Friday 24th October 2014

Resource Clips


Going it alone

Micro-cap Gowest Gold aims for 2015 production

by Greg Klein

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Not all companies follow the same path to production. In fact they can diverge radically, as two November 12 announcements show.

Queenston Mining TSX:QMI is poised to follow the more common route. A smaller company develops and de-risks a deposit until it’s all but irresistible to a bigger company. The latter then makes an offer shareholders rarely refuse. In this case, Osisko Mining TSX:OSK is offering 0.611 of one of its shares for each Queenston share. Based on Osisko’s November 9 close of $9.82, the offer was worth $6 per Queenston share. Queenston had closed that day at $5.01. The November 12 announcement then saw Osisko drop to a $9.02 close, making its 0.611 offer worth $5.51. Queenston, meanwhile, closed November 12 at $5.75. Nevertheless Queenston seems ready for acquisition, whether by Osisko or another mid-tier outfit.

But for another company, the path to production might not require wealthy suitors or even large capitalization. Gowest Gold TSXV:GWA closed November 12 at $0.095 for a market cap of $12.53 million. Even so, it’s determined to take its Frankfield East gold deposit into production by Q1 2015, and to do so itself—well, with a little help from some friends.

Micro-cap Gowest Gold aims for 2015 production

Gowest Gold plans to use high-tech ore-sorting and
third-party processing to begin mining quicker and cheaper.

The company hopes to shorten the path and lower the capex by contracting a third party to produce high-grade concentrate. That, in turn, would be sold to a customer who would refine it further. Gowest’s location in the Timmins mining camp helped the company find a processor with sufficient capacity, which led to the memorandum of understanding announced November 12.

“It’s a matter of building the mine a couple of years sooner and putting less than a third of the capital into it than if we tried to do it ourselves,” says IR manager Greg Taylor. “That would mean generating cash flow a couple of years early, and then we’d make a separate decision on whether to continue doing it that way or to build our own plant after we’ve already started mining.”

To that end, Gowest is now working on engineering, metallurgical and mine development studies prior to hammering out a final agreement with the mill operator next year. A report announced last February suggests the mill would produce concentrate grading over 90 grams per tonne gold.

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