| | Profile Snapshot: Grayd Resource Corp (GYD-V)
Friday, December 03, 2004
Grayd Resource Corp is a late life cycle junior which is well positioned to benefit from a rising tide resource sector bull market in 2005 and even make a discovery that would allow the junior to buck negative market trends. The company has been through several bottom-fish cycles, but was ignored by John Kaiser from 2000 onwards until late 2004 when a combination of rising gold prices and the successful permitting and financing of the Mulatos gold project by Alamos Gold prompted a major review of Grayd's nearby La India project. The company had been a low priority bottom-fish buy in the $0.10-$0.19 range since early 2000, but that priority ranking was upgraded to medium in December 2004 at a time when the stock was hovering just above the bottom-fish buy range. The company's flagship play is the 7,569 ha La India project about 7 km northwest of the Mulatos deposit, a 3 million ounce high sulphidation epithermal deposit being brought into production as a 150,000 ounces per year heap leach mine. Grayd had crawled along the bottom until 2003 when the company's biggest shareholder, John McCluskey, handed the reins to an up and coming geologist called Marc Prefontaine so that he could concentrate on Alamos and its Mulatos project. Prefontaine assembled a land position in the Mulatos district that attracted two financings led by a group of brokers from Haywood which provided early stage financing for Mulatos. The project also attracted a $400,000 financing from Kinross which sought a toehold in what some majors were viewing as a major new gold district. Grayd had a small market run during 2004 but was hit hard when drilling on La India killed the geological model in a key target area where management hoped to find a deposit similar to Mulatos (36 million tonnes of 1.64 g/t gold). While the results do not kill the potential for a multi-million ounce discovery, they have injected a new degree of complexity which Grayd hopes to unravel during the first half of 2005 with a program of detailed mapping and sampling. Should this work develop hot new targets the company will try to drill them in the second half of 2005. If not, Grayd will likely turn to several majors who have expressed a big picture interest in Grayd's large land position which covers about a third of the Mulatos belt. An alternative scenario is that Alamos Gold becomes the subject of a successful takeover bid, which would shine a spotlight on the other juniors with properties in the Mulatos district. Although the La India project in Mexico may require patience for another six months or so, short term joy could come from the Seel copper-gold project in central British Columbia where another junior called Gold Reach Resources Ltd (GRH.H-V) is earning a 51% net interest. The Seel property is located near two other modest sized copper-molybdenum deposits, one of which, the Huckleberry, is a 20,000 tpd operating mine. The Seel property has been the focus of exploration during the eighties that focused on small near surface zones that Grayd management has interpreted as peripheral evidence of a buried copper porphyry deposit that may have a significant gold component. An IP survey has revealed a sizable anomaly that coincides with a copper soil anomaly. Grayd and Gold Reach plan to start a 1,500 metre 10 hole drill program in December 2004. Gold Reach was a dot-com dud that has been resurrected by a group of brokers hung in the stock. A different group of brokers is long Grayd. Should Seel deliver a new porphyry discovery the paper structure is in place for both juniors to become very active. Grayd had about $350,000 working capital left at the end of December 2004 and 2,950,000 warrants whose exercise price of $0.30 escalates to $0.40 on February 16, 2005. Grayd has 34 million shares issued and 41 million shares fully diluted. At $0.21 the 100% owned La India project is carrying an implied project value of $9 million while the 49% net Seel project sports an $18 million IPV. The company also owns 100% of the Delta VMS deposit in Alaska which is available for farmout.
