RE: text
Gold Canyon know no reasons for low price, high volumes
Gold Canyon Resources Inc (C:GCU)
Shares Issued 135,625,018
Last Close 2/5/2013 $0.69
Wednesday February 06 2013 - News Release
Mr. Troy Fierro reports
GOLD CANYON COMMENTS ON RECENT SHARE PRICE AND TRADING VOLUME CONCERNS
In response to enquiries, Gold Canyon Resources Inc. has commented on the company's recent share price weakness and higher-than-normal trading volume, which over the past several months have raised concerns among its investors. Volatile stock market conditions, particularly for junior mining issuers, and continued concern for the global economy have no doubt contributed to the decline. However, Gold Canyon management is unaware of any specific reason, other than these continuing general market conditions and market trading influences unrelated to Gold Canyon's business discussed below, for the recent weakness in Gold Canyon's common share price as there have been no particular events or material changes in the affairs of the Company to support the decline.
In fact, the Company continues to move forward with its flagship property, the Springpole Gold Project in northwest Ontario, Canada, as well as develop its rare earth interests in Malawi, Africa pursuant to the existing REE Joint Exploration Agreement with the Japan Oil, Gas and Metals National Corporation (JOGMEC). Gold Canyon has cash reserves of more than (Cdn)$10 million, considered to be sufficient to fund current operations through the short to medium term without the immediate need to raise more capital. In the circumstances, management believes that Gold Canyon's current share price significantly undervalues the Company, and with the support of Gold Canyon's board of directors, is currently examining various initiatives and strategic options to remedy this situation.
Management has recently engaged in significant consultation with Gold Canyon shareholders, investment brokers, analysts, institutional traders and investment bankers regarding potential contributing factors to the Company's share price weakness and large trading volumes and believes the following may be attributed, at least in part, to the recent downward pressure and larger trading volumes in the market for Gold Canyon shares: -- Market participants have indicated that, due to investor fatigue with the mining sector, both retail and institutional, and prolonged mining sector weakness, resource money managers are experiencing higher than normal redemption challenges in their funds and managed accounts, causing them to sell shares to raise the cash needed to make redemption payments. With respect to Gold Canyon's shares in particular, the continued recent demand has resulted in bids to buy at reasonable valuation levels, providing the sellers with better liquidity than is the case with many other mining issuers, and indeed than had historically been the case with Gold Canyon until very recently. -- Gold Canyon had historically issued a large number of "flow-through" common shares which, because of the associated tax treatment in Canada for qualified flow-through mining expenditures undertaken by the Company, carry a much lower cost base than regular shares. The lower cost base allows resource money managers to sell these shares at prices that, despite declining market prices generally, are still profitable, providing more attractive optics than selling at a loss.
Gold Canyon management believes there is reason for optimism. Redemptions are typically a late cycle phenomenon and should start to moderate as the market attempts to develop a bottom, removing one of the primary selling catalysts while higher volumes may indicate that "smart money" buyers are stepping in to take advantage of these current attractive valuations in Gold Canyon shares. Also, the holdings of "spent flow-through" shares is now somewhat reduced, which could eliminate the benefit to investors of selling low cost base shares that are still in a profit position.
More generally, market analysts have suggested there have been hints at a potential turnaround in mid to late 2013. Notwithstanding potential improvements in the outlook for the global economy generally, and potential related benefits to the mining sector in particular, Gold Canyon continues to pursue various initiatives with a view to enhancing shareholder value including: -- The announcement of an updated resource estimate for the Springpole Gold Project, effective September 19, 2012 (see the Company's news releases dated October 17, 2012), which included an updated indicated mineral resource of 128.2 million metric tonnes at an average grade of 1.07 grams gold and 5.7 grams silver per tonne for 4.41 million ounces of gold and 23.8 million ounces of silver and an updated inferred mineral resource of 25.7 million metric tonnes at an average grade of 0.83 grams gold and 3.2 grams silver per tonne for 0.69 million ounces of gold and 2.7 million ounces of silver (see the independent technical report dated November 30, 2012 available through the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com). -- Anticipated completion of a Preliminary Economic Study of the Springpole Gold Project by SRK Consultants (Vancouver) in or about the first or second quarter of 2013, which Gold Canyon management believes to be a major milestone that will allow investors to better assess the true value of the Company's assets and be a catalyst for unlocking shareholder value. -- Continued advancement of the Company's Springpole Gold Project through the first or second quarter of 2013 including geotechnical drilling; continued efforts with respect to advancing environmental assessments, facilitating an access road and securing a connection to the Hydro One grid; and ongoing consultation with First Nation communities of Cat Lake, Slate Falls, Lac Seul and Wabauskang, as well as the Metis Nation of Ontario. -- Anticipated completion of a mineral resource calculation and the assembling of financial data by Mitsui Mineral Development Engineering Co., Ltd (MINDECO) of Japan, the contract operator of the program, in or about March 2013 with respect to the Company's Chambe Basin rare earth elements (REE) joint venture project in Malawi, Africa. Gold Canyon management believes this milestone will demonstrate that Gold Canyon's REE interests have potential value which may provide future opportunities to monetize these non-core interests in order to raise non-dilutive capital for continued advancement of the Springpole Gold Project. -- The recent hiring of Richard Moritz as Vice President of Corporate Communications. Richard will focus on raising awareness of the Company, its projects and the attractive valuation opportunity Gold Canyon represents to both existing and potential new shareholders, particularly at the institutional level with the goal of increasing market participation, new buyers with cash reserves to match with sellers and creating a more positive pricing dynamic. -- The recent mandate given by the Company's board of directors to review and evaluate a full range of alternatives to provide better transaction and trading value and efficiencies for Gold Canyon's US and European investors, as well as increase awareness of Gold Canyon and its projects throughout these existing, and other potential markets. -- The recent mandate given by the Company's board of directors to identify and retain a lead investment bank to assist management with its communications with retail and institutional investors, advise on future financing opportunities and review and evaluate alternatives available to the Company to enhance shareholder value.
Mr. Troy Fierro, Chief Executive Officer of Gold Canyon, added, "The strategic objective of the Company remains unchanged and that is to advance Springpole towards production. We believe completion of the Preliminary Economic Assessment for the Springpole Gold Project, scheduled for Q1/Q2, will unlock value for our shareholders. In the meantime, the Company will continue its efforts to de-risk the Springpole Gold Project, seek value in and from its non-core assets, and broaden the shareholder base of the Company. Gold Canyon remains sufficiently capitalized so there is no immediate need for financing. When markets improve, the Company will have the ability to apply financial resources towards expanding the mineral resource and exploring other targets within the 80,000 acres currently under control at Springpole and will be well positioned to recover value lost during this difficult period."
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