GAL:LSE GAL:TSX
A gold mine bursting with potential. Article on Galantas Gold (GAL:TSX GAL:LSE) from Money Week the UK's most read financial magazine.
 Galantas - "A gold mine bursting with potential"
This is not widely known by many gold enthusiasts, but Ireland also has gold. And near Omagh in Northern Ireland’s County Tyrone, one penny share company, Galantas Gold ( GAL) has the country’s only operating gold mine.
Why this gold mine is only now coming to light This is not just a hopeful project. Galantas is actually mining gold today, and making good money out of it. The mine has an interesting history.
It was started in the 1980s by RTZ Corporation for tax purposes, after the closure of its Cornish tin mine left it as a UK company with no UK mine. A change in the tax laws prompted RTZ to sell. Jack Gunter, who was about to retire after fifteen years with RTZ, saw the opportunity and stepped in to buy it.
In the tense political climate of the time it had one particular merit. As an open pit mine it required no rock blasting – and that meant no explosives that could fall into the hands of the IRA. Gunter, now in this 70s, is the chairman today, while the mining engineer Roland Phelps has been chief executive since 1997.
Today, this experienced veteran duo are running a profitable, if small, gold mine. But they believe that the Omagh mine could soon be producing a lot more gold. And as Irish investors turn from chasing gold shares overseas to the gold on their own doorstep, the share price has been ticking up. Let me explain why.
Having last week been granted additional mining licences, Galantas’s licences now cover some 600km2 and estimates made by the independent consultant ACA Howe back in 2008 suggest that this contains some 400,000oz of gold in nine different zones.
These are set out in the following table:
Use link above to view table
As you can see, about three quarters of this gold is in the least certain ‘Inferred’ category, while only 16,000oz is in the ‘Measured’ category. But the 2008 Howe report also said that these gold-bearing zones could be extended to hold a total of 1.33-2.46 million ounces of gold, while further exploration targets could add another 400,000.
Now ACA Howe is back on the case. Before the end of May it is expected to provide a resource update, adding ounces to its 2008 estimate and moving some from the ’Inferred’ to the ‘Indicated’, and the ‘Indicated’ to ‘Measured’ categories.
A whole new level to for Galantas to exploit and reap the rewards This will be important information for the share price, but Howe has a second purpose. It will also comment on Galantas’s plans to move from surface to underground mining.
Galantas has already produced its own mining scoping study, and Howe will provide confirmation of its cost estimates, of its operating methods and of its tailings storage. It will also comment on Galantas’s plans to expand its processing plant, which uses a ‘froth flotation’ method to produce a gold concentrate that is sold, under a life of mine off-take agreement, to Xstrata Corporation.
Assuming that ACA Howe’s report raises no obstacles, Galantas will apply to mine underground and, although this is more risky than surface mining and will no doubt require Galantas to raise some capital, it should take production to a new level. And that should be good for the business.
Last year, Galantas produced 6,479oz of gold, with some silver and lead credits taking the ‘gold equivalent’ up to 7,307oz. Although it is yet to publish full year results, based on figures for the first nine months the mine is likely to have delivered a net income of close to £1m, while cash in the bank should exceed £3m.
Galantas shares are traded on both the Toronto Stock Exchange and AIM, where the current share price of around 5p values the business at £11.5m. That looks pretty reasonable for a cash-rich business making £1m a year.
But chief executive Phelps is eyeing something much more substantial. With underground mining he reckons the mine could produce 50,000oz of gold per year. That should bring it to the attention of a much larger group of investors.
Clearly, much is riding upon ACA Howe’s report in May. I will be watching it with great interest. |
