Dec 09
31
Crocodile Gold Corp. (TSX: CRK $1.86) is a new company that I’m very pleased to be working with. CRK is a Canadian company and new entrant to the category of junior gold producers though it’s recently completed acquisition of past producing gold assets in the Northern Territory of Australia. CRK’s assets comprise an area greater than 3,500 square kilometers, which contains 3.0 million ounces of NI 43-101 compliant measured and indicated resources, 1.8 million ounces of inferred resources, and significant potential for resource expansion. I believe CRK is very well positioned to take advantage of the current gold market and I would like to share three main reasons why I believe 2010 could be the year of the Crocodile:
- This junior gold company has acquired assets and outlined a strategy that appears to position them to be able to deliver both increasing gold production and resource expansion into this gold cycle.
- The company acquired great assets at very attractive prices and the market has not appeared yet to have fully value the story.
- The company’s management team is ripe with mining, gold and capital markets experience, and is supported by Stan Bharti and his global, resource-focused merchant bank Forbes & Manhattan Inc.
Prepare to Deliver Into This Cycle.
The management team at CRK has identified the same basic conclusion as many other mining operators and investors -now is a great time to buy gold!
However, what the CRK management team can boast, that many of its junior gold competitors cannot, is an operational platform clean of potential production delays. We typically see 5 key areas that can trip up a junior gold company looking to enter production: time to discover the metal, feasibility studies, permitting, financing, and mine construction. This company, which first started trading on November 6, 2009, has all 5 in its rearview mirror.
CRK purchased the assets of GBS Gold International Inc. from a liquidator last spring at a time when many companies were reluctant to acquire assets. These assets, prior to entering receivership, had:
- Annualized production of 140,000 ounces
- Exploration licenses and mining leases >3,500 square kilometers
- Both underground and open pit deposits
- 2 mills (an 8,000 tonne/day mill and a 800 tonne/day mill)
- 2.5 million ounces of Measured & Indicated Resources (note: a further 0.5 million ounces of M&I acquired subsequent to purchase of assets)1.8 million ounces of Inferred Resources
The Northern Territory of Australia is a known gold producing region and has produced approximately 11.5 million ounces of gold since the first discovery in 1870. An estimated 3.7 million ounces of gold have been produced specifically from the CRK tenement package, and there are in excess of 600 documented gold occurrences of potential economic significance.
So, CRK has a significant gold resource, has completed technical reports, has operating permits in hand, and significant infrastructure including two processing plants; 4 of the 5 hurdles out of the way at the time of acquiring the assets and a history of previous production. Since that time, the Company has announced the acquisition of additional resources and is actively executing exploration programs to expand and upgrade even more. The Company has also taken care of any near-term financing hurdles, cashing up with two common stock offerings (C$35.0 million in October and C$28.9 million in late December), and by establishing a credit facility for an additional US$25 million (currently undrawn).
What’s more is that on December 29, 2009, CRK announced its first gold pour. CRK is currently mining from its Chinese South pit and Brocks Creek underground mine, and management believes they are on schedule to increase mining rates to 130,000 tonnes per month at Chinese, and 10,000 tonnes per month at Brocks Creek by early 2010. Under the current plan, management is estimating 100,000 + ounces of gold production in 2010 moving to more than 200,000 ounces in 2011.
Great Assets and Attractive Price Not Just for CRK, but For Investors
CRK acquired the tenement package and 4.3 million ounces of gold for A$50 million which included an A$8 million reclamation bond, which equates to approximately US$9 per ounce. This is a great acquisition price considering gold is trading at approximately US$1,100 per ounce today, and considering that CRK may ultimately outline more resources than the 4.8 million ounces known at the time of acquisition. On that note, CRK press released details of a major exploration program back in November, which is designed to upgrade and extend current resources, add to the current mining reserves, and determine the potential to increase the resource base at a number of CRK’s key projects.
Reviewing this same situation from the market’s perspective, gold is still trading at approximately US$1,100 per ounce, but CRK shares are trading at approximately US$60 per ounce (using 4.8 million ounces which includes the original 4.3 million ounces and the additional acquisition of 0.5 million ounces). Now, no one is suggesting that junior gold producers should be trading in line with the gold price, but US$60 per ounce is attractive when you consider that junior gold producing company’s trade at an average of approximately US$200 per total resource ounce.
That’s Not a Gold Management Team; This is a Gold Management Team!
In order to execute on its plans to resume production and discover additional resources, CRK has assembled a top-tier management team with a proven history of taking assets to the next level. This is a seasoned team of veterans that combines the qualifications and experience of gold exploration, development and production amassed over years spent in both the senior producer and junior exploration areas.
Mike Hoffman, the President and CEO, is a professional mining engineer with over 25 years of experience in mine operations, projects, engineering and corporate development. Mr. Hoffman has previously served in senior executive positions at senior gold companies Goldcorp Inc., Desert Sun Mining Corp. and Yamana Gold Inc., and has also gained experience in leading junior mining and exploration companies like Crowflight Minerals Inc. and Kria Resources Inc. Mr. Hoffman is no stranger to building gold producers and has the contacts and experience to guide this company forward.
Two key members of Mr. Hoffman’s team are Grant Davey, COO, and Brad Boland, CFO. Mr. Davey is a mining engineer with almost 20 years of experience in the mining industry including senior mine and operational management roles within the AngloGold Ashanti and Anglo American organizations in South Africa and Australia. Mr. Davey has operated mines in the gold, platinum and coal sectors, and provides continuity to the projects having most recently served as COO of GBS Gold International Inc. Mr. Boland is a Certified Management Accountant, was the CFO of Consolidated Thompson Iron Mines before joining CRK, and has spent time in senior financial roles at Kinross Gold Corp. and Goldcorp Inc. Messrs. Hoffman, Davey, and Boland’s knowledge, contacts and experience in production, exploration, and finance, especially with respect to gold, are an invaluable asset to CRK, and one of the reasons, I believe, that this company is truly one to watch as they have significant upside potential.
Stan Bharti, the President and CEO of Forbes & Manhattan Inc., a private merchant bank operating globally, and which I have commented on in previous posts, is the Chairman of CRK and represents his team of approximately 100 professionals who fully supports this company. Over the past several years, the Forbes team has raised more than $3 billion and has been instrumental in the successes of mining companies Desert Sun Mining Corp., Consolidated Thompson Iron Mines, and First Uranium Corp.
Some of the key board members that add depth and vision to CRK are Bruce Humphrey, former COO of Goldcorp and CEO of Desert Sun and Chris Bradbrook, former VP Corporate Development of Goldcorp and CEO of New Gold. Seasoned financial executives Greg Cameron, a former investment banker and George Faught, the CEO of Aberdeen International and a former CFO of North American Palladium and Hudson Bay Minerals are the remaining board members.
Bottomline
Crocodile Gold Corp. is a company in the right geographical location, with a foothold in a precious metal that proves time and again to be the true strategic metal -gold. The company’s game plan of resuming operations at a known former producer and expanding the established resource base with a pipeline of high quality exploration initiatives, all with a high potential for future production, show that they are not only ready, but capable, of taking full advantage of the current gold market. The quality of CRK’s projects, teamed up with the added value of an experienced management group and support from a successful resource focused merchant bank, gives this company a superb chance for great success, especially considering its current valuation in this gold market.
