AZK/DEZ - about Goldbelt Resources
Goldbelt Resources is an old shell with a new and great project, still flying way under the radar scope. I don't think anyone has actually mentioned it but for the first time in history we are in a global shortage in all commodities across the board. While gold and silver have yet to shine, more mundane commodities such as iron, moly, coal, even lowly zinc are hitting new highs day after day as Chinese demand continues for everything real.
Paul Morgan, Executive Chairman of Goldbelt Resources and Paul Naughton got the company to take over the Burkina Faso assets of Resolute Resources in 2005. The Belahouro gold project in North-Central Burkina Faso has a $25 million dollar investment history, first by WMC of Australia and then Resolute in a JV with BHP.
Paul Morgan of Goldbelt has put three mines into production. When Goldbelt made the decision to take over the project, he brought in Collin Ellison, President and CEO of Goldbelt to run the company. Collin, with 30 years experience in development and mine planning, has put six gold mines into production. They approached Resolute in early 2005 and signed a deal in March of that year, paying Resolute in shares and making them a 21% owner in GLD. Resolute was quite happy to have done the exploration and to let more experienced management actually put the project into production.
The initial production target, called Inata, shows 933,000 ounces of gold in the M&I category and an additional 226,000 ounces in the Inferred category. Collin Ellison is pursuing an extremely aggressive plan of adding an additional 600,000 ounces in the Inata region while preparing to begin mining in as little as 18 months from now.
BHP and Resolute put together an impressive in-country team in Burkina Faso and Goldbelt was smart enough to keep the team intact. The very talented and very funny Yves Hirbec runs the administration from Ouagadougou while Dr Francois Ouedraogo, Chief Geologist with 15 years experience in West Africa runs the exploration side, having managed programs for BHP, WMC Resources and Resolute Resources.
Our tour to the hinterlands of Burkina Faso consisted of me, (sans giraffe) Collin Ellison and three investment bankers. The very knowledgeable and talented Dr Julian Barnes of Dundee Precious Metals kept us entertained and laughing for two days. Dundee has taken a 23% position in Goldbelt which speaks volumes about how they feel about both the caliber of management and the quality and viability of the project. Also Geoff McNamara of Societe Generale and Marcio Fonseca of Macquarie Metals made up the remainder of our group. It's always encouraging to see investment bankers with a checkbook in hand when your visit a project.
We drove out to the project in two vehicles from Waga. The first two hours were on a nice smooth paved road, the second two hours were on a dreadful dirt/gravel road and the last hour seemed to last a week at least, it was on really rotten roads. But the deal with Resolute also involved turning over all the facilities Resolute has in Burkina Faso and they had put a number of 20 foot containers to good use as cabins for the staff.
The Belahouro gold project lies in the heart of the Birimian greenstone belt consisting of volcano-sedimentary sequences known to host gold in quartz veins. BHP and Resolute conducted a total of 81,000 meters of drilling and spending over $23 million on the project. Since that time, Goldbelt has added an additional 22,000 meters of drilling and has spent over $2 million more on exploration.
In addition to the 1.2 million ounces of gold at Inata, Goldbelt controls roughly an additional 500,000 ounces at nearby Fete Kole and Minfo. Those resources won't play a part in the decision making process for opening the initial 100,000-150,000 ounces of production scheduled for late 2007 but Goldbelt plans on continuing to expand and increase the quality of those resources even as they proceed with mine planning and production.
I'm biased. I happen to really favor the development/production model of metals mining. For an investor it offers the safest and most consistent returns. Even today, Goldbelt is getting about $17 US per ounce of resources while similar exploration/development companies operating in the area are getting between an average of $36 per ounce for pure exploration companies to $94 for developing companies to $67 for actual production companies. Goldbelt clearly offers a significant upside to its current share price.
But every silver lining must have its cloud. With Goldbelt, it's the share structure, (poor liquidity). Since the company has no history, bad or good, before being started a year ago, the share structure is the tightest I have ever seen. Dundee Precious Metals owns 23% of the shares, Resolute Limited controls an additional 21%, management owns about 17% and several small funds own about 13% in total. 74% of the shares are in the hands of very very strong investors who were buyers for the long run. So while the stock can show a printed price of $.78 Canadian as of last Friday, it wouldn't take much buying to run it much higher. A company simply cannot be this undervalued in this sort of market for very long.
I was impressed with the operation being planned, with their business model, the personnel were superb and knowledgeable. Even the caliber of the investment bankers along for the tour was first rate. In short, this is a well managed, well executed business model with a very high potential for both increasing gold resources and shareholder value. I liked the company enough to be quite happy to buy some shares but even that was difficult as I didn't want to be pushing the stock price up. So we own some but not as many as I would wish. I highly suggest anyone considering buying Goldbelt to be careful and to not put in market orders. You could pay a lot more than you want to. The stock is very tightly held and when it runs, it's going to get more expensive in a hurry.
The company is in the same position as Desert Sun with their Jacobina Project. Desert Sun was a $.50 a share company four years ago and proceeded to prove resources while rebuilding a mill in Brazil. They continued to make progress on the mill while adding resources but the shares barely edged upward. But their patient shareholders were rewarded this week with a buyout of about $5 a share. Goldbelt has the same sort of story, production in 18 months (and that's where the most sure returns come for an investor) while constantly adding ounces. It seems to me that Desert Sun is getting about $150 Canadian per ounce of resource and if they can, so can Goldbelt.
We spent two days in the field looking over the prospects at Feta Kole and Inata before returning to Waga and everyone going on their own way. I parted with Collin in Waga and flew on to Paris (via Niger) and back to Miami. As much as I believed giraffe security would be light in Waga, actually it was the worst of the entire trip and much to his chagrin, Harry was relegated to the cargo hold where he was severely abused. He lost two ears and a horn in the process of coming to his new home in Miami. Minor surgery on my part restored him to good health and he seems to like his new abode.
We do own a few thousand shares of GLD and we are biased. Goldbelt is not an advertiser but I think they will be in the future. Again, we want to remind readers that we don't share in your profits so we don't feel responsible for any losses you may take. This is piece of my opinion and my opinion only. We are not paid to produce it.
Goldbelt Resources, Ltd
GLD-V $.79 Canadian (Feb 22)
GLDDF.pk OTCBB
36 million shares outstanding
Goldbelt Resources website
Bob Moriarty
President: 321gold
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