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8/23/08

Anatomy of a Canadian Stock Promotion (part 4)

Now that we have 'marked' the object of our study as Dorato Resources (DRI.v), it's time to start looking at the details of this particular stock promotion.

Today we'll look at what the DRI.v project location has to offer the world, and we'll leave some of the drawbacks of the project to part five. In fact, now is a good time to point out that we'll be taking the whole story piece by piece over various posts. This is because there's plenty of time to set the scene on this stock as the high point of this promo isn't expected until early 2009. So today we'll concentrate on the ostensible advantages of DRI.v as a stock...it's 'selling points', if you like.

As mentioned in part 2 of this series, perhaps the most important part of a successful stock promotion campaign is that the company in question has believeable content. As written previously, Dorato Resources has taken control of a large geographical area that will almost certainly return excellent drill results when the time is right. It also has positives on its geological location, absolute size of concessions held and low relative political risk to peers.

Here in bullet point form are four of the strong points that the company will use to sell its project and location to the retail crowd in the months to come:
  • In the 'Cordillera del Condor' region, home to deposits such as Aurelian's Fruta Del Norte (FDN) project.
  • On the Peru side of the border, thus in a 'mining friendly' country.
  • Undeveloped mining territory of great promise
  • Large concession area, with five identified early-stage targets
There will be other promo points of course, but we'll cover things like the association with Franco Nevada, the region team of experts, the exploration covered by good cash at bank etc in future episodes. Today is just the project targets. So here we can see a few maps and charts all taken from DRI.v filings. This first one...........

(click to enlarge)

....outlines the geographical area involved. The DRI concessions lie right on the border between Peru and ecuador, but are all on the Peru side of the international boundary. We can also see how DRI is quick to point out the proximity to major gold and copper deposits/districts/projects etc on the Ecuador side of the border (marked with red and gold dots and stars).

The map also points out the so called "Anglogold Targets". This is because DRI.v might (or might not, we shall see) be keen on saying it's "discovering" the region, it won't be going in to the region totally blind. In 2003 and 2004, Anglogold explored the region and mapped out the five targets with asterisks on the map above. Incidentally, the findings of Anglogold largely agreed with an earlier exploration done by a company called Metalfin in 1993 and 1994.

Here is a second map that shows the five targets in closer detail.....

(click to enlarge)

...and for the moment, I'm going to concentrate on the same target that has been pushed to the front of the queue by Dorato itself, namely the "El Tambo" target (number 1 on the map). This is because in its press releases and exploration plans, DRI has said it will aim at "El Tambo" first. I think this is because El Tambo has been the best mapped of the five targets so far (by both Metalfin and Anglogold) and offers a close to guaranteed target. Something like 17 veins have been identified at the target, and previous rock samples have given gold returns that average 10 to 11 grammes per tonne, but also returns of up to 45g/t (about an ounce and a half). This is pretty important for a stock promotion, because the company will have a very, very good idea where to drill its first hole to return eyecatching assay numbers later.

This last chart...
(click to enlarge)

...is the simplified sketch of the El Tambo target. As well as other important details, it shows the main identified veins as pink lines and the position that Anglogold proposed for the first two drillcores. The point of this more geological sketch is not to blind the non-geologist with science but to show that people who know about these things have already been here and they know quite a lot about what's on offer already (as mentioned this week, although I have picked up quite a lot along the way, I'm not a geologist myself nor do I pretend to be).

So what we have here is a company that knows it's going to find gold when it sticks its drills into the ground. This is underlined by the fact that local artisan miners (often known as 'garimpeiros') are active in the zone. Be clear that garimpeiros might use primitive techniques, but they are by no means stupid. They wouldn't mine a zone where there is little gold available. Period.

So when DRI.v finishes its current "Phase One" exploration and moves to the drilling program of betwen 14 and 24 drill holes envisaged in "Phase Two", the sampling done by the company along with the previous explorations should get them "on target" with the drill, and in position to return some sexy-looking gold returns. By the way, it should be pointed out that phases one and two will cost the company (i.e. its shareholders) about U$4.5m, this hefty figure due to the fact that the region is rather inaccessible and the project needs plenty of helicopter support. More on that little detail later.

Thus ends the background to the Dorato Resources projects from a positive point of view. The next post will look at the drawbacks the same projects present, which is information less likely to be freely available from the company going forward.

Related posts
Anatomy of a Canadian Stock Promotion (part 1)
Anatomy of a Canadian Stock Promotion (part 2)
Anatomy of a Canadian Stock Promotion (part 3)

Disclosure: I would like to remind you that at no point will I make any sort of recommendation to buy or sell any DRI.v securities. I would also like to make it clear that to the best of my knowledge the promotion techniques used and to be used by Dorato are totally legal. Finally, I would like to make it clear that I am not passing any moral judgement on Dorato Resources, and will try to avoid any insinuation of judgement in future posts in this series. The aim is to educate readers about some of the ways promotion campaigns are used and the company structures behind them.