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Golden Arrow Cash Flow Funds Exploration
By James West
MidasLetter.com
Thursday, March 26, 2009
Wouldn't it be nice if you had invested in a portfolio of properties in prolific gold fields, and much of the exploration and operating costs were covered each year by a royalty the company held on a producing mining project? Well if you haven't, you still can.
Risk capital for exploration has become quite scarce, despite gold's apparent strength in the $900 to $1,000 per ounce range. Investors are interested in near-term production scenarios, but not so much in earlier stage exploration plays, unless they have major size potential that could attract a major producer's interest as a takeover candidate. This is a direct reflection of the lack of confidence permeating all markets these days.
Golden Arrow Resources (TSX.V: GRG) has an extensive portfolio of 40 projects in South America including 9 drill ready prospects. But more importantly, the company also owns a 1% royalty on Yamana Gold's Gualcamayo Gold Mine, being commissioned presently and expected to commence production before the end of April. Golden Arrow's technical team made the discovery of the Gualcamayo mine in the late 90's before selling its interest in the project to Viceroy and kept a royalty on the project.
The Gualcamayo Property is located in northern San Juan Province, Argentina, approximately 279 kilometres north of the provincial capital of San Juan. The main Gualcamayo block consists of one Cateo (exploration concession) and 57 Minas (mining property interests), covering 7,128 hectares of ground.
With an expected mine life of at least 10 years, annual gold production will commence at an estimated 195,000 to 210,000 ounces in 2009 and ramp to between 220,000 and 235,000 ounces starting in 2010. The project contains 2.9 million ounces of gold in proven and probable reserves, and an additional 1.02 million ounces across measured, indicated and inferred resources.
So Golden Arrow expects to receive approximately US$1.5 million in cash annually from its royalty for at least the next ten years but more likely for 15 years based on continued exploration that is ongoing by Yamana. A net present value of the royalty using $1050 gold and a 15 year mine life is almost $23M CAD! This is a significant incoming cash flow for a company with a market cap of just $5.8M CAD and this immediately separates the company from 95% of other explorers listed on the TSX Venture Exchange.
Currently, Golden Arrow's primary exploration focus is on the Poncha Gold Project in San Juan Province, Argentina.
Golden Arrow is earning up to a 100% interest in the Poncha Project from Teck Limited's (TSX:TCK, NYSE: TCK) subsidiary, Teck Cominco Argentina Ltd. ("Teck"), by fulfilling expenditure and tenure maintenance requirements subject to Teck's option to re-earn up to a 65% interest in the Poncha property. Although Teck does have an option, liquidity problems are expected to curtail Teck's further interest in the project, and Golden Arrow expects to retain 100% ownership.
On March 11, Golden Arrow announced that it would commence a 3,000 metre "step-out" drilling program which is designed to identify the extent of the ore body discovered and announced on March 27, 2008.
Hole RCPC 13 intersected an eye-popping 266 metres grading 1.21 grams per tonne of gold and 3.3 grams per tonne silver, within which was a higher grade section measuring 61 metres long and assaying 3.04 grams per tonne gold and 7.16 grams per tonne silver.
"The plan is to step out in all directions from that discovery hole and drill up to 3,000 metres across 5 to 8 holes to a total depth of up to 600 metres," said Keir Reynolds, manager of Investor Relations for Golden Arrow. "We already announced that we've mobilized some equipment and technicians are onsite preparing roads and drill pads, and we anticipate the drilling will start in the next few days."
"Golden Arrow has about $1.2 million in the bank and we're now contemplating a private placement of about $1.5 million to get cashed up for 2009 exploration and to offset any delays in the payment of the royalty revenue," he said.
"We are pleased to begin the highly anticipated step-out drilling on our discovery at Poncha," stated Joseph Grosso, President and Chief Executive Officer of Golden Arrow Resources. "With the hole ending in mineralization, we are excited to be able to test the extension of our find as it brings back the memories of our other two world class discoveries."
Many of Golden Arrow's other projects are adjacent to, or in close proximity of, some of the largest deposits in South America. Rio de las Taguas Property is adjacent to Barrick's Pascua-Lama deposit (23.7 million ounces of gold resource), and the Potrerillos Property adjoins Barrick's Veladero discovery (15 million ounces of gold equivalent resource).
Golden Arrow is a member of the Grosso Group, a management group founded in 1993 that has a history rich in successes which include; the discovery of two multi-million ounce precious metal deposits, partnerships with industry majors such as Barrick Gold, Newmont Mining, Teck Cominco, Rio Tinto and Viceroy/Yamana.
In June 2007, Golden Arrow began financing a private company, of which it is 100% owner, based in Colombia, the same country where Greystar Resources and Ventana Gold, two TSX Venture listed companies that have enjoyed exceptional success to date. The mandate of the company is to locate past producing and/or permitted precious metal projects. Golden Arrow will be providing an update on these Colombian efforts shortly.
Golden Arrow has just over 20 million shares outstanding. Visit the company online at http://www.GoldenArrowResources.com.
SOURCE: http://www.midasletter.com/news/09032608_Golden-arrow-cash-flow-funds-exploration.php
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