Tag Archives: Springpole

NEWS: Gold Canyon Corporate Update and New Investor Relations Agreement

Mar 11, 2015

Gold Canyon Resources Inc. (TSX VENTURE:GCU)(OTC PINK:GDCRF) (“Gold Canyon” or the “Company“) is pleased to provide an update of the Company’s activities. On February 5, 2015, Gold Canyon completed a private placement raising gross proceeds of $1,306,850. Given the Company’s conservative use of cash, the current working capital allows Gold Canyon to continue to collect environmental baseline data vital for future permitting of its 100% controlled Springpole Gold Project as well as support corporate and project overhead into next year.

On November 5, 2014, the Company announced completion of three years of aquatic habitat surveys at the Springpole Gold Project. These surveys have uncovered no prohibitive issues. In 2015, the Company plans to continue to collect additional data on aquatic habitat and water quality and chemistry to augment its already robust dataset while at the same time identifying opportunities in the region around Springpole to create and/or improve aquatic habitat to offset habitat displaced by any potential future mine plan. Once all opportunities have been identified, they will be reviewed and assessed during further discussions with the Department of Fisheries and Oceans Canada (DFO). Some potential offset initiatives may be suitable for working with local First Nations communities, an opportunity Gold Canyon seeks to pursue. Gold Canyon is now at the stage where it can begin work on aspects of the project needed to develop a mine environmental assessment (EA).

“We continued to reduce overhead costs over the latter part of 2014,” commented Akiko Levinson, President, CEO and director of Gold Canyon. “Although the downturn in the mining sector has been sharp, we have the means to keep weathering this storm and be able to look at various options we may have to move forward.”

Springpole Gold Project

In a news release dated March 25, 2013, Gold Canyon announced a Preliminary Economic Assessment (PEA) prepared by SRK Consulting (Canada) Inc. of Vancouver, British Columbia for the project. This PEA provides preliminary support for a potential conventional open-pit mining and milling operation. At a 5% discount rate and a US$1,300/oz gold price, the project, has an estimated pre-tax net present value (NPV) of US$579 million, a pre-tax internal rate of return (IRR) of 25.4%, and a non-discounted payback of just 1.7 years. Other highlights of the project include:

  • At full operation, an estimated 217,000 ozs and 1,200,000 ozs average annual gold and silver production, respectively
  • Estimated cash cost of US$636/equivalent ounce gold (eq.oz Au) and all-in cost of US$860/eq.oz Au (eq.oz Au = total revenue/Au price)
  • Strip ratio of 1.7
  • Average mined gold grade of 1.25 gpt and silver, 6.31 gpt (undiluted)
  • Initial capital cost of US$438 million and total capital cost including sustaining of US$544 million
  • Payback period of 1.7 years (non-discounted)
  • Pre-tax NPV of US$579 million
  • IRR (pre-tax) of 25.4%
  • Life of mine of 11 years

The PEA is intended to provide an initial review of the Company’s Springpole Gold Project’s potential and is preliminary in nature. The PEA includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA based on these mineral resources will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. The quantity and grade of reported inferred resources in any estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category.

The PEA is effective as at March 25, 2013 and dated May 3, 2013, and is available through the Internet under the Company’s profile on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and on the Company’s website at www.goldcanyon.ca. The PEA is based on the project’s most recent National Instrument 43-101 (“NI 43-101”) compliant mineral resource estimate that includes an Indicated Mineral Resource of 128.2 million tonnes grading 1.07 g/t gold and 5.7 g/t silver and an Inferred Mineral Resource of 25.7 million tonnes grading 0.83 g/t gold and 3.2 g/t silver at a cutoff grade of 0.4 g/t gold. This estimate is set out in an independent technical report, entitled “Mineral Resource Update for the Springpole Project, NW Ontario, Canada” (the “Technical Report”), dated November 30, 2012 with an effective date of September 19, 2012, which was prepared for Gold Canyon by Dr. Gilles Arseneau (P.Geo.), associate consultant with SRK Consulting (Canada) Inc., an independent Qualified Person as defined by NI 43-101. The Technical Report is also on SEDAR at www.sedar.com and on the Company’s website.

