Star Gold Aims At Production
In December of 2015 I told attentive readers the COTs on gold and silver were the most favorable in many years and at the very least we would have a tradable low. That was just before gold shares rocketed higher. On February 1, 2016, I stated, We’ve seen the Bottom in Gold and followed that up months later in August with a piece I titled Money Always Moves from Weak Hands into Strong Hands and how we were going to have a strong correction.
We did in spite of the chat board idiots who invest using a rear view mirror and think that everything either goes straight up or straight down. Nothing does. Everything goes up and goes down. Bull markets lay the groundwork for bear markets. Likewise, bear markets lay the groundwork for bull markets.
In between writing dozens of articles that turned out to be a pretty accurate read on the market, I wrote a short book that can be read in two hours listing things I have learned in 50 years of investing. It’s called Nobody knows Anything. Some reviewers have called it the best book on investing they have ever read. For some strange reason Bill Murphy didn’t like it. That may have been because it didn’t have pictures.
If you would learn to think for yourself and use simple common sense that is so uncommon, you can make a lot of money. You don’t need gurus or experts and in fact there are none. Most people are idiots or fools and many of them have learned to tell you what you want to hear in the hopes you will vote for them or give them money.
Investing is no more complex than buying what is cheap and selling what is dear. The only trick is to understand the difference between the twain.
I first wrote about the Longstreet project belonging to Star Gold (SRGZ-OTCBB) three and a half years ago. The Round Mountain look-alike property has a resource of 155,000 ounces of gold. Management wants to raise that to 250,000 ounces and to go into production as soon as possible.
Alas, they got mousetrapped in the four-year debacle in gold shares. Their shares worth $.38 then have traded as low as $.05 recently. But not all is lost. The company was worth nearly $12 million USD three years ago and can be bought for just over $4 million today but nothing has changed except they are closer to production today. In hindsight, they were expensive at $.38 and they are cheap today.
As I stated in the first article, the company is run like a private company. That’s good in this environment. There are some really solid shareholders who have a lot of confidence in Lindsay Gorrill, the Chairman of Star.
In difficult times, you want a manager such as Lindsay Gorrill. He also runs Canada Fluorspar, a Canadian private company about to go into production in Newfoundland this summer. In what must be a first, the project is $20 million under budget and two months ahead of schedule. Frankly, in my 16 years running a resource website, I’ve never heard of such a thing. He also has over $1.6 million of his own money in Star Gold. I love it when management has major skin in the game. If you lose, they lose and that’s the way it should work. And management is not taking salaries.
Walker Lane in Nevada, straddling the California border hosts some of the most prolific gold mines in the United States. The trend is where the North American Plate meets the Pacific Plate. More than 50 million ounces of gold have been produced from mines on the Walker Lane including the world famous Comstock Lode and the Round Mountain gold mine owned by Kinross and Barrick Gold.
Star Gold did a deal on Longstreet in 2010 with the intent to put it into production just as soon as possible. The company completed a scoping study in 2014.
Star paid $270,000 in cash to the vendors along with a $3.55 million work commitment and 400,000 shares for 100% interest in the project. There is a 3% NSR at production. The 2013 Technical Report showed just over 155,000 ounces of gold equivalent in resources.
For much of the last three years, the project has pretty much been in a state of hibernation until the mining industry began to come to life last year. The company did complete a $650,000 financing in October.
Benchmarks to look for in 2017 will include setting up the necessary water rights in February/March, completion of the Plan of Operation by April, a Bankable Feasibility Study by May, Hydrology completed by June and starting the EIS in July. They expect to finish the EIS and file it in the December/January 2018 time period and expect approval in the summer of 2018. Once they have approval, they expect to finish the mine in six months and begin mining.
The scoping study showed an IRR of 29% based on production of about 85,000 ounces of gold over a mine life of 4.4 years. Naturally management intends on more drilling to extend the life of the mine. This is not the biggest project I have ever visited, actually it’s the smallest but their plan is perfectly feasible, their numbers are extremely conservative. The idea of using cash flow to finance more drilling to find more resources is the same game plan miners used to use when they thought mining was about making a profit for shareholders instead of just spending money. I think it will work and certainly the company is pretty cheap.
I’ve been a shareholder since my visit to the project in 2013. I also participated in the October financing. Star is an advertiser and I am biased. Naturally their plans revolve around the price of gold actually supporting an operating mine and I believe the sweet spot of investing will be projects about to go into production. Please do your own due diligence.
Star Gold Corporation