 TORONTO (miningweekly.com) – Most exploration companies may not survive unless the market improves significantly, says former mining analyst Chad Williams, who now heads junior gold hopeful Victoria Gold.
“If this market doesn't turn around dramatically, 80% of the juniors are going to hit the wall; they are going to be insolvent,” he said in a presentation in Toronto on Thursday.
And Williams has not wasted time in moving to take advantage of the difficulties in which Victoria's rivals find themselves.
In the space of 10 months, the company snapped up two cash-strapped juniors – Gateway Gold and, most recently, StrataGold – adding projects in Canada's Yukon territory, Nevada and Guyana and 4,4-million gold ounces in the ground.
“And there will be more,” Williams added.
“It's basically an arbitrage between those of us who can raise money and those of us who cannot.
“And so the opportunities for consolidation are huge.”
Victoria bought Gateway in December and closed the StrataGold deal last week. Both transactions were stock-based.
Although its share price has yet to catch up with the idea, Williams said he wants to set the company apart from rivals who are building a name in the market with one large development project or exploration prospect.
“We are building a company. These folks are developing assets.
“And that's fine. But what happens if there are technical issues, a problem with the metallurgy, with the permitting. They're stuck.”
Victoria has also focused on more modestly-sized projects, which won't require significant dilution for the company to see them into production.
The company has an internal target of achieving total production of between 200 000 oz/y and 300 000 oz/y within two or three years, Williams said.
The firm has a large land package in Nevada, but also recently cast its gaze northwards, with the acquisition of StrataGold and its flagship Eagle Gold project, in the Yukon.
The asset has very similar geology to the Fort Knox mine, in Alaska, which is owned and operated by one of Victoria's biggest shareholders, Toronto-based Kinross Gold.
A 1997 feasibility study indicated that the project could be economically developed as an openpit heap leach mine, but it was shelved at the time because of low bullion prices, and the study is no longer material because it predates the National Instrument 43-101 standards.
However, the project currently has indicated resources of 2,7-million gold ounces.
Williams said the company's nearest production potential lies with the past-producing Cove project, in Nevada, where it has discovered a new high-grade zone.
The Helen zone is located 610 metres northwest of the previously mined Cove open pit and an old underground mining area, and Williams believes the deposit could be brought into production for under $15-million.
Unlike the oxide material mined previously on the property, the new discovery is a Carlin-style disseminated sulphide sediment hosted gold deposit.
Victoria has earned 100% of the project in an earn-in agreement with Newmont Mining, which has a 51% back-in option.
Preproduction capital expenditure could be kept low by treating the ore at other miners' underutilised mills in Nevada, Williams said.
The company is also excited about the Big Springs project, which it acquired by buying Gateway.
Victoria's exploration chief Raul Madrid, a veteran of gold discoveries in Nevada, actually recommended that Williams go and buy the property after walking the ground.
“It didn't take me long to call the guy at Gateway and say I wanted to do a deal with him.”
Geologists are onsite right now and drilling could begin by year end at Big Springs.
The firm also has several other prospects and projects in Nevada, including one right next door to Barrick's Cortez operation, as well as property in Guyana that came with the StrataGold deal. The Guyana assets will likely be monetised, however.
Shares in the company rose 1,1% on Thursday, to 43,5 Canadian cents by 15:53 in Toronto. |
|
