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Excerpt Bottom-Fish Action Report January 21 - February 10, 2007
February 15, 2007
Solitario Resources Corp
It is worth pointing out that another old bottom-fish with an open cycle, Solitario Resources Corp (SLR-T: $4.43), did a deal with Votorantim in August 2006 on its Bongara zinc-lead deposit in Peru. Bongara hosts a Mississippi Valley type zinc-lead system occurring as stratigraphic and structurally controlled zones in dolomite. It is located in the Amazon jungle covered portion of northern Peru. Solitario acquired the project in 1994 when it targeted a high grade oxide zinc deposit with grades of 20-40% zinc. By August 1995 Solitario had estimated a resource of 1,347,000 tonnes of 20.5% zinc and 2.1% lead using a 7.5% combined zinc-lead cutoff. Further exploration in search of sulphide mineralization resulted in the Florida Canyon discovery, which prompted Cominco to option Bongara in December 1996 on stiff terms that required it to spend US $27.5 million over 4 years and fund all costs leading to a bankable feasibility study to earn 65%. Cominco spent US $16 million before it flipped the option to Pasminco in August 2000, but by February 2001 both Cominco and Pasminco dropped the option. Cominco drilled 80 holes (24,700 metres) in the Florida Canyon area, establishing a mineralized footprint of 2,500 m by 1,300 m. No resource calculation was ever published. The August 2006 agreement allows Votorantim to earn 70% by committing to put Bongara into production and funding all costs. Votorantim must spend $1 million in year 1, $1.5 million in each of years 2 & 3, and $2.5 million annually thereafter until $18 million has been spent. Solitario was recommended a top priority bottom-fish buy in the $0.76-$1.00 range on January 11, 2001 based largely on its platinum group metals Quedra Branca project in Brazil. Solitario had acquired the project by merging with Altoro Gold, an earlier bottom-fish buy recommendation. I subsequently went on an analyst tour organized by the Hunter-Dickenson group whose Rockwell Ventures had optioned the project. By the time we analysts arrived HDI had already concluded that Quedra Branca was a bust, but had not told anybody. The problem Rockwell encountered was that the PGM bearing horizons had been messed up by folding and faultin which it made it difficult to drill off a resource quickly. The analysts started to get a sense of foreboding when the discussion during the briefing the night before the drive to the property seemed to focus unduly on the type of insects present on the property. When we arrived after a long drive we were taken to some boulder fields from where we could hear the drills turning. It is tour protocol to take analysts to an active drill site so that they can take photos of the drill rig. You don't learn very much seeing the umpteenth drill rig and a couple boxes of the most recent core, but viewing an active drill is something that is simply done. After coming within earshot of a drill rig without actually seeing it, we were herded back into the trucks and driven back to the base camp. The highlight of that return drive occurred when a pair of walking sticks dropped onto the windshield of Bob Dickinson's car and performed a sex show every analyst photographed. What was otherwise a well organized and enjoyable trip became legendary in analyst circles as the long journey halfway across the world to listen to an invisible drill rig. Rockwell subsequently dropped the option and Solitario's stock price faded away, aided by the financial problems encountered by its major shareholder, Crown Resources Corp. Since then Crown's problems have been cleaned up, the Solitario control position distributed to shareholders, and Crown itself has been taken over by Kinross. Solitario developed an uptrend in 2004 after Kinross bought Crown, which resulted in Solitario acquiring 1,942,920 Kinross shares. As of October 31, 2006 Solitario owned 1,742,920 Kinross shares worth about $26 million at the current Kinross price of $15. Anglo American optioned Quedra Branca in early 2003 and continues to spend money on this PGM project. Solitario's new flagship project is the Pachuca Real silver-gold play in Mexico acquired early 2006. Newmont optioned 65% of Pachuca Real in September 2006. Solitario was converted to a Spec Cycle 100% Hold on December 23, 2003, and continues to be a Spec Cycle 100% Hold for bottom-fishers.
*JK does not own shares in any of the securities mentioned herein
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