Grayd Resource Corp (GYD-V)
| Bottom-Fish |
Ex-Bottom-Fish |
Game-Fish |
Shell-Fish |
Diamond Stock |
| Yes |
No |
No |
No |
No |
| Current Recommendation: |
BF MP Buy $0.10-$0.19 |
|
Status last changed: |
December 3, 2004 |
|
| Bottom-Fish Priority: |
Medium |
|
Working Capital |
$350,000 |
12/1/2004 |
| Life Cycle Stage: |
Late |
|
Cash Breakup: |
$0.01 |
|
| Issued Stock: |
33,753,338 |
|
Monthly Overhead: |
$19,780 |
|
| Fully Diluted: |
41,016,638 |
|
Non-Cash Hard Assets: |
$0 |
|
| Insider Stake: |
8.9% |
|
Market Capitalization: |
$8,613,494 |
|
| Institutional Stake: |
9.2% |
|
Current Stock Price: |
$0.21 |
|
| Story Type: |
Mineral Exploration |
|
Chart Pattern: |
Bottom Emerging |
|
| Key People: | Marc Prefontaine |
| Current Bottom-Fish Since: |
January 5, 2000 |
|
Bottom-Fish Buy Range: |
$0.10-$0.19 |
Bottom-Fish Account ($1,000 worth bought at upper limit of buy range)
| Initial Position: |
5,263 |
|
Base Price: |
$0.19 |
|
| Current Position: |
5,263 |
|
Interim High: |
$0.46 |
142%
|
| Cumulative Sale Proceeds: |
$0 |
|
Interim Low: |
$0.05 |
-74% |
| Current Position Value: |
$1,105 |
|
Current Price: |
$0.21 |
11% |
| Total Value: |
$1,105 |
|
Gain/Loss from start price: |
$0.17 |
24% |
| Total Position Gain/Loss: |
11% |
|
Kaiser Ownership: |
No |
|
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The above chart has been supplied by Chartsmart, a comprehensive offline news and trade tracking system with automated online updating that covers all Canadian and US publicly listed equities. John Kaiser recommends Chartsmart for anybody seeking to research a larger universe of stocks than featured on kaiserbottomfish.com or to do technical analysis.
|
Date |
|
Recommendation |
Action |
Net
Cash |
Net
Stock |
Gain |
Status |
| Remington Creek Res Ltd (RCR-V) |
11/28/1994 |
$0.10 |
BF Buy $0.10-$0.19 |
Buy 5,263 @ $0.19 |
$0 |
5,263 |
-47% |
BF Buy $0.10-$0.19 |
| Remington Creek Res Ltd (RCR-V) |
6/4/1995 |
$0.15 |
BF Dud Sell 100% |
Sell 5,263 @ $0.15 |
$789 |
0 |
-21% |
Closeout Hold 0% |
| Grayd Resource Corp (GYD-V) |
12/1/1997 |
$1.15 |
New BF Buy $1.00-$1.25 |
Buy 800 @ $1.25 |
$0 |
800 |
-8% |
BF Buy $1.00-$1.25 |
| Grayd Resource Corp (GYD-V) |
12/11/1998 |
$0.34 |
Closeout old recommendation |
Sell 800 @ $0.34 |
$272 |
0 |
-73% |
Closeout Hold 0% |
| Grayd Resource Corp (GYD-V) |
12/11/1998 |
$0.34 |
New BF MP Buy $0.30-$0.49 |
Buy 2,041 @ $0.49 |
$0 |
2,041 |
-31% |
BF MP Buy $0.30-$0.49 |
| Grayd Resource Corp (GYD-V) |
1/5/2000 |
$0.17 |
Closeout old recommendation |
Sell 2,041 @ $0.17 |
$347 |
0 |
-65% |
Closeout Hold 0% |
| Grayd Resource Corp (GYD-V) |
1/5/2000 |
$0.17 |
New BF LP Buy $0.10-$0.19 |
Buy 5,263 @ $0.19 |
$0 |
5,263 |
-11% |
BF LP Buy $0.10-$0.19 |
| Grayd Resource Corp (GYD-V) |
12/3/2004 |
$0.21 |
Upgrade Priority to Medium |
|
$0 |
5,263 |
11% |
BF MP Buy $0.10-$0.19 |
The company was first recommended as a bottom-fish buy in the $0.10-$0.19 range on November 28, 1994 when it was called Remington Creek Resources Ltd (RCR-V). At the time Remington was a reorganized shell with plans to option a Mexican gold project. The stock perked to a high of $0.23 on December 30, 1994 but by May 31, 1995 it had traded as low as $0.11. The reason for the listless market action turned out to be a decision by management to conduct a 3:1 rollback after the Mexican gold deal had fallen through. So on June 4, 1995 I closed out Remington with a 100% sell recommendation at $0.15, giving Remington the dubious honor of being the first bottom-fish dud. Remington Creek was reorganized in February 1996 as Grayd Resource Corp under the direction of John McCluskey, who optioned a group of Alaskan VMS projects and raised a tidy amount of capital in 1997. Grayd was adopted as a bottom-fish buy in the $1.00-$1.25 range on December 1, 1997 as part of the 1998 Bottom-Fish 100 list. Grayd started off with more than $5 million working capital, most of which it spent in 1998 on its Alaskan VMS projects. Grayd traded to a high of $2.24 on March 18, 1998, but by summer the stock had slipped below $1. By then the resource sector was in a major bear market. On December 11, 1998 I closed out the old recommendation at $0.34 for a loss of 73% from the $1.25 bottom-fish buy limit, and recommended Grayd as a new medium priority bottom-fish buy in the $0.30-$0.49 range. By then Grayd had shifted its focus from polymetallic VMS targets to an Alaskan gold play. Grayd traded in the bottom-fish recommendation range until summer 1999 when the stock came under pressure due to a weakening gold market and mediocre results from the gold project. The stock tanked to the dime level when John McCluskey, Grayd's driving force, was hit by a truck, a rather literal manifestation of the catastrophe risk in my TROCL risk system. On January 5, 2000 I closed out the old recommendation at $0.17 to rack up another loss of 65% from the $0.49 bottom-fish buy limit, and recommended Grayd as a low priority bottom-fish buy in the $0.10-$0.19 range. The "low priority" designation acknowledged that McCluskey would need time to recover from his accident, as would the arrival of better metal prices, but the fact that I maintained Grayd as bottom-fish buy reflected management's commitment not to reorganize the company. In 2002 Grayd acquired a large land position in the Newfoundland Botwood Basin play Altius had generated. The Botwood Basin never did deliver a major gold discovery and by late 2003 Grayd had given up on it. A key turning point, however, occurred in March 2003 when John McCluskey stepped aside as CEO to make way for Marc Prefontaine. McCluskey had become completely immersed in Alamos Gold and its Salamandra project in Mexico which he and Chester Millar hoped to turn into a mine. One of the first things Prefontaine did was option the La India and Triple A claims in Mexico which the vendor had staked northwest of the Salamandra project, a somewhat disconcerting development for McCluskey who remained on the board of Grayd and was its biggest disclosed shareholder. Rising gold prices and the success Alamos was having overcoming the obstacles at Salamandra which had plagued the previous owners attracted attention to Grayd's strategic land position from both the market and majors. Grayd financed in early 2004 and proceeded to drill a target, but the geological model proved incorrect and the stock dropped to a dime once again during the summer after peaking at $0.46 in February 2004. Since then Grayd has acquired several claims within the Triple A block which consolidated into a single package known as the La India project. During November 2004 I had issued my first partial sell for Alamos Gold, and in the course of being yelled at for not fully appreciating the exploration potential of the Mulatos district I came to appreciate the strategic significance of Grayd's La India project and re-initiated coverage of Grayd.