Investor Relations Agreement

Gold Canyon is also pleased to announce that it has retained the services of Renmark Financial Communications Inc. to handle its investor relations activities. In consideration of the services to be provided, the Company has agreed to pay a monthly retainer of $5,500 starting March 6th, 2015.

Renmark Financial Communications Inc. does not have any interest, directly or indirectly, in Gold Canyon or its securities, or any right or intent to acquire such an interest.

Qualified Person

The PEA was completed by SRK Consulting (Canada) Inc. of Vancouver, British Columbia, pursuant to NI 43-101. The PEA was completed by, or under the supervision of Bruce Murphy, Maritz Rykaart, Mark Liskowich, Dino Pilotto and Adrian Dance, each independent Qualified Persons (as defined in NI 43-101). Adrian Dance, a Qualified Person pursuant to NI 43-101, reviewed and approved the technical and scientific information relating to the PEA contained in this press release. Dr. Quinton Hennigh, Ph.D., P.Geo., a Qualified Person pursuant to NI 43-101 who is acting as a technical adviser to, and a director of, Gold Canyon, is also responsible for approving the technical information in this news release that is not related to the PEA.

Full release

Gold Canyon is Heating up – Institutional Buying is Evident

Gecko Research, Mar 6, 2015

As we dig deeper in our due diligence on Gold Canyon (gcu.v) and tell the story from our perspective, it’s evident to us that one or several institutional buyers have been (and still are) buying shares in the open market. In this article we will try to shed some light to that thesis and what they might find so attractive that the retail investors have missed.

Institutional Buying

We have been following the day-to-day trading of GCU very intensely for a while now and when we were buying shares around 16.5-17 cents, we noticed that someone was iceberging (see below) their order at 16.5 cents. This is a typical strategy for deep pocket institutional buyers and we think they weren’t very successful at that level. They probably picked up 400,000-500,000 shares before GCU started to move higher.

We are simplifying a bit here, but close to 70% of the company’s outstanding shares has traded in the last three months and although some of those shares are traded several times, a large huge chunk of that was Sprott and Pinetree dumping (as we explained here) their holdings. We are making a guess here that someone has been accumulating between 20-40 million shares at the very least in Gold Canyon lately and what we can say with a 100% certainty, those shares have not been bought by retail investors. Someone is still out there buying and the only conclusion we can make from that is that institutional buying is strong in GCU at the moment.

Life Cycle of a Junior Explorer

Placing Gold Canyon in the graph below, it’s our opinion that Gold Canyon is past the “discovery cycle” and has already bottomed out in time for its next cycle. We have seen the speculators leave (Sprott, Pinetree and very likely many retail investors) and now it seems like institutional money is moving in. Our whole thesis for our investment is that GCU is ripe for a take-over, so we see someone else moving the Springpole Gold Project forward with the next step being to take the Springpole Gold Mine to a full feasibility study.

JrLifeCycle
Let’s assume that we are right and that one or several institutions (take your pick: funds, large-cap producers, Chinese interests) are trying to acquire a strategic position in GCU, what attracts them besides what’s already known? Sure, the 5.1 Million ounce open pittable deposit in a great jurisdiction is the obvious reason. But as we have touched on before, we suspect that the potential at Springpole is greatly understated and perhaps even misunderstood.

We have had a friend of ours, a geologist who we consult when we ourselves lack in knowledge and understanding of the technical aspects, go through all the technical reports and other available information. If you look at the map of Springpole below, all the drilling that has been done is in a small corner of the property, to the north-west. It’s clear that most of the project has never been drilled and if what our geologist told us is correct, Springpole could very likely become a >10 Million ounce gold mine. The deposit is open at depth, to the south and to the southeast.

springpole

The Springpole Gold Mine put in perspective

Springpole’s resources are 5.1 Million ounces eq. (4.4 Moz Indicated, 0.7 Moz Inferred). When one prepares a bankable feasibility study one has to do infill drilling to prove up the resources into reserves, so in that sense this comparison is not 100% accurate, but it will still get you an idea of just how undervalued Gold Canyon is. Two other large Canadian projects:

1) Goldcorp has one of their flagship properties in the Red Lake district, the Red Lake Mine, which produced 414,000 ounces in 2014. That mine has 2,550,000 ounces in Proven and Probable reserves.

