Channel Resources is Vulture Bargain #17- One Million Golden Ounces for a Lotto Tickey Price
About one month ago we shared a Special Vulture Bargain Update with Got Gold Report Subscribers on an interesting exploration company working in Burkina Faso between Orezone's (ORE.TO) Bombore' project and Riverstone Resources' (RVS.V) exciting Liguidi prospect. As a courtesy to our entire blog readership we are reproducing an excerpt of that notice just below.
Special VB Update
September 12, 2012
VB #17 - One Million Golden Ounces for a Lotto Tickey Price
HOUSTON -- This month we are adding a new Vulture Bargain (VB#17), naming a small explorer working in Burkina Faso that has managed to prove up in excess of one million ounces of gold resources in all categories, but thanks to the terrible bear market for juniors is still trading in the Lotto Tickey price range. Obviously it is a gamble or it wouldn’t be priced as low as it is, but this one is not just a Lotto Tickey. Far from it.
This one is the proverbial high-risk-high-reward play we like to take a shot with while scratching our head, wondering why we have been given so low priced an opportunity. We are willing to risk a Vegas Money sized stake to see if the Trading Gods will look the other way long enough to allow the market to price the stock like it should. We will explain that comment as we go forward.
Bear Market Bonanza Op
Back one year ago, this company was priced at 4X or more of the current price and that was BEFORE they turned in their maiden 43-101 resource estimate on their Flagship Tanlouka project. Tanlouka is located about 8 km east southeast of Orezone’s Bombore’ deposit and about an hour’s drive east of Ouagadougou (pronounced Wa’-ga-doo-goo), the country’s capital city.
As shown in the chart below, the second leg of the brutal bear market for junior miners (March to May of 2012) decimated the price and broke the market’s confidence in the company, sending it as low as 6-cents in June in a panic spike. A price we dubbed Ridiculous Cheap on the charts, as many of you will no doubt already know.
Channel Resources is Vulture Bargain #17
The company should be no surprise to any Vulture who has kept up with our comments on the welcome page of the subscriber site. It is Channel Resources (CHU.V or CHJRF). Comparison chart below:
(VB paragraph: We are gaming the value they have already put on the table plus the blue sky that comes with the 79-square km land package being in ancient gold elephant country in Burkina Faso. For only strong, non risk-averse Vultures with a sense of adventure and a gambler’s heart. High risk, high reward.)
Let’s briefly speak to both (resources on the table and the blue sky), understanding that we know and trust that all Vultures will dig in and do their own careful due diligence to satisfy themselves before attempting to game any of the companies we attempt to play here at GGR.
Resources Found and Good Chances of More to Come
A very good place to start that trip down “Due Diligence Avenue” for Channel Resources is a September 4 press release which serves as a corporate update here:
According to the P.R, Channel filed a technical report (see link below), following up on their July 19 maiden resource estimate (when the junior market was in first stage panic and could not have cared less then) for the Mankarga 5 deposit, part of the Tanlouka Project, which showed that: “… the Report identifies Indicated Mineral Resources of 14.1 million tonnes at 0.94 grams per tonne gold ("g/t Au") for 425,000 gold ounces and Inferred Mineral Resources of 29.1 million tonnes at 0.78 g/t Au for 729,000 gold ounces. The Resource Estimate was made and the Report compiled by Mr. Jeffrey K. Smith, P.Geo., Principal Geologist at AMEC Americas Ltd.. The Report has been filed on SEDAR and is also available on the Company's website at www.channelresources.ca.”
The press release continued: “Tanlouka Gold Project, Burkina Faso, West Africa…
With the announcement of a maiden resource estimate at Tanlouka, Channel has achieved an important milestone in demonstrating the potential of the Tanlouka Project. From the first hole drilled on the Mankarga 5 structure to the present, over a period of two years, a NI43-101 compliant resource has been established with a major new resource contained within a single open pit shell. The mineralized structures at Mankarga 5 remain open down-dip and along-strike with potential to add to its gold inventory. (Ed. Note. M-5 is only one of several promising zones and not to be confused with Mankarga 1 which is nearby but likely a separate deposit.)
"We are very pleased with the progress that our team has made on the Tanlouka project," commented Colin McAleenan, Channel's President and CEO. "While the very difficult market conditions prevailing over the past six months and especially over this summer have limited the impact of our achievement in the markets, we believe that we have created real value for shareholders that will, in time, be reflected more faithfully." (Emphasis added.)