TROCL Risk assessed as of December 1, 2004 - Overall Rating: 1+1+0+1+1=4
| Timing Risk |
Reorganization Risk |
Opportunity Cost Risk |
Catastrophe Risk |
Liquidity Risk |
Overall Risk |
| Medium |
Medium |
Low |
Medium |
Medium |
Medium |
Key to Speculative Value Icons used in Active Project Table for the 3 UPV Dream Targets
| $100 million |
$500 million |
$2 billion |
| Poor |
Fair |
Good |
Poor |
Fair |
Good |
Poor |
Fair |
Good |
  |
 |
  |
  |
 |
  |
  |
 |
  |
| Note: narrow arrow indicates IPV is outside the fair value channel but within 25% of the fair value limits |
| Green background indicates the dream target judged appropriate for this play by John Kaiser - otherwise unranked. |
| Flagship Play |
Secondary Plays |
Other Plays |
Active Company Projects
| Country |
Region |
Project |
Net Interest |
Stage |
IPV $
MM |
$100 |
UPV
$500 |
$2000 |
Mineral Group |
Metals |
Deposit
Style |
| Canada |
Central BC |
Seel |
49% TC |
M1-Target Drilling |
$18 |
|
|
|
Polymetallic |
Cu Au Ag |
Porphyry |
| Mexico |
Sonora |
La India |
100% WI |
M1-Target Drilling |
$9 |
|
|
|
Gold & Silver |
Au |
High Sulphidation Epithermal |
| USA |
Alaska |
Delta |
100% WI |
M2-Discovery Delineation |
$9 |
|
|
|
Polymetallic |
Cu Pb Zn Ag Au |
VMS |
Corporate Skyline - Overall Rating (Scale of 10): 6.4 - Good - Reviewed: December 3, 2004
| Story |
Asset |
Structure |
People |
| 6.7 |
3.8 |
7.5 |
7.5 |
Skyline Ranking Details
|
Factor |
Rank |
Avoid (0) |
Bad (1) |
So-So (2) |
Good (3) |
Excellent (4) |
| 1 |
Story - Target Size |
2 |
No Targets |
less than 500,000 |
500,000-1,000,000 |
1M-5M |
more than 5,000,000 |
| 2 |
Story - Portfolio Size |
2 |
0 |
1 |
2-4 |
5-10 |
more than 10 |
| 3 |
Story - Frontier Bluesky |
3 |
None |
Well Explored Area |
New Model or Technology in Well Explored Area |
Underexplored |
Unexplored |
| 4 |
Story - Geodiversity |
3 |
None |
One Country/one property |
One country /several properties |
One Continent/several properties |
Several Continents/Several Properties |
| 5 |
Story - Political Risk |
4 |
No Project Focus |
Unstable |
Trending toward instability |
Trending toward stability |
Stable |
| 6 |
Story - Title Risk |
2 |
No Title |
Disputed or pending private vendor; Aboriginal land claim or environmental permitting issues |
Unvested or vested in third world from private vendor or pending from third world government |
In N. America vested via private vendor or pending via government or granted by 3rd world government |
Acquired directly from non third world government by staking, permit, concession, etc |
| 7 |
Asset - Working Capital |
1 |
Zero or less |
less than 10% |
10-50% |
50-100% |
more than 100% |
| 8 |
Asset - Non-Cash Hard |
0 |
No Non-Cash Hard Assets |
less than 10% |
10-50% |
50-100% |
more than 100% |
| 9 |
Asset - Spec Premium |
1 |
100% |
more than 90% |
50-90% |
10-50% |
less than 10% |
| 10 |
Asset - Gold Oz Deficit |
4 |
more than 20,000,000 |
5,000,000-20,000,000 |
1,000,000-5,000,000 |
500,000-1,000,000 |
less than 500,000 |
| 11 |
Structure - Distribution |
1 |
Public owns more than 90% |
Insiders & Institutions each less than 10% |
Insiders & institutions each less than 20% |
Insiders or institutions each more than 20% |
Insiders more than 30% & institutions less than 20% |
| 12 |
Structure - Chart Pattern |
3 |
Exponential Rocket Launch |
Long-term uptrend reversal or double top or head & shoulders |
Trough or long term downtrend or flags or pennants or plateau |
Long-term downtrend reversal or Long-term uptrend or Double bottom |
Emerging from long term bottom |
| 13 |
Structure - Breakdown Risk |
4 |
2 year Hi/Lo Ratio more than 10, price in upper 10% of range |
2 year Hi/Lo ratio 5-10, price in upper 20% of range |
2 year Hi/Lo ratio 2-5, price in upper 20% of range |
Price in upper 50% of range but below upper 20% of range |
Price in lower half of range or high/low ratio less than 2 |
| 14 |
Structure - Shldr Mood |
3 |
Class Action Lawsuits |
Hangover-liquidation |
Drunken Exuberance, Sobering Up, or Smug Satisfaction |
Tipsy about potential or gearing for comeback |
Just getting started |
| 15 |
Structure - Resale Timebombs |
4 |
more than 50% restricted for 1 year plus |
