1. January 3, 2003
THE SOURCE OF INDEPENDENT EQUITY RESEARCH™
Analyst: Ron Wortel, MBA, P.Eng.
Independent Equity Research Corp. 130 Adelaide St. W, Suite 2215, Toronto Ont., Canada M5H 3P5, www.eresearch.ca
Band-Ore Resources Ltd.
Recent Price $0.57
Symbol BAN:TSX
Shares O/S 29.9 million
52 Wk. Range $0.85-$0.35
Fiscal Year End Dec. 31
EPS CFPS
2000 $(0.02) $(0.01)
2001 (0.04) (0.01)
2002e n.a. n.a.
2003e n.a. n.a.
eResearch
Data Source: www.wallstreetcity.com
Recommendation
Speculative Buy
Target Price
$1.05
Risk
High
Ave.MonthlyTradingVol.
495,275
Quick Facts
STRENGTHS
• Goldexplorationproperty
on favourable geology in
prolific Timmins camp
• Kennecott as a partner in
fundinganddevelopingits
diamondproperty
• Wellfundedfor
explorationand
operations
RISKS
• Inherent exploration risk
• Goldpricevolatility
CONCLUSION
• Exposuretogoldina
rising market
• Excellent partner for the
developmentoftheir
diamondproperty
We are recommending the shares of Band-
Ore Resources as a Speculative Buy for
investors who are seeking exposure to
the current improving gold price market
through a junior gold explorer. Band-Ore
is also part of a developing diamond
exploration project with major Kennecott.
Band-Ore Resources Ltd. is a Canadian
based exploration and development
company with two significant exploration
projects underway, one gold the other
diamonds. The Thorne Project is located
in the Timmins gold camp and is
undergoing a geophysical survey at this
time to identify targets for a winter drilling
program. Exploration and sampling
programs continue under the direction of
Kennecott on the GQ diamond property
north of Wawa, Ontario.
An independent mining consultant
estimated an inferred resource totaling
approximately 4 million tonnes grading
approximately 3 g/t Au for about
400,000 contained gold ounces on the
Thorne Property. If BAN was given an
average of US$20 per resource ounce it
would represent a potential market value
of close to C$13.2 million. Every US$5/
oz improvement in the gold price could
translate to an addition C$3 million value
for the Thorne resources. Band-Ore
recently re-interpreted the location of the
Porcupine Destor Fault zone moving it
approximately 1 km south and still within
the Thorne Property. This new position
gives the Company significantly more
favourable geology and numerous
untested geophysical anomalies on the
north side of the fault zone. Regionally,
most of the significant gold deposits
have been found on the north side. A
drilling program to test these anomalies
will start in January 2003.
The Wawa Diamond Project covers the
39 km2
GQ Property that lies 20 km north
of Wawa, Ontario with excellent access
from the Trans-Canada Highway.
Diamonds were first discovered on the
GQ property in January 2000. By the end
of September 2001, the Company had
recovered over 13,000 diamonds and
identified 5 diamond-bearing areas.
Continued on page 2...
SUMMARY AND RECOMMENDATION
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Band-Ore Resources Ltd. has two developing exploration projects: gold in Timmins, Ontario and
Diamonds in Wawa, Ontario
2. eResearch Band-Ore Resources Ltd.
2 January 3, 2003
In October 2001 BAN entered into agreements with Kennecott Canada Explorations
Inc. for the exploration and development of the property. BAN and Kennecott have
identified three main Volcanic Heterolithic Breccia zones associated with one main
volcanic event containing several diamond bearing areas on the property. One of
these zones, the Engagement zone, indicated dimensions that could encompass a
minimum of 14 Mt of potentially diamond-bearing rock. Kennecott continues to expand
the known zones of diamond bearing rocks.
BAN should complete a financing that would give the Company sufficient funds to
meet its plan C$1 million in exploration programs for 2003 and have C$500,000 in its
treasury.
