Getting It All Right
Nov 5, 2014
Columbus Gold (CGT-V) runs a gold exploration program in French Guiana on a deposit called the Paul Isnard project that has produced more than 2 million ounces of placer gold since 1875. It was interesting to me that French Guiana actually produced more gold per capita than any other country in the world. But the population isn’t all that much.
Columbus Gold is the brainchild of Robert Giustra, cousin to Frank Giustra but in an entirely different segment of the market. Columbus Gold was formed in 2003 as a project generator primarily based in Nevada with as many as 22 projects and JVs at one time. In 2011 Giustra became aware a subsidiary of IAMGold wanted to sell a 1.9 million ounce gold project in French Guiana.
Through a series of deals, Columbus Gold picked up 100% of the Paul Isnard project for 18 million shares, $4.2 million and an NSR of 1.8% on the first 2 million ounces of gold and .9% NSR on the next three million ounces of gold. An updated 43-101 released in August of 2014 showed an inferred gold resource of 4.3 million ounces. In addition to the NSR Columbus Gold sold a 1% royalty on the project for $5 million in May of 2013.
With great hindsight, Giustra pulled the deal of the century with Russian based Nordgold in September of 2013. Nordgold is the world’s 13th biggest gold producer with nine operating gold mines in four countries and production of 925,000 ounces in 2013.
Nordgold agreed to earn 50.1% of the Paul Isnard project by spending a minimum of $30 million US and completing a BFS (Bankable Feasibility Study) by March of 2017. Columbus operates the project and collects a 10% management fee. That is enough money, that in the most dismal gold market in memory they can afford to move their primary Nevada project forward.
The budget for 2014 provides for up to 25,700 meters of drilling done by three drill
rigs and a potential 130 holes. They are doing infill drilling on 50-meter centers to upgrade the resource to measured and indicated from inferred. Columbus Gold plans on releasing an updated resource in January of 2015 and completing a PEA at the end of Q1 of 2015.
The Isnard project has great potential for expansion. The drill program designed to increase the confidence level of the resource will be drilling a lot of the 2.5 km wide existing resource that continues 1-3 km both east and west in both gold anomaly and favorable geology. Due to the existing wide spacing in the existing drill holes, they will be adding ounces internally as well as externally to the existing deposit.
Once the BFS has been completed, depending on the cost of construction, Columbus Gold can fund their 49.99% or allow dilution by Nordgold depending on the number of proven and probable ounces outlined in the study. The numbers vary but basically the higher the number of ounces, the better the deal for Columbus Gold. In the worst case, if CGT is diluted to below 10% their interest reverts to a 2% NSR.
Nordgold is already making plans for the future. Between September of 2013 and August of 2014, they quietly bought up about 9.9% of the shares of Columbus on the open market. Given the last placement, they have been diluted down slightly but they still own about 9% of the outstanding float. It would be natural for them to think about simply buying Columbus Gold at some point
If you ignore the very real assets CGT holds in Nevada, at today’s price of the stock, the market only values their gold at $22 an ounce. Given the world class potential, those ounces would be going to $100 an ounce in a rational market and $400-$800 in a takeover. Nordgold will buy Columbus at some point, it would be nuts for them not to.
But given the state of affairs between the US and Russia, I doubt the company would be at all interested in the Nevada properties. The flagship Nevada asset is the Eastside project some 25 miles west of Tonopah. CGT owns 100% of Eastside subject to underlying royalties.
Drilling in 2011 resulted in a discovery hole of 13.6 meters of 2.42 g/t Au. A follow-up phase II drill program of 12 RC holes in 2013 found additional mineralization. A major drill campaign for 2015 calls for 64,000 meters of drilling in 250 holes with the intent to generate a 43-101 resource by the end of 2015. The technical staff believes Eastside has district potential. Investors seem to give Eastside no value whatsoever.
Columbus Gold has excellent management, a world-class project with over 4 million ounces where CGT only gets $22 an ounce in the ground and district scale gold in Nevada. They are partnered with one of the most dynamic young gold companies in the world who will finance the French Guiana project to a BFS. It doesn’t get any better than that. They are doing everything right and one day either gold mining will stop entirely or prices will come back to sanity.
Columbus Gold is not an advertiser and I don’t own shares. I do like them a lot. Do your own due diligence.
CGT-V $.35 (Nov 4, 2014)
CBGDF-OTCBB 135.8 million shares
Columbus Gold website