Will 2+2=8 For Columbus Gold?
I wrote recently about Columbus Gold in October. The company owns 45% of a gold project in French Guiana with 2.75 million ounces in proven and probable reserves, not resources, reserves. With a market cap today of about $97 million US that values their 1.23 million ounces at about $79 an ounce. That’s really cheap for a project that shows a plan for producing 237,000 ounces of gold a year. Someone will take them out and this project is going to go into production.
Columbus Gold’s partner in South America is Nordgold, a Russian company. Naturally the Russians don’t want any part of US assets so the 14 other projects owned by Columbus Gold are not only not giving any value, if anything they are a drag on the company. It’s something I have talked to the company about for years, how to monetize their other very real assets.
Their Eastside gold project in Nevada discovered by Andy Wallace already holds a 721,000 ounce gold resource in addition to a 272,000-ounce historic resource. Their 100% owned Bolo Gold project in Nevada had a 2800 meter drill program conducted in August of 2017. The company has just sent 1900 samples off for assay and expects results to be released early in January.
Columbus Gold shareholders voted overwhelmingly in November to approve a spin-out of the 14 non-core assets into a new company that will be named Allegiant. Columbus received approval for the spin-out from the Supreme Court of BC on the 4th of December.
Existing shareholders of Columbus Gold on December 11 will receive a 20% distribution of their current CGT-T shares. If you own 10,000 CGT-T shares on the 11th, you will automatically get 2000 shares in Allegiant.
This is a really easy call. Columbus Gold is currently getting nothing for the fourteen 100% owned non-core assets even though they are coming out of the chute with about 1 million ounces at Eastside with a current value of exactly zero. Doing the spin-out is going to monetize those 14 assets. They have to be worth something. The only real issue I see is the question of what 2+2 equals. I know it’s going to be more than four and should the assays from Bolo come up trumps, Allegiant shareholders could be treated to a post Xmas gift. Columbus Gold will still own 13% of Allegiant so they have a vested interest as well.