Sittin on a Gold Mine Volta has about 6 high quality and advanced projects but remains well below investors radar.
It is perhaps the cheapest gold stock on the bourses in terms of its gold resources.
Much of the detail can be found on the web site and todays NR highlites a very successful initial drilling program for one of its lesser projects, operated by Newmont.
But, lets first consider its flagship project..............Kiaka in Burkina Faso.......which it is aggressively drilling and fast tracking to development.
The template for KIaka is Iamgolds Essakane gold discovery also in Burkina Faso and which is on strike with Essakane..
Essakane contains 6.1 million oz of gold at an average grade of 1.2 gms/ton.
It began production in late 2010 and will produce about 325,000 oz per year for 15 years at an average cash cost of about $425 per oz.
Production is by open pit and conventional crushing and milling and CIL............exactly as is forecast for Kiaka. Gold Recoveries are 95 % or just below Kiaka's 97 %.
Essakanee produces about one third of Iamgolds annual production.
With a market cap of about $20 billion, Essakane is therefore valued at about $6 billion.
Now, let is see how Kiaka compares with Easakane.
Kiaka has 4.8 million oz at an average grade of about 1.2 gms per ton, of which 3.1 million oz are in the M & I category at an average grade of 1.35 gms/ton.
This obviously makes Kiaka a world class discovery ....................but, it will get much bigger.
The latest 43-101 resource update ( June /11 ) which included the 2010 drilling data and some early 2011 data, was 120 % higher than the estimate a year previous.
This is very strong confirmation of the geologic model which has been updated to guide the 2011 drilling program.
The results of that drilling program have been nothing less than spectacular and another large increase in gold resources can be expected when the new 43-101 is released this quarter.
The consulting ressource estimator , SRK, considers there to be good potential to find additional resources:
- The current model remains open at depth along the main mineralised strike interval,
- The current model remains open along strike to the northeast where mineralisation remains open to potential strike extension, as illustrated in the long section and plan view,
- The current model remains open along strike to the southwest where scout drilling has encountered encouraging mineralisation,
- Potential additional material alongside the KMZ within the hanging wall flanking structures,
- Within the current mineralised wireframes more material is present at lower-grade cut-offs which may add additional ounces to the deposit should more favourable costs be defined than currently assumed.
- Volta also plans to follow up on other geophysical targets in the licence area which SRK agrees warrant further exploration.
Given this information and a very successful 2011 drilling program, it can be expected that Kiaka will displace Essakane as the largest gold discovery in Burkina Faso.
BF is a world class gold producing region, so to be the largest gold discovery brings with it excellent value.........at least $6 billion based on its geologocal twin of Essakane.
There is of clourse much more to VTR than Kiaka.
There is the Gaoua classic gold/copper porphery discovery which holds 2.8 million oz of au Eq resources, measured at $1.50 copper and just $750 POG.
It too will be commercially produced, once Kiaka is producing.
Besides that, Volta has 4 other very advanced and highly prospective gold projects in BF and Ghana which also adds to value but not yet to the curfrent market cap.
Volta has very strong management and a very strong balance sheet.
Its most recent equity raise was at $1.90.
The most recent analyst target is $6.25 and that is just scratching the near-term surface.
A prefeasability study is underway and the results will be relaased this quarter.
It will show sparkling economics, along the lines of its twin gold mine, Essakane............about 325,000 oz per year at a cash cost of about $450 per oz and for 15 years or more.
Those type of numbers make the seniiors drool.
Volta has a posion pill, so it can ward off an unfriendly offer.
But, its quite likley if not probable that Volta will be taken out this year, subsequent to the release of the prefeasoabily study.
By then, there is an excellent chance that Kiaka will have in excess of 6 million oz of economic gold.
Volta has a market cap of just $175 million or less than $25 of market cap per oz of gold.
CPQ, whose drill results nearly matched those of Kiaka, weas taken out for $90 per oz of Inferred resources in the ground.
For this reason, I cant see Volta being taken out for any less than $125 per oz.