If a recent 43-101 report proves accurate, the next round of drinks may be on controversial Vancouver gold mining promoter Frank Callaghan.
As the chief promoter and CEO of Barkerville Gold Mines Ltd over the past 18 odd years, Frank Callaghan has fostered a mixed reputation, and it’s not just for his penchant for loud ties and golden adornments.
Describing one of his prospective mineral properties in April 2000, Callaghan was memorably quoted as saying,”It’s like standing in the middle of a lake so big you can’t see to either side.” Barkerville’s stock ran all the way up to $2.40.
A few days later, regulators came calling, and Callaghan denied making the statements, insisting he was misquoted. “I mean, how do you stand in the middle of a lake?”
Quoting a Stockwatch reporter: “Had an investor bought 1,000 shares then and hung on until August 2005, he would then have found himself rolled back 1:10 and left with 100 shares. Had he held those until January of 2009, he would have been rolled back 1:10 again, leaving 10 shares. His original $2,400 investment would now be worth $9.70.” ($9.90 as of July 6, 2012)
But something big happened last Friday. Mr. Callaghan surprised Howe Street by announcing an indicated gold resource of some 10.6 million ounces at Cow Mountain, one of Barkerville’s properties. Callaghan’s story, if true, is a very big deal. The Barkerville stock, currently sitting around .91, could foreseeably be worth many multiples more.
When the stock opened after the news it shot up to $1.21 before closing before the long weekend. (BGM shares were trading around .45 cents just two weeks before).
IR star Keir Reynolds seized on the moment with this cheeky post, Is Barkerville’s Resource Estimate Believable?, while simultaneously some investment pundits began claiming to have known all along (and others prepared to short the stock).
Callaghan, not worried about criticism, issued insiders a fresh batch of incentive stock options immediately following the press release.
The market is not convinced yet, and won’t be for 45 days from the date of the press release, by which date Callaghan is required to file the 43-101-compliant technical report explaining the resource calculation. If the filing is consistent with what has been announced, fund managers are likely to send Barkerville shares (and Callaghan) through the roof.
When I showed the press release to well known Casey Research analyst Marin Katusa, who I ran into on the street moments after receiving the news, he was similarly amazed. “Well, it’s deep and a vein system,” he said, “but I’ve got to see the 43-101 report.”
I talked to Joe Martin, my boss at Cambridge House, who recalled 15 years of Callaghan exhibiting at Cambridge conferences. On more than one occasion Joe reported difficulty collecting Frank’s bill but Frank always came through and Joe has remained one of his strongest supporters even before last Friday’s good news.
I talked to Tony Simon, a chartered accountant who is a living encyclopedia (as Joe is) on everything Howe Street. Tony recalled a younger Frank Callaghan as a ski bum in Whistler. “Frank is my friend, but he has always pushed things to the limit… and as an enthusiastic promoter, he has sometimes overpromised.” said Simon. “But you’ve got to hand it to him. He has been consistently working that project for almost two decades and has developed it to the point it is now.”
Even more astounding than the 10.6 million ounce indicated gold resource, the report also predicts that BGM’s project area has a geological potential of 65-90 million ounces. Experts I have spoken to suggested that to prove a mineable resource of that size would require generations worth of work.
“Reporting “geological potential” is highly unconventional, but it is done very liberally in this news release.” said Quinton Hennigh, a geologist and investment newsletter writer. Click here for Quinton’s brief July 3, 2012 technical interpretation.
However, Simon doesn’t think that Callaghan’s claims are out of line. “Frank’s been working this district for 20 years, he knows it best and he’s not going down in a lie now… I’ll bet he has 10.6 million ounces and I think the worst case will still be multi-million ounces that are economically viable at today’s gold prices.”
I was able to learn that neither of Callaghan’s close friends, Tony or Joe, have picked up any shares since the announcement. They’re waiting for the 43-101, like the rest of us.
Callaghan is reportedly so pumped up that he is bouncing off the walls.
“He could use a Friedland, Lundin, Giustra, or Ross Beaty to help him negotiate a sale,” said Simon.
Yesterday after a cold beer I cold-called Callaghan’s cell phone and said that if I could just get an independent geologist to review his 43-101, I think I could attract a strategic negotiator (such as the ones aforementioned) to help him make a sale.
“Are you frickin kidding me!?” Callaghan said. “Don’t you know it’s illegal to share a report with somebody before filing it with the exchange!?”
“I did not realize. I’m sure you can appreciate a young man out for a buck,” I said. “Of course,” he said, nonchalantly. Callaghan hung up and boarded a plane, with no doubt the most exciting summer of his life ahead of him.
What will be of Barkerville, who knows. A billion dollar exit or another overpromise. By now the street knows the potential, but at the same time we’re all on “risk off” mode and afraid to lose any more. The sting of a loss on a deal with Callaghan’s name on it might hurt even more than other losses.
The new resource estimate at Cow Mountain was compiled by Peter George of Geoex Limited, a veteran Canadian geologist who wrote an opinion on the geological potential of the Bruce Channel gold project (Red Lake), a property owned by Golden Eagle Mines, several years ago, that triggered a takeover by Goldcorp in 2008 for some 1.5 billion dollars.
We checked Goldcorp’s annual reports and Bruce Channel is still being talked about in future tense.. adding credibility to Peter George and thus to the Barkerville report.
But also, “In 2010, he (George) worked on a resource for Rubicon Minerals Corp. that was downsized after the B.C. Securities Commission intervened with concerns about it.” Said the Financial Posts’s Peter Koven.
Nobody knows until that report shows.
I had heard before that Callaghan has no problem comparing himself to fabled mining promoter Murray Pezim – a larger than life figure who had a long series of failures in the resources space before finally striking it rich in his 60’s.
There is no doubt Callaghan fits the Pezim mold, although slightly younger and certainly better looking. Whether or not he makes a bunch of Howe Street players rich like Pezim did comes down to the 43-101 report.
Best of luck to Frank!
Correction: I spoke with Joe Martin July 7am and he notified me that he picked up 10,000 shares in Barkerville on July 4th, “In my RRSP. Just for fun.”
Disclaimer: All facts to be verified by the reader. Author strongly discourages stock trading as a result of this post and assumes absolutely no liability for any individual’s stock trading loss. We all must do own due diligence and talk to an investment advisor before making investment decisions. CEO.CA offers no individualized investment advice.
Listen: Promoter’s Anthem