Following yesterday’s market close, Seafield Resources (SFF, TSX-V) reported news that fundamentally changes the company in a way that we believe will ultimately drive the share price even higher than what we have been speculating in recent weeks. In essence, Seafield has smartly restructured a letter of intent with Caribbean Copper and Gold Corporation (CCGC) and is moving ahead to acquire a 100% interest in the Quinchia Property in Colombia (20 kilometres southwest of Medoro Resources’ Marmato Mountain deposit) which has considerable blue-sky potential and currently contains an inferred (non-compliant) resource of 4.3 million ounces of gold.
Previously, Seafield was going to acquire a 50% interest in privately-held CCGC. Now, Seafield will purchase from CCGC “all right, title and interest in and to certain mining claims, options and land packages, located in the Quinchia district of Colombia, as well as all relevant data, drill cores and materials related thereto.” This is a much cleaner agreement and gives Seafield 100% control over a 4,700 hectare district that lies within established infrastructure, including easy access to the Pan-American highway, regional power grid and soon to be refurbished railway, and is located at a relatively low altitude of less than 2,000 metres.
The Quinchia Property 2008 Technical Report, which BullMarketRun acquired recently, is a fascinating 60-plus page read that we will be posting on our site in its entirety shortly.
The Property has three major targets – Dos Quebradas, La Cumbre, and Juan Tapado. Dos Quebradas has an inferred resource of 2.1 million ounces (96.3 m/t at 0.69 g/t) based on just eight drill holes in 2006; preliminary model results for the La Cumbre target indicate 2.2 million ounces of gold (118.3 m/t at 0.58) based on just seven drill holes in 2006; and Juan Tapado, just north of Dos Quebradas, is a known large gold sediment anomaly that has yet to be drilled.
The Technical Summary report states: “Limited diamond drilling and metallurgical test work at Quinchia has been successful at delineating a potentially significant low-grade large-tonnage Au-Ag deposit at Quinchia which is potentially amenable to bulk-tonnage mining and mineral extraction techniques. Quinchia is considered a property of merit…a stage-three exploration diamond drilling program totaling 7.500 metres and additional metallurgical tests is recommended.”
With yesterday’s close at 14 cents, Seafield’s current market capitalization is only $8.4 million. Given the Quinchia acquisition (a formal agreement is expected to be signed shortly), Seafield deserves a significantly higher market cap (if we assign just a $5 value to each inferred non-compliant ounce at Quinchia, Seafield should be trading in the range of 35-40 cents – so one can see how this stock has tremendous upside potential from here).
The new agreement with CCGC also better protects Seafield’s current cash position of approximately $2 million (previously, Seafield would have had to pay $5 million for a 50% interest in CCGC). Seafield will initially pay out $250,000 and five million shares for Quinchia. After one year, Seafield can elect to make a final payment to CCGC of $250,000 and an additional two million shares for a total of $500,000 and seven million shares (or return Quinchia to CCGC). Seafield will also assume underlying property option payments totaling $5.5 million over 30 months.
Our expectation is that Seafield will complete the formal agreement with CCGC very soon (within 30 days) and use some of the cash it has raised recently to begin an immediate and extensive exploration program at Quinchia including the stage-three diamond drilling program recommended in the 2008 Quinchia Technical Summary.
Bottom line: Seafield is headed much higher. It is an immediate and aggressive buy for speculative investors with 10-bagger potential from here by Q1 2010. The Quinchia deal and the closing of the recently announced private placement clear the way for a powerful new advance in this stock. Technically, Seafield is heavily oversold and all moving averages are in bullish alignment (a reversal in the 20-day is expected Wednesday).
We are continuing to work on a major report on Seafield which will be posted on BullMarketRun.com soon. We remind investors that we like to follow the money, and with the Patersons behind this play we are particularly excited about Seafield and its prospects. Seafield’s aggressive push into Colombia will be the focus of attention for investors, but the company has two other very interesting projects (the Elora Gold Property near Dryden, Ontario, and the Picachos silver-gold Property in Mexico) that should generate some additional excitement over the coming months.