Tanlouka's expected growth over the next year will be driven not only by a potential market recovery but on a demonstration of the expansion potential of the Mankarga 5 deposit, which remains open along strike and to-depth, further drilling to determine the extent of mineralization at Mankarga 1 and Mankarga 1-South targets, and also on work underway to add new discoveries in other target areas. Chief among these include the Manesse and Tanwaka targets, approximately five and ten kilometres north of the Mankarga zone, originally identified in historic regional geochemical surveys. Channel has recently followed up on these targets with extensive 100 metre by 25 metre soil surveys, the results for which are expected soon. In addition to the identified targets of Mankarga, Manesse and Tanwaka, the Company will begin exploring the western third of the property, which has not yet seen any fieldwork.”
Lotto Tickey Price but Resources in the Can
By the way, the technical report mentioned above concludes: “Work completed at Tanlouka to date indicates that the mineralization is robust and can support a preliminary economic assessment (PEA). Based on the positive exploration results, the QP recommends Channel undertake a PEA at Tanlouka. Accordingly, Channel is planning to proceed with such a study. Recommendations are provided as a single phase of work, with the recommendations able to be conducted concurrently.”
The First of Perhaps Several Deposits East of Orezone’s Bombore’
So Channel has, in two short years, drilled and delivered a million ounce gold resource on their 90% owned Tanlouka Permit (the Burkina Government holds a 10% carried interest); for something like $5 an in-the-ground-within-a-single-pit-shell-ounce in all-in exploration costs.
That “Lotto Tickey” chance would be without any further kicks at the exploration can, but in Channel’s case there are several interesting potential exploration ‘can-kicks’ and possibly market moving catalysts we can point to.
On the exploration front, one of them has already been mentioned by the press update above in the form of the extensive 100 meter by 25 meter soil surveys at Manesse and Tanwaka. (See the map below at left and on the website at the link shown.) http://www.channelresources.ca/s/Tanlouka.asp
Manesse and Tanwaka are the geochem anomalies north of Mankarga in the inset map. Both areas saw historic, limited geochem sampling. Channel has undertaken a much more robust soil sampling program on both of them with the results pending.
According to management, in this area of Burkina, which is a very, very old geological zone, soil sampling, if done systematically and extensively can tell a lot about what is underneath the surface.
Soil sampling very often leads to discovery here (a fact we have already witnessed with Semafo, Iamgold, Orezone and Riverstone), almost as often as following the artisanal miners into new zones does.
Artisinal Evidence Aplenty
Speaking of artisanal miners, there are several areas on the Channel properties which the locals have dug shallow pits to reach free gold near surface. The company intends to follow up on these obvious bird dog pointers once the market returns to more like normal and financing is not so “iffy.”
The locals find the zones which travel all the way to the surface but do not have the technology or the resources to find, much less tackle, deeper, overburden covered deposits.
Their work in an area is proof that gold is there, but until the geos put the drills on it; until they learn a lot more about the structures there is no telling what the size or average grade of the deposits are. The main point to remember here is that robust soil sampling is an excellent tool to use in this ancient portion of the African Continent.
Following the Locals…
Gold deposits are scattered across the savannah in seemingly random fashion until one is able to connect the dots. These are some of the oldest gold deposits on earth, by the way.
The locals can only reach the uppermost, at-surface zones and often leave small workings (in relation to the actual size and depth of the deposits) and open pits behind to mark where they extracted free gold – an excellent “pathfinder” in the region.
Suffice it to say for now that Channel has more than just the Mankarga 5 deposit to explore, there are compelling reasons to believe they might be on the trail of other, interesting and commercial deposits to the north of M-5 and the company wants to do serious exploration of the only sparsely explored western sections of the permit as soon as it is practical to do so.
(Images of artisinal workings in the Tanlouka permit area. Credit Channel Resources)
Doing Due Diligence a Must!
Vultures with more than a passing interest in CHU also might want to take a look at the company presentation from August at this link: http://www.channelresources.ca/i/pdf/chu-presentation.pdf
Mankarga 5 drill results up to July 7, 2012 are at the link below. http://www.channelresources.ca/i/pdf/CHUman5resultslist.pdf
Drill cross sections from Mankarga 5 can be found here: http://www.channelresources.ca/i/pdf/CHUman5resultssections.pdf
Tanlouka Technical Report here: (Essential for serious and large Vultures. Note in particular the timing and history of the permit.) http://www.channelresources.ca/i/pdf/CHU2012TanloukaTechReport.pdf
The guts and bolts. Channel has more shares issued and outstanding than we would like to see at this stage, but we won’t carp too much about that with a 7 or 8-cent stock. What counts is market cap and at $0.07 or so we are talking about less than a $10 million MC for a company with a bona fide million-plus ounce gold resource. How many companies can you name that sport a $50 million market cap or more with less than the resources Channel has delivered?
We see room for improvement in both share price and in investor/trader awareness of this one. Absent a black swan event we expect it.
Spend a little quality time at the CHU website.
Tanlouka lies along the Markoye Shear Zone in the Brimian Greenstone Belt, which is host to quite a few mines and deposits as the map inset shows.
