FOUR LETTERS AND FOUR WORDS THAT CAN STILL MAKE YOU RICH!
SRSR – Sarissa - Keevil – Nemegosenda – Niobium
Sarissa Resources, despite solid progress in 2009, continues to fly way under the radar of Wall Street. Sarissa stock is currently basing following the 2009 run, giving the astute investor an opportunity to add shares to their portfolios.
Locate your financial bearings with Sarissa Resources in 2010 and beyond!
Sarissa Resources (SRSR) is a junior mineral exploration company rapidly evolving into a mining company. Its flagship Nemegosenda property in mining-friendly Ontario is the site of the second largest (“world class”) niobium deposit on planet Earth, with third-generation industry veteran Scott Keevil at the helm!
– Scott Keevil has mining in his blood. His grandfather had a hand in discovering the Nemegosenda mineralization back in the 1950’s. Scott’s father Norm is chairman of the resource giant Teck Resources (TCK) and is literally worth billions. Norm got his start years ago with one property and now Scott is likely following in his footsteps. Scott took the helm of Sarissa two years ago and has already built a steady track record of progress, with the help of a competent team of directors, geologists, and consultants. Scott and his team have purchased the property in several increments, conducted a pre-feasibility study, cleared roads, tested in the adit, surveyed the land, drilled, logged, and assayed the cores, produced a NI 43-101 technical report, researched and summarized all historical work, negotiated with the natives, created a computerized model of the data, expanded the historic resource, initiated metallurgical testing and a feasibility study, and pursued public relations and funding in an extremely responsible manner. It is also important to note that Scott took restricted shares for 2 years in lieu of a salary as one of many signs of his commitment to shareholders. With Scott’s exceptional experience and proven track record, he is the perfect person to be running the show!
– Nemegosenda is Sarissa’s flagship property in northern Ontario, 30 miles east of Chapleau. It is no accident that Scott selected this as his first property. Extensive work in the 1950’s by Dominion Gulf Company made current drilling efforts like “shooting fish in a barrel,” especially the Hawke Zone (formerly the D Zone), where a 580-foot horizontal adit at lake level is still in good condition and was used for recent sampling. In all, 68 diamond drill holes were carried out, with 38 in the Hawke Zone. About a mile away, seven other zones collectively referred to as the South-East Zone, have had drilling and trenching and other work and hold similar promise. Back in the 1950’s the focus was primarily on uranium, which while present was not in economic quantities. Niobium and rare earth elements were identified, and fairly comprehensive metallurgical testing of niobium by the Colorado School of Mines was even carried out, but was abandoned even as very promising results (90% extraction rates) were being obtained, as niobium was not as valuable back then. This situation has changed in past decade. In a recent press release, the company stated that there are “no barriers to extraction” as a result of the first phase of its metallurgical testing. Sarissa has purchased several property claims over the past two years, as well as under the lake, and now “believes that any potential extensions of the mineralized areas may be covered in its 5500 acre holdings.” From the historic data, SRSR was confident they had 20 million tons of nearly 0.5% Niobium (approximately US$5 Billion), but that is just the start. The ore body is also perfectly amenable to surface mining, which gives the project an enormous cost advantage. As one company consultant put it, “If I were to dream up the perfect property, I wouldn’t have the audacity to come up with one like this!”
– Niobium (Nb) is primarily (90%) used in making steel lighter, stronger, and more heat and corrosion resistant. Tantalum (also present) is used in electronics. The REE’s (rare earth elements) are critical to many modern products, including batteries, electric cars, headphones, disc drives, cell phones, etc. China currently controls most of these markets. More details on these elements and their uses are easily available on the web. Recent data suggests that even with the global economic turmoil the price of these commodities are holding up well, and the uses and potential demand for these specialty elements grows over time. As an example, a new aluminum alloy is making use of niobium for some specialty markets. The rising demand and limited supply points to stable or rising prices. Especially, niobium is regarded as “irreplaceable” in its markets, and it could be irreplaceable in your investment portfolio!
