minesite.com – June 24th 2010

The following article appeared on minesite.com in June 2010:

Spanish Mountain Gold is one of the top tips from the Junior Mining Fund in which investment Guru Jim Slater is involved.

By Charles Wyatt

It was always going to make sense for chief executive Brian Groves to change the name of his company from Skygold Ventures to Spanish Mountain Gold.  That is the name of his main asset and it is a big, solid pure gold play in British Columbia.  Skygold as a name put one in mind of one of these tall arty bits of architecture which are erected in places as a reminder of something best forgotten.  So ride on Spanish Mountain, and remember that it has a second project – Thunder Ridge – which is some 100 kilometres to the south.  In fact Thunder Ridge used to be called Spanish Creek so it could make sense to switch Thunder Ridge’s name back again to round things off.  Brian Groves, an ever helpful Australian, has plenty of fans in London, as was shown when he presented at our 63rd Minesite Mining Forum last November.  They are led by the redoubtable Invesment guru Jim Slater who certainly got his timing right when he switched his investment focus almost exclusively to gold and agricultural land a couple of years ago.

Jim, and his colleague, Ian Watson, who together made a great success of Galahad Gold in London a few years ago, are now clesly involved with Junior Mining, a fund specialising in junior to mid tier mining companies.  Gold companies predominate in its portfolio, and the price has risen from 100p when launched last September to the current 132p, which is a useful performance.  The latest monthly report from Junior Mining discloses that the focus tends to be on companies like Medusa, Centamin, Silver Lake Resources and Norseman Gold, companies which are judged to offer the best value in the emerging producers category.  However, the report then goes on to say that “a rare exception to this approach is the outstanding value in Spanish Mountain Gold which, although a few years away from production, has large gold resources at a significant discount to its peers.”  According to Ian, every ounce of gold in the ground is valued at US$15 per ounce which is a figure right at the lower end of the scale compared with peers, and though the grade is low the production costs will also be at the bottom end of the scale.  So things do, indeed, look out of kilter.

Low grades don’t phase Ian Watson as long as the resource is big enough to sustain a good sized pit operation, and it certainly did Galahad Gold no harm that the huge Pebble porphyry copper-gold-molybdenum-silver project in south-western Alaska in which it once held an interest was low grade.  The project is now under development by Anglo American.  Spanish Mountain may never match up in size to Pebble, but Ian is still confident there is plenty more to come.  Cynics might recall the classic comment from Mandy Rice-Davies “well he would say that, wouldn’t he?”, given that Ian Watson is a director and major shareholder in Spanish Mountain himself, but there’s no denying that both he and Jim Slater have put their heads well above the parapet.

The company’s finances are sound enough, as Spanish Mountain raised C$5 million in February at a point when it still had C$2.5 million in the till, and was expecting a C$1.9 million mineral exploration tax credit from the province of British Columbia.  Fast forward a few months, and the company has just agreed to acquire a 100 per cent interest in the Cedar Creek property, which abuts Spanish Mountain, for C$500,000.  Brian Groves is clearly intent on consolidating the area.  At the moment the resources are estimated at 3.94 million ounces of gold in the measured and indicated categories with a further 460,000 ounces inferred at a cut-off grade of 0.3 grammes per tonne.  And it could prove expedient to accept a 0.5 grammes per tonne cut-off as this only reduces the measured and indicated resource to 2.58 million ounces and the inferred to 290,000 ounces.  There is clearly plenty more to come as exploration proceeds.

Preliminary work at Spanish Mountain has already shown that gold recoveries of 88 per cent to 90 per cent can be obtained from flotation, although more confirmatory tests are required.

In addition, this year there will also be 5,000 metres of exploration drilling around the Main Zone, which will try to extend the edges of the resource outwards, as well as testing completely new areas.

All the work currently in progress is geared towards providing the information necessary for the preliminary economic assessment which Brian Groves reckons should be finished by the end of the year.  As background to the project it is worth pointing out that is has power connected to the site, which is accessible by road.  There is a good workforce close by and the Mt Polley and Gibraltar mines are over to the west.  The share chart has been intriguingly strong since April, when the shares touched C33 cents.  They are now 49 cents, helped no doubt by the gold price, but also by the every growing fan club of UK investors who reckon Messrs Slater and Watson are onto a good thing.