Stockhouse Ticker Trax is published to subscribers every Monday (annual cost only $99). We focus on best-in-class high growth small companies trading on the TSX and TSX.V between 5 cents and $3 with a market cap below $300 million.
Equity Analyst Danny Deadlock has 30 years of experience speculating on Canadian penny stocks and targets capital gain opportunities and diversification in metals and minerals exploration, energy, and technology.
For experienced investor, Ticker Trax provides and extra set of eyes and ears (idea generation) and for those learning to invest in micro cap stocks, we provide stock picks and market education.
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Update on Victoria Gold & warning flags flying in Colombia
1) Victoria Gold (TSX: V.VIT, Stock Forum; 15 cents)
www.vitgoldcorp.com
Net Cash: $35 million
Gold In-Ground Valuation: approx. $3 per ounce (assigning only 20% to Inferred resources)
A month ago I featured Victoria Gold near 17 cents while the stock was valuing their Yukon gold project at approx. $5 per ounce.
https://stockhouse.com/opinion/ticker-trax/april/5/six-million-gold-ounces-in-canada-worth-$5-oz-!-st
With the April collapse in gold prices and an announcement this past week that they would delay financing, the price of that gold-in-ground has fallen to an astonishing $3 per ounce (risked reserves). Average value of the 50 junior golds we track with a minimum one million ounces, has also collapsed to $17 per ounce.
VIT announced May 6th that they are suspending mine development until 2014. They have made good progress on debt financing, but struggling with the equity portion (which is not surprising in this market).
While the delay is disappointing, I would rather they delay development than finance at this ridiculously low valuation. That would result in terrible dilution to existing shareholders.
Its six million ounces are not going anywhere and this is one of the only large gold deposits in Canada owned by a public micro cap company, with good economics and environmental approval (Yukon). To push ahead with a dilutive financing in this market would have been devastating to shareholders.
Our intention in following VIT is for the takeover potential and with the gold valued near $3 per ounce, this should be a good one to tuck away.
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WARNING FLAGS IN COLOMBIA
If you own shares of junior exploration companies in Colombia (or are considering it), you’ll want to read through this section. 
This week it was announced by the Colombian government that they would delay an upcoming “first round” of mineral concession auctions. This auction process has been in the works since 2012 but the delay could have devastating consequences for those small public companies doing business in Colombia and hoping to secure the rights to their exploration projects.
The timing could not be worse because small companies are struggling to stay afloat and raise capital. For investors, this decision by the Colombian government spells risk – and institutional investors hate political risk.
Through Ticker Trax (paid subscribers) we recently started following Colombian Mines (TSX: V.CMJ, Stock Forum; 40 cents) who have a very important drill program starting by the end of the month – targeting high grade gold, copper, and silver at a project called El Dovio.
I checked with the CEO of Colombian Mines (Robert Carrington) to ensure they were not at risk by this auction decision. Mr. Carrington tells me their core projects like Yarumalito, El Dovio, and Mercedes are not affected because they have legal registration to the land – a process that took many years.
It is the companies (and there are a lot of them) that are waiting for final registration that could face serious problems.
The news from Colombia was disappointing because we have seen risk increasing throughout South America and Colombia was low on the risk radar.
World class discoveries will no doubt continue but now the government wants a bigger share of the pie. From an investment perspective, you want to ensure the public company has full legal right to their land – that is particularly important for public companies working with third-party private companies.
There is nothing wrong with investing in Colombia – you just need to do it wisely. The gains could be huge on some of these companies but stick with those who have full legal right over their exploration projects.
To dig deeper into this because so many investors have exposure to Colombia, I hunted down an old Canadian friend who lives in Colombia and has extensive mining experience there. He agreed to (confidentially) share his opinion – as harsh as it may be.
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These are his comments:
Sadly, as the 2010 mining code falls, this is another great example of the gang of monkeys they call a government in Colombia chasing a football around with obscene ideas occupying their mind and wasting everyone’s time and money.
In the end it’s just more of the same kind of delays the industry has been experiencing for years in Colombia.
You will be able to knock me over with a feather if they really do re-open the application process in June. If they do, I predict the system will open and crash almost simultaneously due in part to pent up demand but in even greater part to gross incompetence.
This makes the 4th or 5th time they have put out a deadline and they have always issued delays - usually just before they were supposed to take effect. A pretty smart guy by the name of Einstein commented that "the definition of insanity is doing the same thing over and over, and each time expecting different results."
Maria Constanza Garcia (new President of the National Mining Agency in 2012) has done nothing to help this industry. In fact, she has done just the opposite.
They still have 14,000 pending applications hanging out there, and instead of doing their mandated job, they are examining issued titles for deficiencies. They don't have the spine to stand up and put a muzzel on the Ministry of Environment or even start to defend the exploration and mining industry. Can you spell DIVERSION?
The government claims they want to stop speculation while in fact by going to an oil field style auction process they are inserting themselves as the biggest speculator, simultaneously destroying self initiation.
It is amazing who is at risk with these auctions.
Companies like Colombian Mines and Seafield are secure because I believe they own most of their properties already. I am not sure about companies who may have options to purchase or joint ventures (either in whole or in part) – a couple that come to mind may be Belhaven and Atico Mining.
I also believe Solvista's property at Caramanta is secure but do not know about their holdings in the Jerico area. The bulk of Continental Golds Buritica project seems to be secure but some of their outlying projects are clearly at risk. Eco Oro's Angostura project appears okay but they will have minor grey areas. Sunward also seems to have a solid position at Titiribi, and assuming Red Eagle completes its purchase of Santo Rosa de Oso I believe that property is in good condition. Red Eagle may be at risk at their Pavo Real and Mina Vieja projects in Tolima Departments.
Like Red Eagle, IF Belhaven Copper and Gold completes its purchase option for La Mina and completes its obligations to AngloGold Ashanti it will own those properties subject to production royalty reservations to the underlying owners. Assuming Atico completes its rather pricy option for Mina El Roble ($16.45 million) for a 90% interest, I believe the core production contracts are secure, however I do not know about the peripheral properties.
Miranda Gold is a good example of where you would need to do some serious digging. They just announced the purchase of MinaGrande in Colombia and if you dig deep enough I believe that Mina Grande and all of their other properties are applications and not granted Concession Contracts. The company pointed out that the Cannones (taxes) have been paid, but I know situations where companies paid cannones for many applications and years later they are still pending or were later denied.
There is no guarantee in Colombia that an application will be converted to a concession contract any time soon - if ever.
The other important element to remember in Colombia - under Colombia law you cannot sell an application. You can only sell a Concession Contract. So some companies are buying a “kiss and a promise" from the owner of the application. You must hope the owner properly registers that contract and until he does – you cannot get critically important permits for drilling, etc. – that process alone could take years.
Many junior companies want to jump into Colombia and take advantage of the rich resources. It is not for the faint of heart. The potential is there, but stick with companies who have a long history in the country and own their projects outright.
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Disclosure: Danny Deadlock owns 15,000 shares of Colombian Mines and 50,000 shares of Seafield.
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