By Peter Kennedy
It’s only half a drill hole. But Atac Resources Ltd.’s (TSX: V.ATC, Stock Forum) Rau gold project in the Canadian Yukon is already drawing comparisons with North America’s most prolific gold-producing area, the Carlin gold trend in Nevada.
That in a nutshell is what has sent Atac’s stock price soaring close to $9 from under $2 in early September, even though the junior has no proven ounces in the ground and likely won’t have for at least another year.
Yet after easing 2% to $8.80 on Wednesday, the Vancouver junior has an $800 million market cap, based on the 90.8 million shares outstanding.
“For that kind of market value you would need to have a few million ounces of 43-101 compliant mineable reserves,’’ said a former mining analyst who is not an Atac shareholder and asked not to be named.
The analyst, who now works primarily as a consultant, said comparisons with the Carlin Trend – a gold mining district that up until 2008 had generated over 70 million ounces of gold –are “highly premature. “
As a result, he said future drill results will need to impress the market if the share price is to be sustained at current levels.
Atac, which like any junior prospectors has zero revenue and reported a net loss of $273,443 or $0.00 a share in the three months ended June 30, 2010, is undoubtedly getting a lift from the price of gold, which hit an all-time record of US$1,424.30 an ounce on Tuesday.
Drill results
But Atac chief executive officer Graham Downs said in an interview that the stock market valuations are mainly fuelled by the view that the geological environment at Rau is similar to the Carlin trend.
It’s a perception that has been driven by mining analysts such as John Kaiser, a newsletter writer who recently described the geological setting at Rau as “a dead ringer” for the Carlin Trend.
“I first noticed this play last summer when Atac reported interesting gold results for a geological setting that suggested a sediment hosted gold system of the sort that has made Nevada and its Carlin Trend famous,’’ he wrote in a report.
“I'm waiting for some more drill results to support the idea that at Osiris they have a medium grade multi-million ounce discovery,’’ he said in an email to Stockhouse.
The 100%-owned Rau project is located in the Keno Hill District of the central Yukon and covers an area of 1,500 square kilometers.
In the past three years, the company has been focused on an area known as the Tiger Zone.
But subsequent exploration work convinced the company to move its drill rigs about 100 kilometres further east. In early September, the stock began to take off when the company said drilling on the new Osiris target area had coughed up 9.26 grams over 31.13 metres.
That intersection was contained in a larger interval that averaged 4.65 grams per-tonne gold over 65.2 metres, and was pulled from the top portion of drill hole OS-10-01.
“It is early stages, obviously with half a hole drilled out there,’’ said Downs.
He said the company hopes to release more assays by the end of November, including the rest of hole 0S-10-01, and assays from seven more holes.
The placement
Still, he said it could be a long time before the company is in a position to make an estimate of ounces in the ground. In order to make a resource calculation for the Osiris target area, the company would have to do another year of drilling. It could then take another six months to come up with a calculation.
“But I don’t think we could do that,’’ he said. “The target is too big.’’ So it may actually take longer for the junior to come up with a resource estimate for the Osiris find.
Still, the stock’s rapid ascent is good news for participants in two recent private placements that raised $22 million, putting the company in a position to spend about $20 million on the Rau property next year.
That money came from the placement of 8.4 million common shares at $1.85, and a second placement of three million flow-through shares at $2.15 a share. Both were completed in August.
In connection with the private placements, the company said it has issued 238,500 finders shares and 686,580 finders’ warrants, each of which entitle the holder to purchase one common share at $2 a share until February 5, 2012. These securities are subject to a hold period that expires on December 6, 2010.
Large shareholders include The Rule Family Trust which owned 7.8 million shares or just over 10 per cent, according to a management information circular filed in April. The Rule Family Trust is a holding vehicle for Rick Rule of Global Resource Investments Ltd., which recently joined forces with Toronto investment firm Sprott, Inc.
Strategic Metals Ltd. (TSX: V.SMD, Stock Forum), a company headed by directors and officers of Atac, held 9.8 million shares or 12.54% of the company in April. On Tuesday, Strategic shares rose 6.7% to close at $2.54.
As of June 30, 2010 Atac had $5 million outstanding options with a weighted average exercise price of 69 cents.