This article is the third and last in a series about Douglas Lake Minerals and its Mbwemkuru property in Tanzania. The first article (click here), by Toby Hansen, introduced the company and the property and concluded that Mbwemkuru may be the largest alluvial gold project in the world with a wild guesstimate of perhaps 5 million oz of very-low operating cost, very-low capital gold. The valuation estimate based on 1 million oz of gold indicates an easy ten-bagger. The second article (click here) points out that all of the world's historic gold rushes (including the California, Klondike and South Africa gold rushes) began with alluvial deposits with very fast production of low cost gold followed by larger, even more prolific hard-rock mining of the source of the alluvial gold. So it seems that Douglas Lake Minerals may have something pretty exciting on its hands.

This third article compares Douglas to the most recent "to the moon" gold exploration company, Kodiak Exploration (KXL.V), which had a major find in Canada that was announced last fall.

The graph that follows compares the rises of each of the two exploration companies from their stock price low immediately preceeding the excitement. The X-Axis gives the number of trading days relative to that stock price low. The Y-Axis gives the relative stock price to that stock price low. For example, a four on the Y axis indicates that you would have a "four-bagger" (or the price would have quadrupled) on that date if you had been fortunate enough to buy on the low.

The first observation to make is that the trajectories of Kodiak Exploration and Douglas seem to be similar. We'll see in a few moments that Douglas is skyrocketing even faster than Kodiak given where it is in terms of news announcements and actual exploration results.

The second observation is obvious: unless you are already in, you did not get in at the bottom. Douglas Lake is almost an eight-bagger in less than two months. So, one needs to be careful with this one. Is there good reason to think it can continue to rise? The comparison to Kodiak may shed light on this question.

A brief history of the news announcements surrounding Kodiak's launch is as follows:

(1) 9/17/2007 - Kodiak announces expanded drilling and a purchase of more land at its Hercules project. You could say this is a hint that something good was found on the property, but the stock price does not noticeably react.

(2) 9/27/2007 - Kodiak purchases more property (after management awards itself stock options a few days earlier). In retrospect, something is happening, but the stock price does not react.

(3) 10/1/2007 - Stock price hops as Kodiak announces outstanding drill results of over one oz gold / tonne at the surface with 11 meters thickness. The grade is very good, but the combination of the high-grade and 11 meter thickness is truly outstanding.

(4) 10/22/2007 - Stock price jumps as Kodiak announces yet more outstanding drill results.

(5) 10/30/2007 - Stock price hits all time high shortly after Kodiak announces the finding of more ore-bearing veins.

(6) 11/6/2007 - The party is over as Kodiak announces a private placement. It seems that when the insiders sell part of the company that means the top is in.

Now let's look at the Douglas Lake timeline and see how it compares:

(1) May 8, 2008, A conference call with gold expert Bob Moriarty is announced (but does not take place) to discuss Douglas Lake's new alluvial property (even before a press release about the property is made). The stock price jumps.

(2) May 9, 2008, A press release announcing Douglas Lake has gotten the mineral rights for a large alluvial property is published. The stock price has already jumped. The very compelling Bob Moriarty conference call (including a back of the envelope estimate of 5 million oz) takes place this day.

(3) June 2, 2008, The Chinese invest in Douglas Lake and get 20% for 6 million dollars (valuing the company at 30 million dollars). The stock price jumps as this is seen as an indication that the alluvial deposit is for real.

(4) June 11, 2008, Douglas Lake announces first quantitative exploration results for the alluvial project. Out of six "random" samples an average of 95 grams gold / tonne are announced. These are stunningly good results.

So, Douglas Lake, right now (at step (4)) has made its first quantitative exploration results. That puts it at the same point in exploration development as Kodiak was with its first quantitative results (at step 3). Its hard to know where Douglas Lake will go from here, but Kodiak had more than a triple to go from when its first quantitative results were announced.

One big difference between Douglas Lake and Kodiak is the level of press coverage. I don't ordinarily pay attention to explorers but I couldn't miss hearing about Kodiak on the various mining web sites and message boards. I haven't seen anything like this for Douglas Lake. This lack of press coverage is one of the reasons I think Douglas Lake may still have a ways to run.

Learning from the Kodiak experience, I'm currently planning on holding onto my position until either a private placement with someone other than the Chinese (or the Tanzanian government or Tanzanian influential individuals) takes place or until disappointing exploration results are announced. The Kodiak experience indicates that there is plenty of upside that an explorer like Douglas Lake can experience if it continues to produce good exploration results. The fact that Douglas Lake's alluvial deposit can be brought into production without further financing leaves it in a position where it could go much, much farther without any dilution.

This will be my last post on Douglas Lake for a while, I think. The stock is so illiquid that, as with other juniors, you cannot expect me to preannounce my exit. For me this kind of exploration stock is something I intend to trade and hope to exit around the time of maximum excitement. We all have to take responsibility for our own trading.

Leave a comment and let me know what you think.

Monty High

DISCLOSURE: The author owns Douglas Lake stock and stands to benefit from a stock price advance. Douglas Lake is obviously a quite risky Jr exploration mining company and everyone must do their own due diligence and bear the responsibility of their investing decisions.