Business: Exploration and development of gold and copper projects in Brazil, Colombia, and Alaska, and U3O8 in Alberta.
Traded Toronto: GOLD
USOTC: GLDLF
Shares Outstanding: 118,615,324
Initial Coverage 7/28/12: US$0.91
Price 6/2/17: US$1.26
Market Cap: US$149 million
Fully Diluted Shares: 135.4 million
Gold Resource (all categories)*: 24.4 million oz.
Cash Holdings with No Debt: C$20 million
Progress Rating: A3
Phone Number: 855-630-1001
Website: www.GoldMining.com
*By acquiring projects when they were out of favor, GoldMining has built up a global gold resource with minimal dilution. The breakdown of GoldMining’s 43-101 global resources by category and property is displayed by chart on the following page.
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THE BOTTOM LINE
I’m excited about some of the penny gold exploration stocks covered in this letter. But I’m also bullish on gold and believe that optionality plays like GoldMining will become big winners during this gold bull market. I also believe that as the cycle matures, large-scale gold-copper porphyries like those recently picked up by GoldMining at the bottom of a cycle will become highly sought after by the major mining companies simply to keep their gold production at current levels.
It should be noted that while GoldMining is an option play on gold, many of its projects have huge exploration potential as well, which will not be overlooked by major mining companies that may come into the picture. To optimize shareholder value, I view this management approach as kind of a mix between a prospect generator that carefully guards its financial resources, but, unlike most prospect generators, already holds a huge number of ounces in the ground. With 24.4 million ounces of gold in the ground and with just under 120 million shares outstanding selling at around US$1.25 per share, the market is paying a mere US$6 per ounce of gold in the ground. Let’s say the price of gold rises just $100 per ounce, or 8% above its current price. There is no way then that the market won’t pay $20 or $30 per ounce owned in the ground. Then you take a look at the chart and ask yourself, given the basing action of these shares this year, if this might not be a very opportune time to get some of these shares into your portfolio. At least that is what I’m asking myself
My friend John Kaiser rejoices in the fact that we are in a period where money is flowing into new discoveries and that we don’t have to sit back and wait for the price of gold to drive our stocks higher.
John is right. It is an exciting time for exploration stocks and nothing is more exciting than seeing a ten-cent stock explode to $5 or $10 when massive hidden wealth is revealed by the drill bit. But another strategy that works extremely well is the optionality play in which companies with financial resources during cyclical downturns acquire mineral wealth already discovered through expensive drilling in the past by companies that have since fallen on hard times. Amir Adnani has been one of the few CEOs I know in Vancouver who has cheered for the bear market in gold to continue so that he could pick up more valuable assets at fire sale prices. But GoldMining is not only an optionality play. It has a very strong cash position that it can prudently use to increase the value of several of its projects even as we await higher gold prices.
For two reasons, I want to call your attention to the chart at the top of the following page. The chart displays the TSX Venture share price performance over the past ten years. First I want you to note just how depressed the micro cap exploration industry remains. Sure, we had a nice run up after the 2008-09 crisis. But the five-year bear market in gold took the index to lows not seen since 1999 prior to that amazing rise in gold shares and junior exploration stocks that peaked as the financial crisis was nearing its birth.
The second reason I’m showing the chart above is to make the point that under Amir Adnani, GoldMining has been acquiring various assets at exceptionally low price points. This is why when I met Amir in his office in January of 2016, he expressed his view that he would be happy to see the junior mining sector remain in the gutter a while longer. My own view, confirmed by the work of Michael Oliver, is that gold and commodities have hit bottom and are starting a new bull market. If so, now may be a grand time to pick up some shares of GoldMining Inc., which has a gold resource of approximately 0.2 oz. of gold per share, which currently is priced at around US$1.25.
On a Gold-Copper Porphyry Binge!
