Dogged persistence is paying off for Barkerville Gold Mines Ltd. (TSX: V.BGM, Stock Forum) President and chief executive officer Frank Callaghan. Since he took control of the company in February 1991, the Prince Edward Island native has assembled a large land package in central British Columbia’s Cariboo mining district, about six kilometers northwest of Barkerville, an historic gold rush town.
On Friday, shares of Barkerville soared after the junior released news of a potentially huge gold resource on the company’s 100%-owned Barkerville property, which covers 1,118 square kilometers, and encompasses four former mines. Estimates include a NI 43-101 compliant indicated resource of 10.6 million ounces, located in an area known as Cow Mountain.
That resource is located within a much larger area, covering about 10% of the Barkerville property, which is thought to host between 65 million and 90 million ounces of gold, the company said.
To put those numbers in perspective, Vancouver-based Goldcorp. Inc. (TSX: T.G, Stock Forum) (NYSE: GG, Stock Forum) has 3.95 million ounces of proven and probable gold reserves at its Red Lake mine in northwestern Ontario, which remains among the world's richest and most enduring gold operations.
These resource estimates are based on a compilation of over 7,100 drill holes (or 347,000 metres), which have been completed by the company and previous operators.
“This is very good for mining in British Columbia,’’ said Callaghan during an interview with Stockhouse in his Vancouver office. The resource estimate on 10% of the company's prospective belt puts the Cariboo-area project into the "world class category," he said.
However, Friday's announcement comes with a warning that the company's resource estimates are "conceptual" in nature, meaning it has a lot more work to do before any gold resources are considered proven and therefore mineable.
At Friday’s close of $1.21, the stock was up 50% from Thursday on heavy volume of 7.2 million shares. That leaves Barkerville with a market cap of $129.8 million, based on 107.2 million shares outstanding. The 52-week range is $1.91 and 31 cents.
Other stocks that moved on Friday’s announcement included Golden Cariboo Resources Ltd. (TSX: V.GCC.H, Stock Forum), which jumped 138% to 31 cents. TIEX Inc. (TSX: V.TIX, Stock Forum) was up 67% to 2.5 cents. Both of these companies sold property rights to Barkerville in exchange for shares in the junior.
While company officials caution that exploration is still in the early phases, the latest estimate is clearly a big win, not only for Callaghan, who controls roughly 10% of the company, but also for other Barkerville shareholders. They include Sprott Asset Management and gold analyst Ian Gordon.
With about $2.5 million in the bank and another $20 million expected to be available via the exercise of warrants, Barkerville is well equipped to continue with exploration at the property. If the current estimates are any indication, Barkerville can support at least three open pit mines. However, Callaghan doubts that his company will be the one to bring those assets to the production stage. “We will probably get taken over,’’ he said.
A 58-year-old native of Prince Edward Island, Callaghan grew up in Montreal. At the age of 16, he hitchhiked out to Vancouver in 1972 and has been in Vancouver ever since. He has been President of Barkerville since February 1991.
One veternan mining analyst said 10 million ounces "is quite significant if everything hangs together," but added that he would want to see more details before making any on-the-record comments.
"Barkerville has a long history of production and is a legitimate area for gold exploration,'' he said.
News of the resource estimate comes as the company prepares to start production at its Bonanza Ledge Mine, which is also located on the Barkerville property in the Barkerville Mountain area. Ore from Bonanza ledge will be shipped west to processing facilities at the company’s QR mine site, located between Wells and Quesnel. Callaghan estimates that Bonanza Ledge will produce up to 25,000 ounces of gold annually. Estimates are based on reported grades.
Barkerville is also planning to extract about 10,000 ounces of gold from the former QR mine which it acquired in February 2010.
Revenue from these operations should allow drill crews to continue exploration at Barkerville, where the company has the permits to complete another 1,600 drill holes along a 67-kilometre trend that is home to Cow Mountain, Barkerville Mountain and Island Mountain.