After reaching highs of $1900/oz in the middle of last year, Gold fell all the way to just below $1600/oz. Since then, the precious metal has been rallying and it may not be too late to jump on the gold rally.
One under the radar stock that may present such an opportunity is North Springs Resources (OTCPK:NSRS). The company, headquartered in Nevada, has had a number of exciting announcements recently that should propel it in front of the eyes of mainstream investors and money managers.
For some background, North Springs Resources is focused on the evaluation, acquisition, exploration, and development of mineral resource properties. Currently, the company is in the evaluation and acquisition phase of operations. The Company is led by a skilled and experienced management team and independent consulting geologists with many years of experience. North Springs is committed to creating value for its shareholders by advancing its current holdings and by acquiring new properties with significant potential.
The critical piece of information came out on February 2 when the company announced that its analysis at the Goldstar property indicates potential for up to a multi-billion dollar gold estimate. North Springs Resources said that it positively re-analyzed the potential reserve estimates for the Goldstar/One Arm Joe Gold Project made by previous operators. Surface observations and new data collected from the ongoing drill program at Goldstar, along with historic references to the property, comparable mines in the surrounding area, previously available sampling and exploration data pertinent to the Goldstar site, and based on industry standards, indicate that the possible reserve estimate for the property could be as high as 2,769,230 tons grading 0.7 oz. gold/ton, or 1,938,461 ounces of gold.
Calculation of the updated potential gold estimate utilized numerous visual observations at Goldstar and historical information of the Goldstar site and surrounding areas which indicate that various sections of gold bearing quartz veins in the region may reach continuous depths down to approximately 2,000 feet. The Goldstar Property consists of 9,000 feet of a gold bearing quartz vein that appears to be 1-2 feet wide on average at the surface stretching over two zones (Goldstar: 6,000 feet and One Arm Joe: 3,000 feet) and nine (9) claim blocks totaling 180 acres. Notably, the gold bearing quartz vein that runs the length of the Goldstar site appears to be approximately six miles long - an area that well surpasses the Goldstar site.
As we move forward with exploration at Goldstar, the overall size and potential of the project continues to grow and impress us, stated Harry Lappa, President of North Springs Resources. Our new found knowledge of the property and area indicate that we could be sitting on up to 2,000,000 ounces of gold at Goldstar, which, if realized, could be worth approximately $3.2 billion at today's gold prices. Exploration and drilling will continue as we strive to prove up this possible massive resource.
The company is also busy exploring its other holdings. On January 31, North Springs Resources announced that it has commenced phase one exploration at the Imperial Gold Silver Property in Esmeralda County, Nevada, located about 150 miles northwest of Las Vegas in the Railroad Springs Mining District.
We are thrilled to be able to announce that we have already completed an initial sampling program at the Imperial Property so early in the year. This, along with the North Springs Property in Nevada and the Goldstar Property in Arizona, make three currently active exploration programs underway for the Company, stated Harry Lappa, President of North Springs. In the western portion of the Imperial Property, high-grade gold and silver vein targets were sampled at the old Imperial Mine workings to confirm historic assay results. Several samples were collected there over 460 feet in the Lower Adit and over 200 feet in the Upper Adit. In the eastern portion of the property, we collected several more surface samples from the high-priority Resource Target. We will send the samples into the laboratory for immediate testing and intend to release the assay results as soon as they become available.
The Imperial Property consists of 24 unpatented mineral claims covering approximately 480 acres and includes the historic workings of the high-grade Imperial Mine. Previous exploration has identified four high-priority target areas at the Imperial Property; Imperial Fault Target, Jasperoid Breccia Target, IP Target, and Resource Target. The phase one exploration plan for the Imperial Property outlines a four month $250,000 exploration program that will include geochemical and environmental studies, followed by a reverse-circulation drilling program intended to test previously identified mineralized zones and potentially increase the 50,000 ounce gold resource estimate made by previous operators.
The last piece of big news is the company's recently announced acquisition of a property. On January 26, North Springs Resources announced that it executed a Definitive Agreement with Discovery Gold Ghana Limited to acquire up to a thirty five percent (35%) interest in the Edum Banso Gold, a high-potential gold exploration property in Ghana, Africa.
Terms of the Definitive Agreement call for North Springs to acquire an immediate 25% interest in Edum Banso by issuing 10,000,000 restricted common shares of Company stock to the current shareholders of Discovery Gold. North Springs can acquire an additional 10% interest in Edum Banso by paying $250,000 to Discovery Gold and funding a multi-phase $1,000,000 work commitment in 2012. The Company has already advanced $150,000 to Discovery Gold towards the total cash consideration with the balance of $100,000 payable within 30 days.
The Edum Banso Gold Project is a prime example of a high-potential and almost drill-ready gold property that we think has huge near-term upside from several significant targets, said Harry Lappa, President of North Springs. We look forward to working closely with our new partners and anticipate appointing a qualified Project Geologist to plan and lead the next stage of exploration.
