Silver and IMA Exploration
Silver Stock Report
by Jason Hommel, Feb 28, 2005
More and more people are becoming aware of the growing importance of silver as an investment vehicle. The fundamentals for the shiny metal are excellent and can only get better. The key? Supply and demand. Annual mine supply is just under 600 million ounces while annual demand is almost 900 million ounces, and almost all of that demand is from industry at 40%, jewelry at 30%, or photography at 25% of annual demand. Investment demand is less than 5% of annual demand, and that is poised to change due to the growing awareness of the silver shortage. Why is silver in short supply?
Silver is the greatest conductor of electricity known to man, and so it has been used in virtually every electrical device ever created. Since the end of World War II, the United States consumed about 7/10ths of an ounce of silver per person. Most of the silver ever produced in human history has been consumed, and so, now above ground silver is more rare than gold.
Of course, in a world increasingly awash in devalued paper currencies and debt, silver's most important use of all may be its historic role as real money. When the train inevitably starts to come off the troubled economic track, silver will once again serve as a tried-and-true monetary refuge. Ultimately, silver is a proven store of value.
However, despite its many strategic uses, silver incredibly finds itself in a growing supply deficit. That's because once-enormous above-ground stockpiles have been drawn down to dangerously low levels. More silver has been used than produced in the last sixteen (now going on seventeen) years! Sixty years ago, during the bygone era of silver coinage, billions of ounces of Ag were kept in storage. Today these immense stores are nearly gone. For the first time in memory the U.S. Mint is buying silver in the open marketplace to produce its yearly supply of Silver Eagle coins. Today's spot price is $7.26. During 1979-1980, the oil baron Hunt Brothers and their Middle-eastern friends conspired to corner the world's lucrative silver market. They nearly succeeded, driving the spot price to $50 in the process. Today's inflation-adjusted price of the former peak would be well north of $150 to $250/oz. The difference today is that above-ground supplies have gotten much smalle r, and fewer mines are producing silver as their primary metal. China is consuming all commodities - silver included - at a voracious rate, and the global financial system is drowning in an ocean of paper. It's not question of whether the silver price is going to explode, but when.
Many silver stocks in exploration companies stand to explode in price to an even greater degree due to the leverage they offer the silver investor. Exploration companies also can explode in price as they create wealth through the process of discovery. IMA Exploration is one company that deserves a closer look.
Mining people are continually on the lookout for the next "elephant" - the colloquial term for a company-making mineral deposit of gargantuan proportions. The overwhelming majority of outfits never find such an increasingly elusive prize. However, one company . . . IMA Exploration (IMR-TSX.V, IMXPF-OTC.BB), recently bagged a certifiable silver "elephant" in the Patagonia region of Argentina. At a whopping 268 million indicated ounces of silver and still growing, the question remains, just how big of an ore body has IMA discovered?
To date, the raw numbers are truly impressive. And with nearly every turn of the drill, IMA is adding more metal to its already stunning totals. IMA's "Navidad" property is vast, its geology rich and complex. Multiple styles of mineralization occur along a several-kilometer trend. There's copper, lead, and silver - so, so much silver. Bulk, lower-grade tonnage interspersed with dazzling intercepts of bonanza-grade mineralization.Some are calling Navidad the hottest new silver deposit anywhere on the planet. So far, Navidad has lived up to this exalted billing.
-- 80.8 million tons at 103 g/t silver and 1.45% lead using a 50 g/t silver equivalent cut-off.
-- 207 million indicated ounces of silver (Ag) at Galena Hill, "ground zero" at Navidad. Plus over one million tons of lead and another 36 million "inferred" ounces of the precious metal.
-- 61 million oz. Ag at nearby "Navidad Hill" and the "connector" zone that links Navidad Hill to Galena Hill. One intersection boasted an astounding 1,165 grams of silver per ton over 28 meters.
-- A more recent "blind" discovery at Calcite Hill that yielded a 72-meter intersection with a respectable 202 g/t Ag.
-- The new "Sector Zeta" and "Loma de la Plata" zones. Channel samples from Sector Zeta have returned in excess of 1% copper and 100 g/t silver while Loma de la Plata shows in excess of 200 to 400 g/t Ag over more than 50 meters. Drilling has yet to begin.
Basically, Navidad contains some seriously rich rock. One drill result was 35.8 m of 2,850 g/t of silver. That's about 92 ounces/tonne of silver over 117 feet! At $7.26/oz., that rock is worth $668/tonne! And most of IMA's silver is close to surface, and will thus likely be mined by the cheaper open-pit method, that can sometimes be profitable when mining rock worth about $30/tonne! (This explains why the cut-off grade when determining resources is as low as 103g/tonne or 3.3 oz./ tonne.) One IMA geologist stated that he thought Navidad was much more than a potential mine: it was a mining district!
To date, the current resource calculation is as follows: total indicated resources are 271 million ounces of silver, and an additional 36 million ounces inferred, for a total of 307 million ounces of silver. Those numbers are 43-101 compliant. These numbers will likely continue to grow significantly over the next several years as drilling the district continues year round due to the mild climate.
