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Jim Letourneau's Blog

Investing, Technology, Travel, Geology, Music, Golf. I think that covers it.

Metallic Ventures - Undervalued Gold Resources in Nevada

As a shareholder of a junior gold company, it is preferable to have management aligned with your interests. When Jeff Ward, President of Metallic Ventures Gold Inc. ( MVG.V), says "It's my money!" music should start playing in shareholders' ears.



Co-founders Ward and Richard McNeely own almost 40% of Metallic's shares. Neither of them has sold a single share since the company's IPO in late 2002.



Using the metric of valuation per resource ounce or "pounds in the ground," we find that Metallic Ventures' 5.96 million measured and indicated ounces of gold are valued at a miserly $13/oz, while the industry average is closer to $65/oz. Their 3 major properties are:



  • Converse (~4 million oz)




  • Goldfield (~1million oz)






  • Esmeralda (~1 million oz)




Metallic Ventures' gold properties are in Nevada. The Fraser Institute's Annual Survey of Mining Companies 2005/2006 ranked Nevada as having the best mineral policies for the sixth year running.



Metallic's Esmeralda property had historical production of 1.9 million ounces and it was thought that putting it into production would provide cash flow to help fund the development of Metallic's other properties. Unfortunately, putting the mine into production did not lead to positive cash flow. The gold veins were discontinuous and to complicate matters further, the gold was not consistently emplaced within the veins. These problems were not unsolvable but trying to fix them "on the fly" with a burn rate that included a mine payroll of 170 people proved too risky for management to accept.



Remember that less than 20% of Metallic's resource ounces were in this property. Metallic's share price, which had been as high as $9.60, plummeted to $1.45. on its decision to put Esmeralda on “care and maintenance”.  It is my opinion that the market severely overreacted.



The good news is that Metallic Ventures has $19 million left in the till to fund exploration and development of its Converse and Goldfield properties (the other 80% of their resources). They have recently hired AMEC E&C Services Inc. (AMEC) to conduct scoping studies on these properties. I like owning Metallic Ventures’ Nevada gold ounces in a rising gold price environment. The gold hasn't gone anywhere.



I currently own (MVG.WT.TO)