– In July 2009 the first NI 43-101 Technical Report was released on the Nemegosenda project. “NI 43-101” refers to the Canadian and global standards for making mineral resource claims. In essence, it requires drilling and assay lab analysis of resource claims, all by qualified personnel conducted without personal interests. There are five levels of resource claims, including inferred, indicated, and measured resources, and probable and proven reserves. (One can research NI 43-101 and the Bre-X scandal that brought it about if interested.) Under these standards, the historic data was not relevant without current drilling (the historic core samples were not available). In the winter of 2008-2009 Sarissa drilled 9 holes in a tic-tac-toe pattern in the Hawke Zone, easily re-affirming the historic data and then some. The 9 holes were enough to quantify 11 million tons of indicated resource. Meanwhile, computer modeling of all of the data calculates a block of 50 million tons of inferred resources, or 2.5X the historic estimate. The South-East Zone (no current drilling in the July report) is represented as a block of 700m x 250m to a depth of 250m of 0.35% Nb. Unofficially, from a fact sheet the company had available at the March 2009 PDAC industry investor conference, this translates to 160 million tons or greater. The Technical Report made recommendations of $1.8 million of further development and proving up the resource, which the company is in the process of doing. This stock has roughly doubled in each of the past couple years under Scott, with mid-year spikes of 4X to 5X its close. Purchasing shares near Sarissa’s base stock price has historically proven to be an excellent investment decision.
– The project needs to be viable as a niobium property first, but as this hurdle is passed, additional resource value is likely. There is strong evidence of rare earth elements (REEs) that need to go through the same NI 43-101 compliance standards, and the same drilling being done for Nb is also useful for this process. The REEs have the potential to match the valuation of Nb. This is the big wild card that has many investors excited. With the increasing importance in today’s technology, REEs have gotten increased exposure in 2009 and is expected to continue. Once the REEs are quantified in a meaningful way resource investors will not fail to notice. Just imagine what will happen when these REEs appear on the “verified” side of the ledger!
– The size of the mineral ore body keeps expanding as more work is done. The historical data left the impression that there were perhaps 20 million tons in the Hawke Zone, and perhaps an equal amount in the smaller zones making up the South East Area. In the July 2009 Technical Report, the Hawke Zone was defined as an inferred resource of 50 million tons. Subsequently, the company drilled three more holes in the Hawke Zone in a step-out from the previous holes in an attempt to define an expanded zone, and while complete results are pending, initial reports confirm this expansion (60 million tons or more?). Data modeling of the South East Zone were suggesting 160 million tons or more earlier in the year, and subsequent work was suggesting the SE Zone is larger as well. Then in December 2009 the company announced that another zone south of the SE Zone had a magnetic signature similar to the other two zones, and is preparing to drill in this area as well. We must stick to the facts for now but the company does not balk at the suggestion: there is the possibility that all of these smaller zones are in fact connected, and the true mineralized ore body may be up to a mile and half long! (Not to mention the prospect that it also extends under the lake!) And the defined ore body is not only being expanded laterally, it is likely getting deeper. The previous phase saw mineralization continuing at the depth limit of the drill (300 meters), and in the current phase, the company brought a more powerful drill on site. If only the known zones prove out, SRSR will already be wildly successful. Consider what happens to your investment if the whole 1.5 miles is one continuous niobium/REE zone!
– Note that Sarissa has other mineral properties, including a gold property in the promising Shining Tree district (also in Ontario). Historic data, as well as recent results with two initial drill holes, is available and promising (up to 9 grams per ton), and plans are being made to develop and drill some more. Most believe that if this gold play pans out, some sort of JV would be arranged that would help Sarissa further fund development of Nemegosenda. Gold will continue to shine as demand for the metal lights up the investment community.
