Atna rated a speculative buy

Tax-loss selling at this time of year typically creates a seasonal weakness that many speculative investors use to their advantage, to bottom-feed on the junior resource sector.

At 40-42, Atna Resources is showing up on several analysts’ radar screens, including Canaccord Capital’s Graeme Currie, who has put out a “speculative buy” recommendation. With $11.1 million in cash and 21 million shares outstanding (24.6 million fully diluted), Atna is trading at more than a 20% discount to its working capital position of 52 per share.

“Atna is a great scavenger candidate combining cash, properties and strong management,” states Currie, adding that it “is trading below cash break-up value.”

During the past year, Atna appointed, as its president, David Watkins, a former president of Cyprus Exploration and senior vice-president of Cyprus-Amax.

Under Watkins’ direction, Atna is attempting to transform itself into a mid-size producer through mergers and acquisitions. After an initial bumpy start, when the due diligence of a potential cobalt acquisition failed to meet the company’s expectations, Atna acquired an option to acquire a 100% interest in the Monterde gold-silver project in northwestern Mexico.

An open-pit, heap-leach prospect, Monterde is eyed as a possible 90,000-oz.-per-year producer, with cash costs pegged at less than US$150 per oz., and capital costs at US$24 million.

Privately owned Kimber Resources, the vendor, estimates a potential 700,000-oz. resource of 10.5 million tonnes grading 2.1 grams gold and 66.7 grams silver per tonne, based on historic data, underground sampling, trenching and limited drilling.

Monterde was historically mined by underground methods from 1937 to 1943. Bonanza-grade, shear-hosted mineralization was mined from four main stopes over a strike length of 500 metres and to a depth of 250 metres. The mineralized zone underlies a hill that rises to an elevation of 2,350 metres in the Sierra Madre Occidental.

Previous drill results included 32 metres of 3.4 grams gold and 311 grams silver, plus 8 metres of 14.6 grams gold and 455 grams silver. Underground sampling yielded up to 7 grams gold and 189 grams silver over 12 metres in crosscuts, whereas surface sampling and trenching returned up to 33 metres of 2 grams gold and 102 grams silver.

Atna has begun a 2,200-metre drill program of some 20 holes to test the area along strike of the historic workings, estimated at 600-800 metres.

“The program is designed to test the project’s potential by verifying past data and testing the target envelope,” states Currie.

Atna can acquire the property, subject to a 3% net smelter return royalty, by spending US$2.5 million and paying a total of US$500,000 over 30 months. Atna is also responsible for US$900,000 in underlying payments over four years.

Among Atna’s chief assets is a 40% interest in the Wolverine polymetallic massive sulphide deposit, in southeastern Yukon. The project was recently the subject of a positive prefeasibility study by operator Expatriate Resources. By consolidating the Wolverine and Kudz Ze Kayah deposits, Expatriate hopes to be able to conquer any metallurgical concerns.

Wolverine contains a resource of 5.4 million tonnes grading 13.06% zinc, 1.59% lead and 1.43% copper, plus 1.76 grams gold and 378.1 grams silver per tonne.

Brent Cook, an analyst with Carlsbad, Calif.-based Global Resource Investments, also views Atna as a buy at its current level. He thinks the company will likely sell its 40% interest in Wolverine rather than participate in development.

“Moving forward, we expect this junior to become far more pro-active over the coming year,” writes Currie. Cook concurs, stating “David [Watkins] is intent on bringing a significant project into the company and has both the contacts and skill to do so.”

Atna has been looking at potential copper acquisitions in Chile.

The company recently announced it purchased a 100% interest in the Lone Pine mining claims, south of Prescott, Ariz. Lone Pine operated intermittently from the early 1900s to the 1950s, producing ore that averaged 6% copper, 5% zinc and 1.5% lead, plus 103 grams silver and 6.8 grams gold.

Underground workings were developed to a maximum depth of 56 metres and along a strike length of 183 metres. The downdip potential of the polymetallic mineralization beneath the old workings has never been drill-tested, says Atna.

The Lone Pine property occurs in a historic mining district hosting several past-producing volcanogenic massive sulphide deposits, including the Iron King mine (5.4 million tonnes of production) and the United Verde mine (29.9 million tonnes of 4.8% copper, 54.8 grams silver and 1.4 grams gold).

The company has staked additional ground in the area and has begun a surface and underground program of mapping and sampling. Additional target areas are being developed along the favourable horizon, which extends along strike from the mine area.

Atna plans to drill-test the downdip potential early next year, with a minimum of 500 metres.

“While this property may prove an important addition to Atna’s portfolio, the company remains focused on the acquisition of a more advanced project with near-term production potential,” says Yorkton Securities’ Douglas Leishman, who continues to recommend Atna as a speculative buy.