Yukon Update

This is Greg McCoach with an Insider Alert for Tuesday September 6, 2011.

Inside this Alert:

• The Yukon – Call of the Wild

 

Yukon Update

Jack London (1876 – 1916) was a writer who gained international attention with his famous writings which included, “The Call of the Wild”, “White Fang”, and “To Build a Fire”.

Unbeknownst to me until my third trip to the Yukon, Jack London lived in a small one-room shack at the age of 21 where he wintered near Dawson City and wrote material which later became the basis for his books.

I was fascinated by the story of Jack London and the Yukon. Life as they say in the Yukon is bigger up here and Jack’s story is certainly such a case. His time in the Yukon must have been a tough one based on where and how he lived, but gave him tremendous insight and creativity for his stories.

His work, “To Build a Fire”, is generally ascribed to contain the most poignant descriptions of the cold ever written. As I keep travelling to the Yukon, I am beginning to understand the nature of his writings and the issues that our junior mining companies have to deal with up here.

After this latest trip to the Yukon, I came back even more convinced that we are going to see major discoveries for years to come. With that being said however, the problem I see is that these discoveries in many cases are going to take time, a lot more time than most investors understand. I’ll talk more about this later in the report.

One of the things that struck me this trip was the amount of placer mining you see anywhere there is a creek or stream in the White Gold camp. You can clearly see past and present workings almost anywhere you turn. And at $1,800 plus gold you can imagine the fury of the placer mining that is taking place on old and new claims alike.

I talked with a few placer miners who came into town for some R & R after a hard day of working their claims. They told me that at current prices a typical placer miner is highly motivated and can bring in roughly 1,000 ounces in a good season or a couple of hundred ounces in a bad season. Some big placer operators can get much more as they have multiple sites going full bore at the moment.

From what I can tell, based on my belief of the ongoing bull market in gold, activity in placer mining is only going to accelerate. In some cases big new placer discoveries may break open the understanding for the hard rock mining companies looking to make the next big discovery.

But one picture I took says it all about gold in the Yukon. Since 1898 the Klondike Gold Fields have yielded all these different placer deposits and more are being discovered as I write this.

This picture (below) shows samples of placer gold taken out of over 80 different placer mines since 1898. What is incredible to me is that if you look very closely at all these samples you realize that each is metallurgically different from the other.

In other words, all of these gold samples have unique characteristics that are different from each other. What this means it that you have over 80 different types of gold occurrences all in one area! This tells us that there is a lot of source gold to be found and that each source was created by a different geological event. For whatever reason, this area of the world seems to have had some very unusual events for the creation of gold deposits of abundance.

Some of this placer gold in the picture may have come from a smaller system and may already be eroded away. In other cases the placer gold samples are just the tip of the iceberg. This is what makes exploration work and discovery so exciting. We know the gold is there and Shawn Ryan has shown us how to go find the big deposits. From this standpoint, the Yukon is a very exciting place to be for those who are looking to make big gold discoveries.

My excitement during this trip was tamed however by the realities of dealing with the harsh weather that one must face as a mining entity in the Yukon. During the trip I attended the Dawson Days Rocks conference, which is a gathering of all the exploration and geological people who are currently operating in the area. This conference typically takes place every year in the first half of August.

Last year the conference was well attended and I was very anxious to see many of the companies I am following at this year’s conference. I was very disappointed however in what I found. Only half the companies that were expected even showed up. The reason for this was due to the fact that most of the junior exploration companies didn’t get started on their work programs till late June or early July due to bad weather.

Normally the weather can be good in June in the Yukon, but there are no guarantees in such a northern location. This year proved to be an exception which delayed the work of many companies who were hoping to get off to a good start. This kind of delay wreaks havoc for those who have scheduled equipment and helicopter time on a very tight schedule over a short exploration season. Everything got backed up because of the weather and many companies had little of nothing to report at the conference so they just didn’t show up.