2) Goldcorp recently acquired Probe Mines (valuing Probe at the time at C$526 Million) mainly for its Borden Gold Project. Borden has both higher grade underground resources as well as (perhaps?) open pittable resources, together totaling 4.35 Moz mostly in the Indicated category (similar to Gold Canyon’s resources).

Even if Springpole doesn’t contain a single ounce more of what’s been discovered so far, the current resource alone makes this a world class mine in the making. The metallurgy is non-complicated, the strip ratio is very low and the project is in a country that is considered one of the best in the world.

To be fair, Gold Canyon need to bring the Springpole Gold Mine further ahead in order for a comparison to Probe to feel accurate, but how much should 5.1 Million ounces be valued at in a take-over? C$100 Million? C$200 Million? And assuming we are right, how much should the potential to double the resource be worth on top of that?

Gold Canyon’s market cap is a mere ~34 Mcad at today’s 18.5 cents/share (184m shares x 18.5c) and we don’t want to speculate where a fair bid would come in at, but it sure isn’t going to be near where the stock is trading today. A shareholder’s dream scenario would be if more than one party eventually gets seriously interested, only then would we get a maximized and fair bid for Gold Canyon.

(Iceberging: When large participants, such as financial institutions, need to buy and sell large amounts. Instead of placing a single large order, it can be divided into smaller lots. Usually through automated order mechanisms, iceberg orders are used for the purpose of hiding the actual order size. By doing so, other participants only see a small portion of the total order at a time, the same way the “tip of the iceberg” is the only visible portion of an immense mass of ice)

 

Team Gecko Research
www.geckoresearch.com

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Ripe for a Take-over – Gold Canyon Resources

Gold Canyon Resources (gcu.v)

* Shares out: ~184m
* Share price: C$ 0.17
* Mcap: C$ 31 Million
* Cash position: Between C$ 1.5-2 Million
* Website: www.goldcanyon.ca
* Latest Presentation (pdf)
* Springpole Gold Project – Useful Facts & Links

gcu_banner

First off, let us quote ourselves from an earlier newsletter:
“We would like to find a “special circumstance” in the company for it to stand out in comparison to the rest. We are mostly focused on identifying small junior companies as we think they will be subjects to a coming wave of M&A activity during this year. For a large producer, there are plenty of companies/projects out there to gobble up on the cheap.”

In Gold Canyon, we think we have identified more than one special circumstance to motivate us to buy a position. Not only that, we have also made this holding larger than the other holdings we have in our “High risk – High reward, a portfolio within the portfolio” (link).

Before we start talking about Gold Canyon’s core asset which makes this an obvious take-over target, here’s the first “special circumstance”. Two funds, Pinetree and Sprott (no secret here, everybody knows), have since December been forced to liquidate holdings and Gold Canyon was severely hit by this and we see that as a clear over-reaction. This would be our first special circumstance.

When the stock was trading at 11 cents, we were buyers at 10c and unfortunately we didn’t get any shares down there. But we like this stock even at today’s price (16.5-17c) and it’s at these levels we have built a position for ourselves. It was quite obvious that a bounce would come when the large selling was over with and we suspect that GCU at today’s levels is just “breathing a bit” before the next run up.

We don’t prefer to value a company for their ounces in the ground, but when something gets too cheap, it’s easy to point out. Gold Canyon has 4.4 Million ounces in Indicated resources and another 0.7 Moz in Inferred. With today’s Mcap of ~31 Mcad, 5.1 Million ounces in the ground are valued at US$5/oz. In our mind, that’s too cheap and we consider this to be our second special circumstance.