– The commodity market experienced its dip along with the general market, and prices have recovered. A recent Resource World article stated that Nb prices were $20 a pound in 2008, fell to $10 in January 2009, and are now around $18 a pound. In the commodity spike in early 2008, Nb was over $30 a pound, and may creep there again. Many respected industry and market veterans are predicting another commodity bull market, including gold and oil and agricultural and other mineral assets, and some are even predicting the biggest bull market in junior commodity companies in 40 years. Demand for Nb is expected to remain strong and climb going forward. Meanwhile, Sarissa’s authorized shares were lowered to 850 million (from 900 million) after Scott came on board. The outstanding share count in December 2007 was 726 million; in December 2009 it is approximately 769 million. That is a phenomenal limited dilution of 3% per year in light of the norms in this market sector and all that has been accomplished. Sarissa’s commitment to shareholders is well-established. The company has also suggested that uplisting remains a priority at the appropriate point in their development, but has chosen to utilize the majority of its resources to developing its properties currently to maximize shareholder value. Sarissa management prefers a low-key approach to public and investor relations, constantly striving to maintain a strict adherence to SEC guidelines and a rational approach to future share price potentials. U.S. investors should consider the possibility of SRSR as an excellent investment for Roth IRA's.
Sarissa management may consider a 100% sellout, possibly developing the property alone, negotiating a joint venture or entering a Chinese off-take agreement. (A Chinese off take agreement is where the Chinese guarantee they will buy the entire product at market prices or at an agreed floor price, and provide the resources for Sarissa to extract the minerals.) The company is constantly evaluating all of these options, although selling out seems unlikely, and going it alone may prove difficult. The apparent strategy for now is to do as much as possible alone, to increase the payout to shareholders once the project is far enough along to consider a JV or off-take.
Estimation of Value!
With 50 million tons or more in the Hawke Zone and 160 million tons or more in the SE Zone, we are talking about more than $30 Billion in just niobium. Potentially, Sarissa may be valued in dollars per share, as the chart below indicates. (Note: the chart uses an outstanding share count of 820 million, which is the 770 million referenced in the latest financial statements, plus outstanding options of approximately 50 million.) If all the REEs thought to be present are proven up, this chart would have to be amended to reflect much higher share prices!
“Ten for Ten” – What to look for in 2010:
1. Further developments regarding Shining Tree, Sarissa’s exciting gold property. Positive news may well attract investors interested in undiscovered gold plays.
2. Updated drilling results from the Nemegosenda niobium property. Expectations are high that the new results will either prove up the historical resources or expand upon them.
3. Investor interest should increase as Sarissa again attends the PDAC industry investor conference in Toronto in March.
4. The feasibility study, which includes the metallurgical study now in progress, should be concluded, confirming the economic viability of a process of extracting the niobium profitably. Since the Technical Report mentions much of this being done 50 years ago, there will probably not be much mystery here, given 50 years of technological progress.
5. Updated NI 43-101 Technical Reports will take into account all of the development since last summer.
6. Consider this pure speculation, but many believe Scott is interested in building a mining company. If so, developments on a third property are not out of the question.
7. Progress in or actual up listing could occur later this year.
8. The above body of work may potentially be enough to create some sort of major financing agreement with a partner or JV before the year is out.
9. Sarissa management could come up with some other unexpected, pleasant surprises!
10. Conservatively investors should expect an approximate target price range in 2010 of between .10 and .50 per share, depending on the exact nature of potential developments, the success in delivering the Sarissa story to a larger investing audience and the relative position of the junior exploration sector compared to other market sectors. If these and other goals are met or exceeded, it may be possible to achieve a share price approaching $1.00 or more.
Sarissa corporate site: http://www.sarissaresources.com/
Nemegosenda project site: http://nemegosenda.sarissaresources.com/
Nemegosenda NI 43-101 Technical Report: http://www.sarissaresources.com/media/Sarissa_Nemogesenda_Summary_Final.pdf
Shining Tree project site: http://www.sarissaresources.com/pages/projects/shining-tree.php
Investor’s hub Sarissa info/message board: http://investorshub.advfn.com/boards/board.aspx?board_id=8822