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PDAC - Cash-hungry Gold Standard sits pretty in Nevada
Simply put, Vancouver-based Gold Standard, like other gold explorers, is having a hard time raising money, though exploration has gone well.
Posted: Monday , 04 Mar 2013
TORONTO (Reuters) -
If mineral exploration, like real estate, is all about location, then Gold Standard Ventures Corp would appear to own the equivalent of a penthouse on Park Avenue.
Its flagship gold project sits in Nevada's productive Carlin Trend, nestled next to projects owned by Barrick Gold Corp and Newmont Mining Corp. Its location makes the explorer a prime prospect to be scooped up by one of the mining giants or secure financing for its Railroad project.
Unfortunately for Gold Standard, fundraising is often about timing. These are tough times to be a gold explorer, particularly one trying to delineate an extractable resource in a district where development costs tend to be high.
Put simply, the Vancouver-based company, like other gold explorers, is having a hard time raising money, though exploration has gone well, it said. As a consequence, Gold Standard's shares, which ran as high as C$3.03 last year, are now struggling to stay above C$1.00.
"In this market - I'll be blunt - everyone's having a tough time getting traction, but we feel that (our) contiguous land package is very rare and unique," said co-founder and Chief Executive Jonathan Awde, who will travel to Toronto this week for the annual Canada conference.
That package consists of 19,000 acres on the Carlin Trend, a geologic formation that is home to big operations such as Barrick's Goldstrike and Newmont's Rain mine and has produced more than 70 million ounces of gold.
Gold Standard purchased Railroad in 2010, and has since bought additional parcels of land to the south of the project.
The company is now the third-largest landholder on the Carlin Trend, and has several former Newmont staffers on its payroll, including head of exploration Dave Mathewson, a former head of Newmont's exploration in the region.
If this makes it look like Gold Standard is just biding time until it gets bought by one of the nearby giants, Awde isn't looking to disagree.
"I think the two ways in this market to maximize shareholder value are discovery and M&A. Very few juniors can ever make the transition form explorer to producer," he said.
FORMER HIGH FLYER
Until that happens, if indeed it does, Gold Standard must continue to fund its own exploration and move toward the point where it can produce a 43-101 resource classification, which would raise the value of the project and make funding easier.
The company was a Toronto Stock Exchange high-flyer early last year, its shares quadrupling in a little over four months on the back of encouraging drilling data. One hole yielded a rich 3.38 grams a tonne over 164 meters. That result drove the company's shares up by 61 percent overnight.
But the stock ran into trouble when it announced a public stock offering in June, around the time fears were rebuilding about the global economy.
The deal was priced at C$2 a share, about 25 percent below where the company was trading, which sparked immediate selling that only got worse when Gold Standard reported drill results in August that failed to meet the market's lofty expectations.
The offering "took a lot of arm-twisting to get it done, and our stock just got pounded and beaten," said Awde. "We were shorted and pounded and were bid by a large fund with a price sensitive order that was 17 percent below the market."
The company now has about C$9 million in cash, which Awde says should get them through six to nine months of drilling before they'll need a fresh infusion.
For all the potential of Railroad, experts said the Carlin Trend is a technically challenging and pricey place to work, meaning finding more gold won't be cheap.
"The types of Carlin deposits that these guys are drilling are in broken rock and long structures, and so it's slow drilling and it's expensive drilling," said a mining analyst who didn't want to be identified, citing company policy.
Analysts are generally positive on the company, with Thomson Reuters I/B/E/S showing three "buy" ratings and an average target price of C$4.21, well above the company's closing price of C$1.03 on the TSX Venture Exchange on Friday.
If the market doesn't improve over the next several months, Awde said the company may turn to some of its deep-pocketed investors, including Toronto-based hedge fund manager Albert Friedberg, who came on board in 2011 and currently owns 15 percent of Gold Standard.
"At some point this market will turn and I think companies that have good assets in good, politically safe parts of the world around existing infrastructure will receive love," Awde said.