Gryphon Gold Corporation (TSX: T.GGN, Stock Forum); (OTC:BB: GYPH, Stock Forum) is a junior gold company that has the potential to turn into a 50,000 oz producer in the US within a 6-7 month time frame. With a recent NI 43-101 document completed by Telesto Nevada Inc. in hand, this company is about to turn around its fortunes, and likely make some money for investors.
Here are the details...
GGN owns the Borealis Project in the Walker Line Belt of Western Nevada. All major state and federal operating permit are in hand from USFS and NDEP so permitting is a non-issue for the progression of the mine. Once into production, this oxide-heap leach mine will produce an average of 50,000 oz of gold equivalent for approximately 5 years. Now’s here’s the upside, the NI 43-101 estimate acknowledges that the life of the mine only includes the 377,356 oz that are measured and indicated. It doesn’t include 350,706 oz of inferred resources (approx 6-7 years of production) and 27.5 square miles of surrounding favorable geology. Nor does it include 976,000 recoverable ounces in the sulphide deposit, which could translate into another 100,000 oz/yr in production with a 90% recovery rate. So, based strictly on the Telesto report, the Borealis Project has a discounted aftertax NPV of $12.5 million, and IRR of 27%, and a payback of 2.25 yrs at $800US/oz gold price. The report also gives price sensitivities and this is where the current value of GGN shares grows significantly. At $1040 US price of gold, the IRR balloons to 87%. What would another mine hungry junior/intermediate pay for a mine with this return and timeline to production?
John Key, CEO, is a former mining engineer with over 40 years of experience and has run the Magmont, Polaris, and Red Dog mines for Teck Resources (TSX: T.TCK.B, Stock Forum); (NYSE: TCK, Stock Forum). Management has dragged its heels on developing this deposit, but it looks like it’s time for a move with the current run in the price of gold. Drilling and exploration have been good for GGN, however with the downturn that began last year, drilling was curtailed to conserve cash. Historical drilling data from the Freedom Flats includes 99m of 7.5g/t, 97.5m of 6.17g/t, and 57.9m of 6.86g/t. Data from the Graben deposit includes 76.2m of 15g/t, and 25.9m of 24.97g/t.
Management and directors own about 11% of the stock, and institutional investors include Standard Bank UK, Sentry Select, and Geologic Resources.
Recent Events:
November 4 - JV with LaQuinta resources on Easter Gold Property
October 29 - sold the Regent Hill Property to New Era Precious Metals for $2.5 million + a royalty.
The downside that the company is currently dealing with is the funding for construction of the Borealis Mine. Estimated initial costs are $22.6 million with production starting in 6-7 months. The issue of a convertible debenture was approved at the last shareholder meeting, and hopefully it won’t be announced until the shares rise to a more reasonable level. However, considering that there are more than 80 million shares oustanding, even with additional shares issued to get the mine up and running, we are looking at a 50,000 oz/yr producer in a $1000+ US gold environment in a 6-7 month timeline once the company gets the go ahead to begin mining.
I do own shares of GGN.
As always, do your own due diligence before investing.
https://www.gryphongold.com/
www.sedar.com