Peruvian Silver-Zinc Exploration Play on the Move
Something interesting happened on Monday December 2. Gold dropped $32 and silver lost .84 cents. Most of the silver and gold producers trudged lower. Many of the mining explorers were already so low that they aren’t moving much at all. What is perhaps most interesting for the subject of this report, is something that did not happen.Tinka Resources, Ltd. (TSXV: TK) has actually been cutting a path in the opposite direction as of late. See if your technical analysis sense picks up on something (or perhaps several things) of interest in the charts below.
Over the last few weeks, Tinka has been having quite a relationship with the 50 Day Moving Average, bumping along just below, and then making a strong move to close above it. It did close below again the next day – but it is common for prices to make more than one attempt at a resistance line. A few days do not a trend make…but this kind of action should catch the attention of the contrarian trader. (Hint: Watch to see how this stock handles the current decline in relation to its peers.)
Now look at Tinka via a weekly chart. Here we see that prices were very strong for the last two years until April, 2013, when the entire metals’ market began its latest swan dive. From that top, Tinka’s low/loss thus far is about 60% – in line with most producers, and a whole lot better than many of Tinka’s colleagues in the exploration space – who have commonly seen their share price drop over 90% during that time.
Tinka Resources, Ltd. (TSXV: TK), led by President/CEO Andrew Carter, is a junior exploration company based in Vancouver, Canada, focused on its two 100% owned west-central Peruvian projects, Colquipucro and Ayawilca. The combined projects consist of 46 contiguous mineral tenements covering an area of 9,827 hectares.
The deposit has a long mining history, dating from the days of the Spanish Conquistadors until 1950. For the next five decades, various mining entities conducted exploratory drill programs and assessments. The last company was Buenaventura, from 1976 until 2005, when the project was abandoned. In 2005, Tinka Resources staked the property. Beginning with a 15 hole diamond drilling program in 2007, which yielded an initial inferred resource of over 5.6 million tonnes, grading 111.4g/t silver (Ag) with a 30g/t Ag cut off, Tinka proceeded to conduct further exploration.
Then in 2011-12, another drilling program was undertaken to explore the northern extension of the known resource area, raising the inferred resource estimate to almost 14 million tonnes. Using varied cutoff grades, the tests inferred the existence of between 29.5 and 32.7 Moz of silver.
Preliminary work has also been done with various head grades, in order to test potential recovery rates. Tinka estimates that an additional 3,500 meters of drilling (with infill) will be required at Colquipucro, in order to place the resource into the Indicated category.
In 2011, Tinka, commenced a drill program at nearby Ayawilca, anticipating that this effort would demonstrate an extension of the silver deposit identified at Colquipucro. This was not the case, but what did happen was that a deeper hole targeting an IP anomaly east of the surface showing, identified substantial zinc values. Drilling up through the early part of 2013 intercepted Zn values ranging 4.8% – 13.85%.
Tinka has filed amended permits, applying for additional drill sites in several directions, in order to expand the size of the existing resource at Colquipucro, and to further test geophysical targets at Ayawilca.
On November 28, Tinka announced it had closed its most recent Private Placement Financing, raising gross proceeds of $595,000 via the issuance of 1,190,000 units at $0.50 per unit. The company anticipates using the net proceeds of this placement to advance exploration work on Colquipucro and Ayawilca, and also for general working capital purposes.
Though prices for both precious metals and base metals have been under pressure for the last couple of years, there are tentative signs that the down move may be coming to an end – in fact a serious test of the gold and silver (late June) lows is underway as this report is being written.
As silver prices enter the next cyclical bull phase within the larger secular bull market run, Tinkas’ Colquipucro project should once again draw considerable attention. What is perhaps less understood by the market is that several analysts have published compelling evidence that, over the next few years, there is a likelihood of severe shortages developing for zinc. This is in part due to low base metal prices, leading to shutdowns and the shelving of some future zinc operations, but also because, in a few years, several large producers will be looking at “end of deposit” operations.
As this plays out, the potential upside for Tinka Resources’ double threat Ag/Zn plays could place it on the Watch screens of investors around the globe. And by the looks of the charts shown in this report above, it would seem that at least some traders are doing a whole lot more than just watching.
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