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Barrick Gold Corp. wasn�t always a gold miner, it started as a privately held oil and gas company
- Barrick Resources. After suffering huge financial
losses Peter Munk, the principal shareholder,
decided to focus on gold.
The company�s first
acquisition, in 1984, was the Renabie mine near
Wawa, Ontario and it produced roughly 16,000 ounces of gold that year for Barrick. Then Barrick acquired Camflo Mining in 1984, Camflo
had operations in the province of Quebec and in Nevada, U.S.A.
Barrick�s next acquisition was the Mercur mine in Mercur, Utah in
June 1985, followed by the Goldstrike mine, in
Nevada, in 1986.
Munk�s change of focus to gold paid off
handsomely, acquisition after acquisition pole vaulted his Barrick to the top tier of the gold mining world.
Today Barrick
Gold Corp. is the world�s lowest-cost senior gold producer (all-in sustaining
cost basis) and is also the world's largest gold producer. The
company�s 2013 full year gold production guidance is 7.0-7.4 million ounces
from a portfolio that includes some of the world�s premier gold assets. As of
December 31, 2012, Barrick�s proven and probable
mineral reserves were 140.2 million ounces of gold, 1.05 billion ounces of
silver contained within its gold reserves, and 13.9 billion pounds of copper.
Barrick replaced proven and probable gold reserves
for the seventh straight year in 2012.
In 2012, Barrick produced 7.4 million ounces of gold at all-in sustaining costs of $918 per ounce and total cash
costs of $558 per ounce.
It�s obvious Barrick is something special in the world of gold mining,
but what exactly makes Barrick stand so tall? Well,
Barrick considers five of its mines as key assets �
Cortez (N), Goldstrike(N), Pueblo Viejo, Veladero and
Lagunas Norte. These five mines (two are in Nevada) are expected to generate
some 60 percent of 2013 production at an average all-in
sustaining costs (AISC) of $650-$700 per ounce.
Of the 2013 exploration
budget of $300-$320 million, more than 40 percent is allocated to North
America, primarily Nevada. And for good reason�
At double the gold
production from Barrick�s next largest area of
operation (Australia/Pacific) and with an all in sustaining cost of just $789
an ounce average there�s no doubt of Nevada�s importance to Barrick.
Nevada Operations
The Bald Mountain
mine lies 110 kilometers southeast of Elko, Nevada. Probable mineral reserves
as of December 31, 2012, were 5.2 million ounces of gold.
The Cortez mine is
located 100 kilometers southwest of Elko, Nevada in Lander County. Cortez
is one of the world�s largest and lowest cost gold
mines, and the property also has excellent upside exploration potential. In
the first half of 2013, the mine produced 760,000 ounces of gold at all-in
sustaining costs of $392 per ounce and adjusted operating costs of $179 per
ounce. Proven and probable mineral reserves as at December 31, 2012, were
15.1 million ounces of gold.
The Goldrush
discovery is located approximately 6 kilometers from the Cortez mine
in Nevada. There is a measured and indicated resource of 8.4 million ounces
as of December 31, 2012 - there are 5.7 million ounces in the inferred
category. The footprint of the deposit is greater than seven kilometers and
the system remains open in multiple directions. The greater Cortez area
contains substantial district-scale opportunities.
The Goldstrike
Complex is 60 kilometers northwest of Elko, Nevada. In the first
half of 2013, the Goldstrike Property produced 417,000 ounces of gold.
Goldstrike�s proven and probable mineral reserves as at December 31, 2012,
were 12.3 million ounces of gold.
Marigold is located 64 kilometers
southeast of Winnemucca, Nevada. Barrick has a 33% interest in the mine with
the remaining interest owned by Goldcorp. In the first half of 2013,
Barrick�s share of production was 27,000 ounces of gold. Barrick�s share of
proven and probable mineral reserves as at December 31, 2012, was 1.6 million
ounces of gold.
Located almost 100
kilometers north of Tonopah in Nye County, Nevada, Round Mountain
is a joint venture operation in which Barrick holds a 50% interest with
Kinross Gold Corporation � the operator owns the other 50%. In the first half
of 2013, Barrick�s share of production was 76,000 ounces of gold. Barrick�s
share of proven and probable mineral reserves as at December 31, 2012, was
1.2 million ounces of gold.
The Ruby Hill
mine is located less than one kilometer from the town of Eureka and is 193
kilometers south of the Goldstrike Property. In the first half of 2013, Ruby
Hill produced 32,000 ounces of gold. Proven and probable mineral reserves as
at December 31, 2012, were 326,000 ounces of gold.
