Tuesday, March 5, 2013

The Greatest Story to Never (yet) Unfold - Mahdia Gold

Mahdia Gold....where to begin.

For those of you who are not aware the Mahdia Gold mine, it is a ghost mine which was once held by IAMGold and Cambior Inc. Over the 13 years in operation 3.7 million oz were produced from two open pits; The Fennel and the Wenot.

The story which has caught the attention of a few (so far) unfortunate investors is the fact that there is still reported to be gold in the two pits which was not economically mine able at the $350/oz price tag at the time. Now with gold somewhere around $1600/oz (we are still all waiting for the breakout?)  it is believed that the mine can still produce gold for a profit.

So...a Little background about the company, which really starts in 2004 when Mr. Alan Zaakir and his company Aztek Resources acquired the Tiger River gold property close to the old Omai mine. In July of the same year WGM conducted sampleing on saporlitic/lateritic aluvial material. 5 of the 6 samples returned showing gold values, the highest being 3.74 g/t Au. A year later Aztek resources became listed on the CNQ with Zaakir at the helm, backed by ex-mining commissioner of  Guayana Ed Hopkins and Don Gordon serving as investor relations. They touted the potential of their tiger river property given its proximity to a producing mine...not the first junior, and certainly not the last, to have done such a thing.

Just to give a quick briefing of Aztek....
-Fed 25, 2005 - Aztek closes a pp of 1 720 000 shares  at .35 for gross proceeds of $602,000
-Sept 6, 2005 - Aztek signs option agreement for for 80% of the mineral rights to the Mowasi property, Guyana, located near the Tiger River property.

-Nov 14, 2005 - Aztek is halted due to the late filing of audited financial statements. A mapping program is being conducted on the Tiger River property and will be followed up by a sampling program as per the suggestion of Newmong Mining, who made a trip to the site a few months prior.

-Apr 20, 2006 -Alpha One Corporation to aquire Aztek Resources. As qualifying transaction.

-Dec 11, 2007- Aztek terminated agreement with Alpha One Corp. Aztek is "trying hard" to get listed on an internationally recognized stock exchange.

-Mar 26, 2008- Aztek and Wintercrest resources enter into an agreement to undertake an amalgamation of the two companies. Aztek still does not trade on an exchange.

-Mar 28, 2008- The two companies suspend the agreement.
Mar 07, 2008- Securities commission issue a CTO for failing to issue shares from a past bridge financing.

There was a PP or two in between, a bunch of promises and plans, but nothing worth knowing about. The company has not traded since 2005 or 2006 although it is still technically a company. Those who bought shares in the company never saw any piece of meaningful exploration work.

Outside of the way that Aztek resources was managed, the only real importance piece of this story is Wintercrest Resources. This was another company by  Zaakir, but press releases were often signed under a different first name. On Dec 2 of 2009 Wintercrest resources changed its name to Mahdia Gold and did a 1:2 share consolidation.The statements ends with "(the) board is aggressively trying to improve shareholder value". Mahdia Gold then acquires the Tiger River Property from Aztek Resources

-May 14, 2010- Mahdia announces pp of 162,000 dollars at .15. Mahdia said it would use that money to      "run a comprehensive drill program". The release includes information from a survey done by the Guyanese government on the Tiger River property in 1947. Values listed below. Note that it says oz not g.

0.65 oz of gold over 1.3 ft
1.02 oz of gold over 2.0 ft
1.64 oz of gold over 1.7 ft
17.70 oz of gold over 1.0 ft
9.30 oz of gold over 1.2 ft
9.25 oz of gold over 1.4 ft                     

-May 19, 2010 - Mahdia to explore Tiger River property. (No exploration work done to date).

-July 22, 2010 - Mahdia Gold announced a PP of $2,000,000 at 0.20 for the purpose property acquiring and capital operating purposes, the release outlines the intention to acquire the White Creek Gold property previously owned by StrataGold, the release mentiones plans for a exploration program                                                                    http://www.infomine.com/index/pr/Pa942231.PDF

-Oct 20, 2010 - Mahdia announces a $500,000 PP at .10 (warrents at .15)

-Jan 5, 2011 - Mahdia signs option agreement for the White Creek Gold property. Press release ends by saying that Mahdia plans to explore the White Creek Property before the end of 2011 to "identify its value". No exploration work on the white creek property has been done.

-Mar 21, 2011- Mahdia announces pp of 1,200,000 at .25 cents (warrents at .45). PP closes on May 3. News release explains that it was oversubscribed and that the gross proceeds of the PP are $3,500,000.

