Another fascinating week for Castle Silver Resources (CSR, TSX-V) which closed at its high of the day each trading session, testing superb support in the low 20’s Monday, Tuesday and Wednesday before taking the path of least resistance Thursday with a breakout to a new multi-year high of 29.5 cents – a 321% gain for 2017!
Buy pressure (CMF) has ramped up tremendously, confirming there are eager buyers in the 20’s who see this stock as a huge bargain given the limited number of shares outstanding (35 million) and the prospects for this aggressive junior with so much going for it including 2 prolific past producing mines being put back into play.
What’s behind this surge and why is CSR the only stock in the burgeoning northern Ontario Silver-Cobalt Camp hitting new highs right now, after they all enjoyed big gains in January and February?
There are multiple answers to that question, which we outline below, but it’s important to emphasize right off the bat that CSR still has some “catching up” to do with some of its key peers in the district on the valuation side – all the more reason at this point why anything in the 20’s is a steal! Major developments are in the works here that are destined to power CSR much higher.
CSR Remains Undervalued vs. Peers
At 29.5 cents, CSR’s market cap remains a paltry $10.3 million (even less than Cruz Cobalt (CUZ, TSX-V!).
The so-called leaders of the district – Equator Resources (EQU, ASX), First Cobalt (FCC, TSX-V) and CobalTech (CSK, TSX-V) – have a combined average market cap of $36.2 million (the lowest is CSK at $18.5 million).
Don’t get us wrong – EQU, FCC and CSK (along with CUZ as the “area play” stock) could prove to be great buys at their current valuations, especially if Cobalt does what we believe it will do and soars to $40 U.S. a pound or higher – but BMR is the only source covering commodities and stocks that has actually had boots on the ground in this district and knows what’s really happening. That’s why we urged caution regarding CSK’s February 21 announcement that it had signed an LOI to acquire a fully permitted Cobalt processing facility. That facility has been an albatross around the necks of many, and last Monday’s announcement that the LOI has been terminated came as no surprise to us.
We’ve completed 2 site visits to this district and we’re about to make a 3rd, developing close connections with key locals in the process. We have great confidence, therefore, in what we’re about to tell you.
CSR – The Emerging District Leader
What do you imagine is going to happen when the masses wake up one morning very soon and discover what we already have that CSR is now the “Go-To” play in this district?
The “icing on the cake” is a technology angle, a perfect fit for this district and the broader markets, that’s going to make this story magical (see below)!
Suffice to say, that’s why we heard that some well-known, high-powered Howe Street entrepreneurs were key players in CSR’s 15-cent hard dollar financing last month. They are the types who don’t play for mere pennies. They know this business. They’re in for a HOME RUN, and we predict that CSR will deliver by knocking the ball out of the park.
As evidenced by DRA Global’s recent visit to CSR’s Castle Property in Gowganda, forces are at work with BIG plans for CSR – plans that ultimately could drive the valuation from a miniscule $10 million to NINE figures ($100 million or more). That wouldn’t be a first for President and CEO Frank Basa. His Gold Bullion Development ran well beyond $100 million in capitalization during 2010 when it was a Howe Street favorite and one of the Top Ten plays that year on the Venture thanks to a significant Gold discovery that’s about to be proven up as a multi-million ounce resource.
Innovation, diversification, spectacular grades and full access to its properties for work at surface and underground are all major factors in CSR’s favor.
Twelve key points to consider, followed by the “icing on the cake”:
-- CSR has the best share structure in district – just 35 million outstanding
-- Deepest roots in district – $4 million invested to advance Castle and Beaver since 2011 gives CSR a “head start” over the others
-- Advanced exploration permit at Castle – full access to main adit thanks to a closure plan accepted by Ontario government
-- First Nations agreements in place at Castle – critical for exploration and resource development
-- Beaver is on patented claims – no drill permit even necessary!
-- Prolific past producers – at least 20 million ounces of exceptionally high-grade Silver mined at Castle and Beaver up to 1990
-- Castle and Beaver were 2 of the few last producing mines in region when plummeting Silver prices shut everything down around 1990
-- Agnico Eagle’s focus was on extracting high-grade Silver, not the abundant Cobalt that’s present at both Castle and Beaver
-- Multiple opportunities for discovery of new high-grade structures (Silver and Cobalt) at Castle and Beaver
-- Castle also features Gold and base metal potential – separate Gold structure on property
-- 4 million ounce Gold deposit currently being expanded by Tahoe Resources 10 miles west of Castle
-- All-star team of geological, metallurgical and mining experts (Basa, Doug Robinson, Claude Duplessis, Jacques Monette and others who have decades of experience in this district)
Quite simply, no company in the Gowganda-Cobalt-Silver Center Camp offers more value to investors right now than CSR.