The last three acquisitions made by GoldMining, namely, the Whistler acquisition in Alaska, and the Titiribi and the Bellhaven acquisitions in Colombia are primarily gold-copper porphyry targets. When I spoke to Chairman Amir Adnani earlier today he explained to me that there were two basic reasons why the company has acquired porphyry targets. First, with the gold bear market that began in 2011, demand has been very strong for smaller high-grade projects. At the same time virtually no one was seeking the large-scale bulk-mineable porphyry targets. So from Amir’s point of view, the gold-copper porphyry targets represented the best value. Secondly, Amir and the board are seeking to grow GoldMining into a very substantial company. True, many of the company’s 24.4 million ounces of gold are from lower-grade bulk-mineable targets. But as Amir notes, those major deposits are what the major miners always seek during bull markets. Their immense size makes it mandatory that they acquire large deposits. Over the next year or two as this bull market in gold continues, I suspect there will be acquisitions of one or more of GoldMining’s larger porphyries.
The La Mina Gold-Copper Porphyry
That brings me to the most recent of these porphyry acquisitions. Just this week, GoldMining announced the acquisition ofBellhaven Copper and Gold, a company with nearly 1.5 million ounces of gold located in an emerging world-class gold-copper porphyry mineral belt in Colombia. Here are the highlights of this latest acquisition:
- GoldMining consolidates leading gold-copper porphyry portfolio in the underexplored Mid Cauca Belt of Colombia, with the addition ofLa Minato its existing asset base that includes the Titiribi gold-copper project and adjacent concession applications;
- GoldMining's Colombian portfolio now has total contained resources of 5.3 Moz gold (7.2 Moz gold equivalent) in the measured and indicated categories and 3.5 Moz gold (3.9 Moz gold equivalent) in the inferred category as detailed in Table 2 below and includes over 10 gold-copper porphyry prospects for follow-up exploration as shown in Figures 1 and 2;
- La Mina hosts theMiddle Zone and La Cantera deposits, as well as several high-priority prospects includingLa Garrucha, El Limon, El Oso, Media Luna and Buenavista;
- La Mina pit-constrained resource totals1.01 Moz gold equivalentgrading 1.12 g/t gold equivalent in the indicated category and0.43 Moz gold equivalentgrading 1.07 g/t gold equivalent in the inferred category at a 0.25 g/t gold cut-off as detailed in Table 1 below;
- La Garrucha aeromagnetic anomaly is substantially larger than those associated with either the La Cantera or Middle Zone deposits. The last drill hole completed at La Garrucha intersected 271 m grading 1.03 g/t gold and 0.13% copper as reported in Belhaven’s news release dated September 10, 2013;
- A total of 106 diamond drill holes in 36,815 m have been completed to date at La Mina;
- Bellhaven acquired for total consideration of 7,339,303 common shares of GoldMining, representing 5.8% dilution to existing GoldMining shareholders; and
- GoldMining's global estimated resources now includes 8.5 Moz gold (11.4 Moz gold equivalent) in the measured and indicated categories and 10.6 Moz gold (13.0 Moz gold equivalent) in the inferred category as detailed in Table 2 below.
As Amir noted,beyond the current defined resource base, La Mina and Titiribi collectively host several underexplored porphyry targets, which we believe offer excellent opportunities for potential new gold discoveries in an area with excellent infrastructure.
The Titiribi Gold-Copper Porphyry Acquisition
During September 2016 the company announced the acquisition of theTitiribi Projectthrough the acquisition of Sunward Investments Ltd. At that time, GoldMining Inc. was still known as Brazil Resources.
The Titiribi project is located in central Colombia, approximately 70 kilometres southwest of the city of Medellin in the department of Antioquia and comprises one concession that covers an area of approximately 39.19 square kilometres. The project is located between 1,200-metre and 2,200-metre elevations, below the elevation of the Paramo tropical mountain ecosystems, and is road accessible by paved highway from Medellin, with high-power electrical lines passing within three kilometres.
The project occurs within the Mid-Cauca porphyry belt and consists of several near-surface bulk-tonnage gold-copper porphyry and associated epithermal gold systems. A total of 270 diamond drill holes, totalling 144,779 metres, has been drilled at the Titiribi project, with nine mineralized areas identified to date.
