Recently, the city of Toronto hosted the Cambridge House’s Toronto Resource Investment Conference, where a significant number of exploration, development, and producing companies set up booths allowing investors to interact with management and attend some interesting panel discussions.
Four companies in particular stood out from the crows after speaking with management. Two of the companies are producing companies and two are exploration firms. I find the exploration firms quite interesting for different reasons. The first one for the size of its deposit and location within a resource rich belt in South America. The second for its location in an emerging gold belt in Canada, management team, and initial success.
- Great Panther (GPL) – Silver investors should be more than familiar with Great Panther Silver whose stock price has more than doubled over the past year despite a greater than 50% pullback since its high in March.
Great Panther operates the Guanajuato and Topia mines in Mexico. Combined first half production exceeded 1.15 million silver equivalent ounces of production. A three year organic growth plan aimed at increasing silver production to 2.7 million ounces and silver equivalent production of 3.8 million ounces at an estimated cost of $5 per ounce, net by-product credits by the end of 2012 is in progress.
Recent exploration efforts have yielded success at Guanajuato and San Ignacio and the company is on the hunt for mine number 3 with more than $35 million on the balance sheet.
2. Osisko Mining (OSKFF.PK) - Osisko is known for the Malartic mine which went into commercial production earlier this year. Recent drilling has expanded the project to more than 10.71 million ounces of proven and probable gold reserves and led to new discoveries south and southeast of the pit. A resource estimate on the Jeffrey zone should be delivered soon, expanding the deposit further.
Initial guidance is for 1 million ounces of production by the end of 2012 divided up between 235-245 thousand ounces at $675-775 per ounce and approximately 700,000 ounces of gold production at $450-500 per ounce for 2012.
Next up for Osisko is Hammond Reef which holds an estimated 5.6 million ounces of gold and estimated to be placed in production by early 2016. Osisko recently signed an option to acquire an interest in the Famatina gold project in the La Rioja Province of Argentina.
Osisko owns two deposits which are considered core deposits with respect to building a large scale mining operation. The cornerstone asset, the Malartic deposit appears to be much larger than expected with recent drilling success outside of the pit area.
3. Sandspring Resources (SSPXF.PK) – Sandspring owns the Toroparu gold/copper deposit in Guyana which holds slightly more than 8.4 million Measured, Indicated, and Inferred ounces of gold and 566 million pounds of copper.
Additional drilling continues on property to the tune of 10,000 meters per month to better delineate the deposit which remains open along strike.
The Guiana shield, where the deposit is located, can be better described as a part of the West African gold belt if South America and Africa were still combined. This gold belt hosts numerous large scale deposits including Iamgold’s (IAG) Rosebel deposit in Suriname, Newmont’s (NEM) Ahafo deposit and Goldfield’s Tarkwa deposit in Ghana, and Guyana Goldfield’s (GUYFF.PK) Aurora deposit in Guyana.
A preliminary economic assessment was completed earlier this year with 310k oz. of gold and 29 million lbs. of copper per year at a cost of $317 per ounce during a 3.25 year payback period and a $617 million dollar pre-production capital expenditure.
A pre-feasibility study is expected to be completed during the first quarter of 2012 with production slated to start in 2015. The founders, management, and directors control 38% of the issued stock so the management has significant interest in building value.
4. Balmoral Resources (BALMF.PK) – Detour Gold’s (DRGDF.PK) acquisition of Tradewinds Ventures has turned a number of eyes towards the Sunday Lake Fault Trend of which Balmoral owns or has rights to acquire a 70 kilometer long land position.
Balmoral is headed by Darin Wagner, the co-founder and CEO of West Timmons Mining, which was sold to Lakeshore Gold (LSG.TO) in November of 2009 for $424 million, returning more than 20x for his original investors.
Drill results from the Martiniere West Gold Zone have doubled the strike extent with the deposit remaining open in all directions at shallow depths and exploratory drilling on the properties has been yielding success.
Balmoral is a very early stage mining company, but a glance at the management shows a track record of success across the board. This track record should be respected by investors.
The Sunday Lake Fault Trend has been largely ignored by investors, but with Detour Gold on the verge of bringing its deposit to production and the acquisition of Tradewinds Ventures, eyes are now being focused on the length of the gold belt. Balmoral owns and is drilling on a significant amount of acreage east of the deposit.
I am not one that recommends exploration or development companies, preferring to get exposure to that part of the gold market through other ventures. However, both companies hit the mark in two areas that I consider important. The first is a massive deposit, greater than 5 million ounces, which can be exploited over a decade and of potential interest to majors or become a cornerstone deposit. The second is a management team with a track record of success.