Gold Bullion Development Corp. Preliminary Feasibility Study imminent, Gold production scenario achievable with royalty shares


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TSX.V:GBB / PK:GBBFF
02/27/2014 [ACCESSWIRE]

February 27, 2014 / Precious metal investors may wish to add Gold Bullion Development Corp. (TSX VENTURE:GBB) (Pink Sheets:GBBFF) (Frankfurt:B6D) on their watch list. This Q2 2014, independent consulting firm SGS is expected to deliver a Preliminary Feasibility Study (PFS) on GBB.V’s Granada Mine located along the prolific Cadillac Trend in Quebec. The Granada Mine is now positioned for an initial open-pit Gold production scenario on its 1.6 million ounce Measured & Indicated* at 1.0g/t Au and 1.0 million ounces at 1.0 g/t Au Inferred* deposit. The PFS is expected to show the viability of open pit based production targeting high-grade (2 - 3 g/T and more) mineralization over a mining horizon of 3-4 years rolling start as an interim step towards development of the deposit. It is called a ‘rolling start’ as once it begins it is not expected to stop and is expected to grow. Once the initial open-pit is tackled, GBB.V will decide how to best proceed underground where it would tackle even higher grades and a potentially substantial extended mine life.
 
GBB.V is evaluating its options for production; either having its ore custom milled at local facilities or building its own onsite mill. The ideal structure for GBB.V is custom milling as it involves limited risk to everyone. Assuming a favorable PFS this Q2, conceivably either option is achievable by the end of the fourth quarter of this year.
 
To pay for the production development (whether custom milled or onsite mill) Gold Bullion Development Corp. is considering the possibility of issuing some form of Gold royalty share in order to raise capital for taking the deposit to production, see related December 4, 2013 press release entitled 'Gold Bullion announces Granada Royalty Shares' ( URL: http://www.prnewswire.com/news-releases/gold-bullion-announces-granada-royalty-shares-234427131.html ). We asked Fredrick William, Managing Director of Market Equities Research Group, for an explanation of how a Gold royalty share would work for the various stakeholders (the royalty share investors, the shareholders of common stock, and the Company itself) and what benefits/features he expects GBB.V would include in its gold royalty share. Mr. William has no affiliation with the subject company, however he understands various vehicles for financing gold mines, and thus has an understanding as to what GBB.V’s gold royalty share program is likely to resemble.
 
The idea of a publicly listed/tradable company-issued gold royalty share (as opposed to the company making a deal with a gold royalty stream company) is relatively new, however it seems to makes so much sense. The purchaser of a gold royalty share is not buying the mining company, they are buying the gold in the ground – they effectively have title to the metal in the ground (they don’t own the mine, they don’t own the mill, they don’t own equipment, they own the gold). They hold a net smelter royalty (NSR) that becomes a tradable share. Another benefit typically includes the same NRS rights to new gold found at the mine, new gold is added to the royalty share, which is important as GBB.V has larger resource growth potential; GBB.V is confidently targeting** up to 4.6 million total ounces of Gold resource (in all categories) in its next subsequent phases of drilling.

 
Gold Bullion Development Corp. is expected to follow the model employed by Gold producer Banro Corporation (TSX: BAA); BAA successfully issued a gold royalty share to take its Twangiza project to production. BAA offered ~18,750 oz of gold (~$30 million worth), basically they created ~1/2 gram share and it trades on the CNSX. BlackRock World Mining Trust plc took the entire issuance ( http://news.banro.com/press-releases/banro-announces-pricing-of-previously-announced-fi-tsx-baa-201304120866390001 ) -- BlackRock owns that gold in the ground, it no longer belongs to BAA. It is expected GBB.V’s gold royalty shares will be facilitated by physical delivery of bullion to the bearer via metal holding accounts or currency equivalent of choice for those that prefer. There are possible tax advantages for royalty shareholders that receive bullion as technically not until they sell the gold are they required to declare it as income.