The Mid-Cauca porphyry belt hosts several gold projects in development or production in the last decade, including AngloGold's Ashanti's Quebradona, B2Gold's Gramalote, Continental Gold's Buritica, Red Eagle's San Ramon and Gran Colombia's Marmato projects. This has largely coincided with the government encouraging foreign development in a region that has not seen, until recently, the implementation of modern exploration programs.
The first acquisition of a gold-copper porphyry was made on August 6, 2015, when the company acquired a 100% interest in the Whistler Orbit Project in Alaska. Following are the highlights from that August 2015 press release:
- Whistler Orbit, an extensive area (approx. 25 sq km) of phyllic (quartz-sericite-pyrite) alteration that is peripheral to several mineralized porphyry deposits and targets located directly east of the Whistler deposit;
- Island Mountain gold-copper porphyry center, which hosts multiple porphyry centers including the Breccia, Cirque, Howell and Super Conductor zones that occur within an area of 9 sq km and located approximately 23 km south of the Whistler deposit;
- Muddy Creek intrusion-related gold target consisting of quartz-sulphide veins that are hosted within intrusive phases of the Estelle Composite Intrusive Suite and on which historic reconnaissance rock-soil geochemistry and geophysics has outlined multiple gold anomalies (Discovery Creek, Phoenix Creek, Arseno Knob and Bonanza zone) over an area of 5.5 sq km and located approximately 18 km southwest of the Whistler deposit; and
- Several gold-copper targets outlined by historic soil geochemistry, geophysics, and mapping.
The Whistler Gold-Copper Porphyry Project is located approximately 150 km northwest of Anchorage, Alaska and is comprised of 304 Alaska state mining claims (170 sq km) in the Yentna Mining District. Exploration programs can be carried out from a 50-person all season camp that is located 2.7 km east of the Whistler deposit. The camp includes a gravel airstrip, 38 kW diesel generator, water well, septic system and fuel storage facility. The Whistler deposit and adjacent prospects in the Whistler Orbit are connected to the camp and runway by a 6 km access road.
The Whistler Project comprises a gold-copper district in an underexplored area of south-central Alaska. It is underlain by a volcano-sedimentary sequence (Jura-Cretaceous Kahiltna Assemblage) that has been intruded by the Late Cretaceous Whistler Intrusive Suite with associated gold-copper porphyry and epithermal mineralization, and the Late Cretaceous to Paleocene Composite Intrusive Suite with associated intrusion-related gold mineralization.
The Whistler Gold-Copper Porphyry Deposit was the subject of a historic resource estimate published by Kiska in 2011 (Table 1), which calculated 79.2 million tonnes grading 0.51 g/t gold, 1.97 g/t silver, and 0.17% copper for a gold-equivalent grade of 0.88 g/t. The inferred resource comprised 145.8 million tonnes grading 0.4 g/t gold, 1.75 g/t silver, and 0.15% copper for a gold-equivalent grade of 0.73 g/t.
After carrying out its own work on the property, a new resource for the Raintree West Porphyry Deposit only was calculated and announced on May 17, 2016. Following are some of the highlights of this announcement, as provided by the company on May 17, 2016:
- The district-scale Whistler Project is a 170 square kilometre land package that hosts the Whistler, Raintree West and Island Mountain porphyry deposits as well as several porphyry targets;
- A new resource estimate on the Raintree West deposit provides for a total inferred resource of1.991 Moz gold equivalentcomprised of1.428 Moz gold equivalent(51.76 Mt grading 0.68 g/t gold, 3.74 g/t silver, 0.10 % copper or 0.86 g/t gold equivalent at a 0.6 g/t gold equivalent cut-off) below the 100 metre elevation (Zone A) and0.563 Moz gold equivalent(31.68 Mt grading 0.40 g/t gold, 5.39 g/t silver, 0.06 % copper or 0.55 g/t gold equivalent at a 0.3 g/t gold equivalent cut-off) above the 250 metre elevation (Zone B);
- The Raintree West resource estimate is in addition to the previously reported resource estimates for the Whistler and Island Mountain deposits. The combined resource for the three deposits is2.797 Moz gold equivalentin the indicated category (110.28 Mt grading 0.50 g/t gold, 1.72 g/t silver, 0.14 % copper or 0.79 g/t gold equivalent) and6.731 Moz gold equivalent(311.26 Mt grading 0.47 g/t gold, 2.26 g/t silver, 0.11 % copper or 0.68 g/t gold equivalent) in the inferred category;
- Over C$50 million spent on prior exploration work on the Whistler project, which included approximately 70,000 metres of diamond drilling with 7,078 metres (14 holes) of this total completed at the Raintree West deposit; and
- The deposits are open in several directions and future drill programs will focus on delineating higher grade, near-surface zones, adding to these existing resources and testing adjacent porphyry targets.
