RRM.V on the move and should reach decent hights soon...
Mexico play is a rare opportunity for investors5/6/2010 10:15:13 AM | Andrew Delic
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Junior gears up for next exploration phase at El Pulpo.
Ross River Minerals Inc. (TSX: V.RRM, Stock Forum), recently re-instated for trading, is focused on advancing El Pulpo, their impressive flagship exploration project situated in the well mineralized Sinaloa State of Mexico, approximately 125 km NE of the city of Mazatlan. Of interest, El Pulpo is situated in the Western Gold Belt of Mexico between the Sierra Madre Mountains, the Mojave Sonora Mega Shear, and the Pacific Ocean. Multiple mines and advanced projects, including Goldcorp Inc.’s (TSX: T.G, Stock Forum) El Sauzal mine, are found in this region and in a very distinctive trend line with El Pulpo.
We’ve been tracking its development with great interest for several years, and believe timing and opportunity have come together to create what could be the perfect storm for investors.
Since acquiring the 200 square kilometer gold-silver-copper prospect in 2003, the company has spent $5.7 Million toward exploration on El Pulpo. Data collected to date has established a critical and valuable baseline of information from which future exploration and development can take place, as well as reduce the future cost and risk typically associated with advancing the project toward a production decision.
Following extensive discussions with Marcus Foster, President and CEO of Ross River, it became apparent to us the market capitalization is extremely low given the exploration expenditures and significant discoveries made to date on the property. All early indications suggest El Pulpo is host to a very large mineralized system. The baseline data further suggests there are several sizeable porphyry and vein targets on the property worthy of further exploration (see map below).
Executive Summary
•Junior exploration company with advanced, drill ready project.
•$5.7 million spent on flagship 200 square km. El Pulpo project in Sinaloa State, Mexico.
•Six porphyry copper & three gold/silver vein targets identified, less than 1/3 of property explored. Significant upside potential exists as exploration program advances.
•Exceptionally low valuation compared to peers
•Recently re-instated for trading after lengthy halt, trading at post-crash level.
•Exploration and Investor Relations campaign re-commencing.
Share Structure and Capitalization
Shares Outstanding 51,164,994
Options/Warrants: 12,453,000
Recent Share Price: $0.06
Market Capitalization: $2.30 million
In early 2004, RRM traded close to $1.00 and boasted an impressive market capitalization of nearly $25 million. At that time, according to several analysts following the company, Ross River was considered to be undervalued. These observations were made when the price of Gold was $410/oz. the value of copper was “soaring” at $2.00 per lb.
Putting this in perspective today – Gold is hovering around $1,100/oz, Copper at $3.40/lb and Ross River’s market cap is roughly $3 million; less than half of what they spent developing the El Pulpo property to date. The investment opportunity, from our perspective, lies in the explanation of what happened since 2004.
So what happened – why is the share price so low? Nothing unusual, considering the circumstances – RRM, like most junior explorers, was severely impacted as a result of the capital markets retreating during the financial crisis of 2008/2009. As a consequence of the universal collapse of share prices world-wide and the inability of companies to access capital, those with high valued exploration properties were forced to cut expenditures and take a wait and see approach until the markets recovered.
Ross River shares were halted from trading between May 12th and November 9th, thus creating a unique situation whereby its share price remained locked while other companies enjoyed the market recovery. The company has since corrected the situation, filed appropriate financial statements, and have had their shares reinstated for trading. However, steps have not been taken to bring investor awareness back to the opportunity – until now. This promises to be a very exciting re-commencement for current and future shareholders.
A quick scan of press release headlines from 2003 to 2007 (accessed from the company’s website) will give you an indication as to the potential opening up on the property.
Let’s drill down and get into some numbers and geology. Up until the company halted exploration in late 2007, six porphyry copper and three gold/silver vein targets have been identified on less than a third of the property explored. The grades below clearly indicate something significant is occurring throughout the property. The following map provides an excellent overview of the project’s emerging potential.
We think investors will quickly see previous exploration has resulted in surface grades which are simply fantastic, and when compared to the high valuations being given to bulk tonnage operations with comparatively lower grade gold-copper-silver deposits, the El Pulpo project stands head and shoulders above many. In a follow-up report, we intend to provide a peer comparison to put RRM’s low valuation into perspective.
SO WHAT’S NEXT? To kick things off, Ross River is preparing for the next phase of exploration, while actively bringing investor awareness back to levels they enjoyed before the crash. Exploration will include analyzing the extensive geological database compiled to date and conducting further geophysics on the Jutamos copper/gold prospect to fine tune a drill program designed to test this high grade priority target.
The intention is to advance El Pulpo to the point where a defined 43-101 compliant resource can be established, thus greatly enhancing the overall value proposition.
Conclusion
It is our opinion that RRM offers a rare opportunity for the average investor to participate in a mature gold-copper-silver project at dramatically reduced share prices. One only needs to understand the underlying foundation and assumptions of this play to see the significant upside potential going forward: excellent share structure, strong management team; dramatically undervalued market cap given the previous exploration and grades encountered; and finally, commencement of exploration and investor awareness campaign.
www.evolvingcapital.ca
ABOUT THE AUTHOR
Andrew Delic
Andrew Delic, managing director of Evolving Capital Corp., has been actively investing in the junior resource sector for 20 years. Evolving Capital is involved in corporate communications, finance and strategic advice for publicly traded companies. Andrew currently does not hold shares of Ross River Minerals, however intends to purchase shares from time to time for investment purposes.
AI
