Friday, March 25, 2011

Malbex Reources Shows Froth Is Still In Market

Despite a recent pullback from the nosebleed levels of a couple of months ago, there's still some froth in the junior-exploration market. Sought-after stocks are still forging ahead on news that they're planning to drill on their properties. If a stock revs upwards on no results, only on the hope of future results, then the market is far from pessimistic or skeptical.

Malbex Resources did announce a drill-core result today, and its stock leapt up accordingly. It closed yesterday at 59 cents. Opening seven minutes after the result was released, it started off the trading day at 73 cents for a 14-cent jump. It was above 80 cents within three minutes of the open and made its day's high of 85 about fourteen minutes after trading began. Tailing off definitively about twenty minutes after the open, it got as low as 70 cents before bouncing around the price that it closed at: again, 73 cents. Malbex was another stock for which a rush to the entrance was imprudent for many. Anyone who bought about ten minutes after trading began - which could have meant having a market order at the open in a clogged market - was sitting on about a 10% loss at the end of the day.

The result in question was a doozy in terms of length: 2.12 g/t of gold over a huge 132.65 m. There was also 10.8 g/t silver in that hole. Also in that stretch of core, although in a different interval, was a 46m stretch of 3.31 g/t gold and 25.2 g/t silver.

Sad to say, the 132.65 m interval is iffy: it starts at 106 m below ground, more than 40 m below the end of the other result. It's not near enough to the surface to make for a viable strip mine, and its grade is well below the 5-6 g/t to make for a profitable underground deposit. The other interval from the same hole shows more promise: it starts at 18 m below the ground. That's close enough to the surface for a strip mine. Since strip mines can be viable with as little as 0.5 g/t gold, 3.31 g/t more than matches up.

The property from which the hole came, which was located 60 m to the side of another one with good values, is the Del Carmen. It's located near the southern end of the El Indio gold belt between Chile and Argentina. The fact sheet for the Norte part of the Del Carman concession shows some other holes that have gotten strip-mine-grade near surface results - but others haven't. This assay table [ .pdf file ] goes through the results meticulously.

The Moral Of The Story: It's always a good idea to pick through the drill-core results of any property. It's human nature to want to promote what you've got, and exploration companies are no different. Sometimes, a thorough pick-through of the results shows something a little iffy about ostensibly great results. Looking behind the clothes and grooming is one of the necessaries of proper due diligence.

Below is a one-year chart of Malbex, from

Disclosure: None - I don't own even a share of Malbex.

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