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Date: October 22, 2009
By: Dennis Boyko
Several Talk Back comments at GoldMinerPulse were similar to the following theme:
Your resource on Orko is completely wrong. They have 130+ mil ozs but you only list them with 60 in all categories PLEASE FIX!
Although GoldMinerPulse always replies to talk back comments, it was recently pointed out that this same comment appeared in at least one stock chat forum. What follows is a response for the record.
The baseline resource counts for Orko Silver are clearly stated in an October 2009 Orko Silver Presentation as:
February 2009 Completed 6th NI 43-101 Resource Estimate-Indicated Resources are 10.64 million tonnes grading 0.27 g/t Au and 185 g/t Ag for a Silver-Equivalent grade of 201 g/t. at a cut off grade of 100 g/t. Inferred Resource sare 12.0 million tonnes grading 0.25 g/t Au and 185 g/t Ag for a Silver-Equivalent grade of 200 g/t. at a cut off grade of 100 g/t.
68.9 Million Silver Equivalent Ounces - Indicated Resources (47%)
77.6 Million Silver Equivalent Ounces - Inferred Resources (53%)
In the same presentation, Orko Silver also details its ongoing joint venture with Pan American Silver, of which the key relevant points are:
On April 14, 2009 Orko Silver and Pan American Silver Corp. jointly announced an agreement to form a Joint Venture (JV) to advance the La Preciosa project into production
Pan American will contribute 100% of the funds necessary to develop and construct an operating mine, in consideration for a 55% interest in the joint venture
Orko will be fully carried fully carried and will end up owning 45% of a and will end up owning 45% of a producing mine.
The GoldMinerPulse Orko Silver Corp.: (NI) 43-101 Metal Valuation Report shows La Preciosa NI 43-101 resources as 10.64M t of ore in the Indicated category grading 0.27 g/t gold and 185 g/t silver plus 12.09M t of ore in the Inferred category grading 0.25 g/t gold and 185 g/t silver. These grades are, within small rounding errors, virtually identical to the grades used by Orko Silver in the October 2009 presentation.
At the market close on October 21, 2009, the same GoldMinerPulse report showed Orko Silver with 65.94M ounces of silver equivalent. The same report also notes, "The valuations of Orko Silver and Pan American Silver are prepared anticipating that the joint venture is completed." and the La Preciosa details show Orko Silver's as owning 45%.
If you take the Orko October 2009 presentation details and apply the same Pan American Silver joint venture assumptions you would get a
Silver Equivalent Ounces = (68.9 + 77.6) × 45%
= 65.93M ounces
65.93M ounces of silver equivalent from the Orko Silver October 2009 presentation compares very well to the GoldMinerPulse report with the October 21, 2009
update value of 65.94M ounce of silver equivalent. In addition to rounding errors, GoldMinerPulse valued the gold with the October 21st closing price and used the October 21st closing silver
price to compute silver equivalent ounces. The Orko Silver presentation, being a static number, used a 60 to 1 silver/gold ratio to compute equivalent ounces.
Therefore in the future, depending on the closing prices of gold and silver, small differences between the static silver equivalent published by Orko Silver and
the daily computed value at GoldMinerPulse could arise. Such differences are however likely to be small
(the October 22, 2009 GoldMinerPulse update shows 65.97M ounces of silver equivalent) and not significant for purposes of valuing Orko Silver.
One can of course question the assumption that Pan American Silver will complete its options to acquire 55% of La Precioso. Clearly, the GoldMinerPulse Orko Silver Corp.: (NI) 43-101 Metal Valuation Report assumes this.
Perhaps the best evidence of an expected completion of the La Preciosa joint venture is represented by the actions taken by several of the Orko Silver management team and directors. Specifically, the April 2, 2009 Orko Silver Information Circular (available at Sedar) lists the principal occupation for Gary Cope as Mining Executive, President of Orko Silver Corp. and Orex Minerals Inc.. The audit committee section of the Information Circular (Gary Cope is a member of the audit committee) notes: Mr. Cope is currently the President of Orko Silver Corp. and Orex Minerals Inc., both of which are public companies whose shares are listed on the TSX Venture Exchange. The same report shows that Orko Silver directors Gary Cope, Ross Wilmot, George Cavey and Rick Sayers also have Orex Minerals Inc. connections.
