Chesser in Turkey
Big talking Canadian Rick Valenta doesn't hold back when he talks up the potential for his gold mining company, Chesser Resources (CHZ): “Our target is a couple of million ounces.”

That's enough to get a few pulses racing since that tally would translate into a couple of billion dollars (US or Australian) given a gold price that's hovering around the $1400 an ounce mark.

Chesser is coming out with more drill results early this week, so he has the attention of a few punters.

The mining minnow has a market value of $85 million and is exploring for gold in Turkey.

Valenta compares his company's Kestanelik project to Andean Resources' principle asset, Cerro Negro located in Argentina – it had a resource of 3.1 million ounces of gold and 25 million ounces of silver. Australian company Andean was taking over by Canada's Goldcorp last year for about $3.6 billion.

The comparison he makes is on the basis of the high grades the company has seen from the 11,000 metres of drilling Chesser has done so far. He rattles off figures of recent samples like 19 metres at 10 grams and 11 metres at 13.5 grams.

The results all sound very good, but as with many a big story there is a big risk.

For one thing, Chesser is doing another 30,000 metres of drilling from late April and it probably won't be until September before it releases a maiden JORC resource, meaning an “official” estimate of exactly how much gold is in those Turkish hills.

Chesser has $5 million cash left of the $8 million it raised last year in a placement at 30 cents a share. It will have to raise more money later this year, but Valenta is adamant that this will occur after it has done a substantial part of its next drilling programme.

House broker Investec rates the stock a "Buy", but says it is extremely speculative, being an early exploration play.

Chesser's shares are trading at 76 cents, up 7 per cent or 4 cents today, and Investec's target price is $1.50.

Its analysts Geoff Muers and Hunter Hillcoat estimate its discovery cost at $US20 an ounce, “which is low considering the above average grade”. This compares well to the current gold price.

Fundies step in

One of Chesser's biggest fans is 8 per cent holder Baker Steel Capital Managers. This fund manager specialises in gold mining stocks and has had a meteoric rise.

It was set up 10 years ago out of London by Trevor Steel and David Baker with something like US$10 million in seed capital and now manages US$1.5 billion.

David Coates, an analyst with Baker Steel, reflects the comments of many fundies I've spoken to in the past week when he says that his fund has taken advantage of the recent selling:

“There has been a big opportunity..fear is running hot. The selling in the past few days has smacked of a repatriation of cash and has been indiscriminate.”

Other little gold miners Baker Steel holds include Chalice Gold Mines (CHN), Apex Minerals (AXM), Ausex Resources (AZX), Northern Star (NST), Aragon Resources (AAG), Doray Minerals (DRM) and Cortona Resources (CRC).

Hanging on to the tiger

It is not only big mining companies like Rio Tinto that have exposure to dangerous parts of the world as it struggles to gain a foothold in west Africa. Other names that crop up include much smaller companies that have much more geographic risk.

These include prospective copper producer Tiger Resources (TGS) in the Democratic Republic of Congo (DRC), which is due to start production this month.

It's worth keeping an eye out for problems.

Also in the region is the Ivory Coast, which has also lately been rocked by violence and disruption as strong man Laurent Gbagbo refuses to concede office after losing an election last year.

Mining companies have been among the casualties on the share markets.

MiningNews.net lists the companies in this region that have been affected. They include UK-listed Cluff Gold (LSE:CLF) and Canada listed La Mancha Resources (TSX:LMA) that have both placed their operations on care and maintenance.

Locally-listed Perseus Mining (PRU) has reduced its drilling for its Tengrela gold prospect. Other companies in the region include Abzu Gold (TSX:ABS), a Vancouver based company, Aspire Minerals, an Australian unlisted company, and Cape Lambert Resources (CFE).

Warwick Grigor, head of advisory firm BGF Equities, acknowledges that geographic risk for many companies is replacing the geological variety:

“If you go to higher risk countries and pick up big ore bodies, you have leap frogged over geological risk, but now you have to manage country risk.

“At least you've got an ore body, so you can try to talk to the authorities. You have a tiger by the tail, and if you hang on long enough you might turn it into a mine.”

All your columnist knows is that in uncertain times, at least the only thing most investors have to lose is their money.

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