-May 9, 2011- Mahdia acquires the White Creek gold property for $700,000. The property had some preliminary exploration done on it through a joint venture program by StratGold and Newmont. Press release concludes that Mahdia is studying said data and will make it available to the public shortly.

-May 30, 2011- Mahdia acquires Omai gold mine. As well, they acquire historical drill results which seem to outline 1.4 million oz. The press release concludes with a comment on a 5 million dollar PP at .60 with a 1/2 warrant at 1.05. SP shot up to a dollar shortly after the release. This news release also details that the agreement with the Guyanese government does not include any stock transaction. Instead, the company is required the pay $11,500 to the government over 2 years.

-Aug 18, 2011- Mahdia hires AMEC to assist in completion of a N43-101 report. They also report some litigation issues at their Tiger River property (all 9 blocks), which the company says it considers a "minor nuisance"; a base camp will be built on the tiger river property.(another pp proposal is announces days after which states a 3-8 million will be raised at .40/share and .60/warrent.)

-Nov 18,2011- Mahdia releases non 43-101 compliant historical drill results. First set of drill results seen up until now. Table can be viewed at http://www.cnsx.ca/Storage/1405/128315_Mahida_Gold_Press_Release_November_17,_2011.pdf

-Dec 12, 2011- Mahdia Gold extends the closing on the previously announced PP to January 2, 2012. Release states that they are trying to create relationship with prospective participants who can be benneficial to the companies long term growth. They also announce the mobilization of TRADO drills and equipment to the White Creek property, data from the previous operators has been received and will be used to define new targets.

-Jan 3, 2011- PP set to close for Jan 2 is extended to close on Jan 31. Zaakir is granted 2 mill stock options at an exercise price of .10. SP at this time was 0.18. Release ends by stating that drills are being mobilized to White Creek and the Omai property.

-Feb 16, 2012- John Reynolds joins the board as co-chairman. As well the PP closing date is extended until March 19th, the price of .40/share is dropped to .30/share, warrant price of .60/share stays the same. The Omai project is "officially opened".

-Mar 30, 2012- At the request of the CNSX, Mahdia releases more fulsome disclosure on the details of the White Creek acquisition. The release states some late filings, money was borrowed for the White Creek payment, and that the transaction is at an arms length.

-Mar 30, 2012- PP closes, fully subscribed, at 8 million.

-Apr, 26 2012- Press release states that 2 diamond drills are drilling at the Omai site. One focused on hydrology and the other focused on drilling into the ore body in the Fennel Pit.

-Jun 26,2012- Mahdia announces two more drills are being mobilized for confirmatory and twin drilling along the Wenot Trend. The campaign is said the be 6500m over 12-15 holes. In a second release, historical drill results are released, which can be viewed here. http://www.cnsx.ca/Storage/1463/134038_June_26_News_Release_%281_of_2%29.pdf

-June 29, 2012- Mahdia releases more historical drill results, including some monster grades. Of importance, the barren diabase dike is mentioned. The press release states that historical drilling, from 1997, concludes that the dike goes on for a depth of 180m, and that mineralization is intrusive below. (In my conversations with people who were either close to the project in the Cambior days, or actually worked there, their main concern was the Diabase dike. more on this later.)

-Jul 24, 2012 - Mahdia releases NI43-101 geological report, report mentions a number of issues, including the firing of the drill crew due to poor performance. The report is later deemed to be non NI43-101 compliant and is now known simply as the AMEC report. The report can be found on Sedar,

-Sep 14, 2012- Mahdia applies for listing on the TSX-V exchange.

-Sep 19, 2012- Mahdia appoints Michael Galloro as chief financial officer.

-Oct 22, 2012- Mahdia announces expansion of its land package in the Omai/Essequibo district. The agreement with South American Mining inc., the vender, will receive an initial $50,000. In total, the agreement for 100% mineral rights over the 21,000 acres will require the payment of 1,000,000 USD and 2,000,000 Shares of Mahdia. This release contains some interesting points, mainly that Omai explansion was closed off the the previous operators.

-Nov 1, 2012- Mahdia arranges a 3,500,000 pp at .25 cents.

-Nov 22, 2012- Mahdia announces the appointment of Gordon Glenn as CEO.

-Dec 13, 2012- Mahdia hires Andre Duchane as mining consultant.

-Jan 3, 2012- Mahdia announces mended terms of the the PP propsed on Nov 1. Each share will now have a .40 warrant exercisable for a period of 24 months after closing.