We are valuing the stock at the potential implied value based on the Company's projects
due to the improving gold market that should increase in situ resource valuations and
the success at its diamond exploration project. We rate the common stock of the
Company as a Speculative Buy with a 12-month target of C$1.05 per share.
Band-Ore has the potential for a significant gold discovery in the prolific Timmins
camp with the results from the GQ diamond project providing another exciting facet
to this junior exploration story.
THE COMPANY
Band-Ore Resources Ltd. is a Canadian based exploration and development company
based in Burlington Ontario. The Company trades under the symbol BAN on the
Toronto Stock Exchange. Currently Band-Ore has two significant exploration projects
underway, one gold - the other diamonds, as well as other properties undergoing
geologic evaluation. The Thorne Project is located in the Timmins gold camp and is
undergoing a geophysical survey at this time to identify targets for a winter drilling
program. Exploration and sampling programs continue on the GQ diamond property
north of Wawa.
The Thorne Project in the Timmins gold camp is the Company's most advanced
property with a drill-inferred resource estimated at 400,000 ounces. The property
covers a significant portion of the Destor-Porcupine Fault zone and associated highly
prospective geology. The Company's second significant project is the Wawa Diamond
Project that is focused on the GQ property north of Wawa, Ontario. Over 20,000
diamonds have already been recovered from preliminary sampling on the GQ property.
Band-Ore has signed an agreement with Kennecott for the exploration and potential
development of the GQ property. Kennecott is conducting an aggressive mini-bulk
sampling program to determine diamond content within the numerous diamondiferous
showings. Drilling determined the vertical continuity of two of the larger units.
The management of Band-Ore consists of experienced professionals with numerous
years of experience in the public field with both business and technical expertise.
Management has shown its patience in holding onto the Thorne Property through the
tough gold market and now should see the benefits in the current improving price. As
well, the team saw the potential of the Wawa diamond discovery early and acted
strategically to acquire a significant land package that is now showing its potential.
Exposure to both gold
and diamond
exploration success
3. eResearchBand-Ore Resources Ltd.
3January 3, 2003
PROJECTS
Thorne Project
Band-Ore holds a 100% interest in the Thorne Property. Parts of the Thorne Property
are subject to net smelter royalties or a net profits royalty, some of which require the
payment of annual pre-production royalties and some of which the Corporation has
the right to acquire. The property is located approximately 20 km southwest of
Timmins, Ontario with good road access. The Thorne property consists of 411 claims
that cover approximately 16,000 acres.
Geology
The Thorne Property is predominately underlain by Porcupine Group metasedimentary
rocks wedged between Tisdale Group volcanics to the north and Deloro Group
ultramafic rocks to felsic rocks to the south. The Destor - Porcupine Fault Zone
(DPFZ) separates the Tisdale Group Volcanics and Porcupine Sediments from the
Deloro Group ultramafic rocks to the south. The DPFZ is a regionally extensive,
deep seated and complex fault structure that extends from east of the Ontario -
Quebec border westward through the heart of the Timmins mining camp. Just west
of Timmins, the Porcupine Destor Fault Zone is offset to the south by a series of
northwesterly trending faults, and strikes across the Thorne Property. Recent re-
interpretation of the regional geology and geophysics by the Company has indicated
the DPFZ is approximately 1 km south of its previously interpreted location, and still
within the Thorne Property. This new interpretation gives BAN significantly more
favourable geology and interesting IP anomalies on the north side of the DPFZ.
Regionally, most of the significant gold deposits have been found on the north side of
the DPFZ.
An independent mining consultant estimated an inferred resource totaling approximately
4 million tonnes grading approximately 3 g/t gold for about 400,000 contained ounces
on the Thorne Property. This resource calculation was derived from a total of thirteen
separate zones with grade ranging from 1.75 g/t to 18 g/t, all are located within an
alteration / deformation zone termed the Golden River Deformation Zone. Geologically,
the structural setting of gold mineralization on the Thorne Property is similar to the
gold deposits of the main Timmins Camp. The Company is currently conducting a
geophysical survey of the property to re-establish the old Band-Ore IP anomalies.