The Springpole Gold Project
Before we invested in Gold Canyon, we consulted one of the geologists in our network and had him look over the Springpole Gold Project, we got very good feedback. The deposit is an open pit, bulk tonnage with good grades at surface (~2gpt) and simple metallurgy. It’s located in Northwest Ontario, Canada, around 70 miles from the Town of Red Lake.

Since the Preliminary Economic Assessment (PEA) was done in 2013 a lot has changed in terms of costs for the mining industry. Not only has material and machinery become cheaper, the same is also true for labor and energy. So even at $1,200 gold (the PEA was done @ $1,300) we think there’s reason to believe that the economics are even better today despite a lower gold price. This has strengthen our view that this is a very robust project and we would go as far as saying that this is exactly what a large mid-tier or even a major is looking for.

To paraphrase Mr. Hennigh from the interview (see below) we did on Tuesday, “There’s a strong likelihood that both the capex and the operating cash cost would come down significantly and it would make an even stronger case today despite the lower gold price”. One should keep in mind that the $438 Million capex for a 20,000 tpd operation is not shabby in the first place. If that number is lower today, as many indications suggests, it’s easy to see why this project is ripe to be taken over. According to the PEA, cash cost was estimated to be US$636/equivalent ounce gold (eq.oz Au) with all-in cost of US$860/eq.oz Au.

What is even more favorable now compared to when the PEA was published, is the relation between USD/CAD. The Canadian dollar has come down a good 20% against the US dollar which will do wonders for the cash cost. Put in a different way, gold is trading at $1,500 Canadian today.

With what has been drilled to date and what we know today, the Springpole project is in our view of very high quality but interestingly enough, the majority part of the mineralization is still untouched as only a small north-western section of the project has ever been drilled (and still Gold Canyon has shown >5 Million ounces). The rest of the project offers significant opportunities to expand the currently known resources and to discover new areas of mineralization. In terms of exploration upside and resource growth, we assume the potential is definitely there to actually double the size of the deposit.

Risks
There is always risk involved, as with all investments. The companies we chose to invest in and write about should be considered nothing but high risk. The biggest risk we see in the near term (0-9 months, we don’t intend to hold it any longer than that) is Gold Canyon’s financial situation. The company has enough money to muddle along, perhaps even through the fall, but the low cash position is to us the largest risk with this investment. GCU doesn’t have the kind of cash to aggressively take the Springpole project forward and there are also no guarantees that they will be able to raise more cash when needed.

Gecko Podcast interviewing Mr. Quinton Hennigh
On Tuesday of this week, we talked to Quinton Hennigh, technical advisor and a Director on the Gold Canyon Board. Quinton has a background as an exploration geologist with Newmont Mining Corp., Newcrest Mining, and Homestake Mining.

In the interview we learned some of the history of Gold Canyon. Did you know that the company is one of the oldest listed companies on the Venture exchange with over 30 years of listing? We didn’t. Another interesting detail is the fact that Gold Canyon has never done a share rollback, the share structure as we see today is the original one since day one.

Listen to the interview by visiting our podcast section

Conclusion
We’ll make this short. Gold Canyon is all about risk vs. reward. The special circumstances mentioned above makes it very clear why we see a lot of value and upside at 17 cents with very limited downside. As we have stated before, we feel strongly that 2015 is the year when large producers and well financed companies should go out and acquire high quality projects. Gold Canyon has a very high quality project and if our assumptions/guesses are anywhere near the truth, GCU’s flagship property could be a world class mine in the making.

There aren’t many 5-10 Million ounce gold projects located in one of the best and safest jurisdictions in the world. And of the ones that actually exist, how many are up for grabs?

 

Team Gecko Research
www.geckoresearch.com

If you like our work, feel free to share this link with your friends for our free newsletter: www.geckoresearch.com/signup

We are not investment advisors and what we write is our own view only. Please read our disclaimer

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