportunity to gobble-up silver at a discounted rate, in much the same manner that gold quickly scaled back above $1,500 U.S. Gold certainly has been, and for the foreseeable future anyways, will be seen as a "safe haven" for risk aversion in still unsettled economic times.
Exploration companies, both major and junior, have taken the hit right along with the fluctuation in commodity pricing. Ironically, many have yet to demonstrate a recovery, but the question is "when," not "will" they will once again rise? Luckily for the faithful of the mining investment community, it is virtually never a short-term endeavor as most investors are in it for the long-haul based upon thorough due diligence of their chosen companies to track.
When it comes to North American exploration projects, there are a few key areas of focus in which gold miners and, subsequently, investors typically set their sights due to prolific gold trends. In Canada, it is the area outside of Ontario known as the "Red Lake District," which has been home to significant finds recently. In the United States, it is without question Nevada. Nevada produces gold that puts it in the same breath as gold-producing giants such as South Africa and Australia.
In fact, outside of those two countries, more gold comes from Nevada than anywhere else in the world. It is home to multiple gold trends that have garnered the attention of all the majors in the industry and made terms like "the Carlin Trend" or "the Eureka Trend" household phrases.
The famous Carlin Trend is second in the world in size of reserves only to the legendary Witwatersrand Basin in South Africa. Further, not only are these the trends that have been historically producing massive amounts of gold, but they continue to grow in overall land mass and are already being brought up in comparison to other, less-explored trends within the state.
Barrick Gold (NYSE:ABX) (TSX:ABX), the world’s number-one gold producer, has set up camp in Nevada for many years; cranking out gold at a furious pace.
Barrick has seven active projects in Nevada alone. Of particular note is Barrick’s Cortex operation which produced 1.14 million ounces of gold in 2010 at total cash costs of only $312 U.S. per ounce. Even more impressively, the mine has already exceeded its original guidance of just over one million ounces. In fact, as a result of commencement of production at Barrick’s Cortex Hills open pit mine, guidance has been increased by more than 120%. The Carlin Trend is also home to Barrick’s world-famous (and appropriately named) Goldstrike Property. With proven and probable mineral reserves tallying more than 12.6 million ounces of gold, the Goldstrike produced 1.24 million ounces in 2010 at a cash cost of $530 U.S. per ounce.
While no company can truly be compared to Barrick’s sheer massive gold production, Newmont Mining (NYSE:NEM) (TSX:NMC) also has a strong presence in Nevada. The two industry giants operate cooperatively on projects within the state. Recent quarterly reports from Newmont show that it extracted more than its fair share of Nevada gold in the first three months of 2011; with the reports marking the total as 433,000 ounces at costs attributable to sales of $643 U.S. per ounce to kick off the new year.
With Newmont’s recent acquisition of Fronteer Gold, the footprint of Newmont in Nevada grew even more formidable as Fronteer’s properties lie in close proximity to Newmont’s in Nevada, allowing for synergies and cost savings to be exercised.
Majors are not the only companies looking to flourish from the resources that Nevada bears. Junior companies poised to ride through the turbulence of commodity fluctuations that are focused in this region of the U.S. are the companies that possess a great deal of allure to mining investors.
In particular, Vancouver-based Max Resources Corp. (OTCBB:MXROF) (TSX-Venture:MXR) is a company with substantial holdings in multiple areas throughout Nevada that border projects of majors in the well-defined trends and also could bear significant future revenue due to strategic positioning in the lesser-explored areas. Max is actively exploring four different projects in Nevada presently.
The Company’s Table Top Project in Nevada is not only located right next to the Sandman gold property that Newmont kept in the recent acquisition of Fronteer Gold, but has also just completed a third drilling program, assays pending, with recent results including an intercept of 12.1 metres of 0.91 g/t gold, inclusive of 9.1 metres of 1.09 g/t gold. The project is located along the Kings River Rift, a regional geologic feature that appears to control mineralization in the area and which hosts multiple high-grade vein-related gold systems.
Along this trend is MAX's Sleeper Canyon Mine (2.5 million ounces of gold produced), located 25 miles (40 kilometres) to the north, the Goldbanks gold occurrence located 37 miles (about 50 kms) to the south, and the Sandman gold deposits immediately to the north.
One of the other Max projects, Majuba Hill, is host to a number of past-producing high-grade copper and silver mines and set to begin drilling in the near-term. The company's initial exploration program is designed to expand and define the extensive zones of high grade copper/silver mineralization identified during reverse-circulation drilling conducted by Minterra in 2007.
Highlights of Minterra's drilling included 145 feet at 1.85 opt and 0.49% copper, inclusive of 15 feet at 5.01 opt silver and 100 feet at 0.99 opt silver, inclusive of 15 feet at 4.00 opt silver. The mineralized system is open to the north, east and west and to depth. In addition, soil sampling is planned for two areas of copper/silver mineralization identified to the west and to the east of the mineralized zone, where copper samples as high as 7.2% Cu and 3 opt silver in outcrop have been reported by previous operators and have not yet been fully mapped or explored.
While very promising, this is only a portion on the Max Resources portfolio. The Max management has been quiet, with no news being released in nearly a month which has allowed for this junior to slide off the radar of exploration investors. With the discounted price, quality of the Max portfolio and tight share structure, riding in the shadows of the investment community may not last as shares are now nearly 20 cents lower than they were at the end of March. Proper due diligence of this developmental miner in the short-term is encouraged.
Commodities are in a long-term bull market, and recent corrections are important to sustain the long term bullish sentiment. Investors buy on dips such as these and look for quality Companies in the sector that have impressive property holdings, strong management teams and a long term vision of growth. As was mentioned above, certain geographical locations such as Nevada are simply more favorable and have produced stronger results for junior and major miners alike.
Geography has no assurance of success, but Nevada has proven that it has world-class mining properties and the land in the "Silver" state is valuable not only on the Vegas strip, but also throughout the great state.
