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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

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Thursday, February 19, 2009

Metanor Resources Share Price Breaks Resistance

I spent some time with the management of Metanor Resources (Serge Roy--Chairman & CEO; Ghislain Morin--President & COO; and Ron Perry--VP, Treasurer) at the ValueForum InvestFest Conference in Orlando, Florida on February 6 – 8.

Here is the link to ValueForum
Metanor, as a sponsor of this investment conference, hosted an evening reception. Here is what I learned and what I am thinking.

Production at the Bachelor Lake mill is advancing forward. Today's release shows Metanor has increased ore throughput from 700 tons per day (tpd) to 800 tpd with minimal investment and intends to move to 1,000 tpd in 2009.

Even better, the company is quickly developing the resource rich and high-grade Bachelor Lake mine.

The Bachelor Lake and Hewfran mines are classified as "abandoned" and as a result will be eligible for the up to 47% Quebec tax credit for exploration and development. The ore from these mines will also go through the bulk sampling process (50,000 tons of ore) before the ore from Bachelor Lake/Hewfran are declared to be commercial producing mines. This is the same process Metanor went through with the Barry pit in 2008.

My sense is that the timetable is about 12 months before they begin bulk sampling from Bachelor Lake and Hewfran. Bachelor Lake and Hewfran have high grade ore (7-9 grams and higher per ton) and can easily be connected with one another underground at levels 6 and 8. The Bachelor Lake mill is right next to the Bachelor Lake mine head so transportation costs for this ore will be near zero.

The plan remains to mix the higher grade Bachelor Lake/Hewfran ore with the lower grade Barry pit ore. This will extend the mine life for all three mines. This is a very good thing for shareholders.

The mill is still getting about 95% gold recovery rates even at the higher mill throughput rate.

Metanor investors have emailed me or commented on the previous post expressing concern because the share price had been stuck at C$0.45 while other junior gold producers had a higher percentage run up in share price over the past two months.

It is my opinion that the share price resistance experienced over the past two months was due to the overhang of the Raymond James "flow through" secondary private placement in December. Those who bought into the secondary were selling at cost to take advantage of the tax arbitrage provided by the Province of Quebec's "flow through" tax credit for provincial citizens. I also believe we have burst through those trading shares two weeks ago and the share price has moved to resistance at higher levels—currently at about C$0.60 per share.

Last month, Metanor also received a check from the Province of Quebec for about C$3.3 million in exploration tax credits for past exploration activities.

I remain very excited about the “Blue Sky” Nelligan property we visited this past summer and am hopeful drilling activities will begin at the Nelligan soon. Remember, Nelligan produced a 584 gram per ton channel sample and is only 4km from the Bachelor Lake mill. Even better, Metanor owns the property between Bachelor Lake and Nelligan which is unexplored to date.

Moreover, there are also smaller properties (6,000 oz. to 348,000 oz. of historical resources--NOT MI&I) within a reasonable distance of the Bachelor Lake mill that have 1 million - 1.5 million oz. historical gold resources.

Metanor's management has indicated they are being extremely cost conscious while trying to advance the number of ounces they produce as quickly as possible. Increasing production is very important in a rising gold price environment and I expect the price of gold to trend higher for several years.


The Gold Stock Strategist
Full disclosure: I own shares in Metanor Resources. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their own investment decisions. Do your own due diligence.

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