Growth spurt ahead at GOZ
BJORKDAL, Sweden – “Battered Honduras gold piker now steady Sweden miner” is the headline CEO Glen Dickson puts on his overlooked Gold-Ore Resources.
We are this week touring Gold-Ore Resources’ Bjorkdal Mine in Sweden.
The pull for value investors,
including a fresh 10 percent Toronto accumulator of the stock,
include declining operating costs (as in, kicking out most of the mining contractors) and exploration that easily could double mine life to 10 years and boost its one million-ounce (all categories resource
Gold-Ore (TSX: T.GOZ, Stock Forum) just produced a one millionth ounce of gold from its longstanding mine here, not far from the far-north town of Skelleftea.
The once-Honduras prospector that director Ron Ewing launched in 1997 likely
will earn $8.2 million in its fiscal 2010 year, or 10 cents a share.
The Canada-operated company, as it lowers operating expenses for the (until now) mostly contracted mine under the stewardship of President Robert Wasylyshyn (in photo with mine map),
will quadruple in stock value in six to nine months.
There are no fresh veins at the open-pit and underground mine needed for this to happen.
Quarterly output from the 22-year-old Bjorkdal Mine is rising steadily every three months.
Yearly output at Bjorkdal could double to 80,000 ounces by 2013 (my estimate) with precision engineering, improved recovery methods and Scandinavian mojo.
Bob Wasylyshyn is with us at the mesothermal deposit this week.
“My goal is to get to at least 60,000 ounces at the least
… in 1997 the high was 93,000 ounces for the year,” the 55-year-old geologist says.
Toronto’s Resolute Funds, a value seeker for mining stocks, is “at least 8.4 million shares filed and climbing,”
Mr. Dickson, Gold-Ore’s CEO and also a geologist, tells me.
What brings me here (before two autumn trips scheduled back to Antioquia in Colombia starting next week) are points hammered home to me by Patrick Abraham (pictured here with rock), whose Panama brokerage controls more than five percent of Gold-Ore shares.
Gold-Ore Resources appears priced at a three-year mine life when Bjorkdal’s life looks set to run 10 years or more.
Yearly gold output is running at a 44,000-ounce pace as of the August quarter.
Market cap of $50 million Canadian is less than one times yearly revenue. The company has no gold hedges against production.
$10 million in the bank, no debt and a fully-owned operation whose replacement cost for a technologically advanced mill and other facilities is $50 million.
A gradual transition away from contractors who “just do things their own way, which are not our way,” says Bob W.
“We are getting the elephants out of the room.”
Full-time employees at Bjorkdal, some 600 kilometers north of Stockholm, number 60 (with contractors it is 150-plus workers here.)
New quartz-streaked veins – we can see them everywhere here – almost surely will boost grades and in turn lower operating costs to $650 an ounce or lower from about $720 an ounce.
“We have lots of ore tied up in the stopes, and our previous contractor drilled these way too wide for our tastes,” Mr. Dickson says. At least 50 veins are what he says are “exploitable.”
Gold at €1,000 per ounce (euros) makes this yet another reason I am here this week.
If the euro were to decline against other currencies, primarily the USA and Canadian dollars, Gold-Ore’s operating expenses would slide, making for thick gross profit margins.
We just saw Glen Dickson and director Ron Ewing off to London this morning for the start of a six-city tour of asset managers and brokers. Gold-Ore just published what appear to be exemplary production and recovery data.
Mr. Abraham, a director of our Ticker Trax Planetary Prospect Bellhaven Copper & Gold (TSX: V.BHV, Stock Forum), accompanies me on this Sweden visit. Patrick, son of the late newsletter writer Larry Abraham, owns about five percent of GOZ shares, along with clients of his brokerage. (Gold-Ore insiders, led by Bob W. and Glen Dickson, own about 10 percent of the company.)
Bob W., Gold-Ore president, is also a Bellhaven director. As we tromp across an open pit that has two million metric tons of 0.6-gram gold, Bob leads us toward one of several entrances to 18 kilometers of tunnels, all dug out by Gold-Ore.
“We see a $90 per ounce savings in operating cost just for bringing in a new contractor and doing our own stoping,” he says.
Bob W. is second in command on the executive chain.
He is the most plain-speaking, data-enriched and pragmatic miner/prospector I have done business with since Dr. Paul Zweng of Bellhaven, my ultimate Colombia and Panama gold-copper prospector.
“I know of your reputation in the industry, Thom,” Bob W. says, and I think, Hmmm, am I about to get dinged once more for regulatory events that shut me down—for good reason -- in the commodities melt-Up of 2003?
But no, Mr. Wasylyshyn is referring to my roles as a co-creator of MarketWatch.com and as a project-specific researcher and reporter for Canada’s Stockhouse and our Ticker Trax paying audience.
“Our Bjorkdal deposit is in the super-safe jurisdiction of Sweden and our deposit is expanding faster than the mining,” he says.
“We have not hit the edges of the ore body in several directions.
We are wide open to take this for another 10 or 20 years.” (Photo above: Patrick Abraham, longtime shareholder Derek Williams, Bob W. and Ron Ewing at the open pit this week in Sweden.)
What I like about Bob W. (and his team here) is the same reason that drew me to Bellhaven’s Dr. Zweng when he was developing QGX in Mongolia eight or so years ago. He gives the possible melt-Down possibilities equal time.
“Every story has two sides, as you well know,” he says.
“Our other side is the cost of production and we are dealing with that. We use an underground contractor for mining and his costs are significant.”
Gold-Ore’s board in May dealt with the sticky tasks of purchasing fresh mining equipment and becoming “much more owner-operator oriented,” as Glen Dickson, CEO, tells me just before hopping that flight to London. “We are making adjustments to our mining methods to reduce dilution, to boost grade.”
I could go on (and will in future reports).
The takeaway is that Gold-Ore Resources is 10 percent into a process for optimizing its underground mining, its area exploration and its open pit.
That is vast upside for an operation that already achieves almost 90 percent recovery rates on its ore.
“It is what we put into the plant (which is superb, with innovative ABB electronic controls and a KNELSON Concentrator) that matters here,”
Bob W. says as we pour 20 kilos of 65-percent gold ore (almost $500,000 worth) into buckets that will be shipped to a Germany processor (Please see photos – all by Thom Calandra.)
This is the third of several reports from Bjorkdal. The first ones already are in the hand of Ticker Trax subscribers. I own 12,000 shares of Gold-Ore Resources.
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