Goldfinger about Vangold
1 online Today This week by @Goldfinger on 26 May 2020, 15:07 Banyan Gold, Vangold, And Bull Markets Someone once said, The best things in life come to those who wait. While I wouldnt completely agree with this adage, it would seem to hold true for Banyan Gold shareholders. Yesterday, Banyan Gold (TSX-V:BYN) announced the initial resource estimate for its AurMac Project in the Yukon and blew away investor expectations. AurMac hosts an inferred gold resource totalling more than 900,000 ounces at an average grade of .54 grams/tonne gold. The best part is that this is just the initial resource for AurMac, and barely 1/10th of this 92 square kilometer property package has seen any drilling. The AurMac resource is also open at depth. Banyan Gold CEO Tara Christie is confident that the gold mineralization extends at depth, however, the priority in 2020 will be to expand the near-surface resource with step-out drilling at both the Airstrip and Powerline Zones. The 900,000+ ounce gold resource at AurMac is near surface, open-pittable, and road accessible. AurMac is in the Mayo Mining District of the Yukon which hosts several infrastructure advantages that simply dont exist in other areas of the Yukon: Victoria Gold is moving into commercial production at the nearby Eagle Gold Mine (Canadas next gold mine), which is less than 40 kilometers from AurMac. AurMac has road access right to site, and a three-phase power grid line exists on the Property. The town of Mayo is less than 60 kilometers from the project, and Mayo has an airport that can be used to fly in workers, supplies, and equipment. Alexco Resources (TSX:AXR) and Victoria Gold (TSX:VGCX) are significant Banyan shareholders, and both companies have been very supportive of Banyan via technical assistance and allowance of Banyan to use their camps for geologists and drillers. There is a cell tower off the highway that runs through AurMac. Banyan CEO Tara Christie remarked that she was able to use her phone near the drill pad at the Powerline Zone, and that is not something that happens often in the Yukon. These infrastructure advantages are critical to the economics of any mineral resource, and Banyan is fortunate to benefit from multiple advantages at AurMac. In addition, if you increase the cut-off grade by 50% (to .3 g/t Au), you lose less than 15% of the gold ounces, but gain a 20%+ better grade. Its also important to remember that the life of mine average grade at Victoria Golds Eagle Gold Mine is .63 g/t Au, which means that AurMac is comparable to a mine that is entering commercial production with robust economics (US$800 all-in sustaining cost) and more than 200,000 ounces per year of gold production over a 10+ year mine life. Its hard to overstate the significance of yesterdays AurMac maiden resource estimate news, and the markets reaction to this news. I have been a Banyan shareholder for 2 years and there were many months in which my level of conviction was thoroughly tested. However, I always had confidence in CEO Tara Christie and the deep value that I saw in Banyan shares. I knew it was only a matter of time and the right market conditions before this value began to be realized. Yesterday, the market began to appreciate Banyans potential: BYN.V (Weekly - Two Year) BYN shares have risen more than 100% from the March lows; however, the price and volume profile on the weekly chart couldnt be much more bullish. There is likely to be some resistance at the C$.15 level, as there are slightly more than 5,000,000 warrants expiring in July with a C$.15 exercise price. However, once the C$.15 level is cleared decisively, there is nothing but blue sky above. After many relatively lean years in the junior mining sector, it seems that we have entered into a season of plenty. Companies are easily raising the money they need, and many are being offered more money than they set out to raise. Just a couple of weeks ago, Barrian Mining (soon to be New Placer Dome Gold) was looking to raise between C$7.5 million and C$10 million. And yesterday, after the close, Barrian announced that they are about to close the books on a C$12 million financing. This is impressive considering that C$12 million is nearly twice as much as Barrians market cap before the Kinsley Mountain acquisition. In a bull market, just about anything is possible. Suddenly, news that would have been previously yawned at, or deemed as being bearish, is looked upon favorably by eager investors. Context is key, and in a bull market environment, prices are rising and investors want a piece of the action. This creates a positive feedback loop that enables companies to raise capital more easily, which creates more exploration activity that creates more news flow and more new discoveries, resulting in more excitement in the sector. It also happens that we are at the end of May, and many companies are getting ready to mobilize exploration crews to their projects across North America. Its an auspicious time to be an investor in the junior resource sector. However, as my friend Eric Coffin of HRA Advisory reminded me yesterday, Never confuse brains with a bull market. In other words, a lot of us are probably feeling pretty smart right now, which means its important to remind ourselves that were really not that smart. Dont forget to sell some on the way up. And if Mr. Market lets you take out your initial investment after a multi-hundred percent move, its usually not a bad idea to do so. We will never catch the entire move in a bull market, and nobody rings a bell at the top. All we can do is manage our risk and never let one position consume too much of our portfolio. Its also useful to have some dry powder available to be able to take advantage of new opportunities and to also be able to add to positions during the inevitable bull market corrections. Being 100% invested is foolish and substantially limits our options as an investor. Before I conclude, I would like to mention another company called Vangold Mining (TSX-V:VGLD). Vangold has an impressive management team including CEO James Anderson and Director Dan Oliver of Myrmikan Capital. This is a team committed to creating shareholder value and doing it the right way. Already, Vangold has taken a 1,000 tonne bulk sample from its flagship El Pinguico Gold & Silver Project near the city of Guanajuato, Mexico and shipped it to Endeavour Silvers Bolanitos Mill which is less than 30 kilometers away. The idea is to monetize existing ore stockpiles at Vangolds El Pinguico Project. El Pinguico is a high-grade gold and silver deposit that was mined from the early 1890s until 1913. The mining was done exclusively from the El Pinguico and El Carmen veins, which are thought to be splays off the Mother Vein, or Veta Madre. The Veta Madre is associated with a mega fault that outcrops for 25 kilometers, and is the most important source of precious metal mineralization in the region. The Veta Madre may cross VanGolds property at depth, underneath the high grade El Pinguico and El Carmen veins. Its important to note that limited drilling has been done on the property and no drilling has attempted to encounter the Veta Madre at depth. Historic stockpiles of mineralized material exist on surface and underground at El Pinguico, which may potentially provide feed to one of several operational mills in the Guanajuato area. It is these stockpiles that Vangold is aiming to rapidly monetize, and subsequently use some of the proceeds to fund deeper exploration drilling at El Pinguico with an objective of intersecting the Veta Madre at depth. Vangold has only 60 million shares outstanding, however, there are 26 million warrants with a C$.10 exercise price creating a bit of a warrant overhang in the stock. Management assures me they are working on a plan to lift this warrant overhang, bringing C$2.6 million into the companys treasury in the process. I expect that a significant portion of warrant holders will exercise their warrants and hold the shares as a vote of confidence in management and the companys vision, I expect this process to play out over the next 2-3 weeks, and once it is completed, Vangold shares could move substantially higher. Disclosure: Author is long BYN.V and VGLD.V shares at the time of publishing and may choose to buy or sell at any time without notice.