CSR’s 2 high-impact exploration plays and small-scale production potential are enough to drive this stock to $1 per share or higher by the summer, especially in red-hot Silver and Cobalt markets which is what we’re anticipating for the balance of 2017.
The company hasn’t even started playing “show and tell” yet with investors – wait until the masses start seeing samples like the one below that we collected from the waste pile at the Beaver (cut and polished).
Pictured above is native “dendritic” (fern-like) Silver, believed to exceed 1,000 ounces per tonne! Keep in mind, the Beaver produced at an amazing average grade of 171 ounces per tonne intermittently over a period of several decades (7 million ounces) from the deepest shaft in the district. Is it mined out? Not a chance in our view. Upcoming surface work at the property will provide valuable news flow and some Silver and Cobalt numbers that are sure to drive the curiosity and excitement of investors. The Beaver and the adjoining Temiskaming share a colorful, prolific history.
Castle Main Adit Is Like A Honey Hive!
Agnico Eagle didn’t shut things down at Castle (or Beaver) in 1990 because of ore depletion – Silver prices plummeted and the company was also facing union problems, so it ceased operations throughout the entire Camp. The main adit at the Castle Property features a massive network of tunnels, opening up huge possibilities for targeted exploration and potential extraction. Underground access in this district is critical, and CSR has it. Remember, too, that CSR has already demonstrated the existence of high-grade Silver outside the mined resource when a discovery hole in 2011 returned a whopping 188.8 oz/ton over 3 m at depth (great time to follow up on that!).
Agnico Eagle left behind plenty of Silver and Cobalt at Castle. Below is a picture from just a short distance inside the adit that shows part of a high-grade Cobalt vein (“Cobalt Bloom”).
Now, as promised, the “icing on the cake”!
Technology Angle Gives CSR Immense “Blue Sky”
CSR has even greater multi-bagger potential from current levels as we’ve learned from our research that includes hard to find publicly available sources that the company has a process (reaction oxidation) that it’s about to roll out to the market.
The origins of this came from a fascinating, highly successful $6 million research program involving Basa, using ore from the Castle mine when Agnico Eagle was still producing in the late 1980’s. The timing of the collapse in metal prices was unfortunate, just as testing was producing amazing results.
A reaction oxidation process returned exceptionally high recoveries (>99%) of Silver, Cobalt, Copper and Nickel (source: Metallurgical Society of the Canadian Institute of Mining and Metallurgy). Incredible recoveries, and note the Copper and Nickel, too, from Castle!
Basa, who’s truly a metallurgical genius, has the formula to solve a long-standing metallurgical problem in the district given the characteristics of the ore. Over 600 million ounces of Silver and 50 million pounds of Cobalt were officially produced last century in the Gowganda-Cobalt-Silver Center region, but in many cases Cobalt was either an unpaid or under-paid by-product (same with other metals). In general, there was minimal focus on Cobalt or on high-grade Cobalt areas which were typically left behind or used as a tracer to track Silver.
Significantly, the above process leaches all metals (including Gold) into one solution, and can also be used for recycling cathode materials from spent electric vehicle Lithium-ion batteries (lucrative potential market for CSR – American Manganese soared to $50 million+ on a process it has).
We can’t emphasize enough how huge this could be for CSR. Two fairly recent news releases from the company – November 29, 2016, and January 31, 2017, provided investors with some clues regarding this. Now, thanks to our exhaustive research that included a trip in February to the district, we can say with an exceptionally high degree of confidence that CSR’s “metallurgical evaluation of Cobalt and Silver recovery” (Nov. 29, 2016, NR) is indeed a game-changer backed up by decades of district experience that puts this company at the forefront of innovation among all the juniors active in this region.
And speaking of innovation, what might the consequences be for CSR if a highly respected global engineering firm like DRA Global recommends a state-of-the-art 1,200 tonne per day mineral processing facility at Castle to serve the Granada Gold mine and presumably the needs of the Gowganda-Cobalt-Silver Center Camp (GGM March 28, 2017, NR)?
To quickly summarize, the “pros” who got in on CSR’s 15-cent financing don’t play for pennies – they are looking for a return of 10 x or more on their investment, and what we’ve outlined in this report puts this stock on that path.
-- A focused, high-impact exploration story (Silver, Cobalt and even Gold and base metals at Castle) featuring 2 prolific past producers
-- Near-term small-scale production potential (2 of the last few producing mines in region)
-- Innovation leader in district with game-changing recovery solutions that may have much broader applications
Now you know why this stock, still below 30 cents, has us so excited! We’re also hearing that the CSR story will soon be broadening out to European and Asian investors.
No news from CSR since its nearly $1 million financing but we look forward to an update any day now as well as an impactful BMR return visit to both the Castle and the Beaver!
Note: John, Jon and Daniel hold share positions in CSR.
Read more at the source: http://bullmarketrun.com/?p=55603