more than 30% restricted for more than 6 months |
more than 30% restricted for 3-6 months |
more than 70% free within 3 months |
100% free |
| 16 |
People - Technical |
3 |
Blackbox specialists |
No geological or geographical |
Average geological & limited geographical |
Average geological and geographical |
Top-notch geological & geographical |
| 17 |
People - Funding Strategy |
3 |
Public Offerings |
Retail: brokered or private |
Institutional: brokered |
Farmouts or sophisticated |
Deep-pocketed insiders |
| 18 |
People - Funding History |
2 |
Zero $ |
less than $1M |
$1-5M |
$5-10M |
more than $10M |
| 19 |
People - Mgmt Priority |
4 |
Rollback Plan |
Failed promotion |
On the shelf |
Second String |
Flagship |
| 20 |
People - Stable Size |
3 |
More than ten |
Six to ten |
Four-six |
Two-three |
One |
Overview
Grayd Resource Corp has three key exploration projects: the 100% optioned La India project in Mexico where the target is to discover a high sulphidation epithermal gold deposit similar to the adjacent Mulatos deposit of Alamos Gold Inc (AGI-T), the 100% owned Seel project in central British Columbia optioned 51% to Gold Reach Resources Ltd (GRH.H-V) where the target is a copper-gold porphyry deposit, and the 100% owned Delta project in Alaska which hosts a volcanogenic massive sulphide deposit with a historically reported inferred resource of 17.3 million tonnes of 0.6% copper, 2.0% lead, 4.7% zinc, 73 g/t silver and 1.9 g/t gold. The flagship play of Grayd as of December 2004 is the La India project, the second largest land package in a region receiving renewed exploration interest from majors and juniors. The La India project was the subject of a drilling program in 2004 that disappointed the market and is forcing management to rethink its assumptions about the underlying geology. Because of its strategic location, widespread evidence of hydrothermal alteration, and the presence of gold mineralization, the La India project has the potential to attract speculators during 2005 and deliver a new discovery, but such a discovery will require basic prospecting and mapping work coupled with a clever geological imagination. During the first half of 2005 developments on adjacent ground will drive speculative interest in La India, with a focus shift to La India's potential itself depending on the outcome of grassroots exploration work by Grayd during the first half. The near term potential for speculative interest in Grayd lies with the Seel copper porphyry project which is the flagship of a junior that has been rescued by a group of Canaccord brokers from the dot-com graveyard. Gold Reach has raised the $400,000 required for a 1,500 metre 10 hole drill program scheduled to begin in December 2004. Gold Reach is primed for a big promotion if Seel delivers good results, which should provide overflow market action for Grayd, which has been financed by Haywood brokers. The Delta VMS project in Alaska is available for farmout.
Ownership Terms, La India Project, Mexico
 Grayd has options to acquire 100% of several claim groups totaling 7,539 hectares in the Mulatos District of Sonora State in Mexico collectively known as the La India project. The 476.6 ha La India option dated November 13, 2003 requires Grayd to pay US $555,000 over 4 years, pay a 1% NSR (of which 0.5% can be bought anytime for US $750,000), and pay $0.50 per recoverable troy ounce of gold based on the recoverable reserves outlined by a bankable feasibility study. The 6,591.5 ha Triple A option dated December 23, 2003 requires Grayd to pay US $816,000 over 5 years and a 2% NSR of which half can be bought anytime for US $1,500,000. On October 19, 2004 Grayd announced options on three small claims within the Triple A block totalling 471 hectares. The La Cruz claim requires US $150,000 in cash payments over 4 years and a 1% NSR that can be bought for US $250,000. The Viruela also requires US $150,000 in cash payments and a 3% NSR that can be bought for US $250,000. The San Fer claim will cost US $57,000 and 220,000 shares over three years. These claims were at one time owned by San Fernando Mining which drilled about 60 holes during 1994-95.
