Great Trades

Great stock trades based on fundamentals and technical analysis.

Tuesday, January 30, 2007


"This is behaving like an underground river"

As we mentioned in November, some readers had questions about a water source for Metalline Mining (MMG) after an October press release indicated that, as part of the feasibility study, they needed to find sufficient water to supply the mine and concentrator operation. This was the biggest issue for those investors who thought it may be the only obstacle that could prevent the project from being economically feasible.

Today, Metalline Mining announced test results on the first hole they completed. This testing suggests they have hit a large source of water. They experienced little drawdown from the first pump after 24 hours of continuous pumping at the maximum rate possible, so they put in a bigger pump to pump water at a 55% higher rate and still had little drawdown and an almost instantaneous recovery of the water level to the static level when the pump was turned off. With the static water level around 350-500 feet below the surface and the wells going as much as 1200 feet deep, we believe there is ample water there for their operations. Previous testing on the water indicated that the "water is ideal for use in mining applications." The consulting hydrologist stated "this is behaving like an underground river." They also have several other borings nearby that have very good production potential if needed.

Despite the fears of many, it appears securing a water source will not be an issue for MMG's mining and concentrator operation, and continued water testing should confirm that conclusion.

What is your opinion of Pacifica resources, PAX.V? I understand they have a large zinc resource in the Yukon.
Pacifica has a lot of potential because of their huge zinc resource, but it's so remote it would be very expensive to mine and process. Power and transportation will be big obstacles for them to overcome, and even if they can overcome them the economics aren't that attractive, as the costs for everything in the remote Yukon are very high and they still have years of infill drilling and studies to do before proving feasibility. That will require much more stock dilution.

If the price of zinc goes much higher long term, Pacifica has a chance to do very well, but it's got a long way to go and a lot of challenges ahead. Their shared management with Yukon Zinc, which has disappointed investors, doesn't help. Their best chance will likely be to find a good partner who's willing to take on a lot of the financial risk of developing the project, but it won't be easy.

Big remote projects without infrastructure look good on paper, but prohibitively high costs often prevent them from ever going to production. It doesn't matter how much metal a project has if it can't be economically mined. However, metal scarcity and much higher long term metal prices can make otherwise uneconomic projects viable. Pacifica needs zinc to increase in price significantly in the years between now and when they can produce a feasibility study, and that may just happen.
Post a Comment

<< Home


December 2005   January 2006   February 2006   March 2006   April 2006   May 2006   July 2006   August 2006   October 2006   November 2006   December 2006   January 2007   February 2007   March 2007   April 2007   May 2007   June 2007   August 2007   October 2007   November 2007   May 2008   September 2008   October 2008   January 2009   February 2009   March 2009   April 2009   May 2009   June 2009   July 2009   August 2009   September 2009   October 2009   November 2009   December 2009   March 2010   May 2010   June 2010  

Great Trades Home    Email GreatTrades

Great Investments Blog     Great Investment Articles Blog

Disclaimer: Great Trades may have a position in all or some of the stocks discussed in this blog, but is not paid by any company to promote their stock. Great Trades contains opinions, none of which constitute a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. Great Trades does not provide personalized investment advice.

Seeking Alpha Certified

Enter your email address to subscribe:

Delivered by FeedBurner

This page is powered by Blogger. Isn't yours?