Torex Gold (TXG) put the Guerrero gold belt back on the map earlier this week with a monster $350-million bought deal financing underwritten by BMO Capital Markets and others. In a junior mining sector that has been on the ropes for much of the year, it’s an impressive cash pile.
Torex’s Morelos deposit has 5.4 million ounces of gold in all categories and is down the road from Goldcorp’s (G) Los Filos mine, which is projected to produce 345,000 ounces of gold in 2012. Torex would have already been a big pill to swallow for any gold producer, so the financing effectively moves the company out of the realm of takeover candidates.
That leaves Newstrike Capital (NES) and its Ana Paula deposit, which I wrote about here. Before the year ends, Newstrike is expected to publish a maiden NI 43-101 report outlining more than 3 million ounces of gold in a high-grade breccia and a lower-grade zone. It will be the culmination of 2 years of drilling that has produced impressive intercepts such as these, the most recent results, which included 76 metres of more than 10 g/t gold.
Newstrike CEO Richard Whittall was interviewed by Andrew Bell on BNN Wednesday and he was quick to establish that Newstrike doesn’t plan to join Torex on the production path: ”Our company is all about exploration. We’re not a production company.”
Another key difference between TXG and NES — not mentioned on BNN, but significant — is that Torex’s deposit is harder to get at and therefore more expensive to mine. Morelos is underneath a mountainside, while Ana Paula is on level ground and near-surface, which should lower the strip ratio.
I liked Whittall’s answer to Bell’s question about location risk in Guerrero, identified in reports such as this as one of the most dangerous provinces in the ongoing drug war between rival gangs. Whittall reiterated that key Newstrike managers have spent the past 18 years in Guerrero and noted that there was “no security at the project” — a comment that seemed to catch Bell off-guard.
It’s worth noting, however, that Goldcorp is building an airstrip at Los Filos so it won’t have to transport gold bars out by road.
Here’s the interview:
Disclosure: I own shares in Newstrike Capital. This is not investment advice, and all investors should do their own due diligence and consult a licensed investment advisor. Please read my disclaimer.