By Steven Ralston, CFA
Golden Dawn Minerals (TSX:GOM.V) (OTC:GDMRF) recently filed a NI 43-101-complaint Technical Report on Kettle River land package. Also, earlier in January, the RIVI financing was executed and the company announced the results from 2016 underground drilling program at the May Mac mine.
Technical Report on Kettle River land package
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.
The Greenwood Area Property is 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.
Most of the historic mines are clustered in the Phoenix and Summit mining camp areas, and all of the historic mines are less than 150 meters in depth (most being less than 50 meters deep). The two localized groupings suggest that the two areas may overlie porphyry-copper gold source intrusion. Management intends to explore areas evidencing indications of intrusive porphyry deposits. In addition, historic exploration focused on higher-grade massive sulphide/oxide ores, generally bypassing lower grade footwall stringer mineralization and iron-rich skarn zones of mineralization.
Drilling Program Update
On January 16, 2017, Golden Dawn Minerals announced the results from 2016 underground drilling program. As reported in December, drill Hole MU16-01 intersected the Skomac vein at 18 meters from the end of the level No. 7 adit. The remaining 8 holes (MU16-02 through MU 16-09) were drilled in a fan pattern. From the table below, all intercept about 0.5 meter of significant mineralization.
The results for the surface step-out hole BF 16-26 at the May Mac mine were revised upward from intersecting 6.07 meters of mineralization grading 79.6 g/t Ag, 0.57 g/t Au, 1.9% Pb and 1.4% Zn to intersecting 6.07 meters of mineralization grading 133.6 g/t Ag, 0.54 g/t Au, 3.6% Pb and 1.5% Zn due to the high lead content. For samples with >5% Pb, the initial 4Acid digestion assay provided low biased results; for full Pb recovery, an Aqua Regia digestion or Peroxide Fusion assay is required, which lead to higher silver and lead values in the check assays.
Management continues to commission diamond drilling at the May Mac Mine to locate a source of mill feed. Underground diamond drilling should have commences by January 21, 2017 from drill station #3, to be followed further drilling at station #2 and station #1. On October 17, 2016, Golden Dawn entered into a Letter of Intent (LOI) with New Nadina Explorations Limited (NNA.V) for the acquisition of Kettle River Resources Ltd, which holds 100% interest in 54 mineral claims and 75 crown grants encompassing approximately 10,400 hectares. Consideration for the acquisition consists of a $80,000 non-refundable deposit upon signing the LOI, $15,000 by November 26, 2016 and CAD$1,000,000 (inclusive of deposits), along with $600,000 worth of Golden Dawn stock on closing, which is expected to be on or before January 31, 2017.
Update on Metal Purchase Agreement with RIVI Capital
On January 3, 2017, Golden Dawn Minerals announced the execution of the Metal Purchase Agreement with RIVI CAPITAL LL. The initial US$3.0 million was placed into an escrow account and will be released upon transfer of a security interest in the Greenwood Mill, Lexington Mine and Golden Crown Mine. Another US$1.0 million (approximately CDN$1.3 million) will be paid no later than February 21, 2017. In return, 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 intends to use 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 and to bolster working capital.
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 $0.51. The target was raised slightly due to rally in the price of gold.
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