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Posts tagged ‘Allied Nevada Gold Corp. (ANV)’

Do The Math

April 20th, 2011

Coral Gold Has 3.4 Million Gold Ounces Inferred In Nevada

By Kevin Michael Grace

David Wolfin doesn’t wait to be asked whether his company’s stock is undervalued. The President and CEO of Coral Gold Resources Ltd is positively adamant about it. “Newmont just bought out Fronteer. In Toronto, at PDAC, they basically said the sale was equivalent to $200 an ounce in the ground. We are trading at 10 bucks an ounce in the ground. We are extremely undervalued.”

Wolfin is referring to the facts that Coral has a 2009 NI 43-101 inferred gold resource of 3.38 million ounces at its Robertson property on the Cortez-Battle Mountain Trend in Nevada and a current market cap (April 20) of only $23.4 million. Actually, that works out to about seven bucks an ounce. Asked to explain the disparity, Wolfin answers, “Most people chalk it up to being in the inferred category or that it is uneconomical. These are the things that we have to prove to the world are not true.”

Coral Gold Has 3.4 Million Gold Ounces Inferred In Nevada

Part of Coral Gold’s problem is that, for about 20 years, its Nevada properties languished in the mining version of what Hollywood calls “development hell.” Wolfin explains, “We built a small heap-leaching operation there in the late 1980s. The stock price went up over $10 a share, but then a couple things happened. The price of gold went down. Our mine manager got stricken with cancer and died, and our recovery rates weren’t as high as we had hoped for. Later we discovered sulphide rock was getting mixed with oxide rock, and sulphide rock takes longer to break down and oxidize. We shut down the mine at that time, and we were approached by 30 major mining companies.”

Coral chose a joint venture-option agreement with Amax Gold. Wolfin: “They came in and started a big drill campaign. They did a feasibility study in 1994, and we shopped it around, but it turns out it wasn’t bankable. They didn’t put enough of the drill-indicated resources into the reserve category.” Coral indicated its unhappiness with Amax, so the property was divided, with Coral eventually regaining full ownership of Robertson.

Amax was later taken over by Cyprus, which became Kinross. Placer Dome bought 61% back-in rights on the Excluded Property, and then became Barrick. (There are two other Cortez properties, Norma Sass and Ruf, which are joint ventures with Levon Resources.) This wasn’t the end of the uncertainty. Wolfin explains, “The Bureau of Land Management contacts us in 2000 and says, you guys haven’t cleaned up the mess in the mine you had in the late 1980s because the property was tied up by those majors. So we embarked on a massive reclamation program which stretched over five years.”

Since 2005, Coral has been confirmation drilling Robertson. Assays reported from November 2010 to January 2011 have included 1.096 grams per tonne over 18 metres, 6.24 g/t over 1.5 metres, 1.34 g/t over 19.8 metres, 3.74 g/t over 6 metres and 1.37 g/t over 24.4 metres. Robertson’s 43-101 inferred resource went from 1 million ounces to 2.3 million ounces in 2008, to 3.4 million ounces in 2009. Over 500,000 feet has been drilled, 1,160 holes. Wolfin says, “It is an inferred resource because all the work done by Amax was done pre 43-101, so it doesn’t qualify. Which is a shame, because Amax used MRDI, which is now AMEC. It was done at the highest standards of that time. Today we are looking towards upgrading those ounces from inferred and working on a preliminary economic assessment. It is due in July. That will be a major milestone for the company because it will show the world it’s economically viable to put in a mine.”

Our preliminary economic assessment is due in July. That will be a major milestone because it will show the world it’s economically viable to put in a mine – David Wolfin

Coral has petitioned to drill 500 holes and seeks a blanket permit. Wolfin admits this will take some time. He says, “Because we had a heap leaching operation there, we are treated differently than a grassroots-exploration property. We did an environmental assessment in the 1980s, but now we have to do a new one. We are doing cultural surveys, studying the pygmy rabbits, the sage growths, the rattlesnakes, whatever kind of animals and rodents are there.”

Beyond the historic delays, missed opportunities and current permitting frustrations, what bothers Wolfin most is the seeming inability of the market to comprehend what Coral has at Robertson. For example, the property adjoins Barrick’s Cortez Pipeline Mine, which last year produced 1.14 million ounces gold at $312 per ounce and has proven and probable reserves of 14.5 million ounces. He adds, “If you look at Allied Nevada, one of Bob Buchan’s new companies (he’s the one who started Kinross), similar story. They’re mining half a gram of gold; they started three years ago at 30,000 ounces a year production. Now they’re talking a quarter-million ounces a year, and they’re a $3.4-billion market cap. We’re not much different.”

Coral has $3 million in cash and only 31 million shares. Wolfin concludes that Robertson’s economics can’t be ignored much longer: “There are 160 million ounces of gold on the Carlin Trend and probably 50 million or 60 million on Cortez-Battle Mountain. We have 3.4 million ounces there. It’s been found at 1,000 dollars an ounce. That’s 3.5 billion dollars staring you in the face, and we’ve got a market cap of $23 million.