Background, Location and Geology
The La India project lies at the northern end of a 15-25 km long belt of hydrothermal alteration and gold mineralization in the middle of which is located the Mulatos gold project that Alamos Gold Inc (AGI-T) is developing as a 150,000 ounce per year heap leach gold mine. More than half of this belt is controlled by Alamos, with Grayd the second largest landholder in the region. This belt contains at least six major hydrothermal centres, one of which is on the La India property within a 10 km by 3.5 km northwest trending area containing local zones of intense alteration. Gold mineralization has been identified within 7 areas of the La India project. The La India trend parallels a northwest trend of alteration that is largely controlled by Alamos with the exception of the La Juliana project which is owned by Chesapeake. Although Grayd's ground does not have any obvious major targets, it has attracted the interest of Kinross, which in June 2004 took down a private placement of 1.6 million units at $0.25. What has attracted Kinross and inquiries from other majors is the belt's big picture similarity to the Yanacocha system in Peru.
Regionally the belt is located within the Sierra Madre Occidental Province, a northwesterly trending mountainous belt of volcanic rocks 1,500 km long and 250 km wide. The volcanics consist of a 28-36 million year old package of deformed andesitic rocks known as the Lower Volcanic Group, which is overlain by an 18-24 million year old package of undeformed tuffs and flows. Epithermal gold-silver mineralization is largely confined to the Lower Volcanic Group, of which the best known deposits are Minefinders' Dolores (40,883,000 tonnes 1.56 g/t gold 89.7 g/t silver at 1 g/t gold cutoff), Glamis Gold's El Sauzal (18,500,000 tonnes 3.37 g/t gold), and Gammon Lake's Ocampo (4,518,000 tonnes 6.109 g/t gold 298 g/t silver). The Mulatos deposit (36.3 million tonnes of 1.64 g/t) is a system of stratabound, high-sulphidation epithermal mineralization associated with a 25-36 million year old dacite and rhyodacite dome complex. It is located 7 km southeast of the La India project.
The La India property contains old workings and adits but does not appear to have undergone modern exploration except on the La Cruz and Viruela claims where 90 holes have been drilled since the eighties. The last exploration effort was undertaken by San Fernando Mining, which drilled 21 core holes in 1994-95 that yielded low grade intervals of varying lengths. San Fernando, whose flagship was the Las Fortunas project which it eventually sold to Alamos, subsequently became Keywest Energy, which was swallowed by an energy income trust in 2003. San Fernando had apparently been attracted by earlier percussion drilling work which suggested a 250,000 ounce gold resource averaging 1.5 g/t, but its own core drilling suggested that while 250,000 ounces were still present, the average grade was an uneconomic 0.5 g/t gold. Grayd does not have any immediate plans to revisit the La Cruz-Viruela zones, and acquired this ground to consolidate the entire land package so that there are no holes left if big picture thinking does transform La India into a hot play.
During 2004 Grayd completed an 11 hole drill program on the La India and Cieneguita zones which delivered mixed results. According to Marc Prefontaine the company designed the program with the assumption that a rhyodacite dome underlay the La India zone, as was the case at the adjacent La Cruz zone and at the Mulatos deposit. The seven holes drilled into the La India zone, while yielding a couple encouraging intersections of 31.3 metres of 1.32 g/t gold and 21.9 metres of 1.52 g/t, revealed much greater geological complexity at depth that killed the simple dome model. The Cieneguita and La India zones are located west of the El Realito project for which Alamos reported encouraging gold results on November 29, 2004. Alamos describes this target as unusual for the Mulatos district because it involves native gold with hematite and other iron oxides in a manner similar to the El Sauzal deposit. This may have implications for zones on the adjoining La India claim such as Cieneguita where zones of gold-bearing vuggy silicification have been super-imposed by northeast structurally controlled veinlets containing hematite and native gold that have spiked up to 32.5 g/t gold. Grayd intends to conduct a program of detailed mapping prior to a new round of drilling in May 2005. Grayd also plans to prospect the Triple A claim, which represents the bulk of the La India land package and hosts two zones of gold mineralization, Puertos and Pinosa. About half the Triple A ground is covered by the unprospective Upper Volcanic rocks with thicknesses of 150-200 metres. These rocks post-date the mineralization in the Lower Volcanics.