-Jan 7 2013 - Mahdia announces Gordan Glenn leaves his position as CEO and appoints Donald Gordan as the intern CEO. This comes less than three months after Glenn was appointed as CEO.

-Jan 24, 2013- Mahdia releases 587 acres (the "Shallow Flats Area") to Roraima Investing and Consulting services. It is assumed that they will work the area alluvialy as Mahdia trys to get some cash flow coming in. No resource estimate has been done on this area.

-Feb 8, 2013 - Mahdia releases a corporate update. Can be read here http://www.cnsx.ca/Storage/1516/139433_Mahdia_Gold_Press_Release_2012_update_8213__2_.pdf

-Feb 12, 2013 - Mahdia confirms gold grade of 4.41 g/t over 16.9 m. These are the first results from phase 1 drilling at the Wenot pit. Total grades can be seen here. http://www.cnsx.ca/Storage/1517/139511_Mahdia_Gold_Press_Release_Wenot_Drilling_results_13213__3_.pdf  The results, being mediocre at best, is not the real story here. Its that they were able to discover additional mineralization zones below previously tested targets.

-Feb 15, 2013 - Mahdia confirms gold grades from previously drilled core from the Fennel pit (2006) with confirmatory and supplemental assays. The grades were impressive, including 1.83 g/t au over 78 m; release states that all results are NI43-101 compliant. Full release: http://www.cnsx.ca/Storage/1517/139528_Mahdia_Gold_Press_Release_Fenell_Drilling_results_15213__2_.pdf

-Feb 25, 2013 - Mahida appoints Andre Duchane as COO.

So, there we are.... I left out a few proposed PP that never closed, and other releases I didn't feel were very important. When I first entered this play at .19 I had my doubts, of all the other companies is this beaten down sector with measured ounces and money in the bank, it didn't seem like a wise choice. Zaakirs management history left much to be desired; after receiving so much money and showing nothing for it, one has to wonder, (imagine my concern when upon receiving financials in the mail I see that Zaakir earned $775,000 for the year when a 350,000 pp just closed). As I dug into things a bit, I was faced with a number of geological concerns about the Omai property, specifically a large, barren, diabase dike which runs straight through the area of mineralization in the Fennel pit. The Cambior reports include talk of underground mining below the base. Underground mining tends to me more difficult/expensive than open pit mining. These type of sills tend to be difficult obstacles given the hydrological conditions which often surround them as well as the nature of the rock. Here is an illustration of what I'm talking about

As you can see, lots of potential. I felt that given the price of gold relative to the price of gold then would make the project extremely more economically feasible. The Cambior report also came with a number of old drill holes. Grades were decent, they can be viewed here

So...what does Mahdia have?

Well, there are a number of things which still made the project appealing to me. First off...infrastructure. This was one of the largest mines in South America at the time and, in my experience, infrastructure is time consuming and expensive to create. Environmental impact studies, baseline testing, hiring of consulting firms, and the list goes on. I liked that so much was already in place.

Secondly, they had a stockpile of low grade ore. To be honest, I have been somewhat disappointed that they have failed to do anything with this yet. The ore is low grade, but I'm willing to bet that it can be processed very economically (when Cambior declared their cut off grades, gold was 350/oz). I'm not aware if they have investigated its economic viability yet, but as it was on their list of things to do for 2013 in their corporate update, I will assume they have not. A 1999 report from Cambior stares that ther were 240,000 oz of gold in the stockpile, with an average grade of 0.85 g/t Au (note that Cambiors cut off grade was 1.65 g/t Au). The mine was in operation until 2006, so it no doubt grew from the inital 240,000 oz estimate.

Third...As little as I have been impressed with Zaakirs use of money, the man evidently has some connections. I remember hearing that multiple companies were bidding for the old Omai mine, although I never heard who. To give it to a guy like Zaakir the Omai property with his previous exploration track record in Guyana must mean that somebody is friends with somebody.

Lastly, I was in a unique position to invest in a project where I already knew what kind of results were going to be released to the market. I knew that the releasing historical results would not be NI compliant and that they would have to twin the holes out to prove the grades.

Overall, even given a few concerns, I liked the story. The price has risen and settled back down a number of times since I originally bought in, allowing me to de-risk my position. That being said, I must admit I have been disapointed at how the whole thing has played out so far. Blame it on Market conditions, Management, the retail investors current fear of risk...we all have our favorite mantras...(my favorite is management)

As things seem to be taking a turn for the better over the last little while, and the stock price as such a low level, I may be picking up some more shares fairly soon.

A story to give a look at.....