Anacortes Drilling Leaves Speculators Wanting

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Disclosure: The following represents my opinions only. I am long XYZ.V (Image c/o imgflip)

A little under a month ago, I digested the drilling update from Anacortes Mining (XYZ.V, last at $0.62) and rubbed my hands together in anticipation of the results from hole 501, which was drilled as a follow-up to historic hole RTC-255, and was collared right beside it. The company had pre-released that it had drilled hole 501 to a depth of 496 metres, which put a spotlight on the potential for high-grade feeders at depth below the limits of historical drilling. While that feeder-zone potential still exists at depth, it does not appear to be in hole 501… the hole retuned 82.5m of 1.6 g/t from 28m downhole, and 123m of 2.1 g/t from 115m downhole. By any measure, that’s a great drill hole, but it is not the scorching sizzler that I wanted to see, which appears to echo the feelings of the market this morning.

Deep drilling dreams aside, Anacortes’ leachable resource at Tres Cruces weighs in at 630,000 ounces (with expected 80-85% recoveries). The grade of that leachable material is 1.28 g/t, making it one of the highest grade undeveloped oxide projects out there. It’s early days in the drilling program, but when expectations are high and the delivery is “average”, you get what XYZ got today, which equates to a 35% haircut as I write this. With only 42 million shares out, the Tres Cruces project is being valued at less than CDN$20 million, putting the stock back to the valuation range that it had when I first flagged it years ago — back when it was still under Barrick’s thumb. One hole doesn’t define a company, but today it does define sentiment, and sometimes that’s all that matters in the short run. In light of the reported oxide-only project NPV of US$165 million at $1700 gold, perhaps today’s fall will trigger interest from bigger players who can see how Tres Cruces might fit into a broader Lagunas Norte reboot, but that’s little comfort for my portfolio today on the XYZ line.