The gold mining business seems to be painting itself into a corner. For the past 25 years, the ratio of discovery to that of production has declined on a steady basis. Basically the mining business is consuming its young. The majors rarely explore for themselves and the pace of investing in junior exploration companies has fallen off a cliff in the past ten years. Either the majors start exploring, initiate a series of takeovers or go out of business.
I talked about GFG Resources Inc. (GFG:TSX.V; GFGSF:OTCQB) back in early 2018. The company was in the process of shifting focus from 100% Rattlesnake Hills to a more balanced approach where there would be news on a regular basis.
2017 was a major year for GFG Resources at Rattlesnake as they expanded the project. They reported in early February this year with results up to 99.1 meters of 0.82 g/t gold. There were no giant home runs from the 2017 program but a lot of the ordinary base hits that let you define a major gold system. As I explained in my February piece, big projects require big money. And lots of time. Progress has been made but there are a lot of holes still left to drill. GFG will be releasing a maiden 43-101 resource at Rattlesnake in 2018.
When Agnico Eagle did the original deal on Rattlesnake Hills with Evolving Gold in 2011, the terms valued the project at $110 million. The price of gold peaked at $1923 in September of 2011 and declined after that. A year after the original deal was signed, Agnico Eagle asked Evolving Gold to modify the terms of the agreement. Bruce Duncan, running EVG, saw the chance to get 100% of the project back after Agnico Eagle had spent millions in exploration. In a flash of brilliance, told Agnico Eagle to take a hike. He used other, not so nice, words.
It’s hard to imagine someone managing to destroy 80% of the value of a company in only three years but Bruce Duncan accomplished it. From the peak in 2009, the share price declined by 80% by the time Duncan murdered the deal with Agnico Eagle. But he wasn’t through yet. Between 2009 and now, the price declined to a low of $0.02 in 2016. Duncan managed to knock off 99.9% of the value of the company in only seven years.
The lengths that those running junior resource companies will go to protect their paychecks is quite remarkable. In ten years Bruce Duncan managed to collect more money in paychecks than the total value of the company today. Today Evolving Gold is functionally bankrupt.
GFG realized they needed to put daylight between themselves and Evolving Gold so they have gotten EVG totally out of the Rattlesnake deal with the exception of a 2% NSR and 1.5 million shares if GFG announces a 43-101 resource of over 1 million ounces of gold.
Wyoming is near impossible to explore in winter. GFG realized they needed a plan B where they could work 12 months a year so in late 2017 began a program of putting together a land package in the Timmins gold district.
Since the run up in share prices in early 2016 the market has been flat. The company has been able to assemble a remarkable package of drill-tested projects in the core of the Timmins district that no one else wanted. While everyone else was crying at the lack of action in gold prices, GFG put together a superb package of properties at absurd prices. The cream of the crop was the purchase of the Sewell project for 390,000 shares. Richmont drilled the prospect in 2004 and hit 60 g/t gold over 1.3 meters.
The Timmins district in Ontario has produced over 70 million ounces of gold since its discovery in 1909 in what was then called the Porcupine Gold Rush. The district continues to be one of the most productive in Canada with new discoveries on a regular basis.
GFG cashed up with a $7 million private placement as gold warmed up in December of 2017. Their 2018 program calls for a budget of $3 million with some 8,000 meters of drilling in 6–7 targets in Ontario. Infrastructure and highly skilled labor allows exploration on a year round basis.
The highest priority drilling will be at the Deerfoot/Sewell property and the Reeves Complex. Deerfoot historic results from drilling by Hemlo Gold Mines in 1994 showed 43 g/t gold over 1.5 meters. By consolidation of the various properties in the district GFG has lowered the risk and increased the probability of a major find. All of these projects are on known historic structures.
Drilling starts in September and should continue until at least December. I think their timing is perfect as the price of gold and gold shares is going to get interesting. The price of GFG is down 65% in the last year while they have continued to make major progress. The market just doesn’t yet get it.
I love Rattlesnake Hills and have since I first visited it in 2008. But big projects consume money. I would far rather see GFG find a partner with deep pockets to advance Rattlesnake and they work in Timmins where a couple of million dollars buys a lot of drill holes.
GFG has substantial management the quality of which is not incorporated in their share price. A lack of visible progress is the sole reason the shares have gone lower but a ton of activity has been going on behind the curtain. Now the company is about to produce a lot of visible action and I think the market will get it. If Rattlesnake Hills was worth $110 million in 2012, with the addition of the high-grade projects in Ontario only serves to make the value higher. One day investors will get it.
GFG is an advertiser. I have participated in the last private placement and still own those shares. Do your own due diligence. They have provided an excellent presentation and anyone who is interested in the company should view it.
GFG-V $0.25 (Aug 08, 2018)
GFGSF OTCBB 87.8 million shares
GFG Resources website
Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
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