Lendor's Vote of Confidence
On January 20, North Springs Resources received a vote of confidence from its credit provider as the company secured additional funding. The company announced that it reached an agreement to expand the company's Draw-Down Line of Credit Note facility by an additional $750,000 to a total of $1,750,000. The proceeds from this financing may be used for project acquisitions, project exploration and development, general working capital, or such other purposes as the Company may determine from time to time.
The company is awaiting the results from its first drill core samples in its Arizona property. On February 1, North Springs Resources said that the first drill core samples are expected to be recovered from the exploration program currently underway at the Company's 20% owned Goldstar/One Arm Joe Gold Project (the "Goldstar Property" or "Goldstar") located near Wickenburg, Arizona. North Springs and its partners are currently conducting a 21-hole drill program at Goldstar, focusing on seven (7) high-priority target areas.
Drilling at Goldstar continues to progress nicely and all initial indications have been positive, stated Harry Lappa, President of North Springs Resources. Our experienced exploration team on the ground is performing very well and I expect they will continue to perform at a high level for the remainder of the program. We look forward to getting some new drill results soon and possibly adding to the previous gold estimate of 350,000 ounces.
North Springs Resources compares to a company like Yamana Gold (NYSE:AUY) when it became public in 2004. Since then, the stock has sky rocketed over 850%. A comparable rise in North Springs Resources stock would make it close to a $10 stock.
Something also to keep in mind is that with the potential in the North Springs' properties, it may be a perfect acquisition opportunity by one of the big cap gold stocks such as Newmont Mining (NYSE:NEM), Barrick Gold (NYSE:ABX), or Yamana Gold itself. In a recent article published on Seeking Alpha, the author noted that investors should "expect mergers and acquisitions in the gold mining industry moving into 2012." The reason given was that many of the senior miners "face the prospect of maturing mines and diminishing reserves, in addition to production delays and shortfalls among new projects."
The M&A trend is in effect so an acquisition wouldn't be a shock as there were two notable deals in the industry in 2011. Barrick Gold acquired Equinox Minerals Limited for C$8.15 per Equinox share in cash, or a total of approximately C$7.3 billion. In another deal, AuRico Gold (NYSE:AUQ) agreed to acquire Northgate Minerals.
Gold has come off its 2011 highs but the long term trend still points north and analysts agree. Kitco Metals, one of the world's premier retailers of precious metals and a leading supplier of refining services, recently conducted a survey of 8 brokers and banks and their forecasts for gold prices for 2012. Here is a summary of their forecasts:
- Morgan Stanley lists gold among its "favorite longs" in the commodity complex for 2012 and forecast prices of $2,200 an ounce.
- UBS says its core view on gold remains bullish, with an average 2012 price of $2,050 forecast. The broker added that "most of the factors that pushed gold higher in 2011 are not going away."
- BNP Paribas remains positive on gold prices in 2012 with an average price for gold of $1,775 an ounce.
- SEB Merchant Bank, the Swedish bank, says it forecasts an average gold price of $2050/oz in 2012. "Additional outbreaks of volatility should however be expected in coming months during flights to liquidity with the European crisis still in a critical phase and the effects of Chinese monetary tightening topping out," they say.
- TD Securities forecast an average price for gold of $1,855 an ounce for 2012. There are still many factors that are supportive for gold, including "'money-printing,' record low interest (real) rates (low opportunity costs) and continued strong physical buying (ETFs, bullion and coins) are important catalysts helping to lift gold to new records in Q4-2012," they say.
- Barclays Capital said that gold should trade as high as $2,200 an ounce in 2012 and silver should touch $45.
- MKS Finance looks for gold to hit record highs in 2012, averaging $1,808 an ounce with a forecast peak of $2,120. "We expect most of the factors that drew gold higher in 2011 to continue to push the yellow metal towards a new all-time high in the course of 2012: geopolitical tensions in specific regions, sovereign-debt quality deterioration, (and) official-sector buying just to name a few," MKS said.
- Sharps Pixley sees gold averaging $1,765 an ounce in 2012. "Fundamentally gold remains a good bet--the market is supply constrained and demand in Asia remains robust," Sharps Pixley says.
Separately, in a recent article on Mineweb, the author noted that forecasts for gold are "still very positive for 2012." The website said that Martin Murenbeeld, Chief Economist at DundeeWealth Economics, is predicting that the gold will end the year at a price of $1950. The article further noted that he has a strong record in predicting gold price performance.
Notably, industry analysts are bullish on precious mining stocks. According to Kitco, analysts with Barclays Capital gave a "heavily overweight" rating to the base- and precious-metals sectors based on "better-than-expected economic data have helped to ease concerns over the outlook for global growth."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.