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Gold Standard's Pinion Uncovered: The Next Open-Pit in Nevada?

Tuesday, 23 September 2014 04:48 AM

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London, England / ACCESSWIRE / September 23, 2014 / Today, Rockstone Research Ltd. published an update on Gold Standard Ventures Corp. The full analysis can be downloaded as a PDF via the following links:

English:

http://www.rockstone-research.de/research/RockstoneGSVupdate3english.pdf

German:

http://www.rockstone-research.de/research/RockstoneGSVupdate3deutsch.pdf

Excerpt:

On September 10, Gold Standard Ventures Corp. ("GSV") published the eagerly awaited maiden NI43-101 resource estimate for its 100% owned Pinion Deposit, which is located on the prolific Carlin Trend in Nevada, USA. The results exceeded expectations of management and the market, including ourselves. This now bodes outstandingly well for what lies ahead for this junior explorer advancing fast to probably the best take-over candidate in the gold space. The phase-2 drill program - that starts on Pinion any day now - is set to heavily increase the pressure on senior mining companies like Newmont, Barrick, Agnico Eagle or Goldcorp to step up first and make an offer to take over Pinion. This is simply because gold deposits like Pinion are very rare on a global scale, especially if located in a safe mining jurisdiction like Nevada, where multi billion Dollars worth of infrastructure begs for fresh feedstock.

These kinds of heap-leachable gold oxide deposits right at surface can be developed into mines much faster and cheaper than other types of gold deposits. There exist hundreds of other gold exploration and development companies in the market working on a much larger gold resource and higher grades than Pinion. Yet there does not exist many gold deposits which are as attractive as Pinion. We contemplate Pinion being one of the most attractive and undervalued development projects in the gold market today and especially in the foreseeable future, also due to its prime location on the prolific Carlin Trend.

As per Cowen & Company's estimates, Pinion could start mining as early as 2017 with average cash production costs of less than $600/oz and a yearly output of around 75,000 oz (at a $1,200/oz gold price, this would generate cash-flow of around $90 million per year translating into an annual profit of around $45 million). Thus, a 10 year mine would generate profits of around half a billion Dollar.

Canadian investment bank Cowen & Company on the expansion potential of Pinion (August 29, 2014):

"Upon review of the new geologic model and cross-sections, it is apparent that in several areas, the lateral extent of mineralization remains open. In addition, some of the historic drilling ended in ore, so that the vertical continuity of mineralization could be extended with further drilling. We expect the second phase of drilling to be the first round of step out drilling to target zones that would increase the resource. We also viewed zones that were insufficiently drilled, or did not sufficiently test for ore bearing strata across fault zones."

Macquarie Capital Markets Canada Ltd. in its latest research update (September 10, 2014):

"Pinion maiden resource significantly larger than we expected. We expected the initial resource to be ~500kozAu and that subsequent infill drill programs would expand the resource towards 1moz... Significant expansion upside ahead via the drill bit - Phase 2 has started. With a detailed geological model completed for the Pinion Deposit, target areas have been documented in all directions to expand the deposit. A number of shallow and deeper targets immediately adjacent to the existing resources have high potential to upgrade existing resources to indicated status. We have reviewed the sections in detail at site and given the strong lateral continuity of the host trap rocks (permeable collapse breccias), we expect there is a very high probability that the resource will also be expanded significantly once Phase 2 drilling is completed. Management has targeted mid 2015 for the completion of a PEA on Pinion... We reiterate our Outperform recommendation and $2.25 target. GSV is one of the only precious metal explorers in the world that has a large prospective land position on a +100moz productive gold trend - the Carlin Trend."

Macquarie provides several price target scenarios: With a limited downside risk of $0.50 (-23% from current $0.65), the upside potential to $10 (+1,439% from current price) appears very attractive as being feasible.