An October 22, 2009 check of contact information showed the following:
Orko Silver Management web page: Chief Geologist: Ben Whiting; Art Freeze, Consulting Geologist, Advisory Board Member; George Cavey, Vice-President Exploration and Director;
Orex Minerals Inc. Management web page: Chief Geologist: Ben Whiting; Art Freeze, Director; George Cavey, Director; Ross Wilmot Chief Financial Officer, and Director;
April 2, 2009 Orko Silver Information Circular (available at Sedar) lists N. Ross Wilmot South Surrey, B.C. Director and Chief Financial Officer;
Note: The overlap of the management team listed at the Orko Silver web site and the management team listed at the Orex Minerals web site is not 100%. For example, Miguel Davila Carrera, Project Geologist at Orex Minerals does not have any apparent connections with Orko Silver (but all other people listed at Orex Minerals Inc. Management web page [viewed October 22, 2009] have Orko Silver connections). Similarily, Mike Devji, Executive Vice President and Director at Orko Silver does not have any apparent connections with Orex Minerals (but all other people listed at Orko Silver Management web page [viewed October 22, 2009] do have an Orex Minerals connection).
Given the above facts, I believe that valuing Orko Silver with the assumption that Pan American Silver completes its obligations under the terms of the joint venture agreement and gains 55% control of La Preciosa is a reasonable assumption.
Orko Silver and Orex Minerals: Is shared management, shared directors and shared office space for two separately traded public
companies any reason for investor concern? Well, consider a scenario of Mr. Perz, a fictional owner of mining claims in Durango State, calling
his business acquaintance Mr. Gary Cope:
Ring, Ring, Ring a phone rings at 1180 - 999 West Hastings Street Vancouver
Mr. Cope: Hello Gary Cope here
Mr. Perz: Ah, hello Gary, this is Mr. Perz in Durango State Mexico
Mr. Cope: Mr. Perz, so nice to hear from you again. What's up?
Mr. Perz: Well Gary, I have put together a package of mining claims in Durango state not to far from the Durango Volcano Field. I need to raise more than
1/2 a million to cover my expenses. I know you already have land positions in Durango State? Are you interested in making me an offer?
Mr. Cope: Yes, I'm interested. Tell me more.
Mr. Cope's think bubble... yes, this is worth looking at for ....
My think bubble... But which hat is Mr. Cope wearing when he says he is interested? Both Orko Silver and Orex Minerals hold land positions in Durango State.
La Preciosa is at roughly at 24.43 degress North and 104.46 degrees West
Durango volcano field is at roughly 24.15 degrees North and 104.45 degrees West
Orex Minerals' Coneto claim is roughly centered at 24.98 degrees north and 104.67 degrees West
Note 1: The Orex Minerals Coneto web page (viewed October 22, 2009) had the following information about the Coneto project:
Exploration objectives for Coneto are similar to "La Preciosa", our sister project. The target we are exploring for is a deposit of more than 100 million ounces of silver equivalent.
Note 2: From the January 07, 2009 Orko Silver Provides 2008 Year End Summary
The Martha Vein oriented drilling program has extended the mineralization in a SSE direction,
toward the La Preciosa/ Santa Monica Property boundary. The Company's geologists have noted a drop in the silver values to the southeast,
where drilling has taken place on the periphery of a small Quaternary basaltic volcano. Here Martha vein thickness remains strong.
A similar depletion in grade is also noted along the southern boundary of a second basaltic volcano along the northern boundary of
Martha drilling. Our technical team now believes that heat from the emplacement of the northern volcano may have remobilized and
caused the pooling of silver-bearing fluids into large mineralized zones, as seen in the vicinity
of hole BP07-71ext (20m of 460 g/t Ag Eq) and hole BP07-75ext (40m of 260 g/t Ag Eq) as well as a number of other thick
intercepts where our best portion of the current resource estimate lies.
A similar scenario may be in place in the southeast in the vicinity of the second volcano.
Orko geologists plan to test this theory in 2009 by drilling wider spaced holes south and southeast of the southern volcano,
toward definition of richer areas of silver concentration.
Assuming, as GoldMinerPulse does, that an Orko Silver and Orex Minerals like arrangement fullfills all the legal requirements set out in the rules and regulations pertaining to publicly traded companies on the TSX Venture, what should investors think?: Is the Orko Silver and Orex Minerals arrangement typical of Canadian junior explorers? Who else is doing this? How should investors view these types of arrangements? What questions should investors ask when they find such arrangements?
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