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WHAT A DIFFERENCE A HOLE MAKES AND TAKE OVERS TAKE OVER

Saskatchewan’s and Canada’s most followed exploration play was dealt a good hand, then a bad hand followed by a good hand. Goldsource Resources Inc. (GSX-TSE-V) found good quality sub-bituminous coal, looking for kimberlites and diamonds near Hudson Bay, east central Saskatchewan in two drill holes, 1.2 kms apart earlier this year. They followed this up in June with a second and a third hole, 1.3 and 2.5 kms respectively south of the discovery holes and intersected a few metres of carbonaceous mudstone, coal seams and sand partings. Goldsource stock started out this card game under a dollar, rose to over 19 dollars with the release of the two plus 20 metre coal seam holes, then dropped to just over 4 dollars with the results of the two non-coal bearing holes. A fifth hole drilled in July, 3.0 kms northwest of the original coal bearing hole yielded 23.2 metres of similar looking bituminous coal in two intervals from 81.6-94.0 and 97.3 -104.9 metres. Obviously the coal basin thins out southward and continues northward and the program will now concentrate expanding the coal to the north. The stock took a quick turn about and headed back to near 10 dollars, then settled to the 8 to 9 dollar range in late July. Neighours like Wescan Goldfields (WGF-TSX-V), Westar Resources (WER-TSX-V) and Saturn Minerals (SMI-TSX-V) holding permits peripheral to the discovery witnessed an up and down of their stocks and will be watching with interest how the Goldsource coal card game proceeds. Wescan received notification that they are holders 83 coal permits totaling 60,080 hectares (601 sq.kms) and are awaiting official notification of another 268 permits totaling 192,640 hectares (1,926 sq.kms). Wescan are well positioned relative to the original discovery. The company is awaiting government approval to proceed with a drill program to commence probably this fall. Wescan stock has see-sawed between 80 cents and a dollar with movements somewhat related to Goldsource stock prices.

TAKE OVERS TAKE OVER

As we all know coal, both steam and metallurgical varieties have seen meteoric rises in prices and although the green house affects cannot be ignored the world needs coal to make power and steel. Teck Cominco Ltd (TCK-TSX), one of Canada’s most successful mining companies announced a takeover bid for Fording Canadian Coal Trust (FDG-U-TSX). The agreement will comprise a combination of $82.00 (U.S.) and 0.245 of a Teck Cominco Class B subordinate voting share per Fording unit valued at $14.1 billion. Fording is an open-ended mutual fund trust and one of Canada’s largest royalty trusts. The Trust makes quarterly distributions to unit holders using royalties received from its 60% interest in the metallurgical and thermal high-quality coal products of the ElkValley Coal Partnership from six open-pit operations in southeastern British Columbia. Cominco owns the other 40% interest in the Partnership. The second quarter distribution was $2.50 to unit holders, and the third quarter (and final) distribution of $3.00 will be included in the $82.00 per unit cash payment. On July 29, the day of the announcement Fording was up over 7 dollars to $91.00 but backed off to between $8.50 and $9.00 at month’s end.

Another take over that caught our attention was the Kinross Gold Corp (K-TSX-) and Aurelian Resources Inc (ARU-TSX-V) business arrangement where Kinross has offered to buy 100% of all of the outstanding shares of Aurelian, valued at $1.2 billion. The offer amounts to 0.317 of a Kinross common share, plus 0.1429 of a warrant, with each warrant entitling the holder to acquire on Kinross common share with an exercise price of $32 per Kinross common share and will expire five years after execution of the arrangement. Aurelian own the Fruta del Norte gold deposit in Ecuador with an inferred mineral resource estimated to be 58.9 million tonnes grading 7.23 grams per tonne or 13.7 million ounces of contained gold and 22.4 million ounces of contained silver at a grade of 11.8 g/t. At the moment Ecuador is not the most popular country in South America in terms of security of tenure. However Kinross must have assured itself that Ecuador will become user friendly and that proceeding with this take over will lead to a successful relationship with the government. Aurelian stock has seen its stock see-saw these past months due to the uncertainty of Ecuadorian politics. The Kinross takeover bid took Aurelian stock from under 4 dollars to over $7 then backed off to over $6 in late July.