The gold-friendly zones continue to the south into Ghana, where another of our VBCI issues, James Longshore’s Xtra Gold (XTGR) is working. We will likely have more about Xtra Gold in another update shortly.
Bottom Line for now, we are moving Channel Resources from VBCI to fully fledged Vulture Bargain status as of today, September 12, 2012, with CHU changing hands at C $0.075 as we put the final touches to this special update.
As with all VB issues we hold a long position in CHU built up over the past few months, as disclosed on the subscriber charts.
CHU is a Speculation and should be considered high risk. We hold a long position already and should be considered as biased. By way of full disclosure, we are not yet done building our position and are actively attempting to accumulate additional “size” on dips now, including trades today at .07 and .075.
Obviously, CHU is not for everyone. It is certainly a risky, Lotto Tickey priced issue that needs a break from the Drill, Trading and Market Gods in order to break out of the bear market and buyer’s strike funk it currently suffers from on the one hand, but already does have a good deal of promising “good stuff” in the can with interesting, potentially market moving news imminent on the other.
So we consider Channel Resources as one for our most adventuresome Vultures to take a peek at; Vultures with a cast iron stomach, a sense of adventure and a gambler’s heart. Vultures who don’t mind taking a Vegas money shot at one-million plus ounces of Burkinabe gold at a Lotto Tickey price and willing to be patient for market conditions to hot up a little from here.
If we held no position at all we would take an initial stake at the offer and then try to catch a kamikaze seller at some ridiculously lower price to round out the Vegas money position ahead of the soil sampling news to come. The stock is thinly traded so we wouldn’t get in a hurry buying or selling and we definitely would not chase it.
Recent price: $0.075
Shares issued and outstanding: 119.3mm (Management 8%, 12% FD)
Fully Diluted: 144.5mm
Market cap: < $10 million
Subscriber Chart for CHU.V: http://stockcharts.com/h-sc/ui?s=CHU.V&p=W&yr=2&mn=0&dy=0&id=p54498499710&a=280216797
Channel Resources website: http://www.channelresources.ca/s/Home.asp
Insider activity: Modestly favorable. (As of 9-12-12)
Postscript: We very strongly recommend that anyone intending to build a meaningful position in the company contact and get to know management. We found Senior VP Cyrus Ameli to be personable, engaging and forthright. He would be an excellent place to begin discussions with management.
Our thanks to Eric Coffin of HRA for bringing this opportunity to our attention originally.
Channel also has an interest in the Fox Creek Lithium/Potash Project in Alberta, but we are not including that in this discussion.
That’s it for this special edition of the Vulture Bargain Roundup.
Remember that we continue to make new commentary on the VB and VBCI issues directly in the charts, which is our preferred way to communicate.
Once again, thank you for honoring us with your business.
”Ya’ll don’t forget to check the charts often, ya-hear? ”
Other VB Notes
Vultures can access all of the full-size Vulture Bargain charts and our “VB Possibles,” the Vulture Bargain Companies of Interest or VBCIs by logging in to the subscriber pages. We are constantly updating and commenting in those charts, and that is where we intend to do most of our “communicating” about the VBCI issues.
For new Vultures “Free Shares” means that we have taken profit on a portion of our initial stake, usually at least at a “double” and hold the remainder of the position virtually risk-free.
“Trophy Shares” means that we have taken profit on a portion of our Free Shares so the issue is not only risk free, but it has also given us a measure of profit “fun.” We think Free Shares and Trophy Shares are the very best way to build a portfolio of small miners and explorers, so we really do enjoy the issues that allow us to do so.
“Vegas Money” is uber-high risk money in an amount one can afford to lose all of and not affect one’s standard of living, like the amount one might take on a weekend trip to Las Vegas.
“Lotto Tickey” is the highest risk issue we attempt to game, always extremely cheap, but not without a good shot at the brass ring. Definitely not for the faint of heart, but sometimes these gambles actually do “hit the numbers” and man, is that ever fun!
All Vulture Bargain Issues Are Speculations and Should Be Considered High Risk.
Until next time, good Vulture Bargain Hunting!
Disclosure: The above contains opinion and commentary of the author. Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure: The author and/or his family currently holds a net long position many of the “Vulture Bargain Candidates of Interest” or “Vulture Bargain Stocks” mentioned in this report or within the last year. GGR Members actively trade them and may increase or decrease their positioning at any time without further notice. For Mr. Arensberg’s disclosed positioning, consult the individual tracking charts available on the GGR Subscriber pages of the Subscriber website.
The author receives no compensation from any company mentioned in this report with the following exceptions: Brazilian Gold, Mega Precious Metals, Millrock Resources, Timberline Resources and Northern Tiger Resources are sponsors of GotGoldReport.com.