As you can imagine I was very disappointed for many of the companies I had on our TOP 10 Yukon LIST. Many will get some soil sampling done with the limited time left, but few will get anything related to actual drill results. This means that come the busy fall reporting season, most of these companies will have nothing coming that could significantly move their share prices.

With that being said however, there have been a few companies that were better prepared than most and will have some news to report in the next few months. As it turns out several of the Yukon companies that I have highlighted in the overall Mining Speculator TOP 10 LIST have fared rather well.

Those companies are Kaminak, Ethos Capital, Colorado Resources, and Golden Predator.

First Kaminak, who had their camp established last year with plenty of supplies for this season got off to a stellar start in April. They have consistently reported good results and will continue to do so for the next several months in my opinion. They are the clear leader in the Yukon Gold camps for what I believe is going to be a major discovery greater than 5 million ounces.

KAM this fall is most likely going to put out a 43-101 resource calculation in the neighborhood of 4 to 6 million ounces of gold. When you consider how many more targets they need to drill on their property package based on excellent soil and trenching samples, you begin to understand the scale of this discovery. I know this is still early, but Kaminak in my estimation could be sitting on a 20 million ounce gold discovery, thus the reason I have them at number two on our overall TOP 10 LIST.

My recent strategy to move money into junior companies that have less risk is the best way to play our current problematic volatile stock markets. Kaminak certainly is a candidate for such a strategy, thus the reason I have mentioned this to subscribers.

While our market has not been very good to us over the summer, I am hoping that the fall will treat us better. Events around the world however are very troubling, especially this recent news I told you about in Germany regarding decisions about bailing out other bankrupted Euro states.

That decision is going to be announced sometime around the middle of the month, supposedly around September 15^th. If they do what I think they will do, then Germany gets out of the bailout business and lets those nations flounder. This could cause a collapse of the Euro, which temporarily could be good for the dollar. Precious metals prices would soar in such an event, but again the mining stocks may not participate because of the domino effect this news would have on the big banks in Europe and stock markets worldwide.

Essentially, what this means is that the powers in Europe are at a dead end alley and can no longer kick the can down the road. They must now face the consequences for decades of abuse of their systems of credit and belief in socialistic fantasy. In other words they have run out of other people’s money.

This is just a precursor for what is coming to the United States who has also cornered itself in a dead end alley from which there is now no solution. How much longer do we have is the only question that needs to be addressed at this point and based on current events, the fuse is already lit and burning.

Moving into the highest quality junior mining stocks is the best way to deal with all the uncertainty and volatile stock market action. We may also have to take profits in the short-term if we get them and keep cash on the sideline to get back into the best companies as market volatility shows up in both directions. As investors, I have mostly been a buy and hold guy for the longer term, but current markets demand that we take a more active role in trading the ups and downs. I will try to guide you through this as it happens, thus the reason I have decided not to travel much this fall.

 

Ethos Capital

I visited multiple sites of Ethos Capital by helicopter on my Yukon trip and was very excited by what I found. Based on my lunch conversation with Shawn Ryan, Ethos Capital has the best soils Shawn has seen thus far this summer in the White Gold camp.

These high grade soil results are very similar in nature to the Kaminak soils I saw last year. Both the Kaminak discovery and ECC’s Betty property where these results were found are located on the Coffee fault. Trenching on this area revealed rocks that are and exact look-a-like to rocks I picked up from the Kaminak trenching done last fall.

This is a very exciting development for ECC who is trying to get their grid work to drill these key targets before the weather turns. From what I have heard, drilling was underway mid August and will continue as long as weather will allow. I can’t imagine they will be able to drill much later than third or fourth week of September.

ECC however will be a company that could have something significant to report to the market this fall. I have included some pictures of my site visits and maps of Ethos ground that is currently the focus of their efforts in the White Gold camp.

ECC will also be announcing exploration drilling that will be commencing this fall on their Mexican silver projects. This will help them to have a continual news flow that most juniors in the Yukon simply don’t have.

(Click images to enlarge)

Greg and Ethos Capital CEO Gary Freeman after landing on a key area of the Betty project.

Trenching work done on one of the high grade soil sample areas of the Betty project.


