By Steven Ralston, CFA
Golden Dawn Minerals (TSX:GOM.V) (OTC:GDMRF) has assembled a portfolio of gold properties that is comprised of a series of former mines, advance stage deposits with resources, mineral prospects and exploration targets (and a mill that was operational in 2008), all situated in the historic Greenwood Mining Camp of south-central British Columbia. Executive Summary of Recent Events
On February 14, 2017, Golden Dawn Minerals acquired Kettle River Resources Ltd. (aka the Greenwood Area Properties) from New Nadina Explorations Limited (TSX:NNA.V) in consideration of $1,010,000 and 2,222,250 GOM.V shares. The Greenwood Area Properties are comprised of 57 Crown Granted claims with sub-surface mineral rights (814.3 hectares), 24 Crown Granted claims with surface and sub-surface rights (277.4 hectares), and 51 mineral tenure claims with subsurface rights (10,263 hectares), which in total encompass over 11,000 hectares covering 29 historic metal mines, including the historic Phoenix mine. All showings and historic mines are within a 15 kilometer radius from the Greenwood Mill and are less than 150 meters in depth, with the majority being less than 50 meters deep. The acquisition considerably adds to the company’s mineral rights the Greenwood Mining Camp.
The Greenwood Area Properties are subject to a 1% NSR, of which Golden Dawn can purchase a ½% NSR for $1.0 million during the first five years and thereafter for $1.2 million up to 10 years, leaving a ½% NSR payable to New Nadina Explorations Limited.
On January 26, 2017, a NI 43-101 Technical Report on the Greenwood Area Property was filed on SEDAR. The report was prepared for Golden Dawn Minerals as part of the due diligence process of acquiring the mineral properties of Kettle River Resources from New Nadina Explorations Limited.
A preliminary prospectus was filed on March 22, 2017 in order to facilitate equity and/or debt financings to advance the company’s projects in the historic Greenwood Mining Camp.
Management plans to commission a new technical report that will consolidate all four of the company's properties in the Greenwood Mining Camp into one project tentatively titled The Greenwood Precious Metal Project.
Management will likely proceed toward production without a feasibility study of mineral reserves (which would better demonstrate the economic and technical viability of the project) thereby increasing the economic and technical risks of failure.
On March 31, 2017, Golden Dawn Minerals announces the receipt of a permit to de-water the Lexington Mine (which hosts the Lexington-Grenoble deposit) from the BC Government Ministry of Environment. This essential permit is allows for the Lexington mine to be pumped out in preparation for mining activities and continually dewatered during underground test mining operations. Management intends to initiate the dewatering process after the seasonal snowfall recedes (generally between the end of April and early May).
On April 5, 2017, Golden Dawn Minerals announced the purchase of 100% interest in all remaining cells (487.03 hectares) of mineral claim tenure 513773 for 100,000 shares of GOM.V shares to the current property owner. The transaction increased the Amigo Property to approximately 656.43 hectares. This claim tenure is contiguous with the Boundary Falls Property, which includes the May Mac Mine and the historic May Mac processing facility.
Update on Metallurgical Results of Drilling Program
On March 15, 2017, Golden Dawn Minerals announced initial metallurgical results from laboratory test programs on mineralized drill core samples from the May Mac Mine. Preliminary findings indicate gold gravity recoveries of 49% Au, and further flotation recoveries of 49% for a combined gravity and flotation recovery rate of 98%. The combined gravity and flotation recovery rate for silver was 97.7%.
Drilling Program Update
On February 23, 2017, Golden Dawn Minerals announced the completion of 10 underground drill-hole program totaling 1,320 meters at the May Mac mine conducted during early 2017. Previously in late 2016, 9 underground drill holes were completed that totaled 805 meters. All of the holes were drilled in order to further test the mineralized zones of the Skomac vein and also to test for parallel veins. All 19 holes intersected mineralization, indicating the continuity of mineralization within the Skomac vein system.