The Brazilian Projects
GoldMining went public as Brazil Resources. Its sole focus at that time was Brazil. GoldMining is most certainly still active in Para State of Brazil, and in fact based on a discussion I had with Amir last week, I expect to see some efforts put into the Sao Jorge Project this year.
With gold selling at $1,250, recent economic studies have the Sao Jorge producing between 80,000 and 100,000 ounces of gold per year and delivering an IRR of 30%. But those economics were based on production from just 1 million ounces of the total resource of 1.7 million ounces. Amir believes with a modest drill program of around $1 million, mineable resource at Sao Jorge can become considerably larger. And with 80% of the landholding unexplored, there are a lot of greenfield targets there as well.
While some of the other projects show some promise, GoldMining is clearly going to employ their resources to optimize shareholder value and they have clearly acquired the larger-scale once-in-the-ground mega-million-ounce projects that are likely to have their day in the sun as this bull market in gold heads toward maturity in the coming years. I didn’t discuss this with Amir, but it would not surprise me if GoldMining didn’t farm out some of its Brazil projects that may appear more limited in size potential.
The Rea Uranium Project
By accident more than anything, in November 2013, GoldMining Inc. (then Brazil Resources) acquired the Rea Uranium Project. It’s an asset that the market has barely if at all noticed, especially when U3O8 is selling at $20 per pound. As head of Uranium Energy Corporation, Adnani is no stranger to the uranium mining industry so he was ready to pass along some important information regarding the prospects of the Rea Uranium Project when I spoke to him this week.
To be sure, the Rea Project has some excellent potential. It is surrounded by Areva’s Maybelle Deposit where a 5-meter intercept graded 17.7% uranium. Some $10 million has been spent on this project in which GoldMining holds a 75% interest and Areva a 25% interest. For sure it is a major plus to have Areva as a partner and if anything significant becomes of this project, which is located in the richest uranium fields in the world, I would expect Areva will carry the ball to a very great extent.
With current prices of uranium at a very low $20 per pound, which is below the level of the lowest cost of any mine to produce it, it’s only a matter of time before U3O8 finally breaks out and when it does, it is likely to present that kind of “whoosh” moment that Michael Oliver likes to talk about. At present there are more nuclear reactors operating than at any time in history. The reason prices are so low now, according to Amir, is the delay in getting some 20 reactors back up and running in Japan. Amir noted that analysts were expecting all 20 Japanese reactors to be on line by now. In fact only four have be reactivated. Since price is set at the margin, the delay has meant an overhang in the spot market. But Amir remains positive on the market and thinks that when this excess is finally used up there will be a sudden rise in the price of uranium.
When that happens, GoldMining’s activities on the Rea Project should start to gain some attention. In June of 2015, the Alberta Department of Environment and Sustainable Resource Development provided GoldMining with permits to begin drilling. The Project is located in the western portion of the Athabasca Basin, which the Company believes is an underexplored region and which has seen renewed exploration activity with the recent discoveries in the Patterson Lake area by Fission Uranium Corp. ("Fission"), NexGen Energy Ltd. ("NexGen") and PurePoint Uranium Group Inc. ("PurePoint").
