Merchant banker Sam Magid joins the line-up of international investors in an emerging Mexico gold producer and prospector.
Mr. Magid was some of the early money and planning behind Colombia gold hit Ventana Gold (TSX: T.VEN, Stock Forum), along with another Vancouver, Canada, investor, Ross Beaty. Sam Magid this week took a $3 million share placement of Goldgroup Mining (TSX: T.GGA, Stock Forum), which we profiled last week in Ticker Trax after an interview with its principals.
“We’re still relatively unknown since coming out in April,” Chairman and four-million-share owner Gregg Sedun says. Mr. Magid joins Goldgroup CEO Keith Piggott (14 million shares) and B2Gold (TSX: T.BTO, Stock Forum) CEO Clive Johnson as shareholders of the $105 million market-cap miner.
Sam Magid gets three million shares of GGA at one Canadian dollar each, a seven percent discount to the current price. He also gets multi-year warrants on the stock in this equity placement. See details via Stockhouse. Mr. Magid also participated in a cross of Goldgroup shares along with several other buyers, Goldgroup’s corporate development executive David Fry tells me this morning (Tuesday).
Mexico producer and prospector Goldgroup (fully diluted 101 million Canada-traded shares) almost surely is on its way toward becoming the Osisko Mining (TSX: T.OSK, Stock Forum) of Mexico. Goldgroup is driven by a desire to produce pure gold. I say this knowing how grandiose it sounds, what with Osisko being one of the top-five performing gold stocks in the world this year (and in 2009). I do not own shares of GGA.
CEO Keith Piggott, a British mining engineer steeped in the lore of Mexico, and Mr. Sedun, a Canadian lawyer, investor and banker, have what appears to be a no-nonsense strategy for quadrupling or 
more the gold output (and market worth) of their fresh Goldgroup Mining. Mr. Piggott explains that high-sulfidation gold at 70 percent-owned Caballo Blanco near Veracruz “is benign ore with no rubbish metal in it. This is why we are a 100 percent gold reporting company, not gold equivalent.”
What impressed me as much as Mr. Piggott’s ability to explain his pure-gold strategy was Dr. Paul Zweng’s take on 70 percent-owned Caballo Blanco. Paul Zweng is a 54-year-old doctor of geology (Stanford University). He is an asset manager of a natural resources and Hawaii-based hedge fund. Paul Zweng is a co-founder of Peruvian copper developer Antares Minerals (TSX: V.ANM, Stock Forum), which just got sold for $460 million of cash and stock (plus other considerations). For me, Dr. Z also is a mentor on matters of exploration. He attended my sit-down with Goldgroup’s Piggott and Sedun. (Photo of Keith Piggott, spectacles, and Paul Zweng – Thom Calandra photo)
“I can see, with a heap leach, how they easily could cash flow as much as $100 million a year from Caballo Blanco alone, depending on the gold price and if they hit their target of 100,000 ounces a year,” Dr. Zweng said. We all met at the San Francisco Hard Assets conference earlier this month of November. Mr. Piggott, with 14 years under his belt in Mexico and in his mid-60s, says both the Caballo Blanco and Cerro Colorado projects are 98 percent gold. Its Cerro Colorado mine is producing – 21,000 ounces projected this year and 25,000 next.
“Look,” says Mr. Sedun, a venture capitalist, “just look at what Alamos Gold (TSX: T.AGI, Stock Forum) has done market-cap wise with its Mulatos Mine and 160,000 ounces a year of production (plus a five million-ounce resource). It’s $2 billion. We think we are 40 percent of the way through developing Caballo Blanco (estimated cap-ex of $30 million to $35 million for a heap leach operation). We have production already (Cerro Colorado).”
