This adds a comment from Gold Terra Resource's Gerald Panneton. His was one of many from CEOs, geos and executives about their explorers' (and producers') miserable gold-in-the-ground valuations.*
Note: I will be in Tonopah, Nevada viewing West Vault Mining's WVM WVMDF Hasbrouck gold deposit (third time) and Summa Silver's SSVR SSVRF Hughes Project (second time).
TCRs, updates from two miners I have owned for more than 10 years and one I am just getting my head around. I’ll let the CEOs do most of the context.
[Please feel free to comment on the investing dynamic that makes gold-in-the-ground priced as low as single-digits per ounce.]
Val-d’Or Mining‘s Glenn Mullan just announced a $34.5 million optioning arrangement with much larger Eldorado Gold in NE Ontario’s Abitibi Greenstone Belt.
Val-d’Or Mining is known mostly for Glenn Mullan’s lifetime of prospecting and royalty generating in neighboring NW Québec. That is where properties/concessions and royalty contracts in his Abitibi Royalties and Golden Valley Mines became part of Gold Royalty GROY via a share-for share purchase.
Val-d’Or Mining Concessions
Val-D’Or Mining’s fresh transaction lets Eldorado Gold EGO earn as much as an 80% interest in Baden, Plumber, Island 27 and Matachewan Prospects in the area of Matachewan, NE Ontario. VZZ VDOMF shares are seeing their daily trading for the $9 million USD company triple and quadruple average volumes.
Glenn: “Eldorado Gold has had great success at the Lamaque Mine in Val-D’Or, Quebec, since its acquisition from Integra Gold in 2017. That said, Val-D’Or is a hard mining camp to expand within, given both the presence of Agnico Eagle Mines and several well-funded juniors, including Osisko Mining, O3 Mining, Probe Metals, etc. “
He says VZZ’s pitch was simply “same rocks, but across the Quebec-Ontario border.”
As the CEO of a company Glenn chairs, Jean-Marc-Lulin at Québec’s Azimut Exploration, often says, and Glenn echoes: ROCKS ARE AGNOSTIC, and mineralized ore knows no borders.
“The prolific Destor-Porcupine and Larder-Cadillac Fault Zones, Blake River Group calc-alkaline volcanics, etc. are also all present in Ontario. The opportunity in Ontario is vast and geologically comparable to Quebec. Production statistics over more than one hundred years in the Abitibi Greenstone Belt are also comparable.”
Background: Val-D’Or Mining through predecessor Golden Valley Mines, since 1999, and privately, as independent prospectors before that, has a land assemblage in the Kirkland Lake and Matachewan areas of NE Ontario.
“Having a partner like Eldorado Gold, with exploration commitments totaling over $34,000,000 through vesting, is both a significant achievement for VZZ, and an endorsement of Ontario’s exploration and geological potential. We look forward to working closely with all stakeholder,s including First Nation Matachewan, and the local communities near Kirkland Lake, Matachewan and region.”
Val;-d’Or Mining is “exploration operator” on the 9 properties in Ontario, including the 4 in the new agreement; Eldorado is operator of the 2 properties in Québec — a group of 8 that were originally GZZ’s and a group of 4 claims that were VZZ’. As operator, VZZ could get as much as 10% of the total $34.5 million, which Glenn says is a maximum number not likely to be reached.
Still, “the operator fees, together with the annual option payments beginning next year, will help avoid dilution to share capital.”
Xtra-Gold Resources‘ James Longshore, CEO and country manager, is on site at Kibi concessions in Ghana this week. See images here.
XTG’s income from alluvial gold sales each year nets approx. $2 million USD, sometimes more. The treasury is about $11 million, and the share count is tiny. The cash goes to salaries, expenses, equipment purchases (3 owned drill rigs) and share buyback/cancellations.
XTRA-GOLD team , including VP of Exploration Yves Clement at right, this weekend drilling Kibi Hole 523
The approx. 804,000 compliant gold ounces at the Kibi concession in all categories look reasonable at current, largely miserable ounce-in-grond valuations for tiny explorers.
Xtra-Gold’s 2021 compliant resource came in at 804,400 ounces; divide that into US$16,740,000 thus giving a value of USD $20.81 an ounce in the ground.
Most juniors these days are fortunate to get above $25 for an ounce in the ground.
[Please see another calculation below, using compliant and possibly additional yet non-compliant and speculative ounces.]
I was at the Kibi properties one year ago this week.
Xtra-Gold holds 5 Mining leases across 22,600 hectares of the Kibi Gold Belt.
James Longshore: “Just did my site visit of exploration drilling and I am very happy with our progress since the start of the year. The progress is as follows:
— “To date, we have drilled 22 exploration holes in Zone 3’s mineral resource “footprint” to target new potential gold shoots in the open ground we have never drilled before. In this open ground, if we can find a few more economic gold shoots, this could significantly increase the tonnage resource. All 3 rigs are drilling Zone 3, and we have early indications of hitting some new gold shoots. However, the grades in general are below 0.5 grams per metric ton over some wide intercepts of approximately 50 meters of mineralized material. We might just be on the side of 2 potential new gold shoots, and need more drilling and grades to determine if these are going to be economic. If these turn out to be economic, then we would do infill drilling and we would have lots of assays to release again (see image).
— Update on our internal resource modeling on Leapfrog GEO software: Zone 3 resource sits at approximately 350,000 oz, with only 50 meter spacings on drilling. (This is not NI 43-101 compliant; it is internal modeling by Xtra-Gold geologists only). We will put in a minimum of 3 drill holes at 25 meter spacings for now to see if we can get a grade increase. One drill hole has been completed to date and the grade went from 1.35 grams per ton to 1.76 grams.”
Jim adds, “This could be great news if the other 2 holes have similar grade increases.” If the new ounces become compliant, the total could reach 1.15 million ounces. That is speculation. “Once we finish the drilling of Zone 3, then I would recommend we update the NI 43-101 to show our progress. “
Xtra-Gold’s $11 million USD comprises cash, liquid securities and bullion. That is 24 cents per share of the 61-cent USD a share gets right now.
As for ounce-in ground calcs, the compliant 804,400 ounces across Kibi concessions, divided into USD $16,740,000 and giving a value of USD $20.81 in the ground.
Another way of looking at gold-ounce-in-the-ground price, subtracting cash from the market cap and raising the ounces in internal, entirely speculative calculations that are not compliant with 43-101 National Instrument requirements:
— USD $11 million cash and liquid assets;
— $11 million divided by 46,500,000 equates to approx $0.24 a share;
— $0.24 subtract from trading value of USD stock market price of $0.60 leaves value of USD $0.36 applied to the resource for total value of $16.74 million;
— divide that by 1,150,000 million total internal estimate (compliant and non-compliant) ounces, which equates to $14.55 per oz in the ground.
I am not endorsing that figure, just sharing what some banking analysts and geologists seeking “upside valuations” do with their back-of-envelope calculations.
As indicated over the years, I own shares in both of these companies.
* Gerald Panneton, CEO of Gold Terra Resource YGT YGTFF in NWT, Canada: Yellowknife City, Con Mine and Mulligan projects.
“If you buy Gold Terra, it is currently trading at $8-$10 USD per ounce. So don’t tell me this is not a bargain, he says. “All the reasons (for the hesitation of individual investors) … are hurting the gold explorer- developer group terribly. Hope it will change.”
TCRs, please send your comments as investors and regarding the reasoning above. Thank you.
Thom Calandra is a writer and an investor. Research and material are meant as editorial opinion. He is not a professional investment adviser. Please do not consider his reporting as a recommendation to buy or sell securities.
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