BAN plans a Phase I C$510,000 diamond drilling program in early 2003. Success on
this program could be followed by a Phase II C$ 775,000 drilling program.
Thorne property
contains a 400,000
ounce gold resource
Winter exploration
program to drill
untested IP anomalies
on north side of DPFZ
4. eResearch Band-Ore Resources Ltd.
4 January 3, 2003
Figure 1. Thorne Property - Drill Hole Location Plan
Source: Company reports
WawaDiamondProject
The Wawa Diamond Project covers the 39 km2
GQ Property that lies 20 km north of
Wawa,OntarioalongtheTrans-CanadaHighway. Aninitial25-km2
package was obtained
through an agreement with a private company in March 2000; the remaining 14 km2
were staked by BAN during 2001. Diamonds were first discovered on the GQ property
in January 2000. By the end of September 2001, the Company had recovered over
13,000 diamonds and identified 5 diamond-bearing areas. In October 2001 BAN entered
into agreements with Kennecott Canada Explorations Inc. whereby Kennecott can earn
a 70% interest in the GQ Property by funding all exploration on the property up to and
including a mining decision. The agreements include minimum expenditures of C$15
million over seven years and C$250,000 placements into BAN each year. The agreements
include an Option Agreement, a Joint-Venture Agreement and a Diamond Marketing
Agreement. When a production decision is made BAN would participate in expenditures
at its 30% equity level. Kennecott Canada is a member of the Rio Tinto Group of
Companies whose interests include a 60% stake in Canada's second diamond mine -
Diavik. Kennecott already spent over C$700,000 on the project and recently indicated
that it will continue into the second year of this agreement. Kennecott will present its
2003 exploration program when the partners meet in mid-January 2003.
Geology
The GQ property covers an area containing Archean age diamond-bearing volcanic
complexes occurring within supracrustal rocks of the Michipicoten Greenstone belt
of the Superior Province. The diamond-bearing rocks are metavolcanic alkaline
intrusives and extrusives that are layered within a package of mafic metavolcanic
pillow basalts and lava flows. These extrusive diamond-bearing units, referred to as
volcaniclastic heterolithic breccias (VHB), represent a different suite as compared to
the typical kimberlite pipe deposit and may be the oldest known occurrence of diamond
bearing rocks. Diamonds have been recovered from all facies of the volcanic complex
with the highest concentration of diamonds associated with the extrusives. The GQ
property covers a large portion of the known exposure of the diamond-bearing VHB
rocks in the Wawa camp.
Kennecott provides a
strong partner for the
development of the GQ
diamond property
5. eResearchBand-Ore Resources Ltd.
5January 3, 2003
Figure 2. GQ Property Location Map
Source: Company reports
BAN and Kennecott have identified three main VHB zones associated with one main
volcanic event containing several diamond bearing areas on the property. To date
over 20,000 diamonds have been recovered from grab, channel and mini bulk samples.
Most of the diamonds recovered are micro diamonds with 373 macros including a
0.254 carat broken white octahedral recovered from BAN's initial mini bulk sample
of the Engagement Zone. In the fall of 2002 a limited drilling program on the Engagement
and Rainbow Zones indicated true thickness in excess of 69 and 16 metres
respectively. The Engagement Zone VHB currently shows dimensions of 335 m strike,
69 m thickness to a depth of 220 m resulting in a minimum potential tonnage of 14
Mt. The recent results at area SE-F may extend the strike length a further 1.1 km to
the southeast. Kennecott collected three mini bulk samples weighing about 20 tonnes
each from the Engagement (2) and 14 tonnes from the SE-F area. The results of
these mini bulk samples should provide a better indication of the potential diamond
content and grade of the VHB zones on the GQ property. The exploration program
will include detailed mapping and additional sampling of the newly discovered
diamondiferous zones on the property. Results of the mini bulk sampling program
should be expected in early 2003.
Over 20,000 diamonds
already recovered from
the VBH diamond-
bearing units on the
property
6. eResearch Band-Ore Resources Ltd.