The La India project also adjoins the La Juliana project of Randy Reifel's Chesapeake Gold Corp (CKG-V), which has optioned a 40% net interest to John Lando's Dasher Exploration Ltd (DAE-V). Dasher is a reorganized former diamond junior that raised $2.4 million at $0.80 in October 2004 for the La Juliana project. Dasher, like Grayd, also hopes to discover a high sulphidation epithermal deposit similar to Mulatos, but has the advantage that a northeast structure with high grade mineralization has already been identified. In addition to high sulphidation epithermal targets the La India project also has potential for smaller but higher grade zones of quartz veins on the margins of diorite intrusives. The Alamillios zone is an example of this target.
Ownership Terms of the Seel project, central British Columbia
Grayd acquired an option on January 21, 2003 from Rupert Seel to earn a 100% interest in the 3,750 hectare Seel project in central British Columbia for 650,000 shares, $250,000 cash and $1.2 million exploration by June 6, 2008. The property is subject to a 1% NSR of which 0.5% can be bought for $1 million. This project was generated before the arrival of Marc Prefontaine by Hans Smit, whom John McCluskey had recruited as exploration VP. On May 27, 2004 Grayd optioned 61% to Gold Reach Resources Ltd (GRH.H-V), a former dot-com junior undergoing resurrection by Conrad Swanson. (Gold Reach used to be called Intl Butec Industries, which in early 2000 decided to become WebSmart only to find itself slammed into the Hess Wringer, from which it was let out in time to catch the dot-com downdraft. WebSmart.Com's POS technology never went anywhere and the stock was headed for a 10:1 rollback in 2003 when shareholders rebelled and installed Conrad Swanson as president. This was followed by a cheap refinancing by Canaccord's Turton/Nyquvest broker clan. Gold Reach is awaiting release from the HBOX jail the TSXV created for inactive listings, and a market play arising from a copper-gold discovery at the Seel project.) Gold Reach must spend $1 million by December 31, 2006, at which point Grayd can claw-back a 10% interest by spending the next $250,000. This would leave Grayd with 49% and Gold Reach with 51%.
Seel Geology
 The Seel project is located in the Omenica Mining Division of British Columbia 100 km southwest of Houston. The property hosts two zones of small scale mineralization that were explored by juniors during the early eighties. The first zone is the Seel Breccia pipe which was explored by Lansdowne Oil and Minerals (surviving today as a Bob Cross China play called Orsa Ventures Corp (ORN-V)) from 1982-85. The Seel breccia pipe has a 210 metre wide horseshoe shape and contains copper-gold-silver mineralization over short intervals. The second zone located to the east is the Damascus Vein which Intl Damascus Resources controlled from 1981 until 1989. This high grade zinc-lead-silver-gold vein was optioned first by Cominco and then by Granges and has a reported historical inferred resource of 198,087 tonnes of 4.63% zinc, 2.85% lead, 0.47 g/t gold and 411.3 g/t silver. The steeply dipping Damascus Vein has a strike of 400 metres and a width of 1.5 metres. Neither of these zones is of economic interest to Grayd or Gold Reach in itself, but in conjunction with the presence of extensive hydrothermal alteration and sulphide mineralization they are viewed as peripheral evidence for the existence of an underlying porphyry copper system that, unlike the Huckleberry copper-silver-molybdenum deposit 6 km to the northwest, may have a significant gold component. The Huckleberry Mine was developed by Alan Savage's New Canamin during the nineties as a 36,719,000 tonne deposit of 0.489% copper, 0.13% molybdenum and 2.884 g/t silver that is currently being mined at 20,000 tpd. Immediately to the north of the Seel property lies the Ox Lake porphyry deposit (35 million tonnes of 0.35% copper and 0.024% molybdenum) currently controlled by Silver Standard. During the eighties the area now covered by the Seel property was fragmented by different owners, with the result that different operators during the eighties focused on the small exposed breccia and vein targets while ignoring the potential for a bigger and deeper but lower grade copper porphyry deposit. The claims eventually lapsed during the nineties when British Columbia's anti-mining government turned the province into an exploration pariah.
