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Metanor Gold Production Increasing

Metanor Resources (TSX.V: MTO) is one of those companies that has been toiling diligently away at a disparate group of land holdings that are no trip to Hollywood in their own right, but when viewed in the context of the company's business model and collectively, they make perfect sense. Escalating production of gold is the clear sign that Metanor's cash flow will start to yield a profit next year.

The stock has been trading sideways in the $0.50 range for the last three months, and by all appearances has built a solid floor at these levels. No wonder, really, considering intrepid gold investor Eric Sprott acquired almost 20% of the company at that price. Investors who clamber aboard now get to participate with one of Canada's most respected resource financiers.

And Eric Sprott isn't the only one betting that Metanor's shares a buy at this level.

Northern Securities analyst Ovais Habib issued a research report on the company last week that puts a buy target on the company of $1 a share - a double from current levels.

According to the report:

"Looking forward twenty-four months, we expect production to ramp-up by 104% (from 2009 production) to ~66,000 ounces at a cash cost of ~US$452/ounce. Given that the grades and thicknesses drilled to date have been notable, we believe we have been conservative in our model. We believe the market has failed to fully appreciate these operational upsides and expect the share price to improve in lockstep with production and cost improvements at the mine over the next twelve months. In addition, Metanor is:

• Adding higher-grade ounces adjacent to existing infrastructure. Systematic drill programs in place to expand/upgrade current resources (~1.0 million ounces of Au). New discoveries open potential for additional mineralization near the Bachelor Mill.
• Pending catalysts for the stock include: 1) results expected throughout the year from 2008 and ongoing drill programs on three projects; 2) resource updates from Bachelor Lake/Hewfran as well as the Barry deposits by the end of 2009; and 3) Progress reports on (a) the underground development at Bachelor Lake/Hewfran and (b) ramping-up of operating capacity at the Bachelor Mill from ~800 t/d to ~1,200 t/d.
• Well-financed for aggressive exploration and development/expansion programs in 2009. Approximately $13.0 million in working capital is expected to provide for substantial development of the projects in the next twelve months. The 2009 development/expansion program at the 100% Bachelor Lake Mine and Mill is expected to generate continuous news flow throughout 2009-2010."

Besides Sprott and Northern Securities, Goodman and Company who manages the Dynamic Mutual Funds Precious Metals collectively own 14,350,000 shares

According to Vice President Ron Perry,

"The company started in 2004 with the Dubuisson Property and then they proceeded to put a NI43`101 on it . Serge Roy and Ghislain Morin - these two guys built up the company from the Dubuisson property which now has half a million ounces on it. However, they then felt it would be better to find a property with a mill on it in order to be able to be in production faster and create cash flow, so management proceeded to acquire the Bachelor Lake Complex. First, acquiring 50% from Campbell Resources then the remaining 50% from Halo Resources.

Right now we're in the midst of redoing our headframe. We had a budget of $1.5M for that but we will manage to get it done for about $1.1 million. We are in great shape with all the Indian Bands, we're in mining friendly Quebec and our millis running well.

In the area of Bachelor Lake we're the only milOK, and within a 100 km radius there's about 1.5 million ounces of historical 43-101resources of gold in small deposits, which puts us in a position to acquire these smaller deposits on favourable terms because they're too small to drive the growth of another company on their own."

"We are proceeding with our plans, making progress underground and bringing our mill up to 1200 tonnes per day capacity to process the high grade ore from the Bachelor underground mine at conservatively ~7g/t and blend with the 3+g/t ore from the Barry open pit deposit. We are being conservative in saying an average of 5-6 g/t at 1200 tonnes per d at 94% recovery will get us close to 70,000 ounces gold per annum, with a blended direct cash cost of ~US$458 - this should be in about 13 months from now to July, 2010."

Metanor now has the Bachelor Lake Gold Mill functioning and is crushing and processing the ore extract from the open pit operation on their Barry gold deposit (located approximately 65 km southeast of the mill). The Barry property boasts a highly efficient ore-to-waste ratio of only 1:1.

Initial cash flow from production will be used to expand the resource base at the Barry Deposit and further develop the enormous potential at the Bachelor Lake Gold Mine which produced over 131,000 oz of gold during the 1980's, it currently has resources of 300,000 oz Au and is open in all directions at depth with plans to upgrade to 1,000,000 oz.

According to Metanor's President, Ghislain Morin, current depth of the shaft at the Bachelor Lake Gold Mine is 1,700 feet, the shaft will be sunk an additional 600 feet to a depth of 2,300 feet and a 20,000 meter drill program is expected to add an additional 700,000 ounces of resources.

Mr. Morin has many years of mining experience with an expertise in both underground development and shaft sinking. Prior to joining Metanor Resources, Mr. Morin built mills for several area miners including Cambior (now owned by Breakwater), Aur Resources and BHP Billiton.

The two main veins at the Bachelor Lake Gold Mine run parallel and are 75 feet apart at an 80 degree angle. Metanor expects to drop shaft an additional 700 feet in the near future and the potential is in place to identify 1.5 million ounces going forward. Area miners such as Aur Resources (now Teck Cominco), Agnico-Eagle and Sigma are currently mining at depths of between 5,000 and 8,000 feet. The gold grade at the Bachelor Lake property increases at depth and the strike is open in all directions at the 2,300 foot mark.

SOURCE: http://www.midasletter.com/news/09052806_Metanor-Gold-production-increasing.php


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