Continental Gold CEO Ari Sussman: "Gold will outperform"

Of the 2000 junior resource companies we track, very few have the strength of Continental Gold Corp (TSX:T.CGL, Stock Forum). It has over $130 million in the bank, analysts believe its 5.5 million ounce Buriticá high-grade gold deposit in Colombia will become a cash cow, its technical and management teams are well-experienced, and when the deposit gets permitted (late 2014-early 2015), it will likely be taken out by a major. Amazingly, Continental CEO Ari Sussman — who hosted me for a conversation at his Toronto skyscraper office last Thursday — just recently turned 40.

“You picked a good day to come see me,” Sussman says with a smile as we sit down in his clean, cream coloured office, decked out with contemporary art. The gold price is actually down 3% today, but in Ari’s view, short term volatility doesn’t matter — gold will outperform whether the Fed prints or not.

“End the stimulus, and get a hard recession, or even depression, which is positive for gold. Remember: gold mining stocks performed amazingly during the Great Depression. Homestake was up something like 500% between 1929 and 1935,” Ari says. Alternatively, central banks can continue to inflate their currency to stimulate their economies, which is also good for gold, he adds.

It’s not just monetary intervention driving the yellow metal, according to Ari. “Have you seen the leverage on the paper gold market to inventories of physical gold available for delivery? 60:1. It’s worse than subprime. If you’re going to take delivery, where’s it going to come from? There’s no gold available.”



Here’s Ari

“I swear I’m not a gold bug,” Ari shrugs. “These are facts.”

I was introduced to Mr. Sussman through Pat Di Capo at PowerOne Capital. Pat and Ari are both forces 40 and under in the junior resource business. The two met while taking excess office space from Sheldon Inwentash’s Pinetree Capital (TSX:T.PNP, Stock Forum), and went on to found several companies together — Pat the Limited Market Dealer/broker, Ari the CEO.

“Ari’s secret weapon is his ability to find and motivate talent,” Di Capo tells me, referring to Sussman’s partner, acclaimed Australian geologist Vic Wall. Wall won the Goldcorp Challenge in 2001 and is one of the mining industry’s most successful explorers.

Wall, 69, met Sussman, 40, at a quiet PDAC mining conference in 2002, during the junior mining downturn of 1997-2003. Sussman says he was able to build a relationship with the legendary geologist because the industry was so dead back then, and both men had ambition to create wealth.

The duo’s first deal was Colossus Minerals (TSX:T.CSI, Stock Forum), which assembled the Serra Pelada precious metals project in Brazil, and was the site of South America’s largest gold rush in the 1980s (19 pics). Sussman, Wall and others, with the help of Di Capo, financed and developed that project to near-term production. Colossus shares reached almost $10 and maintained strong liquidity during Ari’s tenure as CEO. He left the position in 2011 to focus solely on Continental. [Ed. note: Under new management, Colossus has had its difficulties. According to Ari, they were underfunded at the wrong time.]




Serra Pelada gold rush in the 1980′s. (Unknown)

Colombia

After their success in Brazil, Sussman and Wall wanted to do something special in Colombia. Former president Uribe was stamping out corruption, the country’s geological potential was well-known, and Sussman had grown fond of the place after backpacking there in his early 20s.

According to Ari, the man with his fingerprints on everything gold in Colombia is Bob Allen. Mr. Allen, an American, moved to Colombia in the 1980s on the promise of its mineral potential. Ahead of his time, he spent the next twenty years assembling a portfolio of gold projects before having huge success in recent years by attracting partners such as Sussman and Wall, AngloGold (NYSE:AU, Stock Forum), B2Gold (TSX:T.BTO, Stock Forum), and others to develop his projects including Buriticá, Gramalote, and La Colosa.

“Bob has a tremendous vision and a great nose for assets,” Ari tells me.

Sussman and Wall saw potential in Allen’s private company, Continental Gold Corp. Allen had founded it in 1986 and stored much of his Colombian portfolio there, but many of the projects were dormant. Sussman was able to convince Allen to let him take Continental public in 2010, with Ari as CEO, Wall as Special Advisor, and Allen as Chairman.

Buriticá

Of the projects within Continental’s portfolio, Wall became focused on Buriticá, which operated a small but high-grade underground gold mine on a mountainside 60KM from Medellin. The project had been producing on a small scale, and had only a few drill holes in it when Wall and Sussman arrived. Honing in on the mine, Wall was able to reclassify Buriticá’s potential. Continental has since been able to prove up a resource in Buriticá which has become the envy of every gold company in Colombia — and all the majors are circling, according to Ari.

Buriticá is rare for its size and high-grade: 5.5 million ounces averaging around 10 grams per tonne gold in thick, deep veins. The deposit is open along strike and at depth, with depth being the key for exploration potential. Sussman believes Buriticá could grow to 10 million ounces or more.

Analysts tend to agree. “Buriticá could be producing 200,000 ounces a year for 20 years. It’ll be a cash cow for Continental Gold, or whichever major eventually takes it over,” said Colombia Gold Report’s Paul Harris.

Banks including RBC, TD, CIBC, BMO, Scotia, GMP, Dundee, and Clarus cover the company, with targets of $5.50 to $11.00 on Continental’s shares. Continental trades on the Toronto Stock Exchange under the symbol CNL, last at $4.00.

The market believes Buriticá will be sold.

Last leg

Continental will spend approximately $60 million in 2014 of the company’s $130 million treasury. Approximately half will be spent on drilling; the other half will go to underground development and G&A.

Permitting is a huge catalyst for Buriticá, says Ari. The project is already permitted with a mining license but requires a final amendment to the existing environmental permit to cover the surface portion of the proposed new mine, including the plant and tailings area. Continental is working closely with the authority who will review the application. Sussman expects to file the amendment application in late 2013, and is cautiously optimistic to receive permitting within a year from then (late 2014 to early 2015). Sussman is quick to remind me that permitting was Extorre’s catalyst to being sold to Yamana in 2012.

Continental is also drilling in new areas underground, and at other new discoveries on the 50,000+ hectare property.

The company is also working with M3 Engineering on a PFS scheduled for 2014. M3 worked on the Penasquito project, one of Goldcorp’s (TSX:T.G, Stock Forum) cornerstone assets. Sussman says Buriticá has similarities to Penasquito. Both are CBM deposits, which have rich, deep veins.

“There’s going to be a panic amongst majors to acquire good assets, and there’s already a massive shortage of quality projects available,” Ari says with concern for established gold producers.

If Sussman’s team can execute over the next year to year and a half, there’s a high chance he’ll be looking for work come 2015, at which time he’ll be 42.

In addition to Continental, Ari sits on the board of Dalradian Resources (TSX:T.DNA, Stock Forum), which is advancing the Curraignhalt Deposit in Ireland, and is led by Patrick Anderson. Anderson previously developed and sold Aurelian Resources to Kinross for $1.2 billion.

Sussman, Allen and Continental Gold are also behind Sabre Metals, which is in the process of amalgamating with Cordoba Minerals (TSX:V.CDB, Stock Forum), led by Fortuna Silver Chairman Simon Ridgway. Sabre is currently drilling a high-grade copper-gold porphyry target in Colombia, which if it hits, Ari says, could be spectacular. But it’s higher risk.

In my brief study of Ari Sussman, I found him to be engaging and articulate. His secret is simple: be extremely well-capitalized with the best people and best projects.