June 18, 2012 (Investorideas.com Mining Newswire) Gold Investment Newsletter commentary for today: The good thing about this beaten down junior mining market is that we get to be quite selective in the stocks we want to bet on at bargain basement valuations. One of the more intriguing juniors that has come onto our radar is Sniper Resources (SIP.V), trading here near 10 cents per share and near all time lows. As we know in investing, betting on the jockey is imperative, particularly in resource stocks and the difficult business of mining (Sniper is run by Scott Baxter CEO and geologist Doug McGibbon).
Scott sold his last company, Tone Resources, to Rob McEwen as a part of 3 companies that Formed US Gold Corp (Now McEwen Mining on the NYSE) and made his shareholders a lot of money (early investors made over 10 fold returns). Doug McGibbon is one of several geologists in the world credited with over 10MM ounces of gold discovered! Sniper has 4 projects, all in Nevada, with large potential to host economic deposits. In fact, the Weepah prospect (66 claims-just short of 2 square miles) has already garnered a discovery and looks like there is potential to prove up a solid and growing independent 43-101 resource in 2013 (cash permitting). Holes WP-12 and WP-33 locations and the location of the mineralization in them are consistent with their being on the southern extension of the historic Weepah vein, mined in the 1930's, and again in the ’80's by Sunshine Mining Company, and from those holes northward to the property line there is nearly 1/4 mile untested by drilling along the presumed strike of the vein as exposed in the pit. From the property line to the south end of the pit is a few hundred feet more. From those drill holes southward the possible vein structure remains open as well. With Weepah’s location and structure, there are a number of companies that may want to acquire this prospect or Sniper Resources outright in my opinion. Early drilling has already proven to be better/higher grade than some of Scorpio Gold’s surrounding assets for instance (Scorpio is a natural potential acquirer of Sniper’s Weepah asset if future drilling proves successful). Much of the area of favorable geology has not yet been drilled.
Barrick Gold, who is currently producing from two of Doug’s previous discoveries, is another potential suitor eventually. There are a handful of other majors that are potential acquirers that already have Sniper on their radar and dialogue with Sniper management. The properties need more drilling to see what they have, and it is a bit early for an outright acquisition, but therein lies the opportunity to buy stock at a ridiculously cheap valuation! Skin in the game by management is important and there is plenty here. Scott owns over 4MM shares and bought 2MM shares in the IPO at 25 cents, while Doug owns over 1MM shares so management interests are properly aligned with investors.
One positive that has helped create an opportunity for investors is that Sniper has not promoted the company at all and spends the vast majority of their funds on drilling. This is exactly what I like to see but the awareness initiatives for this company, that is long overdue, will be accelerating in the near future. Sans details, I believe the additional exposure will be enough to attract an entirely new investor base into Sniper stock. The bottom line here is we have a CEO who has knocked it out of the park before, a Geo that has found more gold in Nevada than virtually anyone on the planet, and a stock trading for an approximate $3MM valuation (peanuts!).
With the current financing being wrapped up in the next week or so, Sniper should have enough cash to further prove out Weepah and expand this discovery. Overland Pass (84 claims just over 2 square miles) merits acknowledgement and is located across from Barrick Gold’s Bald Mountain mine (4 MM ounces in district reserves) and could be another exciting prospect that may be a catalyst for the stock going forward. We think this is a story that can be bet on and a fair value for the stock, even in this market, should be closer to or above the 2010 IPO price of 25 cents. In fact, by the time we see a 43-101 deposit proved up at Weepah, that prospect alone could value the company north of $25-30MM, which is close to $1 per share. This will take time to prove up, but investors that step up now while the stock is depressed, could potentially hit the bulls eye with a 10-20 bagger.
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