News that Moves: INTR and ELO

Two companies I hold positions in, Eloro (ELO.T) and Intrepid Metals (INTR.V) put out news releases in the past few days.

The INTR release moved the share price from $0.34 to $0.48 in six trading days. The ELO release moved its share price up from $0.97 to $1.13 the day before it actually hit the wire. The market had been anticipating good news since the New Year and the share price had been steadily rising.

But it is interesting to see what the news was that goosed these shares. Intrepid has an interesting, near surface, copper project in Arizona. It has reported results grading as high as 1.5% copper with significant gold and silver credits across 112 meters all within a couple of hundred meters of surface.

It’s a great story but the ITNR share price has been steadily drifting down from my entry price. So what was in the release to cause the share price to reverse course? An unexpected vein of gold? A new outcrop? Nope.

The release revealed the publically available information that Robert Freidland’s Ivanhoe Electric and Rio Tinto had acquired the mineral rights for land “immediately adjacent to the Corral Copper Project”.

News certainly, but, realistically, is it news which should move the share price up 25%? The market apparently thinks so and the market is never wrong. My own view is that the market was looking for an excuse to properly value a very attractive copper prospect and seized on a bit of closeology. Ivanhoe and Rio Tinto have been picking up the mineral rights to copper adjacent land for several years and acquiring rights beside Intrepid’s project is pretty normal course. Given INTR’s post release market cap of a little over 22 million, either giant could buy the company in a heartbeat.

The real significance of neighbours like this is the technical prowess they bring to the district. And, in Ivanhoe’s case, Typhoon deep “imaging” technology. While INTR is looking for and finding copper at depths of a couple of hundred meters, Typhoon can do conductivity and chargeability studies down to 1.5 kilometres. I suspect both Ivanhoe and Rio take INTR’s surface showings as good indicators of a large scale copper porphyry at depth. If they find what they are looking for, INTR’s value will, in fact, go to the moon as such a porphyry would almost certainly extend to INTR’s ground.

Eloro put out a much more substantive release on drilling at its Iska Iska project in Bolivia. This release details the results of a single hole drilled into what ELO refers to as the “tin domain”. From the release:

Eloro is in a unique position of having two discernable different deposit styles juxtaposed against one another; a very large silver-zinc-lead dominant system next to a high-grade tin system. While these two systems are likely genetically related, this means that the Company may potentially have two world class deposits on the same property. (emphasis added)

Here’s the picture:

TIB stands for “the intrusion breccia”. In the release, Eloro’s VP Latin America and General Manager of the company’s Bolivian operations, Dr. Osvaldo Arce, P.Geo, explains,

Areas with significant tin mineralization occur where mineralizing fluids were deposited through intrusion breccias and injection tourmaline breccias in favorable lithologies and structures forming enriched bodies with significant resource potential.

Clear? Me neither. There is a lot of geology at Iska Iska and, inevitably, a lot of “rock talk” in ELO press releases. The key point is that Dr. Arce literally wrote the book on the Bolivian tin belt and is the go-to subject matter expert on Bolivian tin mineralization. (I hope to speak to Tom Larsen, Eloro’s CEO early next week. A fellow layman, Tom somehow translates the rock talk into intelligible terms. Our phone conversations can be hilarious but are also very useful.)

My tentative take away from the most recent Eloro release is that hole DSB-72 hit high grade tin over a long interval.

High grade tin mineralization in Hole DSB-72 occurs as visible coarse-grained high temperature cassiterite which is likely to be amenable to gravity separation.

In a technical release like this one there are, if you will forgive me, nuggets of information which may have greater significance than the grade or interval in themselves. Tin containing rock “amenable to gravity separation” is a game changer. Tin can come in a variety of “matrixes”, some requiring a lot of expensive processing to get the tin out. If the Iska Iska tin can be separated by gravity the economics of the “tin domain” radically change for the better.

The market has been responding to the contents of this press release for a couple of weeks. There was no secret that the release was coming. Drill holes must be reported. And it was a pretty fair bet that the release would be positive. All of that was priced in.

With substantive, technical, press releases the fine detail and the real value added may not be fully understood by the market for a few days or even weeks. The market is never wrong but it is easily confused. It will take a while to assess the actual value of tin amenable to gravity separation. But when the economics become clear, the tin domain as a separate, world class, deposit should push the ELO share price higher. Much higher.

(Disclaimer: I hold shares in both INTR and ELO. I may buy or sell at any time. This is not investment advice. Do your own due diligence. Call the CEO.)