Readers of this blog may remember that I last talked about Gold Bullion Development Corp. (GBB) in my '2010 end of the year post' (http://www.stockhouse.com/Blogs/ViewDetailedPost.aspx?p=111504). In short, the geology of their land package is compelling enough that I have built up a full position in this stock even though their execution has left much to be desired. However, with disappointing execution comes share price declines and - in the right situations - a great opportunity.
GBB is a gold exploration junior on the Cadillac Trend in Quebec. Their flagship property is a former mine site called Granada which itself produced around 50 000 ounces mostly concentrated in several quartz vein structures. To my knowledge, no large-scale commercial production has occurred since.
Since this time the area has undergone a serious revision in the geological hypothesis. While the quartz vein stock systems still contain gold, the mineralization is now thought to be much more disseminated and closer to the surface thus more amenable to bulk mining. One such bulk mining sample was sent for assay and allowed management to estimate a non-43-101 'resource' (emphasis on 'non') of around 2.4 million ounces of gold. More recent drilling has suggested a six-fold increase in the mineralized area. The big question is... does this equate to 6X more gold?
Only time - and the drill bits - will tell.
However, the share price has slowly drifted down and has been as low as $.13. Why the disconnect? I suspect that investors who might have been originally enamoured by the non-43-101 estimate have been getting progressively impatient with the lack of the real thing. Originally, GBB had hired Genivar to prepare the report. While they appear to have done good work, there were not enough people 'on the ground' so to speak and progress was slow. As a result GBB has now hired SGS and are planning for a resource estimate by the end of the first quarter. (As an aside, one would hope it's done by the time PDAC is on!)
A few points in GBB's favour...
-The deposit has been compared to Osisko in terms of the geology... personally I think that this is a little over-quoted but not incorrect. Both companies are on the same trend and some of the geological descriptions are similar.
-Even a resource estimate in the range of 2M ounces is enough to interest investors. 2M, for example, is still forty years of 50000 oz/year (assuming it can be produced at such a rate).
-Execution delays do not change what's in the ground.
-The share structure is still relatively compact and just under 200M which is usually my threshold for juniors. Above this amount and I tend to stay away.
-A recent PP has given the company around $3-4 million which is enough to take them through to the second resource estimate (if my estimates are correct).
-SGS has a very good reputation. If they say an estimate will be done by the end of Q1... I trust them. Hopefully this means that our prior delays are a thing of the past.
The risks here are pretty standard...
-the RE gets delayed
-the RE isn't what the market was expecting... (I would suggest anything under that original 2.4M oz. mark will disappoint)
-the original bulk sample is not representative
-the company has more delays and has trouble financing
Check out the website at http://goldbulliondevelopmentcorp.com
Anyhow... I think I've said enough so good luck and happy hunting.
A.
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Closing and Disclosure
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Do your own DD from reliable third party sources. Don't trust my words as if they were Gospel... while I like to think I am an honest Cephalopod, I am not a fiduciary (relative to you the dear reader) and thus you should not act solely on my advice. Take anything I say 'with a grain of salt' as it may contain factual inaccuracies or misinterpretations... I try to be accurate but can make the odd mistake.