6 January 3, 2003
Figure 3. Engagement Zone Area
Source: Company reports
Corbiere Gold and Diamond Property
The Corbiere gold and diamond property is located approximately 25 km north of
Wawa, Ontario and 10 km east of the Company's GQ diamond property. An initial
sampling program conducted by BAN in 2001 collected 42 rock grab samples. This
work followed up on gold values in altered feldspar porphyry reported by Hemlo
Gold from their early 1990's work programs. The best sample collected by BAN at
this time assayed 12.58 g/t gold from pyrite-rich quartz vein material. Most other
samples collected also returned anomalous values of gold. The 2003 exploration
program for this property includes a two phased study; Phase I - mapping, sampling,
geophysical surveys and analyses for C$120,000, Phase II - 5,000 ft. drilling program
with analyses for C$180,000.
7. eResearchBand-Ore Resources Ltd.
7January 3, 2003
A land position that
could provide additional
success stories
Dambrossio Property
The Dambrossio Property covers an area of 2,304 hectares and lies approximately 15 km
north of the GQ property along the Trans-Canada Highway. The property has not yet
been examined for diamond potential using the knowledge gained on the GQ property.
The presence of the favourable VHB units in not known. The Company has outlined a
C$200,000two-phasedexplorationprogramfor2003includingrocksamplingandanalysis.
Other Properties
The Company holds title to several other exploration properties across eastern Canada
with targets that range from gold, to PGE's and to diamonds. Two of the more
significant, although currently dormant, properties are described below.
Nym Lake
The Nym Lake property is located approximately 15 km southeast of Atikokan in
northwestern Ontario within the Shebandowan Greenstone Belt. The property covers an
airborne magnetic anomaly that is coincident with mineralized pyroxenitic and gabbroic
intrusives. Several grab samples were taken from the mineralized unit and returned values
of up to 3 g/t combined PGE's, 0.45 % copper, 0.08% nickel and 2.9 g/t silver. Three
holes have been drilled on the property with two holes intersecting zones with anomalous
values of PGE's. The Company is not planning work on this property in 2003.
Shebandowan
The property is located four km west of Shebandowan and 90 km west of Thunder
Bay, Ontario. The property holds a gold target with little exploration work conducted
thus far. The Company does not plan any work on this property in 2003.
DIRECTORS AND MANAGEMENT
Wayne J. O'Connor, President & C.E.O. and Director
· Director of the Company since 1991, responsible for the Company's business
and financing operations
· Mining executive for the past 13 years
Robert L. Duess, Vice President and Director
· Director of the Company since 1993, responsible for exploration programs
· Geologist with over 15 years of experience in gold and base metal exploration
James N. Fairbairn, Chief Financial Officer
· Director of the Company since 1991. A director and/or Officer of several other
natural resource public companies includingAusnoram Holdings, Dumont Nickel,
GLR Resources, CGX Energy and Black Pearl Minerals.
· Chartered accountant
Peter Crossgrove, Director
· Director of the Company since 1996. A director of Barrick Gold, Dundee Realty
and Chairman of Masonite International Corporation.
· Mining executive for the past 20 plus years
8. eResearch Band-Ore Resources Ltd.
8 January 3, 2003
Management that has
shown patience,
prudence and strategic
thinking
David Diltz, Director
· Director of the Company since 1993
· Financial consultant with over 10 years of experience with publicly traded
companies.
Thor Eaton, Director
· Director of the Company since 1996
· Business executive with over 20 years of experience with publicly traded
companies.
Roy Lacey, Director
· Director of the Company since 1980 and past president. President of Bandolac
Mining Company.
· Mining executive with over 30 years of experience with publicly traded companies.
George Rayfield, Director
· Director of the Company since 1981. Director and Treasurer of Bandolac Mining
Company.
· Real estate broker with over 20 years of experience with publicly traded companies.
