BullMarketRun.com

7:00 am Pacific

The “Cadillac Trend” is hot.  Gold Bullion Development (GBB, TSX-V), the “sleeper” company we uncovered for our readers a year ago, is up nearly 700% so far in 2010.  Adventure Gold (AGE, TSX-V), Threegold Resources (THG, TSX-V), Savant Explorations (SVT, TSX-V), Vantex Resources (VAX, TSX-V) and Golden Valley Mines (GZZ, TSX-V) are just a few examples of companies working along the Cadillac Trend who have drawn considerable attention from investors this year and their share prices have risen substantially.

Of course The King of Them All is Osisko (OSK, TSX) which now commands a market capitalization of over $6 billion with the largest Gold deposit in Canada, Canadian Malartic.

As BMR readers know, we have a great deal of interest in the Cadillac Trend and we’ve visited the area three times this year.  We’ll be back again soon, no matter how cold and miserable the weather might be.  We’re in the midst of the greatest Gold bull market in history and the pace of exploration in northwestern Quebec continues to accelerate.  We’re convinced there are still a good number of potential home run opportunities out there and we’re very pleased to introduce one of them this morning – Cadillac Mining (CQX, TSX-V).  This is a major turnaround situation – one only has to look at the chart to realize that – with the company’s market cap currently just over $5 million based on 25 million shares outstanding (27.5 million fully diluted) and a closing share price yesterday of 21 cents.  The stock gapped up and traded its highest volume ever yesterday (1.8 million shares) on significant news from a couple of fronts which we’ll get into shortly.

There are major fundamental and technical reasons why this company looks so interesting right now and we urge our readers to perform their own due diligence as quickly as possible.  As always, the risks are high in this game – despite our unquestionably good track record at BMR, there are never any guarantees which is why we frequently remind investors to read our disclaimer.  Don’t ever invest money in speculative junior mining stocks, or anything for that matter, that you can’t afford to lose.  Use discernment and common sense.

Having said that, the case for Cadillac Mining is a powerful one.  The volume spike alone in this stock over the last couple of months in particular suggests something potentially big is in the works.  Volume is often the best indicator of all.  If you take a quick look at the five-year chart for CQX, you can see that record volume has poured into this stock over the last six months and has recently accelerated.  We saw similar trends with Gold Bullion, Seafield Resources (SFF, TSX-V),  Sidon International (SD, TSX-V), Currie Rose Resources (CUI, TSX-V), Adventure Gold and others early in their moves.

Cadillac Mining holds a lot of property to the west of Rouyn-Noranda, approximately six to as much as 30 kilometres west of Gold Bullion’s Granada Gold Property.  GBB’s newly-acquired Kekeko South Property is immediately south of Cadillac’s Kekeko Property.

On Monday Cadillac Mining announced it has entered into an agreement with Visible Gold (VGD, TSX-V) on claims (including Kekeko) covering a total of 7,423 hectares that VGD can earn a 60% interest in.  More on that in a moment.

What Cadillac Mining did not option out, however, was its “Wasamac claims”, a few kilometres north of Kekeko, and this is where things get really interesting.

Few investors seem to be aware that Cadillac Mining’s Wasamac claims adjoin the property Richmont Mines (RIC, TSX-V) has been drilling since May and getting very good results from. In fact, CQX stated in its most recent Sedar filing that the principal structure hosting the Wasamac Gold mineralization dips northerly toward the seven titles comprising 164 hectares owned by Cadillac.  In addition, the Horne Creek fault, host to significant mineralization to the northeast, and the related Mackay splay, also cross Cadillac’s “Wasa” Property which is largely untested for its Gold potential.

Richmont is very bullish about its Wasamac Property which is a former producer (253,000 ounces between 1965 and 1971) with excellent potential to go back into production (we love those former producers – very often there are extensions to structures!).  Richmont is now making new discoveries as it builds on an inferred resource of 285,000 ounces at Wasamac which was outlined after 14,000 metres of drilling between 2002 and 2004.  The company launched a 10,000 metre drill program at Wasamac in May and then added an extra 5,000 metres and a third drill rig after excellent initial results (seven of the first eight holes intercepted mineralized zones of more than eight metres true width).

Richmont came out yesterday morning with more encouraging news on Wasamac including a ramping up of the drill program to 20,000 metres.  Results from eight more holes were released and included 6.14 g/t Au over 6.47 metres, 3.12 g/t Au over 14.04 metres, and 3.17 g/t Au over 7.75 metres (all true widths).  Richmont has confirmed a “strong system of mineralization” between vertical depths of 200 to 800 metres that remains open at depth in several areas.  The Wasamac Shear Zone extends over a strike length of more than two kilometres.  The company is evaluating the potential for an underground bulk-mining operation and expects to complete an updated resource calculation for Wasamac by sometime next month.  Things are moving fast for Richmont at this very interesting property (commercial production at the company’s Francoeur Mine, just 10 kilometres west of Wasamac, is expected to begin by the middle of next year).

