By Kevin Michael Grace
David Wolfin doesn’t wait to be asked whether his company’s stock is undervalued. The President and CEO of Coral Gold Resources Ltd is positively adamant about it. “Newmontjust bought out Fronteer. In Toronto, at PDAC, they basically said thesale was equivalent to $200 an ounce in the ground. We are trading at 10bucks an ounce in the ground. We are extremely undervalued.”
Wolfin is referring to the facts that Coralhas a 2009 NI 43-101 inferred gold resource of 3.38 million ounces atits Robertson property on the Cortez-Battle Mountain Trend in Nevada anda current market cap (April 20) of only $23.4 million. Actually, thatworks out to about seven bucks an ounce. Asked to explain the disparity,Wolfin answers, “Most people chalk it up to being in the inferredcategory or that it is uneconomical. These are the things that we haveto prove to the world are not true.”
Part of Coral Gold’sproblem is that, for about 20 years, its Nevada properties languishedin the mining version of what Hollywood calls “development hell.” Wolfinexplains, “We built a small heap-leaching operation there in the late1980s. The stock price went up over $10 a share, but then a couplethings happened. The price of gold went down. Our mine manager gotstricken with cancer and died, and our recovery rates weren’t as high aswe had hoped for. Later we discovered sulphide rock was getting mixedwith oxide rock, and sulphide rock takes longer to break down andoxidize. We shut down the mine at that time, and we were approached by30 major mining companies.”
Coralchose a joint venture-option agreement with Amax Gold. Wolfin: “Theycame in and started a big drill campaign. They did a feasibility studyin 1994, and we shopped it around, but it turns out it wasn’t bankable.They didn’t put enough of the drill-indicated resources into the reservecategory.” Coral indicated its unhappiness with Amax, so the property was divided, with Coral eventually regaining full ownership of Robertson.
Amax was later taken over by Cyprus, which became Kinross. Placer Dome bought 61% back-in rights on the Excluded Property, and then became Barrick. (There are two other Cortez properties, Norma Sass and Ruf, which are joint ventures with Levon Resources.)This wasn’t the end of the uncertainty. Wolfin explains, “The Bureau ofLand Management contacts us in 2000 and says, you guys haven’t cleanedup the mess in the mine you had in the late 1980s because the propertywas tied up by those majors. So we embarked on a massive reclamationprogram which stretched over five years.”
Since 2005, Coralhas been confirmation drilling Robertson. Assays reported from November2010 to January 2011 have included 1.096 grams per tonne over 18metres, 6.24 g/t over 1.5 metres, 1.34 g/t over 19.8 metres, 3.74 g/tover 6 metres and 1.37 g/t over 24.4 metres. Robertson’s 43-101 inferredresource went from 1 million ounces to 2.3 million ounces in 2008, to3.4 million ounces in 2009. Over 500,000 feet has been drilled, 1,160holes. Wolfin says, “It is an inferred resource because all the workdone by Amax was done pre 43-101, so it doesn’t qualify. Which is ashame, because Amax used MRDI, which is now AMEC. It was done at thehighest standards of that time. Today we are looking towards upgradingthose ounces from inferred and working on a preliminary economicassessment. It is due in July. That will be a major milestone for thecompany because it will show the world it’s economically viable to putin a mine.”
Our preliminary economic assessment is due in July. That will be amajor milestone because it will show the world it’s economically viableto put in a mine – David Wolfin
Coralhas petitioned to drill 500 holes and seeks a blanket permit. Wolfinadmits this will take some time. He says, “Because we had a heapleaching operation there, we are treated differently than agrassroots-exploration property. We did an environmental assessment inthe 1980s, but now we have to do a new one. We are doing culturalsurveys, studying the pygmy rabbits, the sage growths, the rattlesnakes,whatever kind of animals and rodents are there.”
Beyond the historic delays, missed opportunities and current permittingfrustrations, what bothers Wolfin most is the seeming inability of themarket to comprehend what Coral has at Robertson. For example, the property adjoins Barrick’sCortez Pipeline Mine, which last year produced 1.14 million ounces goldat $312 per ounce and has proven and probable reserves of 14.5 millionounces. He adds, “If you look at Allied Nevada, one of Bob Buchan’s new companies (he’s the one who started Kinross),similar story. They’re mining half a gram of gold; they started threeyears ago at 30,000 ounces a year production. Now they’re talking aquarter-million ounces a year, and they’re a $3.4-billion market cap.We’re not much different.”
Coralhas $3 million in cash and only 31 million shares. Wolfin concludesthat Robertson’s economics can’t be ignored much longer: “There are 160million ounces of gold on the Carlin Trend and probably 50 million or 60million on Cortez-Battle Mountain. We have 3.4 million ounces there.It’s been found at 1,000 dollars an ounce. That’s 3.5 billion dollarsstaring you in the face, and we’ve got a market cap of $23 million.