(Image via Vanstar Mining Resources.)
In the face of our generation’s unprecedented market volatility, gold has been holding its own as a safe haven hedge for
investors as a diversification strategy for their portfolio.
Even so, many major companies in the market have struggled after hitting highs in 2011, but there are select emerging players who have a lot to offer at exceptional value … Junior miner
Vanstar Mining Resources (TSX-V: VSR, OTC: VMNGF, Forum) is one of those Companies.
Vanstar Mining has a number of gold projects underway in Québec and as an emerging player in this space, is significantly undervalued.
The value of the Company stands out when compared to the high cost of merger and acquisition activity that occurred in Canada’s mining industry over the past year to date.
A few examples of recent gold mining consolidations covered by Stockhouse:
- Premier Gold Mines Ltd. (TSX: PG) offered to buy the remaining 50% interest in the Greenstone Gold Mines Partnership for an amount of $289 million (CAD) or the equivalent of $130 per ounce
- Endeavour Mining (TSX: EDV) acquired SEMAFO Inc. (TSX: SMF) in a deal worth around $1 billion (CAD), yielding roughly $94 per ounce
- Wallbridge Mining Company Limited (TSX: WM) took over Balmoral Resources Ltd. (TSX: BAR) for a hefty $110 million ($133 per ounce) price tag at less than a million ounces of gold
- Continental Gold Inc. (TSX: CNL) was bought by Zijin Mining Group Co. For $1.4 billion. CNL’s Buriticá project in Québec is expected to produce approximately 250,000 ounces of gold per annum on average at an all-in sustaining cost of roughly $840 per ounce
- Equinox Gold Corp. (TSX: EQX) acquired Leagold Mining Corp. (TSX: LMC)in an all-stock deal for $770 million, also at less than a million ounces of gold
In addition to this, there were also the major acquisitions where
Kirkland Lake Gold Ltd. (TSX: KL), bought
Detour Gold Corp. (TSX: DGC) for
$4.9 billion (CAD) and
Newmont Mining Corporation (NYSE: NEM) bought
Goldcorp Inc. (TSX: G) for
$10 billion (USD).
Gold Price forecast:
(Gold chart April 2019 – April 2020 via goldprice.org)
With gold prices
projected to increase by the likes of Goldman Sachs, this will also indirectly help drive Vanstar’s value even higher in the months (and possibly years) to come.
Vanstar’s potential value:
Looking at only the top three listed here, the average transaction value is $466.3 million, with an average price per ounce of these transactions of $119.
Does this imply that Vanstar’s potential current value could be $95.2 million (CAD), given its 25% interest in the Nelligan gold deposit (800,000 ounces), which contains nearly 3.2 million ounces of inferred resource? Possibly.
A few factors could significantly influence the valuation of the company’s share price, such as the reclassification of the inferred resource into indicated resource, increasing the resource, the potential for lateral and in-depth extensions as well as the increase in the gold price.
Vanstar is currently trading at $0.68 with a market cap of $34 million. Vanstar also holds a 1% royalty (NSR) on the 8 original claims where part of the deposit is located.
Nelligan Project:
Located in Québec’s Chapais-Chibougamau region, the Nelligan deposit contains nearly 100 million tonnes grading 1.02 g/t Au for a current total of nearly 3.2 million ounces of inferred gold. Via the Company’s NI43-101 Report dated October 2019 with IAMGOLD, VSR commissioned InnovExplo to target favourable regions across the Abitibi geological subprovince for disseminated gold deposits hosted by metasedimentary rocks (Nelligan-type gold mineralization).
The deposit is also very homogenous, open at-depth and alongside over the entire 4km strike. This means the current NI 43-101 resources estimate could significantly increase.
The Company is awaiting the results from the winter drilling program at the Nelligan Project that began in January 2020. IAMGOLD already completed over 5,000 meters of drilling on a minimum of 8,000 meters. The results should increase the size and continuity of the Nelligan gold deposit, as well as to categorize some of the inferred resources into indicated resources.
As a means to increase the value of its project portfolio, the Company is executing acquisitions of 100%-owned projects to supplement its flagship Nelligan Gold Project, such as its Amanda Project. The expansion happening at the Amanda Project was recently covered by Stockhouse Editorial.
Amanda Project:
Situated in the southeastern part of the Auclair Formation in the La Grande Subprovince in Québec, the Amanda Project boasts several gold showings listed across the property, with further evidence of a similar geological background is also highlighted within a 15 km radius to the west and southwest of the property. Amanda contains 138 claims covering 7,306 hectares.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.