We first wrote about the Canarc Resource Corporation (OTCQB:CRCUF) way back in March 2007 when this stock was trading at $0.70, so as you can see it has been on the Watch List for a long time. We chose not to make a purchase then and instead we opted to wait and observe its progress. This year Canarc has traded as low as $0.10, that is until this week, when it bounced and doubled its share price to $0.20, closing yesterday $0.19, as the chart below indicates.
Taking a quick look at the chart you will note the sudden spike in the price and also the increase in the number of shares traded. The technical indicators are now on the ceiling which suggest an overbought situation, so we could see some consolidation over the next week or so.
Our interest in this stock stems from our holdings in Endeavour Silver Corporation (EXK) which is our second largest holding in the silver space and is managed by Bradford Cooke who is the chairman and CEO. Brad is also the chairman and CEO of Canarc and is a man with a lot of experience in this industry and is well qualified as this brief resume depicts:
Brad is a professional geologist with 36 years experience in the mining industry, specializing in the discovery and development of mineral deposits. His academic qualifications include a B.Sc., in Geology (Honors), obtained at Queens University, Kingston Ontario and a Masters degree in Geology obtained at the University of British Columbia in Vancouver. Brad then went on to gain experience as a project geologist managing various mineral exploration programs.
In 1988, he launched the Canarc Resource Corporation and has overseen its growth since that time, acquiring, financing, exploring and developing gold mining properties throughout North, Central and South America.
His membership of professional bodies include being a Member of the Association of Professional Engineers and Geoscientists of British Columbia, The Canadian Institute of Mining and Metallurgy, The Prospectors and Developers Association of Canada, the B.C.- Yukon Chamber of Mines and he is also a Fellow of the Geological Association of Canada.
We would also bring to your attention that he has taken Endeavour Silver from a $0.10 stock to a $10.00 stock which is a terrific achievement and testament to his track record.
Canarc Resource Corp., is focused on building shareholder value by discovering and developing gold mines throughout North America, advancing the development of its core asset, the New Polaris gold mine project, a past producing, high grade gold property in northern British Columbia to feasibility and production
Review of 2011 and Outlook for 2012
Bradford Cooke, provided the following review and update of Canarc's progress in 2011, and its plans for 2012.
Highlights of 2011
Completed an updated NI 43-101 Preliminary Economic Assessment Report for the New Polaris gold mine project in northwestern British Columbia, which significantly enhanced the robust project economics for Canarc to build and operate a 72,000 oz per year gold mine at New Polaris.
At US$1400 per oz gold and a $1.00 CA/$US exchange rate, the Discounted NPV (5%) = US$195 million, Internal Rate of Return (IRR) = 42.8%, Payback Period = 1.85 years, Capital Costs were estimated at US$75 million and Cash Operating Costs were a low US$481 per oz.
Received several expressions of interest from mining companies interested in an option and joint venture to advance New Polaris through mine development and a feasibility study, and agreed on a non-binding letter of intent with one party, but they were unable to close the agreement.
Amended the Tay LP property option agreement with Ross River Minerals Inc, to extend the option commitments by one year.
Identified several new exploration targets on the Tay LP property in the light of the positive results from the 470 kilometer airborne geophysical survey that Cap-Ex completed in 2010.
Acquired the Windfall Hills project (3,780 hectares) located in central British Columbia about 90 km northwest of New Gold's 7.8 million oz Blackwater gold deposit.
Staked three additional gold properties called Devils Thumb, Devils Thumb East and Windfall Hills East (15,175 hectares) north and east of the Windfall Hills project.
Defined initial drill targets on the Windfall Hills project by completing a Phase 1 exploration program including detailed soil and rock geochemical sampling over the main target area
Evaluated several attractive merger and acquisition opportunities in order to take the company to another level of growth in an accretive manner
The year 2011 was a challenging one for junior mining companies and Canarc was no exception. Following an upbeat 2010, in large part due to the proposed acquisition of Relief Canyon gold mine in Nevada, Canarc made the difficult decision not to pursue the purchase of Relief Canyon in early 2011 based on additional due diligence. We subsequently sold the Relief Canyon assay laboratory near Lovelock, Nevada for US$600,000 plus expenses, thereby recovering all of the Company's sunk costs related to this acquisition.