The Rea project is one of the largest land holdings in the western Athabasca Basin at 1,253 sq km (125,328 ha). It is owned by Brazil Resources (75%) and AREVA Resources Canada Inc. ("AREVA") (25%), and completely surrounds AREVA's Maybelle River project. The Maybelle River project covers the north-northwest striking Maybelle River Shear Zone ("MRSZ"), which hosts relatively shallow (<200 m), high-grade uranium mineralization at the Maybelle River deposit, which was discovered in 1988. The deposit was discovered in 1988 and published drill intersections include 17.7% U3O8 over 5m in MR-39 and 4.7% U3O8 over 1.7 m in MR-34 (Wheatley and Cutts, 2013)1. The MRSZ extends an additional 11 km north of the Maybelle River project across the Rea project, which will be the focus of the proposed exploration and drill program. A major regional shear zone that hosts high-grade, near-surface uranium mineralization only 9 km to the south at the Maybelle River deposit has been targeted.
While GoldMining will continue to focus on gold, investors should be mindful that the Rea Uranium Project is a very attractive asset. While it provides zero value to these shares now, with some high-grade drill intercepts sometime in the future it could quickly double GoldMining’s current market cap.
Going Forward/The Next Acquisition
In May of this year, GoldMining announced that it will be acquiring a 100% interest in the Yellow Knife Gold Project (YGP) in the North West Territory through a bankruptcy proceeding. This was a project that I was familiar with years ago when Tyhee Gold Corp. owned and operated it.
The YGP comprises five deposits -- Nicholas, Ormsby, Bruce, Goodwin and Clan Lake -- located 50 to 90 kilometres north of the city of Yellowknife in the Northwest Territories. The project includes a 50-person winterized camp and fuel storage, and is accessible by winter road from Yellowknife or by air to a 1,000-metre-long gravel airstrip located on site.
The project comprises 17 mining leases and eight mineral claims with an aggregate area of 8,935 hectares. The YGP is subject to a 2.25-per-cent net smelter return royalty, including a $20,000-per-year annual advance royalty, on the Ormsby-Nicholas Lake property, and a 2-per-cent net smelter return royalty on the Goodwin Lake property.
Diamond drilling completed to date includes 141 holes (27,590 metres) drilled at the Nicholas Lake deposit, 707 holes (157,570 metres) drilled at the Ormsby and Bruce deposits, 28 holes (5,934 metres) drilled at the Goodwin Lake deposit, and 185 holes (40,515 metres) drilled at the Clan Lake deposit.
Total consideration payable by GoldMining under the transaction consists of four million common shares of GoldMining, which will be subject to customary escrow provisions and released as follows:
- 1,574,000 shares on the four-month anniversary of closing;
- 1.18 million shares on the six-month anniversary of closing;
- The balance on the eight-month anniversary of closing.
Upon closing, GoldMining plans to commission an independent resource estimate for the project and complete a technical report documenting the results of this estimate. However, what we do know is that based on extensive past drilling, some 2 million ounces of gold were outlined grading 2 g/t in what was viewed as an open-pit operation.
While this acquisition has not yet been closed, it is my understanding that it is all but inevitable, and when I spoke to Amir Adnani this week he suggested that the Tyhee project could be one that the company will be among those it is most actively moving forward. That would be in addition to spending $1 million to $2 million on Sao Jorge, as noted above, to increase the resource and improve the economics with that Brazilian project and also another $1 million to $2 million to pick up on some very promising drill results on the La Mina Property that were not followed up on because of a lack of financial resources.
MANAGEMENT
I have only talked about Amir Adnani, the chairman of GoldMining. I have known Amir for many years both with respect to his management of this company as well as Uranium Energy Corporation. One of the factors that has made him so successful is his ability to recruit top talent. Day-to-day activities are handled by Garnet Dawson, CEO, and Paulo Pereira, president. I would encourage subscribers to visit the company’s website for more details on the experience and quality of management as well as the board of directors.
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