 
The upcoming PFS numbers will be key in determining what percentage NSR Gold Bullion Development Corp. offers its gold royalty share. GBB.V will also likely negotiate to buy out from the vendor the 2% NSR that exists on its Granada Property and flip that out to the gold royalty shareholders. Important to note though is that GBB.V has already proved once it can generate good numbers on Granada and is no stranger to transferring ownership of NSR via physical gold; when GBB.V originally took over the Granada Property it did a very big bulk sample, poured gold, and paid all the NSR out in gold. GBB.V created gold metal accounts for the owners of the property and paid them in gold.
 
It is expected GBB.V will be mining open-pit of 2+ g/T. When it did the bulk sample its bulk sample grade was 1.62 g/T, the mineralized material was trucked to nearby facilities, and the cash cost was near ~$300/oz – that was a different time though, when labor and costs in general were lower. It is believed GBB.V can certainly do it again, however a $650 - $800/oz cash cost would be more likely at 2 g/T material, and there might be close to 1 million ounces under the revised pit plan. Going underground, it has not developed the grade, however it might be somewhere between 3 – 4.2 g/T.
 
The gold royalty share essentially operates like a preferred share. The royalty shareholder through his royalty shares controls the NSR, thus if and when the Company changes hands (new common shareholders), the new owner has to discuss matters with the owners of the royalty shares. And in the event the mine owner does not want to produce, the royalty shareholders have the right to take it to production or be compensated accordingly.
 
Many anticipate Gold Bullion Development Corp. will insert into their gold royalty share offering an option to convert the present shareholders of the common stock to a gold royalty share according to a conversion rate determined by an independent accounting firm. Common shareholders will have to decide if they want to trade their interest in the Company for safety and stability of being first in line via the NSR for the gold off the top at production, plus lifetime NRS rights to new gold found. The decision to ‘convert’ verses remain a common shareholder is a personal decision and depends on one’s opinion of various aspects of the Company, the economy, the industry, and the price of gold. Trading wise the gold royalty share should be stable and hold its value well, while the common share will be more dynamic; rising and falling as common shares tend do in markets. A look at shares of BAA verses the royalty share it issued is a perfect example; the common stock fell and recovered with the industry, while the royalty held steady at ~$25 (Equities quote CNSX: BAA.PR.A: http://www.cnsx.ca/CNSX/Securities/Mining/Banro-Corporation-Series-A-Preference-Shares.aspx ) – it is as good as gold, literally. The common shareholder is obviously at greater risk, but if everything works out and gold prices cooperate, he gets good margin (possibly even exceptionally good margin), growth, and appreciation. Both win; the gold royalty shares get the cream, and the common shareholders get the gravy.
 
Market Equities Research Group has identified the following related research links on Gold Bullion Development Corp:
 
- Gold Bullion Development Corp. Corporate Website: http://www.goldbulliondevelopmentcorp.com 
 
- SEDAR Filings for Gold Bullion Development corp.: http://sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00004087
 
- Recent Mining Journal article: http://miningmarketwatch.net/gbb.htm
 
- Recent Q4 2013 Analysts Report (C$0.66 price target): http://sectornewswire.com/GBBanalystrepQ3-2013.pdf
 
This release may contain forward-looking statements regarding future events that involve risk and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual events or results. Readers are cautioned that not until subject companies actually releases official details themselves should anyone rely on the information presented herein. Articles, excerpts, commentary and reviews herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned.
 
*NI-43-101 [December 2012] in situ numbers: Measured resource is 946,000 ounces (28.735 million tonnes grading 1.02 g/t), indicated resource is 659,000 ounces (18.740 million tonnes grading 1.09 g/t), inferred resource is 1,033,000 ounces gold (29.975 million tonnes grading 1.07 g/t Au) using a cut-off grade of 0.40 g/t.
 
**Targets: Company is targeting an additional 1 to 2 million ounces grading 3 to 4 grams per tonne within 10 to 15 million tonnes to this total (as per November 26, 2012 release) with subsequent drill programmes. The potential quantity and grade is conceptual in nature as there has been insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the target being delineated as a mineral resource. The potential stated above is based on projections within the mineralized plan of two and three mineralized zones of 3 meters true width on the west and east side of the deep hole program under highly drilled surface mineralization.
 
Contact information:
Simon Levinson, Editor in Chief

Market Equities Research Group
s.levinson@marketequitiesresearch.com

Fredrick William, BA Ec., f.william@marketequitiesresearch.com

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