On March 22, 2017, Golden Dawn Minerals filed a preliminary short form prospectus for 18,055,555 Units at $0.36 per Unit (each Unit consisting of one common share and one common share purchase warrant initially exercisable at $0.40 during the first two years) and 8,750,000 Flow-Through Units at $0.40 per FT Unit (each FT Unit consisting of one flow-through common share and one-half of a one common share warrant initially exercisable at $0.425 during the first two years). The offering syndicate is being led by Secutor Capital Management Corporation. Assuming that the Offering is fully subscribed, the company anticipate net proceeds will be approximately CDN$9.2 million.
As of March 2017, management anticipates that through December 2017 the current planned operational needs of Golden Dawn Minerals are approximately $10.5 million, which is consists of $6.6 million in capital expenditures on the Lexington Mine and Mill, $2.4 million for exploration activities at the May Mac Mine and Golden Crown Properties and $1.5 million in administrative costs. Management believes that cash-on-hand is sufficient to meet required expenditures until the September-October timeframe, by which time the company’s ability to continue operations is dependent on management’s ability to secure additional financing. Management anticipates that at least $13 million in funding must be raised to fully implement the company’s exploration and development plans over the next 12 months.
On February 9, 2017, Golden Dawn Minerals received US$3,000,000 (CDN$3,958,977.69) under the Gold Purchase Agreement with RIVI Capital LLC, and on March 13th received a second tranche of USD$1.0 million (CDN $1,342,000). Under the Metal Purchase Agreement, RIVI shall receive metal stream consisting of 13.5% of the total combined gross production of gold from the Lexington and Golden Crown Mines at cost of US$400 per ounce for the life of the project. Any production from the May Mac is excluded from the MPA. After the delivery of 15,000 ounces of gold (providing the 1-year average price of gold is above US$1,200), Golden Dawn has the option to reduce the metal stream to 6.75% of gross production and increase the cost to US$650. Golden Dawn will pay 10% interest per annum on the first US$3,000,000 until the 170 t/d production level is achieved. Golden Dawn Minerals used the funds to help repay a bridge loan, to complete the acquisition of Kettle River Resources Ltd., to fund the exploratory drilling on the Skomac vein system at the May Mac Mine and to bolster working capital. The MPA is secured by interests in the Greenwood Mill, Lexington Mine and Golden Crown Mine.
On February 24, 2017, the company announced the closing of a USD$1.0 million increase in the existing 3-year Senior Secured Convertible Debt Security with Lind Asset Management VI, LLC. The conversion price of this subsequent convertible security is CDN$0.29 per share. Also, Lind Partners will also receive 4,202,258 3-year warrants exercisable at CDN$0.29. The Face Value of the additional convertible financing is US$1.2 million, which includes funded amount of US$1.0 million and US$200,000 of pre-paid interest. Golden Dawn Minerals is required to repay US$100,000 monthly after the first four months (beginning June 30, 2017). Moreover, the company has the option to repay the entire US$1,200,000 additional convertible financing for only US$1,100,000 if the amount is paid by June 15, 2017. Pre-paid interest accrues monthly and Lind has the option to convert accrued interest quarterly into common shares. In addition, Golden Dawn Minerals retains the right to buy-back the secured convertible security at any time at a 5% premium.
Subsequent to the end of the 2016 fiscal year, Golden Dawn Minerals has issued 4,640,792 shares through the exercise of warrants and options for the total proceeds CDN$574,305.
Managements of junior mineral exploration companies create value through evaluating, acquiring, exploring and/or developing mining properties. Management’s strategy is to increase shareholder value through acquiring projects in the Greenwood Mining Camp, where management has considerable experience, and subsequently advancing the properties to production. With the acquisition of the Greenwood mill, management is able to fast-track the May Mac, Lexington-Grenoble and Golden Crown mines to production.
Our calculation of share value of attributable resources is based on the ascertained net asset value of each property, which is determined by adjusting the value of estimated resources for the expected recovery rate, mining/processing costs and royalties, if any. Also, the resources are assigned a confidence factor that attempts to take into account the risks of each project, such as the locality of the deposits, the assurance level of the resources, various technical mining/production risks, etc. The methodology also accounts for balance sheet adjustments for working capital and assets, such as property, plant and equipment, along with anticipated development capital costs. Based on our calculation of share value of attributable resources, our target for Golden Dawn stock is $0.55. The target was raised slightly due to rally in the price of gold despite the additional funding requirements to implement management’s exploration and development plans over the next 12 months
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