As described earlier, the updated preliminary economic assessment of the New Polaris gold mine project returned substantially improved economics for the development of a 72,000 oz per year gold mine. As a result, Canarc has recently received several new expressions of interest in New Polaris from mining companies. Management intends to seek a new partner for the development of New Polaris.
New Polaris: Moose Mountain Technical Services updated and optimized their preliminary economic assessment of New Polaris and the results were substantially improved economics for the New Polaris gold mine project. Using updated parameters in the base case economic model for the gold price (US$1200 per oz), $CA/$US exchange rate (1.00), cash costs (US$481 per oz) and cut-off grade (7 grams per tonne), the updated Moose Mountain PEA generates a discounted (5%) after-tax Net Present Value ("NPV") of CA$129.8 million with an after-tax Internal Rate of Return ("IRR") of 31.4% and a 2.5 year pay-back period. On a pre-tax basis, the undiscounted life-of-mine cash flow totals CA$280.8 million with a 38.1% IRR and a 2.4 year pay-back period. At a US$1400 per oz gold price, New Polaris has an after-tax NPV (5%) of US$195 million with an IRR = 42.8% and a 1.85 year payback period.
Tay LP: Canarc evaluated the data from a 470 km airborne geophysical survey flown in 2010 and identified a number of strong EM conductors and magnetic anomalies within prospective geological settings that have never been drilled. Management has prioritized these conductors and anomalies for drilling in 2012.
Windfall Hills: After acquiring options to purchase 100% interests in two adjacent gold properties in the Windfall Hills area, located 65 kilometers (km) south of Burns Lake and 90 km northwest of New Gold's exciting new 7.8 million oz Blackwater gold discovery in central BC, Canarc conducted a 340 sample soil geochemical program on a 100 meter by 25 meter grid over the main 2.8 sq. Km. Historic prospect area. The work defined two gold-silver geochemical soil anomalies flanking two geophysical resistivity anomalies that are ready for drilling in 2012. The Company also staked three additional gold properties called Devils Thumb, Devils Thumb East and Windfall Hills East totaling 15,175 hectares north and east of the Windfall Hills project and plans to carry out reconnaissance mapping and sampling this year.
Outlook for 2012
Canarc recently received several new expressions of interest from mining companies interested in an option and joint venture to advance New Polaris through mine development and a feasibility study, and management will continue to focus on trying to close an agreement with a new partner.
Since the company is seeking a significant initial payment or investment from any new partner on New Polaris, the board of directors elected to provide temporary debt financing to Canarc in order to avoid issuing new equity at this time
Canarc also plans to drill several attractive gold targets at the Windfall Hills and Tay LP gold properties, subject to securing either option and joint venture partners or appropriate financing
The company has identified and will continue to evaluate merger and acquisition opportunities to grow its gold exploration and mining portfolio in North America.
Canarc have already identified and will continue to pursue new opportunities for growth by evaluating attractive gold projects in the USA and Canada for acquisition where management's exploration and mining experience can add value.
Canarc Resource Corp trades on the following Stock Exchange's TSX: CCM, OTC:BB: CRCUF, Frankfurt: CAN, giving it plenty of exposure to retail investors. The number of shares issued is 90.40 million, with Warrants and Options accounting for 16.6 million, which brings the fully diluted number of shares up to 107 million. The market capitalization is approximately $18.0 million.
At the moment we do not own this stock, however, when we consider the current back cloth of falling prices for the mining sector, as evidenced by the HUI which closed today at 445, it might be time to prepare a bargain hunters shopping list, which would include this stock. We will continue to watch this stock and should the environment for the miners continue to deteriorate then a low level entry point may present itself. We would prefer to see this current euphoria subside and then we could initiate a buying program, starting very gently and slowly but firmly, build a position in the Canarc Resource Corporation.
As regular readers will know, we have steadfastly refused to increase our exposure to the mining sector for some time now, despite many of our colleagues being bullish on this sector. However, we still feel that 'timing' is an essential part of a good investment decision and had we bought in the last 18 months or so, we would be financially worse off. In order to increase our wealth over this period we have traded options, which have been very kind to us and kept us ahead of the game and we will continue to do so until we are convinced that the mining sector is about to get back on track and return gains which are leveraged a number of times to the underlying commodity.
Disclosure: I am long EXK.