Successful gold producer, Goldcorp Inc. (G-TSX) has signed an agreement whereby Goldcorp will acquire through a friendly plan of arrangement, all outstanding shares of Gold Eagle Mines Ltd (GEA-TSX). Gold Eagle’s principal asset is the world class Bruce Channel gold discovery which is situated along the prolific Red Lake Ontario Trend, adjacent to Goldcorp’s Red Lake gold mine and immediately southwest of Goldcorp’s Campbell Mine and past producing Cochenour-Williams Mine. The Red Lake Trend is a 24 million ounce gold trend with Goldcorp’s Red Lake Mine currently reporting proven and probable reserves of 3.8 million ounces of 2.05 oz/t ore, and their Campbell Mine at 1.9 million ounces of 0.5 oz/t ore. This transaction secures for Goldcorp full control of eight kms of strike length in the heart of one of the world’s richest high grade gold district. The arrangement calls for each share of Goldcorp to be exchanged for (i) C$6.80 and (ii) 0.146 common shares of Goldcorp assuming full pro-ration. The total consideration for 100% of the fully diluted shares of Gold Eagle would be approximately $1.5 billion. Gold Eagle stock reacted favourably and rose about $1.75 on July 31 to $12.20. In June 26, 2008 Agnico-Eagle Mines Limited (AEM-TSX) purchased 5,524,862 units of Gold Eagle at $9.05 per unit for gross proceeds to Gold Eagle of about $50 million. Each unit consists of one common share and one-half of a share purchase warrant with a conversion of each whole warrant at $10.15. With the announcement of the Gold Eagle take over, Goldcorp came off slightly to about $37.50 at the end of July.

MOLY MAKES MONEY AND TUNSGTEN IS TOUGH

One of my favorite stocks that produce molybdenum at its Max mine, Roca Mines Inc. (ROK-TSX-V), south of Revelstoke, in south central British Columbia reported some impressive tungsten assays in drill holes adjacent to the moly mine. As we all know molybdenum is often associated with skarn deposits containing tungsten, such as at Climax and Henderson, Colorado and elsewhere in the world. Up until now Roca has been concentrating on developing and expanding the moly deposit and now with production and money coming in it has the ability to fund exploration for tungsten. The company achieved commercial production on April 16, 2008 and during the last quarter produced and sold 345,571 pounds of molybdenum contained in concentrates and sold at an average price of $32.82 (U.S) per pound at cash costs of $7.75 per pound. The company is currently completing the foundations on a mill base for a third ball mill allowing for greater production flexibility and will provide for a nominal capacity of 1,000 tonnes per day. Recently, four drill holes successfully intersected tungsten mineralization on the southern portion of the Ridge tungsten zone. Of importance the grades appear to be increasing with depth as evident in drill hole MM-08-07 which intersected 0.504% WO3 over 13.10 metres at a down hole depth of 167.80 metres. The continuity of the mineralization indicated by drilling and the sizeable footprint of the mineralization on surface over substantial distances suggests the potential for a large-scale tungsten resource located immediately above the Max mine. Tungsten sells for an about $15 a pound and has a wide range of applications due its robust physical properties, especially the fact that is has the highest melting point of all the non-alloyed metals and the second highest of all elements after carbon. The pure form is used mainly in electrical applications, but its many compounds and alloys are used in many applications, most notably in light bulb filaments, x-ray tubes (as both the filaments and target) and superalloys. Due to its hardness at high temperatures and its high melting point it is used in many high-temperature applications like aerospace uses, wear resistant abrasives, knives, drill bits and a multitude of other uses. Roca stock trades in the $1.80-1.90 range and with revenue coming in on molybdenum sales and this excellent tungsten project proceeding favorably the stock should be on everybody’s radar screen.