Forced Mergers and Bonanza Gold Find
Gold continues to show resiliency and added approximately 2.4% for the week closing — while hitting 11-week highs on Thursday — near the $1,221 level.
The price of gold and the dollar, which often move in opposite directions, went back and forth all week long with the dollar index — which closed down approximately 1% for the week — bouncing above and below the critical 100 level.
The Fed did its usual double talk stating that it doesn’t feel pressured to raise rates aggressively while also maintaining guidance for three rate hikes this year.
Silver was also up approximately 2% this week, closing out at approximately 2.2%.
Copper was down 2.2% for the week and closed at the $2.62/lb. level.
Platinum gained approximately 2% for the week, closing above the $1,000 level at $1,001 per ounce while palladium gained approximately 1.5% for the week, closing at $750 per ounce.
Uranium continues to make its case that the bottom is in. It closed above the $25/lb. level for the first time this year with many of the quality juniors posting new highs.
The Week in Juniors
Aurion Resources Ltd. (TSX-V: AU)(OTC: AIRRF)
I love charts like this and charts like this are what makes speculating in the junior resource space exciting.
Shares of Aurion Resources have gone from C$0.07 to C$1.52 in just shy of one year.
On February 1, 2017 Aurion Resources announced it had discovered a new bonanza gold zone at its 100%-owned Risti project in Northern Finland.
The release reported:
An 1150 m long by 700m wide area of gold mineralization with an apparent NE-SW trend was recently discovered by Aurion prospectors.
Here, 133 rock grab samples collected from predominantly large and angular sub-cropping quartz-tourmaline blocks assayed from nil to 1563.5 g/t Au, including 36 samples which assayed greater than 31 g/t Au (1 ounce per tonne). The average grade of all 133 samples is 74.3 g/t Au.
Many of these samples contain abundant coarse visible gold. Numerous quartz blocks within this trend are > 1 m in at least one dimension and locally reach up to 3.5 m by 3 m by 1 m in size.
The Aurora Zone lies within a broader area of approximately 2.3 km by 3.0 km hosting multiple quartz-tourmaline-Fe-Oxide veins, breccias and stockworks outlined in outcrop, sub outcrop and angular boulders. A total of 525 rock grab samples from this area and including the Aurora Zone have assayed from nil to 1563.5 g/t Au. The average assay of all samples is 21.0 g/t Au.
The company has approximately 55 million shares outstanding and a market cap of approximately C$57 million. I’ll be watching this drill program closely.
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Gold Standard Ventures Corp. (TSX-V :GSV) (NYSE: GSV)
On February 2, 2017 Gold Standard Ventures announced a US$15.5 million 2017 exploration program for its Railroad-pinion project in the Carlin Trend Nevada.
The announcement outlined the 2017 goals, which include:
(1) aggressive drilling at the North Dark Star oxide gold discovery to follow up 2016 successes;
(2) drilling to expand known resources at Dark Star and Pinion; and
(3) drilling to test new high-value targets within the Dark Star Corridor, North Bullion and elsewhere within the Railroad-Pinion District. The budget also includes an extensive pre-development component including new resource estimates, further metallurgical work and economic studies to de-risk key assets.
Jonathan Awde, CEO and Director of Gold Standard, commented:
"Railroad-Pinion has now become a truly district-scale play with multiple deposits of different types. Each year, we set out to find the limits of the gold systems we have discovered and each year we end up with new opportunities that exceed our expectations. We think 2017 will be no different. We believe we have found the right balance between expanding and advancing resources at known deposits and continuing to evaluate the many new targets that have emerged over the past year. This should be a very exciting next few months.”
Mac Jackson, Gold Standard's Vice President of Exploration, stated:
"This aggressive 2017 exploration program will follow up on our great success in 2016 by continuing to expand our oxide gold resources at Pinion and Dark Star, and offsetting open high-grade gold intercepts at North Bullion. We will also complete our folio-style, detailed geologic work to define and test new targets throughout our large land position, including targets along the Dark Star corridor, Ski Track corridor and Pinion thrust (a newly recognized geologic connection between Pinion and Dark Star). With this well-funded, systematic exploration program in place, we are looking forward to our next big discovery in the Railroad-Pinion district.”
The Pinion deposit now has an NI43-101 compliant resource estimate consisting of an Indicated Mineral Resource of 31.61 million tonnes grading 0.62 grams per tonne (g/t) gold (Au), totaling 630,300 ounces of gold and an Inferred Resource of 61.08 million tonnes grading 0.55 g/t Au, totaling 1,081,300 ounces of gold, using a cut-off grade of 0.14 g/t Au (announced March 15, 2016). The Dark Star deposit, 2.1 km to the east of Pinion, has a NI43-101 compliant resource estimate consisting of an Inferred Resource of 23.11 million tonnes grading 0.51 g/t Au, totaling 375,000 ounces of gold, using a cut-off grade of 0.14 g/t Au.
I expect 2017 could be the year for an increase in M&A and this drill program could be the catalyst that makes or breaks the case for Gold Standard Ventures.
