Corrections happen. They also end
People literally hate gold right now. I am getting the most interesting and inventive hate mail from those who wanted to buy gold at $1922 and silver at $49.75 but boy they hate it now.
That of course is when fortunes are to be made. Those same clowns sending me the hate mail should have been selling when they had a profit and that never occurred to them. So anyone who is pro-gold is now the enemy. It will take far higher prices to entice them back and the rewards are going to go to the people who understand markets go up and markets go down. The time to buy is when no one else wants something. The time to sell is when everyone else wants something.
I wrote a timely piece about Gold Standard Ventures back in May of this year. I wrote at some length about a project named the Pinion Gold project they had just purchased the 2nd half of. Pinion has always been an important part of their plans but they sought for years to buy or do a deal on the half they didn’t own to no avail. I’m going to take a lot of credit. I called it exactly right in May. The Pinion project stands on its own and is a major find.
The company just released a barn burning 43-101 and no one noticed or perhaps better put, no one cared.
The piece I wrote in May was perfectly timed and very accurate. The biggest problem wasn’t and isn’t with the market. The biggest problem is that the management of GSV talks about the Railroad Project as one project. Granted, they have spent tens of millions of dollars drilling the deep target at North Bullion and have had what people in the industry call “Technical Success” but “Technical Success” and $5 will get you a Mocha Grande at Starbucks. In fact, their hidden ace in the hole as it were, has always been the Pinion Gold Project.
They couldn’t hype it because someone else owned half of the deposit. Originally by Roland Larsen of Royal Standard Minerals. He’s the kind of guy that when you mention his name, everyone rolls their eyes. He put a gold mine into production and ran it for 18 months. Every three months he would fire the entire crew; they were all wetbacks and illegal anyway. He’d hire an entirely new crew and keep them for three months.
The mine was working away, the mill was churning away and he never produced an ounce of gold. Or better put, he never reported an ounce of gold or shared a gram of gold with his shareholders. He deserves some kind of award for spending millions of dollars running a mine and mill and not producing a single gram of gold in 18 months. You may find this really hard to believe but everyone seems to conclude he pocketed the gold. Imagine that.
So Roland pumps up the share structure of Royal Standard to 920 million shares and it sort of blows away. He would never talk deal with anyone or when he did, his terms were so stupid that no one could deal with him. Scorpio Gold ended up with the half of Pinion that GSV didn’t own. Company President and CEO Jonathan Awde of Gold Standard caught Scorpio at an opportune time and picked up the other half of Pinon for $8.5 million in cash and about $7 million in shares.
GSV knew what they had; I mean that, they knew it. They were paying the equivalent of $20 an ounce if the resource came up to 1.5 million ounces. And when the resource came out, it showed 423,000 ounce of gold at an average grade of .63 g/t Au and a cutoff grade of .14 g/t. When I read the resource I wondered about why they were using such a low cutoff grade until I talked to management. First of all, the indicated resource of 423,000 ounces only dropped to 414,000 ounces at a .3 g/t cutoff. So what was with the .14 g/t cutoff?
Well, that’s about the grade Newmont uses at the Emigrant Gold Mine right next door. I’ll go into more detail as to why the Emigrant numbers are so important in just a moment.
So GSV announced an indicated resource of 423,000 ounces. In the inferred category they have an additional 1,022,000 ounces of gold. Those numbers were a big surprise to everyone in the industry except GSV. As I said, they knew what was there; they just wanted to own all of it.
I said in May, “In the coming months expect to see a lot of drilling and excellent results coming from Pinion. . . It won’t take long or many holes to define a real 43-101 resource. . . I think they have identified the package of rocks that is gold bearing and they have a lot more gold there than even they think.”
Well, they did a lot of drilling and had excellent results, they have defined a world-class resource and I still think they have a lot more gold than even they think.
To really understand what they have, you need to understand the Emigrant Gold Mine owned and operated by Newmont Mining. They began production of about 73,000 ounces of gold a year in 2012; they have about 1 million ounces in a reserve. The ratio of gold to silver is about 1:4 and there is something like a strip ratio of 1/1. Recovery runs about 65 to 68% according to industry experts I have talked to and it’s one of Newmont’s most profitable operations with an all in cost just under $900 an ounce.
Newmont started Emigrant with about 1 million ounces of near surface oxide gold. GSV already has 50% more than that. The GSV ratio of gold to silver is about the same, grade is similar and in my opinion, Pinion will end up larger than 3 million ounces and perhaps as much as 5 million ounces.
We are near a bottom in the metals. I thought the correction was over, it wasn’t. But sentiment is worse towards gold shares than has ever been measured. GSV was $3 a share as recently as early 2012 and they weren’t getting a cent’s worth of value from Pinion. If you assume the 7000 meters of RC drilling managed to increase the resource by 500,000 ounces and a fair value in a reasonable market would be $100 an ounce, that would give GSV a market value of $200 million or $1.50 a share.
In fact I think $300 will be a more reasonable figure for gold in a regular market. I saw the structure. When they say it’s open in all directions, it’s open in all directions. It’s going to be easy to expand the resource. 3 million ounces at $300 an ounce gets real interesting.
For years the majors have been consuming their young. All of them have laid off their exploration staffs. If they want to continue in business, they need to be spreading some money around. Someone is going to snap Gold Standard up just for Pinion.
Gold Standard Ventures is perfectly positioned to be a recipient of those funds. I just wish they would stop taking about the Railroad Deposit. Pinion is as different from North Bullion as apples are from mud pies.
I don’t own shares in GSV but they are advertisers and I am biased. Please do read their website and press releases. This story is so simple that it’s pretty hard not to understand.
Gold Standard Ventures Corp.