The Spring Valley
deposit is a large, porphyry hosted gold resource
located in the Spring Valley Mining District, Pershing County, Nevada,
approximately 20 miles northeast of the town of Lovelock. A May 2011 updated
resource estimate released by JV partner Midway Gold reported 2.16 million
ounces of gold in the combined Measured and Indicated (M&I) categories
plus an additional 1.97 million ounces of gold in the Inferred (I) category.
Barrick�s in the process of earning a 70% interest in Spring Valley.
A Nevada JV
The Barrick Nevada
project that I find most interesting is the joint venture with junior
resource company Midway Gold at Spring Valley.
Barrick took down several placements with Midway, all earmarked for Spring
Valley, and later signed a JV deal where Barrick is funding 100% of the costs
to earn an interest in this project.
Barrick reported in April
2013 that they had exceeded the cumulative expenditure requirement of $30M to
earn a 60% interest in the property. They also exercised, much earlier than
they had to, their option to spend an additional $8 million to earn a 70%
interest. At the current rate of expenditure, Midway anticipates that Barrick
will complete the cumulative expenditure of $38 million to earn a 70%
interest in the project by the end of 2013.
At this point Midway can
elect to have a carried to production 25% piece of Spring Valley. Midway
would pay back its share of the capital out of 90% of its cash flows from
Spring Valley at a rate of prime +2%.
The just completed 2013
drilling program (11,996 meters in 24 RC holes and 8,840 meters in 26 core
holes) was focused on upgrading the quality of the resource for future reserve
calculations.
Recent drilling
highlights include:
SV13-625
113 meters of 4.53 grams
per tonne (gpt) gold including 9 meters of 15.81 gpt gold, 18 meters of 9.5
gpt gold and 8 meters of 12.86 gpt
102 meters of 3.15 gpt
gold including 1.5 meters of 62.19 gpt gold and 1.5 meters of 46.80 gpt gold
SV13-629
56 meters of 1.51 gpt
gold including 1.5 meters of 27.7 gpt gold
55 meters of 1.10 gpt
gold including 1.5 meters of 5.45 gpt gold
Additional expansion
potential for the Spring Valley deposit remains at depth and to the north.
Midway Gold is a high
quality investable gold junior and of course they have other irons in the
fire besides their JV with Barrick. High quality juniors are hard enough to
find, one with money in the bank, working in one of the best areas in the
world - Nevada - for mining exploration and development and a JV with the
world�s premier gold miner makes Midway one to have on your radar screen.
But what if I told you
there was another way, perhaps an even more lucrative way of getting invested
with the world�s lowest cost gold producer putting Spring Valley into
production?
Terraco Gold
Corp. (TSX.V � TEN) has a gold royalty and royalty option (up to a 3% NSR) on the Spring
Valley Gold Project.
Royalty - the right to
receive a percentage or other denomination of mineral production from a
resource extraction operation.
Net Smelter Return
(�NSR�) Royalty - a defined percentage of the gross revenue from a resource
extraction operation, less a proportionate share of incidental
transportation, insurance, refining and smelting costs.
Terraco's net smelter
returns ("NSR") royalty coverage includes three separate
components. The map above and color codes provides a schematic of the
royalties:
- An
option to acquire up to a 3.0% NSR royalty (by December 2016) on claims
covering (outlined in RED hatching on map above) the
majority of the currently outlined Spring Valley gold deposit
- A
total of up to a 1% NSR royalty on the remaining portion (outlined in GREEN
hatching on map above) of the currently outlined Spring Valley gold
deposit as well as areas to the north of the currently outlined NI
43-101 gold resource
- (Per
#2, Terraco currently has direct ownership of 0.5% NSR royalty plus an
option (by December 2016) to purchase an additional 0.5% NSR royalty for
a total of up to 1% NSR)
- Terraco
has a Right of First Refusal (ROFR) for a 1% NSR royalty on claims
within a one-half (1/2) mile perimeter area of interest (around the
claims in RED)
The royalty transactions
on the Barrick-led Spring Valley Project have not only given Terraco a
non-dilutive cash infusion of US$6,000,000 but also gave the company what in
reality is an ATM card. TEN can use that ATM card and pull out millions of
dollars in future non-dilutive financings in order to fund the company going
forward by selling pieces or small percentages of the royalty.
The numbers flowing to
Terraco over the life of the Spring Valley mine (life of mine - LOM) are very
lucrative. I�m a very conservative numbers guy - start with a mineable
resource of 4m ounces gold, 250,000 ounces mined per year for 16 years at an
all in sustaining cost of $900 an ounce � Nevada�s average for Barrick.
