Research
Report for
Sennen Resources Resources - written by
Mike Kachanovsky
Sennen Resources is a relatively unknown junior precious metals explorer that has secured the rights to a large prospective property in Guyana. An experienced management team is in place to direct the exploration activity, and they will have a head start in their efforts through the work completed on the property by the previous owner, Golden Star Resources. I own shares in SN purchased at 37 cents in December 2003, and I have added to my holdings in 2004.
Trades on the TSX-V: SN
Head office: 408-837 West Hastings Street
Vancouver, Canada
Phone: 604-685-6851
Website: www.sennenresources.com
Sennen Resources is small cap junior minerals explorer that is listed on the TSX-Venture exchange in Vancouver. They have a checkered history of past projects but appear to be ready for a serious effort to develop and define a gold resource. They principal asset of the company is the Five Star property,
located in the northwest corner of Guyana near the Venezuela border. The dominant geological structure in the region is the Central Guiana Shear zone, and most of the large gold deposits in Guyana have been discovered in proximity to this structure. Several intrusions have been mapped out within the greenstone of the property, identified through previous geologic work. Senior management staff has been recruited to provide experience in exploration and mine development. For example, Mr. Hilbert Shields was recently appointed VP and director of the company. He was also involved with Golden Star Resources, which is significant as Golden Star once held the license to the Five Star property and completed some exploration work between 1994-1998. Mr. Shields authored a number of reports on the early exploration efforts at Five Star and hence is fully aware of the potential.
Share Structure: 41,434,893 Outstanding
10,666,666 Warrants priced at 40/50 cents, expiry Sept/05
The terms of the acquisition of the Five Star property call for the issuance of 15,000,000 shares in total phased in over a 3 year period.
The ability of the company to fund ongoing exploration commitments appears to be within the capital resources and no further equity offering should be required in 2004. The PP raised over $3.2 million, and the subsequent exercise of warrants outstanding should add at least a further $4.2 million if fully converted.
The Five Star property has already seen over $7 million dollars in exploration activity since the mid-90s. A recently completed engineering study can be accessed at : http://www.sedar.com/csfsprod/data40/filings/00575866/00000001/d%3A%5CReport.pdf
and contains a great resource of information for perspective investors.
The property is uninhabited and has no outstanding environmental issues that would prohibit development.
Trench sampling has identified a number of zones in the Makapa Hills area of the property, and in one vein identified over a strike length of 200m, with a width between 1-1.75 m, gold values were encountered up to 40g/t. The presence of free gold within the samples has caused some difficulty in recording accurate and representative samples, and produced a variance in the measured results.
Based on the historical exploration data available, and the trenching and sampling recently by Sennen Resources, the company completed a PP to fund the costs to begin a full-scale exploration project with the first phase beginning in January 2004. They have purchased a drill rig and shipped it to the property, and have hired a team of 20 locals to assist with the exploration process. It appears that this company is very focused and committed to rapid exploration.
The company owns coal assets in Australia, which were written down to a nominal value but the ownership to the mineral rights remain in good standing. Estimates on the current value of the coal properties have run as high as $45 million. While Sennen has clearly indicated their focus is on the discovery of a gold resource at Makapa, the current commodity strength for coal has opened a window of opportunity for the company to capitalize on their coal holdings, possibly through a JV deal with a coal producer, or the outright sale of the assets. This would result in additional cash resources in the treasury and forestall any future dilution concerns.
Due to the potential for a high-grade ore deposit to be defined, the aggressive attitude of the company towards development, and the sufficient funding to proceed with the business plan, Sennen Resources represents an attractive risk/reward profile. The robust bull market for precious metals and junior explorers could possibly continue for several more years, during which time companies actively advancing attractive exploration projects will dramatically appreciate in value. Those few companies that are successful in bringing a property to development, and operate a producing mine, will be immensely profitable for the early stage investors.
Disclaimer: I have made my research and opinions available to the public as a resource to provide investors and the public with basic information. My comments and opinions should not be interpreted as a recommendation or investment advice, which I am not qualified to provide. While I have made every effort to maintain accuracy in the information I provide, it is possible that there are some errors or omissions in my coverage and the accuracy cannot be guaranteed. It remains the responsibility of each individual investor to confirm if the subject of my analysis is appropriate for their investment objectives, and to conduct their own research and due diligence, and retain the services of a qualified advisor on to provide this service on their behalf. I accept no responsibility for the performance of the companies that I feature in my coverage. Junior mining and exploration companies are a risky market sector and investment in these companies can result in loss of capital. Past performance is no guarantee of future success. From time to time I may purchase stocks in the companies I feature in my reports, and I may sell some or all of my holdings. I will disclose personal ownership in those companies that I refer to at the time of my first coverage, or after follow up reports. I do not accept compensation from companies as payment to provide positive coverage or opinions