GOZ
Now is an excellent entry point for an investment in GOZ.
There are several reasons for this.........................................
....................... The mine has been going through a transition for the last two years from a depleted mine suffering from a lack of capital investment to a functioning mine with growing resources/reserves , a strong positive cash flow and increasing contributions from the higher grade underground mining of quartz veins. The recent declaration of commercial production is a reflection of the transformation taking place at Bjorkdal.
.................... During the last six months, the company has drilled 5,027 metres in 49 core holes (3,400 underground and in the open pit, 600 metres for resource expansion and 1,027 metres exploring Ronnberget) and will continue to drill throughout the year. All exploration activity is being financed entirely from cash flows.
Drilling is currently continuing with two diamond drills and it is anticipated that a total of 10,000 metres will be drilled in 2009. This new data will produce an updated 43-101 which will show that Bjorkdal is capable of extending the mine life for at least 7 years.
............. Todate, underground drilling has been quite successful especially for the Centrala Zone where the first 25 holes were drilled and intersected a series of gold-bearing quartz veins of minable width and good grades.
The Centrala zone represents an area of significant gold-bearing veins that are readily accessible for mining. A crosscut to access the mineralization has been completed and mining of the first vein has started. Mining will take place concurrently with all of the other active mining blocks within the deposit.
Underground grades are 3-4 times of the open pit , ans as these contribute to overall production , average grades will increase , production will increase and cash costs will decline.
...................All mining activity conducted by Gold-Ore over the last 3-1/2 has been restricted to a swarm of quartz veins (over 40 veins in total) in a footprint measuring 1,200 metres across strike and 150 metres along strike. The on-strike extension of the vein swarm to the north represents an extremely large target that has been tested with less than 10 drill holes, many of which intersected significant gold grades. An exploration tunnel, scheduled for completion this October, is being driven along one of the quartz veins to access this target. A diamond drill will be located in the tunnel to test the on-strike potential of the quartz vein swarm. If the drilling is successful there is potential to double the footprint of the vein swarm and significantly expand mine life.
............The company has been successful in increasing gold production over the last year and is currently producing at the annualized rate of 40,000 ounces per year and is projected to reach 50,000 oz/year this fall. The increased productivity and consistency in production in the quarter are directly related to increased grades and tonnages achieved from the underground and open pit mining units, and the suspension of low-grade stockpile processing in early January.
.................Gold-Ore Resources Ltd. confirms that significant gold mineralization has been intersected in the recently completed drill program on the Ronnberget property, located four kilometres east of its Bjorkdal gold mine, Sweden. During June and July, 10 core holes totalling 1,027 metres were completed.
The program was designed to confirm the gold mineralization reported from historic drilling and initially tested an area measuring approximately 50 metres by 80 metres. The drilling confirmed significant gold values.
Gold-Ore continues to compile the data and interpret the results to plan additional exploration work in the area.
............... GOZ now has an excellent balance sheet , with no debt , no hedges and about $7 million in cash , while an extensive drilling program of $4 million is being funded fully from cash flows.
...........GOZ will very shortly reach an annualized production of 50,000 oz at a cash costs of $475 to $500 per oz.
Annual cash flows will be about $30 million at current POG, or about $0.35/share.
That is, GOZ is currently trading at just 2 times annual cash flow , when the average gold junior trades above 10 times cash flow. Investor recognition of the strong emerging value should push cash flow multiple to at least 5 times cash flow , implying a conservative fair value of about $1.75 per share , once 50,000 oz /year is reached , which should be in Q4 of 2009.
Further, GOZ is not a one trick pony , as it has an excellent polymettalic deposit ( zinc , gold , copper, lead and silver ) at its Norrliden Deposit .
The model for developing Norrliden relies on transporting the ore to a nearby processing plant thus negating the need for building a plant at the site. The three operating mines in the district all ship to one central plant. This key feature will allow GOZ to develop a very low capital cost mine.
Gold-Ore commissioned Adam Wheeler C.Eng., Eur.Ing., an independent qualified person to conduct a NI 43-101 compliant mineral resource on Norrliden in May 2008..
The latest resource calculation showed a Measured and Indicated Resource of 1.5 million tons containing 3.54 % zinc, 0.74 % copper , 0.63 % lead , 50.8 gms/ton silver and 0.36 gm/ton gold.
There was an additional Inferred Resource of 867,000 tons measuring 1.87 % zinc, 0.72 % copper , 0.40 % lead, 30.9 gms/ton silver and 0.19 gms/ton gold.
The above resource conforms very closely with the global average grade for the Skellefteå Mining District: 161,000,000 tonnes @ 3.0% Zn, 0.7% Cu, 1.9 g/t Au, 47.0 g/t Ag and 0.8% Pb.
This is a substantial resource and metal prices and credit markets are now reaching a point to move the project to production.
Taken together , these strong emerging fundamentals should warrant GOZ with a share price above the $2 level.
The next 2 quarterly reports ( Q3 and Q4 of 2009 ) are likley going to show sequential record productions and cash flows, as well as additional drill data on that extremely large to the North of current u/g mining at Bjorkdal.
That information could well see the share price quickly double by exit 2009.
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