Today�s gold price of $1400.00 an ounce (minus $900) flows to TEN $3.75
million per year for 16 years or $60m over LOM. These are my own conservative
calculations based on a 43-101 resource of 4m ounces that is over 2+ years
old. The resource numbers should be higher based on the last 2 years of
Barrick drilling, including the best ever holes released within the project
area, so there is lots of cushion built in to the upside.
 But Terraco isn�t a one trick pony�
Terraco also controls the
over 35 sq km Moonlight Project, a contiguous land package connected to the
north side of the Spring Valley project. The Moonlight Project is one of the
largest early stage properties remaining on the Humboldt Trend and the
company has been quietly consolidating and increasing its land position over
the last three years.
Moonlight lies just eight km north of Coeur�s Rochester silver-gold
mine. The Rochester mine has produced over 125 million ounces of silver and
well over one million ounces of gold in its 24 year history.
The Black Ridge Fault
Zone's eastern boundary controls the eastern margin of precious metals
mineralization at Rochester. Drilling at Moonlight indicates that this
district-scale fault system continues through the Moonlight Project
properties. Barrick's drilling confirms the Spring Valley deposits gold
mineralization is open to the north (towards Moonlight) and at depth.
So there is evidence to
suggest that Moonlight could be the next mineralized event in a string of
deposits on the Humboldt Trend ranging from Relief Canyon at the south end,
north through Nevada Packard, Rochester, Spring Valley and Moonlight.
In addition to the Spring
Valley Royalty and it�s Moonlight Project, Terraco
has an advanced-stage gold project in Idaho (the Nutmeg Mountain / Almaden
Project) which hosts a National Instrument 43-101 compliant gold resource of
almost one million ounces. This advanced-stage project has excellent access
and infrastructure and has over 66,140 meters of drilling in 903 drill holes.
The project is host to a
low-sulphidation, epithermal gold deposit that sits on the side of Nutmeg
Mountain, you would push material down to end up on a leach pad, there�s no
stripping ratio to speak of and there�s already landslide material at the
bottom - the inferred resource of 84,000 ozs of gold.
Conclusion
I do not believe Barrick
will drop Spring Valley, they have invested too much
money to walk away from their share of 4.1m ounces of gold (and growing)
which is still open to depth and to the north. Barrick obviously feels at
home and is very comfortable working in Nevada. The only possible negative
about the Spring Valley JV is if Barrick completes its
earn in and then puts the project on hold. Of course if that is the plan why
complete an early earn in? Why hurry up and wait when they could of just
completed their earn in on schedule.
Let�s recap:
- Early
private placements into Midway specifically earmarked for Spring Valley
- The
world�s premier gold miner then entered into a JV paying 100% of the
costs and carrying Midway to production
- An
early earn in for Barrick
- 4.1mm
ozs of gold and growing
- Deposit
open to depth and to the north
- A
politically safe, mining friendly place like Nevada
Imagine having a 3%
royalty on all of the above! Well Terraco Gold TSX.V � TEN does and that
royalty has to look desirable to a number of companies, not the least of
which may be Barrick itself.
Spring Valley, Moonlight
and Almaden all make for a very bright future for Terraco Gold TSX.V � TEN.
Todd Hilditch, Terraco�s president and CEO certainly seems to think so having
bought well over a million shares in the last year. Other insiders and
employees of the company have also been buying in the open market at a
prodigious pace. Given all these factors Terraco is one junior resource
company we should all have on our radar screen. Is a TEN out of ten on yours?
If not, maybe it should be.
Richard is the owner of Aheadoftheherd.com and invests in the junior
resource/bio-tech sectors. His articles have been published on over 400
websites, including:
WallStreetJournal, USAToday, NationalPost, Lewrockwell,
MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews,
Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire,
Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks and
the Association of Mining Analysts.
If you're interested in learning more about the junior resource and
bio-med sectors, and quality individual company�s within these sectors,
please come and visit us at www.aheadoftheherd.com
If you are interested in advertising on Richard�s site please contact
him for more information, rick@aheadoftheherd.com
***
Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell
or the solicitation of an offer to purchase or subscribe for any investment.
Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been
independently verified.
Richard Mills makes no guarantee, representation or warranty and
accepts no responsibility or liability as to its accuracy or completeness.
Expressions of opinion are those of Richard Mills only and are subject to
change without notice. Richard Mills assumes no warranty, liability or
guarantee for the current relevance, correctness or completeness of any
information provided within this Report and will not be held liable for the
consequence of reliance upon any opinion or statement contained herein or any
omission.
Furthermore, I, Richard Mills, assume no liability for any direct or
indirect loss or damage or, in particular, for lost profit, which you may
incur as a result of the use and existence of the information provided within
this Report.
Richard does not own shares of Terraco Gold TSX.V � TEN
Terraco Gold is a paid sponsor of Richard�s website aheadoftheherd.com
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