In the first segment of his May 8th Discovery Watch broadcast, John Kaiser takes a look at Simon Ridgway-headed Radius Gold (RDU) which we featured in our May 3rd Morning Report.
The stock jumped May 1st as drill results came in from Radius' Amalia project in Mexico, but it has pulled back as results from additional holes have come out which have not intersected the same kind of mineralization as the initial holes.
Kaiser speculates that the reason the additional holes have not met the same kind of mineralization is because they are not deep enough. The next phase of drilling also has failed to excite investors:
The company has said we are now going to focus the rest of our 2000 metre program on smaller step-outs centred on this main chute where we have the high gold grades. And that's a bit problematic for the market because this system dips into a hill and to get down deeper you need to step up the hill and drill ever deeper holes...there's also the question of the 2000 metre budget that they can probably blow through...pretty quickly and this means that we're not likely to see the strike expansion from this program so that the markets become a little subdued.
In the broadcast, Kaiser also highlights risks for Radius associated with the company using the farmout model which essentially involves a project owner bringing in a partner to provide funding in exchange for equity. According to Kaiser, the way the Amalia deal has been structured with Pan American Silver (PAAS):
There is the risk that once Pan American vests for 65%, it just decides to stay 65/35, take over operatorship and cash call Radius to death while news flow completely dries up.
Pan American can earn up to 75% interest by taking the project to pre-feasibility.
Despite the issues, Mr. Kaiser indicates that Amalia is a project worth watching.
We would add that is it also worth keeping an eye on the insiders. We note that director Bradford Cocke has been selling since our morning report feature. The selling has not been enough to downgrade the stock's INK Edge outlook.
In the second segment of the broadcast, Mr. Kaiser looks at exploration efforts in the James Bay region and speculates as to why the Midland Exploration (Cloudy; MD) has kept such a tight lid on results from its Mythril project (expected mid-May). Mr. Kaiser also highlights Harfang Exploration (HAR), which has André Gaumond as chairman, and its Serpent project also in the James Bay region. In the final segment, Mr. Kaiser looks at Zephyr Minerals (ZFR) and its Dawson project in Colorado.
This post also appeared on INKResearch.com.
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