Wednesday, June 24, 2009

SFEG Santa Fe Gold Options Pilar Gold Exploration Property



Here we have a junior exploration company, soon to become a junior producing company, having just completed a mill to process ore from their relatively new Summit silver/gold mine. Per prior presses releases and audio interviews on record, SFEG is ‘focused on bringing its Summit mine into production’ virtually to the exclusion of everything else, which stands to reason. Moving into production is crucial for survival of any firm for without selling your end product there is a limited lifespan of any company. Of course you can sell portions of your firm to raise capital, but ultimately too much of that is self defeating. So back to my question: Why? Or to be more specific?...

Why did he option that property?

Frankly I have no idea, so permit me some speculation.

Closer to the finish line. As one can see from past acquisitions by CEO, Pierce Carson, he tends to focus on projects with extensive drilling and/or engineering before he even commits. (Ortiz had 117,000 meters of drilling, a total of over $ 40 million dollars in exploration & development. And that was over 20 years ago, which could easily represent $ 100 million in 2009 dollars). Summit too had extensive work done prior to acquisition. Lordsburg mill was previously a milling site. This is a strategic approach, using existing data and engineering work to establish the resource as opposed to the often lengthy and always risky exploration process, where one can avoid delays and costs of exploration. This tactic alone saves years on the front end of bringing any economically viable ore body to production. Years is money.

Prime target. Well that fits, because the new Pilar Gold Property has had 6000 meters of drilling with one hole qualifying for the mining term: bo•nan•za (n) A rich mine, vein, or pocket of ore. A source of great wealth or prosperity. Woohaa.

Efficiency of time. The mine is a mere 250 mile from their existing Lordsburg mill currently the center of operations, practically speaking. Not a two day drive away, not a continent away or a plane ride away, but a six hour drive. Sounds efficient to me.

Outlay-what outlay? How amazing is it that Pierce secured an option on a gold mine, likely having hundreds of thousands of ounces of gold, that is being controlled by a few thousand dollars? You cannot option much for that kind of money. Would you take your house off the market for three years while the optionor has the ability to sell it anytime and/or rent it out and produce income while you stood by? I certainly would not, but Pierce did it for the shareholders of Santa Fe Gold Corp.

Building value. Currently SFEG hold the rights to two industrial mineral properties each worth millions in their own rights, the Ortiz deposit, a world class size (one million ounces of gold or more), the Summit silver/gold mine, the recently purchased Lordsburg mill site with brand new mill, as well as numerous claims nearby the mill site. The option on Pilar Gold (known historically to contain have produced 2,960,000 ounces of gold in the past), means the area has produced over two and a half BILLION dollars in gold in the past. Is it a stretch to believe that there is only 5% on the Pilar property? ( $ 133,000,000. value with $900 gold). Each of the current properties has values of tens of millions of dollars to possibly hundreds of millions of dollars of value as they now sit. Developed, they could be worth multiples of those figures. So now we have yet one more property to add millions of dollars of value to the asst base. Value is the root word of valuable.

More to come. Lastly Pierce has reiterated numerous times that he has dozens (yes plural) of potential acquisition targets. I think he will apply the same strategic process as we have thus far seen to any of these potential future acquisitions. Do I smell profits?

Sentiment : Strong Buy

Ron B.

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