Adam Graf and Misha Levental from Cowen & Company see GSV as a prime take-over target that "provide the greatest optionality for seniors looking to refill their pipelines and create value." As per their latest (July 29) report entitled Gold Miners: M&A Wave, Part II. Tide Is Rolling In - Ahead of the Curve Series:

"'Buy Now, Act Later' Strategy Remains Our Recommendation For Seniors: We continue to believe the best strategy for seniors is to acquire targets today for heavily discounted prices to NAV; giving them the option to defer development according to growth needs and balance sheet health. We calculate, at current forward curves, the most of the senior producers will have built sufficient spending capacity for even the largest projects within 5 years.

Since our November 2013 report, Gold Miners: Prime Time for an M&A Wave?, senior gold producers have engaged in significant M&A transactions, with better-positioned seniors adding to growth, while the poorer-positioned ones worked to repair balance sheets. In total, among the six top North American seniors, we witnessed close to $6.0Bn in M&A-related transaction value. While gold price has remained relatively range-bound, seniors appear in a better position versus year-end 2013, as highlighted by lower expected 2014 Net Debt to Total Capitalization ratios, and lower expected 2014 all-in costs.

For some, however, better balance sheets and lower near-term costs come at the expense of future production growth. While near-term production is expected to improve, pipelines begin tapering around 2017-2018. Going into 2015, we see capital spending falling off, a consequence of having delayed project development in efforts to conserve cash. We expect that balance sheet improvement that has taken place, coupled with an increasing need to focus on the next stage of growth, should lead to ongoing M&A. ...the higher-levered seniors ABX and NEM have been focused on selling non-core assets (and were reportedly in talks to merge and rationalize assets; see our report Barrick/Newmont – Sorting Through The Noise). Meanwhile, AEM and AUY have taken advantage of healthier balance sheets and historically-depressed equity valuations to buy production and expand project pipelines. Looking to 2015, we expect GG to be in the best financial position to engage in M&A. That being said, we see NEM and AUY as having the capacity to make additional purchases, and ABX and KGC being the most challenged... Despite recent M&A activity, we see the senior gold producers as much better positioned both financially and operationally, to withstand a $1200/oz-$1300/oz gold price environment vs. last year. It is our view that they can now afford to make acquisitions to be built at a later date, and take advantage of low junior miner market valuations."

Technically, GSV has been consolidating sideways within a triangle since the correction ended in May 2013. During the last few months, numerous "breakouts" tried to break and hold above the resistive (red) triangle leg. Most recently, a new breakout above the (red) resistance occurred generating a strong buy-signal.

Link to chart 1: http://scharts.co/1AZh0Gm

As per the definitions of a triangular price formation, the final movement out of the triangle ("thrust") is either a strong and explosive boom or an excessive crash. As the price has been trying to break the upper leg lately, we anticiapte the thrust to finish off to the upside. Only if the price closes below the green support line, a sell-signal is generated as a thrust to the downside must be accounted for. The goal of a thrust to the upside is to transform the high of the triangle ($1) into new support, in order for a new and sustainable upward-trend to start thereafter.

Link to chart 1: http://scharts.co/1jOFud0

The full analysis can be downloaded as a PDF via the following links:

English:

http://www.rockstone-research.de/research/RockstoneGSVupdate3english.pdf

German:

http://www.rockstone-research.de/research/RockstoneGSVupdate3deutsch.pdf

Disclaimer: The author holds shares Gold Standard Ventures Corp. and may sell those any time without notice, whereas neither Rockstone Research Ltd. nor the author was remunerated by any of the companies mentioned herein to produce or publish this content. Please read the full disclaimer at rockstone-research.com and within the full research report as none of this content is to be construed as an "investment advice." All statements in this report other than statements of historical fact should be considered forward-looking statements. Much of this report is comprised of statements of projection. Statements in this report that are forward looking include that gold prices are expected to rebound; that Gold Standard Ventures Corp. can and will start developing its projects into a mine; that exploration has or will discover a mineable deposit. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in these forward-looking statements. Risks and uncertainties respecting mineral exploration companies are generally disclosed in the annual financial or other filing documents of Gold Standard Ventures Corp. and similar companies as filed with the relevant securities commissions, and should be reviewed by any reader of this report. 

 

SOURCE: Rockstone Research Ltd. 

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