The news from Richmont was clearly the spark that ignited the gap-up and the volume surge in Cadillac Mining yesterday.  The intense interest in companies operating along the Cadillac Trend, and the awareness of some investors that Richmont has been drilling right next to CQX’s claims and getting good results, have obviously been the driving factors behind the increase in trading activity in Cadillac Mining recently.  This stock has been under significant accumulation which makes perfect sense.  At the very beginning of November the market cap for this stock was a ridiculous $1 million.  We wish we were aware of it at that point in time but despite the increase in the stock price since then, we suspect CQX is still flying “under the radar” of most investors.  We see a lot of blue sky potential here, especially given the bullishness of the CDNX.  It’s difficult in the current market to find a company with such exciting prospects trading at a market cap of only five or six million dollars.   Cadillac has a few hundred thousand dollars in its bank account but spends its money wisely.  The company will obviously have to do a financing at some point but diluting the attractive share structure at current prices is not in the cards in our view.

Cadillac’s decision to enter into an option agreement with Visible Gold on its properties excluding Wasamac makes a lot of sense.  VGD can earn a 60% interest in 217 of Cadillac’s 228 claims by incurring exploration expenditures of $4.2 million, issuing 500,000 of its shares to Cadillac, and paying Cadillac a total of $100,000.  This is over a four-year period with VGD committed to spending $500,000 in the first year of the option.   Visible Gold, which has a current market cap of $26 million, is in the process of raising $5 million and we expect them to take an aggressive approach to exploration on Cadillac’s claims.  VGD President and CEO Martin Dallaire stated, “Cadillac Mining’s professional team brought this project to a stage that is in line with Visible Gold’s business model – many ready-to-drill targets right on the prolific Gold Cadillac break and close to mining infrastructure.  We will test those targets in the coming weeks and months.”

This is effective leveraging on the part of Cadillac Mining and will allow the company to focus its expenditures on Wasamac and new opportunities elsewhere.

Yes, there’s a really sweet bonus here.  Not only does an investor in Cadillac Mining get exposure to a highly prospective land package just west of Granada, stretching out 24 kilometres, but it appears this company could be close to pulling the trigger on a significant project in the Great Basin.  As disclosed in Monday’s news release, and suggested in the 2008 corporate presentation on its web site (“Nevada/Colorado targets pending”), Cadillac Mining is “actively pursuing precious metal targets researched over the past two years in the Great Basin of the USA.”

Interesting – they are hunting for Gold not only along the prolific Cadillac Trend but in “Elephant Country” across the border.    As part of our due diligence we’ve spoken with Cadillac Mining President and CEO Victor Erickson.  He’s an accomplished mining engineer who knows his stuff.  Over his long career he has worked for several major mining firms, both domestically and internationally.  He’s determined and has all the ability, in our view, to turn this company into a major success.  At his side is Andre Audet (not the same Andre Audet who’s with Everton Resources, though the two know each other and Everton’s Audet speaks highly of his namesake).   Cadillac’s Audet is the company’s Vice-President, Exploration, and served as Chief Geologist at the Sigma Mine in Val d’Or when he was with Dome Mines Group from 1974 to 1987.  He has since worked as an international mining consultant in Asia, Africa, and the Americas focusing on exploration, property acquisition and evaluation primarily on Archean and epithermal Gold and VMS and Sedex base metal deposits. Needless to say, there are smart mining people running Cadillac.  That fact, plus the fact they’ve been researching opportunities in the Great Basin over the past two years, suggests to us they could come up with a whopper of a project down south.

At BMR, the only company we’ll add to our model “Portfolio” is one that offers extraordinary long-term potential.  While this company could perform very well over the short term, we’re particularly impressed with its longer term possibilities which is why we’ve added it our Portfolio at 23 cents.  We’re impressed with management which holds a substantial share position in the company (more than 20%).

In addition, the company’s strong presence on the Cadillac Trend, in particular its close proximity to Richmont’s Wasamac Property, has the potential to provide some immediate excitement while it tries to nail down a project in the Great Basin.  Richmont’s ongoing drilling with more results to come should keep interest in Cadillac Mining high.  And Visible Gold will be going to work soon on Cadillac’s properties and that’s going to be interesting to watch as well.  With a current market cap of just over $5 million, CQX does offer a lot of upside potential going into what we expect will be a very strong overall market in 2011.

“Cadillac Mining” has a nice “feel” to it and we’re very pleased to put this special situation in front of our readers for their consideration and due diligence.

Disclaimer:

The writer holds a position in Cadillac Mining.  BullMarketRun is completely independent from any companies it covers.  BMR accepts no compensation of any kind from the companies we cover in return for that coverage.   We accept no advertising either.  Our stock coverage is for informational purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. No investment opinion or other advice is being rendered on any stock or company.  We strongly recommend that you consult with a qualified investment adviser, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research before making any investment decisions.  The stocks we cover, by definition, are highly speculative and potentially very volatile.  Investors are cautioned that they may lose all or a portion of their investment if they make a purchase or short sale in these speculative stocks.  We are not Registered Securities Advisors. Our opinions can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.  It should be assumed that BMR personnel, writers and their associates may hold or dispose of or trade in positions in any securities mentioned herein at any time.  Owner/Publisher of BullMarketRun.com is Terry Dyer of Langley, British Columbia, who does not currently hold a position in Cadillac Mining.