Grayd, which is the operator, has completed a new IP geophysical survey which has confirmed a high chargeability low resistivity anomaly with a 1 km wide footprint. Grayd has also completed a geochemical survey which confirmed a coincident copper anomaly, though gold values were sporadic. A 1,500 metre drill program consisting of 10 core holes 80-220 m long was scheduled to begin during the second week of December 2004. Half of this program is expected to be done by Christmas, with work resuming in January. The Seel project has the potential to deliver a new discovery which could drive speculators into Grayd.
Grayd is headed by Marc Prefontaine, who was appointed in March 2003 when the driving force behind Grayd, John McCluskey, stepped aside so that he could concentrate on Alamos Gold. McCluskey remains a director and is the largest disclosed shareholder with about 1.7 million shares. His role is that of a passive director at this stage, a role that could change if his Alamos gets bought out in 2006 by another company.Through his Alamos financing and development efforts he has expanded his influence and could open important doors on Grayd's behalf if any of its projects achieve critical mass. Meanwhile Grayd's destiny is in the hands of Prefontaine, who owns 425,000 shares purchased at $0.15 through private placements and exercise of warrants. Prefontaine is a young geologist with something to prove, which is what Grayd at this stage of its life cycle needs. Other directors include John Robins of Hunter staking machine fame, Hans Smit, the exploration VP with experience in British Columbia, Yukon and Alaska, Barry Hoffman, part of the initial Alaska project vendor group, Dan Kostiuk, lawyer, and Tony Garson, former mining analyst. All are shareholders of Grayd.
Kinross owns 1.6 million shares bought at $0.25 and 800,000 warrants exercisable at $0.30 until mid 2005, which it acquired in 2004 as a way to get a toehold in Grayd's Mulatos land position. Grayd apparently has other signficant shareholders who are below the insider reporting threshold and who support the company.
Grayd has completed two cheap financings during the past 24 months, 2,025,000 units at $0.15 in April 2003, and 2,950,000 units at $0.23 in January 2004, both of which were non-brokered private placements with heavy participation by brokers. Most of the $0.15 warrants were exercised in mid 2004, but all the 2,950,000 warrants exercisable at $0.30 until February 16, 2005 remain outstanding. These warrants escalate to $0.40 and are good until February 16, 2006. A key milestone for Grayd will be to get these exercised at $0.30 because this would give the company $885,000 at a time when it will need the money. If these do not get exercised they will be an overhang the holders can short against whenever Grayd's stock gets above $0.40. Grayd is a late life cycle junior for whom 2005 is a make or break year because in 2006 heavy cash option payments start to kick in for the La India and Seel projects. The reorganization risk is offset by management's awareness of the need to turn Grayd into a success during 2005. Towards the end of 2004 Grayd had about $350,000 working capital left. The company is carried on the first $1 million exploration on the Seel project, of which $400,000 will be spent by March 2005. Good results from Seel would present a financing opportunity for Grayd.
Technical Report for La India Project, Mexico by Shane W Ebert - March 30, 2004 - 57 pages 3,330 KB pdf
Technical Report for Seel Project, British Columbia by Peter L Ogryzlo - June 12, 2004 - 53 pages 1,350 KB pdf |