Goldgroup’s team is tight with people of assets, as they say. It bought a central Mexico gold project from Goldcorp (TSX: T.G, Stock Forum) for $3 million and sold it to Mexico’s Carlos Slim for $25 million in July 2010. Goldgroup’s 70 percent of Caballo Blanco [the other 30 percent is Almaden Minerals (TSX: V.AAU, Stock Forum)] came after a purchase of the property from a unit of investor Lukasgroup’s Piggott and Sedun. (Photo of Keith Piggott, spectacles, and Paul Zweng – Thom Calandra photo)
“I can see, with a heap leach, how they easily could cash flow as much as $100 million a year from Caballo Blanco alone, depending on the gold price and if they hit their target of 100,000 ounces a year,” Dr. Zweng said. We all met at the San Francisco Hard Assets conference earlier this month of November. Mr. Piggott, with 14 years under his belt in Mexico and in his mid-60s, says both the Caballo Blanco and Cerro Colorado projects are 98 percent gold. Its Cerro Colorado mine is producing – 21,000 ounces projected this year and 25,000 next.
“Look,” says Mr. Sedun, a venture capitalist, “just look at what Alamos Gold (TSX: T.AGI, Stock Forum) has done market-cap wise with its Mulatos Mine and 160,000 ounces a year of production (plus a five million-ounce resource). It’s $2 billion. We think we are 40 percent of the way through developing Caballo Blanco (estimated cap-ex of $30 million to $35 million for a heap leach operation). We have production already (Cerro Colorado).”
Goldgroup’s team is tight with people of assets, as they say. It bought a central Mexico gold project from Goldcorp (TSX: T.G, Stock Forum) for $3 million and sold it to Mexico’s Carlos Slim for $25 million in July 2010. Goldgroup’s 70 percent of Caballo Blanco [the other 30 percent is Almaden Minerals (TSX: V.AAU, Stock Forum)] came after a purchase of the property from a unit of investor Lukas Lundin’s group, a Vancouver entity.
Dr. Zweng’s hedge fund, Resource Venture Partners, is an owner of GGA. “What made Newmont’s Minera Yanacocha (NYSE: NEM, Stock Forum) so profitable is that it had very little clay in the deposit,” Paul says. “Caballo Blanco looks the same: vuggy silica rock that is inert and does not interfere chemically with cyanide. The potential is for easy and pure gold extraction and processing with few metallurgical challenges.”
Mr. Magid was a co-founder of Salman Partners, a merchant bank. His current bank is called Peninsula Merchant Syndications.
Tellurium: I just got the skinny on this element from the middle-aged geezers at Golden Odyssey. Golden Odyssey (TSX: V.GOE, Stock Forum) is banking on a polymetallic property in British Columbia and a surge in demand for tellurium, which is used in solar panels and in flash-drive, optical disks, thermo-electric gadgetry and other digital storage devices. GOE’s principals were scheduled to present their case in Atlanta this week to several asset managers. I met them the other day. GOE is run by a couple of middle-aged folks from Canada and the USA. I like that – the middle-aged part, that is. See coverage via Stockhouse. A consultant to company CEO Tyrone Docherty is Jim Simpson. Jimhas been handing over vintage and fresh documents and research on Golden Odyssey’s Dear Horn project up there. Some of the doc-blocks and data are about industrial demand for tellurium; some about geology; some about valuations; some about people. All I can say is, if even 30 percent of it pans in (or out), GOE’s skinny market cap of $10 million becomes $100 million, like a couple of those lithium companies we tracked 18 and 20 months ago. Mr. Simpson tells me, “We have four (potential) products at our Deer Horn project in B.C.: Au, Ag, Te (tellurium) and WO3 (tungsten). One of the key points for the presentation in Atlanta is that all our products are at all-time highs ($225 per kg for Te for instance) and apparently going higher.” GOE hopes to execute a $2.5 million drill program at Deer Horn in 2011. It will be getting $500,000 Canadian in exploration credits (or tax rebates) from British Columbia government as soon as the month of December, Mr. Simpson says. I like it that asset manager and hard-rock robot Frank Holmes, via his Texas firm’s U.S. Global Investors World Precious Minerals Fund, owns 2.6 million of the 73 million GOE outstanding shares. I do not own GOE shares nor do I have an interest in the element tellurium, not yet anyway.
Note: Thom Calandra owns none of the stocks in this report.
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THOM CALANDRA of