Conveniently located near one of Argentina's major highways, Navidad presents no major infrastructure problems. It's the kind of wealth-generating property mining giants the world over are scrambling to find - or buy out at increasingly inflated prices. Majors today are involved in a strategy of merger mania as the quickest way to grow their depleted property portfolios. And Barrick Gold is already a major shareholder in IMA.
One way to judge the quality of the project is to look at the quality of the people the project attracts. On Feb. 17th 2005, IMA announced the appointment of Eng. Augusto Baertl to be responsible for the development of IMA's 100% owned Navidad silver deposit in Argentina. As the former President of Compaņia Minera Antamina, Mr. Baertl developed Antamina, which involved a capital investment of US $2.2 Billion. Antamina was operational ahead of schedule, under budget and in strict compliance with international social and environmental standards.
IMA is headed up by Joseph Grosso, an old pro in the search for Latin American resources. Mr. Grosso's family ties and connections in Argentina gave him the inside track on cherry-picking the country's premier properties in the early 1990s. That's when Buenos Aires finally gave the go-ahead for international mining ventures to do business in their highly prospective and under-explored provinces.
IMA currently has just over 44 million shares outstanding - 49 million shares fully diluted when all warrants and options are considered. If all warrants and stock options are exercised, it would bring in about $12 million Cdn. Management owns 15-17% of this debt-free company. With a February 25th closing price of $3.88 Cdn, the market cap for this stock is a very reasonable $154 million in U.S. dollars.
At current share prices, the cost to investors for the ounces in the ground, may be calculated as follows: $154 million market cap / 307 mil oz. = $.57/oz. Or, if the exploration potential of IMA is up to a billion ounces of silver, then perhaps the following may be more accurate: $154 million market cap / 1000 mil oz. = $.15/oz. Expressed another way, you may be getting title from between 13 to 47 ounces in the ground, for one ounce of silver's worth of stock. Meaning, if you spend the equivalent of $7.26 on stock, you are buying title to 13 to 47 ounces of silver in the ground.
Why so reasonably priced? After news of the initial discovery at Navidad, another Canadian miner filed a "nuisance" suit alleging that IMA used its proprietary geologic data to zero in on Navidad. The dispute centers around the bid process for the Calcatreau gold property in Argentina, now wholly owned by Aquiline Resources, the plaintiff in the suit against IMA. IMA, along with Aquiline, was a bidder for Calcatreau, and was shown confidential data for the purposes of placing a valuation on Calcatreau. All parties signed confidentiality agreements that excluded them from exploring and staking ground within some three kilometers of Calcatreau. Navidad, a silver-lead property, lies approximately 42 kilometers from Calcatreau, a gold property. Many have already dismissed Aquiline's claims entirely. The CEO of Aquiline, also a principal in other mining ventures, has earned a reputation as something of a serial litigant, and is currently involved in a separate mining lawsui t in Australia. Meanwhile, shares of IMA will continue to trade at a discount until the matter can be cleared. A court hearing is scheduled in British Columbia in October 2005.
Expect the suit to be settled in IMA's favor - eventually. If Aquiline had the same information as IMA, why didn't they stake Navidad? Or mining giant Newmont, which had previously owned Calcatreau and generated the proprietary data purchased by Aquiline? When the truth is revealed, it will show that IMA was actively exploring the Chubut province in Patagonia and was already zeroing in on Navidad at the time they kicked the tires at Calcatreau.
"There is absolutely nothing to the claim," CEO Grosso states flatly.
To summarize, no investment today offers the explosive upside and limited downside of silver. And very few publicly traded silver companies offer the kind of extreme leverage, proven deposit growth, and blue-sky potential of IMA Exploration.
Stock prices go up and down, and past performance is neither an indicator, nor counter-indicator, of future performance. The information in this essay has been gathered from many sources that are believed to be reliable. No guarantees are being made that this information is reliable. All potential investors are encouraged to contact IMA to verify all important information.
For more information and to get on IMA's mailing list, contact the company at email@example.com, and/or visit their web site at www.imaexploration.com. You can also call the company toll-free at 1-800-901-0058. Mr. Sean Hurd is the person in charge of investor relations - he'll be glad to hear from you.
Jack Myers is a seasoned investor in the junior mining sector. Myers has not been paid by IMA Exploration for producing this article, nor does he work for the company. He does own shares in IMA Exploration, as well as shares in IMA's sister company Golden Arrow Resources (GRG-TSX.V), a grassroots explorer which was spun off from IMA in 2004. Mr. Myers works as a technical writer in Valley Forge, PA. He can be contacted at firstname.lastname@example.org.
Jason Hommel sponsored the writing of this essay by offering to give a 100 oz. silver bar to whomever could write the best essay on silver and IMA Exploration. Jason edited the essay, and added a few bits of information that was researched and highlighted in a total of 18 essays submitted. Jason also owns shares in IMA Exploration, and Golden Arrow, and has not been paid by either company to write this article. Jason Hommel writes a weekly silver stock report that covers the market caps of about 80 silver stocks. See silverstockreport.com