Sandstorm Gold (TSX: SSL)(NYSE:SAND)
Speaking of M&A, on February 1, 2017 Sandstorm Gold announced it had told Luna Gold and JDL Gold to merge. They didn’t use the word “told” but it sure looks like they were told.
Under the terms of the agreement, JDL will acquire all of the outstanding shares of Luna Gold. The combined company intends to change its name to Trek Mining, with Christian Milau from Luna Gold as CEO and Executive Director and Greg Smith from JDL as President and Executive Director.
The new company will be well-funded with approximately US$50 million in cash and no cash debt.
The focus of the new company will be getting the Aurizona gold project into production. Sandstorm holds a 3% to 5% sliding scale net smelter returns royalty on Aurizona and at gold prices less than or equal to $1,500 per ounce, the royalty is a 3% NSR.
The Aurizona Project is located in northeastern Brazil and produced gold from 2010 until late 2015 when it was placed on care and maintenance.
The Aurizona Project produced a total of 329,042 ounces of gold at an average grade of 1.28 grams per tonne (“g/t”) and average recoveries of 88%. Remaining Proven & Probable Reserves are estimated at 18.6 million tonnes at 1.62 g/t for 969,000 ounces of gold, with Measured & Indicated Resources (inclusive of reserves) of 29.9 million tonnes at 1.67 g/t for 1,599,400 ounces of gold.
In addition to the sliding scale royalty on Aurizona, Sandstorm holds a 2% NSR royalty on greenfields properties owned by Luna Gold. The greenfields exploration ground happens to be in proximity to the Aurizona Project.
In addition, the US$20 million owed to Sandstorm from Luna will be settled in equity or a combination of cash and equity of Trek Mining.
Sandstorm’s President & CEO, Nolan Watson, commented:
“As a material stakeholder in Luna, we are pleased with the proposed merger between Luna Gold and JDL and we fully support the proposal."
Sandstorm is pleased, JDL and Luna Gold did not comment. Nobody likes being told.
Zinc One Resources (TSX-V: Z) and Forrester Metals (TSX-V: VEM.H)
On February 2, 2017 Zinc One and Forrester Metals announced their plans on Zinc One acquiring all of the issued and outstanding common shares of Forrester and will complete a private placement financing of $10,000,000.
The proceeds from the private placement will be used for exploration on the high-grade zinc Bongara and Charlotte Bongara properties — in Peru — and for general working capital purposes.
Jim Walchuck, CEO of Zinc One, stated:
"We believe that this transaction is a tremendous step in moving Zinc One towards becoming a zinc producer. Although there are other quality assets in Forrester, it is the high-grade zinc Bongara and Charlotte Bongara properties which will become the flagship project of Zinc One. This is an exciting opportunity for Zinc One and all its shareholders.”
Martin Walter, President of Forrester, commented:
"Combining Forrester's projects with Zinc One's strong corporate finance team along with the proposed financing ensures further development at the Bongara Zinc Project and also offers Forrester shareholders a nice premium to the current share price.”
Below are the highlights of the transaction as described in the release:
Forrester will receive 1 common share of Zinc One for every 5.5 common shares of Forrester.
Assuming completion, exercise of all convertible securities of Forrester and completion of the debt settlement, Zinc One will issue a total of 30,855,273 Zinc One Shares to the shareholders of Forrester.
Based on a price of $0.75 per Zinc One Share, being a volume weighted average price for the last seven trading days, the 5.5 to 1 conversion ratio represents an offer price of $0.14 per Forrester Share, being a premium of 119% of Forrester's volume weighted average price for the period comprising the 30 trading days ended on January 30, 2017.
Following the completion of the Transaction and the Debt Settlement, Zinc One will have issued and outstanding shares of up to 87,630,513 Zinc One Shares.
All outstanding options, warrants and convertible debentures of Forrester will remain outstanding (if not exercised prior to closing of the Transaction) and will be adjusted to give effect to the Transaction in accordance with their respective terms or pursuant to the Agreement.
Prior to closing of the Transaction, Forrester will be permitted to issue up to 27,040,000 Forrester Shares at a deemed price of $0.125 per share to settle outstanding indebtedness of approximately $3,380,000.
Each company's Board of Directors unanimously approved the terms of the Transaction and recommends that their shareholders (if applicable) vote in favor of the Transaction.
The Transaction will require the approval by at least 66 2/3% of the votes cast on the special resolution by Forrester shareholders and, if required, Zinc One shareholders present in person or represented by proxy at the shareholder meetings.
Sounds like two companies that actually agreed to merge to take advantage of the current and projected zinc price and supply-demand fundamentals.
There’s also a $1 million breakup fee payable by the breaching party.
It’s good to see M&A starting to ramp up. I’m still not convinced that this latest gold rally — still calling it the great head fake — won’t see one last significant leg down but I would love to be wrong.
Either way, this is an ideal time to position yourself in the buyouts of the future and in the companies making and working to make the next great discoveries. Discoveries that the majors and mid-tiers have stopped trying to make.
To your wealth,
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.
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