Greg holding the kind of rock we are looking for.  This rock came from the trenching work shown in the previous picture and is almost identical to rocks Greg picked up from Kaminak's trenching last fall while on his site visit. This rock shows the rust color stain within the quartz host rock that has assayed very well for Kaminak further up the Coffee fault.

Greg holding a big piece of rock from treching work that holds alot of promise.  Let's see what this stuff assays!  This is very exciting.

Golden Predator

GPD was fortunate that they have been able to drill since early spring. This is due to the fact that several of their projects have road access which makes things much easier.

Based on my conversations with CEO Bill Sheriff, GPD will continue to drill throughout a good portion of the winter months despite the extremely cold conditions. Because of road access, drilling can happen if the company can keep the water lines heated and the roads open. While drilling of this nature can get expensive, GPD will be selective about how they use winter drilling to meet their objectives.

Thus far, GPD has reported very good results in the early going at Brewery Creek, and a second discovery at Grew Creek, but it looks like more drilling is needed before the market will give GPD their due.

The best results thus far are at Brewery Creek and include 74 m of 7.08 g/t gold in hole BC11-198, including 57.5 m of 8.90 g/t gold beginning at a depth of 6 m. These are very significant results and I am surprised that the company has not had more of a rise in their share price especially since their summer drill program continues to have success.

This past month I have listed Golden Predator on our TOP 10 LIST for TMS and see them as one of the most important players in the evolving Yukon gold story.

Colorado Resources

While in Dawson City, I had breakfast with CEO Adam Travis who gave me the update on their activities on all their projects in both the Yukon and British Columbia.

While CXO ran into the same weather issues that everyone else did this summer, Adam still has an aggressive plan for getting as much work done as possible on several of their key project areas. With that being said however, it looks like it will be difficult to get much if any drilling accomplished before the weather turns in late September.

I was hoping we could get some drilling done on their Yukon properties this year, but Adam assured me that the company is not going to be lacking for news. CXO has two other projects in British Columbia that will see drilling later this fall and both look very promising.

In addition, the company has a very robust treasury and is actively seeking other projects of merit to add to their portfolio which will give them even greater diversification for reporting year round drill results.

This will bode well for the company over the long haul but our stock price has suffered with the weak summer market and the realization that we won’t be getting any drill results from the Yukon this year.

Summary

While the Yukon is a very exciting place for the discovery of big gold deposits, it doesn’t look like this year is going to be a banner year for the juniors who are operating in the area. The weather has really put a wrench into the works for many companies who will have to look towards next year’s exploration season for any significant increase in share price.

The exploration season is very short in the Yukon and any weather problems over the summer months are going to be very problematic until more infra-structure can be built into many of the key exploration areas. For now, as bullish as I am about further discoveries in the Yukon, I must temper this with the fact that this story is going to play out over a long period of time.

Year in and year out further progress will be made and we will probably reach a critical mass of news at some point, but this year is not the year.

For now we look to buy the highest quality junior mining companies that are working in the Yukon, and I think I have given you the best of the best.

The quality companies in the Yukon that I like at this point are the following. Look to build your positions over time realizing you should take money off the table any time you make some money and buy back in on the dip times. Over the long haul I think these five companies have the best chance at giving us the biggest returns from a major discovery in the Yukon or elsewhere on their other projects.

1. Kaminak
2. Ethos Capital
3. Golden Predator
4. Colorado Resources
5. Rock Haven Resources

All remaining companies that I had on our Yukon TOP 10 LIST should be sold into any strength we see this fall in our market. After the reporting season finishes up in December, I see all these companies (listed below) struggling with poor share prices as they wait for another six months before work can once again commence in the Yukon.

We will reevaluate their situations next March as we approach the 2012 exploration season.

TOP 10 YUKON STOCKS

 

1. Silver Predator
2. Stina Resources
3. Aldrin Resources
4. Taku Gold
5. Tarsis Resources
6. Argus Metals
7. Wolverine Minerals
8. Hinterland Metals

 

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