Midas Letter: Golden Arrow Cash Flow Funds ExploraGolden Arrow Cash Flow Funds Exploration
By James West
MidasLetter.com
Thursday, March 26, 2009
Wouldn’tit be nice if you had invested in a portfolio of properties in prolificgold fields, and much of the exploration and operating costs werecovered each year by a royalty the company held on a producing miningproject? Well if you haven’t, you still can.
Risk capital for exploration has become quite scarce, despitegold’s apparent strength in the $900 to $1,000 per ounce range.Investors are interested in near-term production scenarios, but not somuch in earlier stage exploration plays, unless they have major sizepotential that could attract a major producer’s interest as a takeovercandidate. This is a direct reflection of the lack of confidencepermeating all markets these days.
Golden Arrow Resources (TSX.V: GRG) has an extensive portfolioof 40 projects in South America including 9 drill ready prospects. Butmore importantly, the company also owns a 1% royalty on Yamana Gold’sGualcamayo Gold Mine, being commissioned presently and expected tocommence production before the end of April. Golden Arrow’s technicalteam made the discovery of the Gualcamayo mine in the late 90’s beforeselling its interest in the project to Viceroy and kept a royalty onthe project.
The Gualcamayo Property is located in northern San JuanProvince, Argentina, approximately 279 kilometres north of theprovincial capital of San Juan. The main Gualcamayo block consists ofone Cateo (exploration concession) and 57 Minas (mining propertyinterests), covering 7,128 hectares of ground.
With an expected mine life of at least 10 years, annual goldproduction will commence at an estimated 195,000 to 210,000 ounces in2009 and ramp to between 220,000 and 235,000 ounces starting in 2010.The project contains 2.9 million ounces of gold in proven and probablereserves, and an additional 1.02 million ounces across measured,indicated and inferred resources.
So Golden Arrow expects to receive approximately US$1.5 millionin cash annually from its royalty for at least the next ten years butmore likely for 15 years based on continued exploration that is ongoingby Yamana. A net present value of the royalty using $1050 gold and a 15year mine life is almost $23M CAD! This is a significant incoming cashflow for a company with a market cap of just $5.8M CAD and thisimmediately separates the company from 95% of other explorers listed onthe TSX Venture Exchange.
Currently, Golden Arrow’s primary exploration focus is on the Poncha Gold Project in San Juan Province, Argentina.
Golden Arrow is earning up to a 100% interest in the PonchaProject from Teck Limited’s (TSX:TCK, NYSE: TCK) subsidiary, TeckCominco Argentina Ltd. (“Teck”), by fulfilling expenditure and tenuremaintenance requirements subject to Teck’s option to re-earn up to a65% interest in the Poncha property. Although Teck does have an option,liquidity problems are expected to curtail Teck’s further interest inthe project, and Golden Arrow expects to retain 100% ownership.
On March 11, Golden Arrow announced that it would commence a3,000 metre “step-out” drilling program which is designed to identifythe extent of the ore body discovered and announced on March 27, 2008.
Hole RCPC 13 intersected an eye-popping 266 metres grading 1.21grams per tonne of gold and 3.3 grams per tonne silver, within whichwas a higher grade section measuring 61 metres long and assaying 3.04grams per tonne gold and 7.16 grams per tonne silver.
“The plan is to step out in all directions from that discoveryhole and drill up to 3,000 metres across 5 to 8 holes to a total depthof up to 600 metres,” said Keir Reynolds, manager of Investor Relationsfor Golden Arrow. “We already announced that we’ve mobilized someequipment and technicians are onsite preparing roads and drill pads,and we anticipate the drilling will start in the next few days.”
“Golden Arrow has about $1.2 million in the bank and we’re nowclosing a private placement for $1.5 million now to get cashed up for2009 exploration and to offset any delays in the payment of the royaltyrevenue,” he said.
“We are pleased to begin the highly anticipated step-outdrilling on our discovery at Poncha,” stated Joseph Grosso, Presidentand Chief Executive Officer of Golden Arrow Resources. “With the holeending in mineralization, we are excited to be able to test theextension of our find as it brings back the memories of our other twoworld class discoveries.”
Many of Golden Arrow’s other projects are adjacent to, or inclose proximity of, some of the largest deposits in South America. Riode las Taguas Property is adjacent to Barrick’s Pascua-Lama deposit(23.7 million ounces of gold resource), and the Potrerillos Propertyadjoins Barrick’s Veladero discovery (15 million ounces of goldequivalent resource).
Golden Arrow is a member of the Grosso Group, a managementgroup founded in 1993 that has a history rich in successes whichinclude; the discovery of two multi-million ounce precious metaldeposits, partnerships with industry majors such as Barrick Gold,Newmont Mining, Teck Cominco, Rio Tinto and Viceroy/Yamana.
In June 2007, Golden Arrow began financing a private company,of which it is 100% owner, based in Colombia, the same country whereGreystar Resources and Ventana Gold, two TSX Venture listed companiesthat have enjoyed exceptional success to date. The mandate of thecompany is to locate past producing and/or permitted precious metalprojects. Golden Arrow will be providing an update on these Colombianefforts shortly.
Golden Arrow has just over 20 million shares outstanding. Visit the company online at https://www.GoldenArrowResources.com.
SOURCE:
https://www.midasletter.com/news/09032608_Golden-arrow-cash-flow-funds-exploration.php