FINANCIAL FORECAST AND VALUATION
The Company has 29.9 million shares issued and 34 million fully diluted. Management
and officers of the Company control over 25% of the outstanding stock. The
Company recently completed a C$497,000 financing and has filed for a second that
could provide C$500,800. Should this second financing be fully subscribed the
Company would have sufficient funds to meet its C$1 million in exploration programs
planned for 2003. In addition, Kennecott is expected to make its second C$250,000
payment in early January 2003, increasing the treasury to about C$500,000, funds
the Company can use at its discretion. In the money options and warrants if exercised
could also provide BAN with C$822,850 for additional exploration or strategic
investments. The administrative burn rate is estimated at C$20,000 per month at
the current level of activity. The Company has sufficient financial resources to
conduct its daily operations in 2003.
The Company has a 400,000 ounce inferred resource at the Thorne project. Resources
in the ground are currently being valued between US$10 to US$30 per ounce at
projects at a similar stage of development. If BAN was given value at an average of
US$20 per resource ounce it would represent a potential market value of close to
C$13.2 million. Every US$5/oz improvement in the gold price could translate to an
addition C$3 million value for the Thorne resources. At the current share price of
C$0.53 the implied market capitalization is C$14.7 million. This implies the market is
giving a limited value to Company's interest in the Wawa diamond project. The market
value of several comparable diamond exploration companies ranges from C$6 to
C$42 million. BAN has discovered diamonds and their source rock and has a very
strong partner in Kennecott; this should put it at least mid-way in this range.
We are valuing the stock at the potential implied value based on the Company's projects
due to the improving gold market that should increase in situ resource valuations and
the success at its diamond exploration project. We rate the common stock of the
Company as a Speculative Buy with a 12-month target of C$1.05 per share.
BAN is well financed for
exploration and
operations in 2003
Improving gold price
could translate into a
higher market value for
the Company's
resources
Positive results from
the diamond sampling
and exploration
program could improve
the stock price
9. eResearchBand-Ore Resources Ltd.
9January 3, 2003
CONCLUSION
Band-Ore Resources provides exposure to the current rising gold price through its
400,000-ounce resource and the exploration potential on its Thorne property in the
Timmins gold camp. Winter exploration on the Thorne property should provide
encouraging results that could draw market attention. BAN also has a developing diamond
exploration and development project north of Wawa that is generating exemplary results
with over 20,000 diamonds recovered thus far. The Company's partner Kennecott is
conducting an extensive exploration and mini bulk sampling over the winter that could
provide encouraging news and an initial indication of the grade of these diamond-bearing
units. We see an investment in BAN as a good way to play the rising gold market
coupled with an impressive and developing diamond potential. We rate the shares of
Band-Ore Resources a Speculative Buy for risk tolerant investors.
A good play on the
improving gold price
coupled with potential
diamond exploration
success
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eResearch Recommendation System
Buy: Expected total return within the next 12 months is at least 20%
Speculative Buy: Expected total return within the next 12 months is at least 40%. Risk is High (see
below)
Hold: Expected total return within the next 12 months is between 20% and the T-Bill rate
Sell: Expected total return within the next 12 months is less than the T-Bill rate
eResearch Risk Rating System
A company may have some but not necessarily all of the following characteristics of a specific risk
rating to qualify for that rating:
High Risk: Financial - Little or no revenue and earnings, limited financial history, weak bal-
ance sheet, negative free cash flows, poor working capital solvency, no dividends.
Operational - Weak competitive market position, high cost structure, industry con-
solidating, business model/technology unproven or out-of-date.
Medium Risk: Financial - Several years of revenue and positive earnings, balance sheet in line
with industry average, positive free cash flow, adequate working capital solvency,
may or may not pay a dividend.
Operational - Competitive market position and cost structure, industry stable,
business model/technology is well established and consistent with current state
of industry
Low Risk: Financial - Strong revenue growth and earnings over several years, stronger than
average balance sheet, strong positive free cash flows, above average working capi-
tal solvency, company may pay (and stock may yield) substantial dividends or com-
pany may actively buy back stock.
Operational - Dominant player in its market, below average cost structure, com-
pany may be a consolidator, company may have a leading market/technology posi-
tion.
