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TICKERS: GFG; GFGSF

GFG Resources and the Curse of Big Deposits
Contributed Opinion

Source:

Bob Moriarty Bob Moriarty of 321 Gold explains why he believes the acquisition of properties in Ontario is a win-win for the explorer and for investors.

Investors love seeing companies pick up projects with giant potential in the tens of million ounces of gold and billions of pounds of copper, zinc or lead. Investors love big projects. They should hate them. They are a curse.

Porphyries and alkaline intrusive systems can be humongous. Cripple Creek in Colorado is an alkaline intrusive system and was the source of over 23 million ounces of gold since 1890. But what junior mining companies almost always fail to mention is that for every giant discovery ten juniors will go belly up first.

Giant projects require giant amounts of money to explore and develop. The quantity of money and length of time it takes to fully define a large project almost guarantees failure as the standard.

Rattlesnake Hills in Wyoming is one of my favorite projects. Quinton Hennigh and I met in Colorado in October of 2008 and chatted for hours driving up to see it when it seemed the world was ending financially. Quinton was the CEO of Evolving Gold and for certain they were getting clobbered. I participated in a private placement in EVG some six months before on the basis of them having a potential extension to the Carlin Trend. I think I paid $0.95 a share and while we were chatting away going to Wyoming EVG shares were trading at $0.15. The company had $0.22 a share in cash.

I told Quinton I had a bone to pick with him. I invested on the basis of a potential Carlin Trend gold deposit. And I had just been in Nevada looking at other projects for another company. My question basically was, what were we doing going to Wyoming when all of the push on EVG was in Nevada but we were not even in the state.

To give Quinton all the credit in the world, he did blush and look sheepish as he explained that Nevada had been oversold. It was going to take millions to explore and the market wasn't interested in Carlin deposits, no matter what the potential. While Quinton was working for Newmont they had looked at Rattlesnake Hills. It was a Cripple Creek analog and it would be a lot easier to advance than their Nevada projects. Newmont passed on the project so EVG picked it up.

One giant problem that makes big projects even worse. Quinton and I were there in the middle of October. We got to Rattlesnake Hills, drove partway into the property, Quinton waved his arms and pointed to some hills and we left just before the entire state got snowed in for the next five months. Some projects are located in places where you can't work for much of the year. And if you can't work you can't report and if you can't report, investors get bored and dump your shares.

Quinton moved Rattlesnake Hills forward and it seems to me the shares went from $0.15 to maybe $1.65 or so. Agnico Eagle found it interesting and did a deal with Evolving where the entire project was valued at $110 million. Quinton moved on to Novo and EVG went through a couple of changes of management.

In early 2012 Agnico Eagle wanted to slow the pace of their exploration. Gold had topped at $1923 in September of 2011 before dropping lower. All of a sudden the money spigots had dried up. By now a fellow with the name of R. Bruce Duncan was CEO of Evolving Gold.

Duncan saw a chance to get the benefit of millions of dollars that Agnico Eagle had spent on Rattlesnake Hills and get back 100% of the property. So he refused to budge on the terms of the JV and basically told Agnico Eagle to take a hike.

The wisdom of his actions pretty much shows up in the price of the shares. EVG was worth about $5 a share (pre-split, pre-split); while I accept that there are times such as 2011 until the end of 2015 where everyone was failing, Evolving's shares are now at $0.16.

EVG did a deal on Rattlesnake with another tiny junior that couldn't get traction and finally sold it to a new company named GFG Resources Inc. (GFG:TSX.V; GFGSF:OTCQB) in late 2016. GFG shares some management with Gold Standard Ventures Corp. (GSV:TSX.V; GSV:NYSE) that has been a brilliant success in Nevada. And while GFG has expanded Rattlesnake in a good way, investors were starved of news for five months a year. So the project that was valued at $110 million in 2011 was limping along at a tiny fraction of that in 2017 even after brilliant results.

Management woke up and realized it was the lack of news flow that was killing the share price, not the quality of the project. So in December of 2017 GFG announced a takeover deal with Rapier Gold and acquisitions of projects from Probe Metals and Osisko Mining in the Timmins District in Ontario. Not only will there be measurable progress twelve months a year, GFG can keep their technical people hard at work year round.

I love the deal. I'm not a big fan of companies collecting projects like Beanie Babies. I'm not sure where the idiots running junior mining companies got the idea that if two or three projects are good, twenty or thirty are better. Who in their right mind actually believes he can advance thirty projects at the same time? I'll bet they couldn't even name the thirty projects.

As I said before, I really like Rattlesnake a lot. I believe it has district scale potential but it's going to take a lot of money and management to prove up. But now they have feet on the ground in Ontario in a serious mining district with serious projects. The company has just over seventy million shares outstanding and is still less than 30% of what Rattlesnake alone was valued at seven years ago. With news in hand, I think the market will soon revalue the company. They have seven million in the bank to advance Canada for now and Wyoming if the snow ever melts.

I participated in a PP with GFG months ago and I own shares. GFG is an advertiser so I have to be biased. Do your own due diligence.

GFG Resources
GFG-V $0.48 (Jan 29, 2018)
GFGSF OTCBB 71.3 million shares
GFG Resources website

Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

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Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: GFG Resources. GFG Resources is an advertiser on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned are billboard sponsors of Streetwise Reports: GFG Resources and Gold Standard Ventures. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of GFG Resources Inc., a company mentioned in this article




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