Ahead of the Herd With Cangold

 

Richard (Rick) Mills

Ahead of the Herd

 

As a general rule, the most successful man in life is the man who has the best information

 

Today I’m speaking with Robert Archer, President, CEO and Director of Cangold Limited TSX.V - CLD

 

Mr. Archer has more than 30 years experience working for mining companies throughout North America, including Newmont Exploration of Canada Ltd., Rio Algom Exploration Inc., Placer Dome Canada Ltd. and Noranda Exploration Inc. Mr. Archer is also President and CEO of Great Panther TSX – GPR and Chairman of the Board of Directors for Altair Ventures TSX.V - AVX

 

Rick: What’s your take regarding the gold and PM market’s Bob?

 

Bob: There’s a bit of a disconnect between the physical market for precious metals and the paper market. It’s in the futures market where prices are determined, the traders are so skittish these days, in terms of trying to determine trends and whatnot, they just hang on every little bit of news coming out, good or bad, and then try to jump on it thinking that this is a signal or a catalyst for prices to move higher or lower.

 

So, because of that you’re seeing this tremendous volatility in prices that I don’t ever remember seeing in the prices of gold and silver. It’s just incredible. But meanwhile the physical market is really tight. Just ask anybody who’s tried to buy gold or silver coins or bullion.

 

You’re paying huge premiums and you often have to wait weeks or even months for delivery. So, the physical market is pretty tight and yet pricing doesn’t really reflect that. Pricing is all over the place, and it’s really tough for a lot of guys to get a handle on and determine whether we’re in an uptrend or a downtrend.

 

There are never any straight lines in this business, either in the markets or in commodity prices, and so nobody should expect to see that, but I think the long-term trend is still upwards for precious metals because all the fundamentals that brought us to this level in the first place are all still there, huge debt loads, sovereign debt issues, currency crises etc. So, those are big issues and they’re not going away any time soon.

 

 

Rick:  Tell us about Cangold.

 

Bob: I first actually got involved with the company back in 2001, at that time it was an inactive shell going under the name of First AU Strategies.

 

The Argosy Gold Mine in northern Ontario, which Cangold still owns, was the first project we brought in to get the company active again. Then we had an option on the Thorn property with Rimfire Minerals up in northern BC.

 

We got a little momentum with those two projects, but it was tough going back in 2002, 2003, being it was hard for juniors to raise money. With Great Panther’s success in Mexico we decided to take Cangold there as well. We got a couple of early stage projects, then we fell on hard times through 2008, as did everybody else, and coming out of that, it was really difficult to finance grassroots stuff.

 

Rick: Time to change the ships direction?

 

Bob: We decided that we would rather be patient and wait for the right project, rather than rush into a bad deal with mediocre potential and end up going through a whole bunch of dilution and failed attempts.

 

So we started looking for a good solid project to really focus the company on, it did take a little longer than we would have liked. There were a number of attempts at doing deals that fell apart for one reason or another, but we certainly appreciate everybody’s patience while we did that.

 

Rick: I’m excited about the project you did find.

 

Bob: We were able to negotiate a deal with Brigus Gold on the Ixhuatan Gold Project in Chiapas State in southern Mexico. And because it is a fairly major transaction, we decided the best way to approach that, rather than with a 5 cent stock, or 10 cents as it were, was just to go through a bit of a rollback restructuring, it was only 1 for 5, and that allowed us to finance at .50 cents.

 

We’ve got shareholder approval and the deal has been signed with Brigus. We’ve raised $5 million, everything was filed with the stock exchange, and we’ve got final exchange approval.

 

Rick: I look at this project and I don’t see an exploration play, this looks like something Cangold, given your teams experience, could step into and start  immediately into a pre-feasibility study?

 

Bob: That’s one of the things that really attracted us to it, is the fact that with a lot of projects, the vendors waive their arms and say it’s got this, it’s got that, or talk about potential, but this one has already been drilled off.

 

There’s a NI 43-101 compliant measured and indicated resource of 1,041,000 ounces of gold and 4,400,000 million ounces of silver, and another 700,000 ounces of gold and 2,250,000 ounces of silver in the inferred category.

 

So, it’s an excellent project with these resources already defined. There has been 89,000 meters of drilling conducted across the project.  There are seven or eight different targets and 342 drill holes. So, it’s had a substantial amount of work done on it already.

 

We’re coming into something that is already well defined, the deal calls for us to earn our 75% interest by taking this through feasibility. So, it’s not something where we have to go in and spend half a million dollars a year, or something like that, in drilling just to try and find something. This is already a defined deposit and it’s pretty much at scoping study level right now, and we’ll just quickly take it through prefeasibility, and from there, hopefully, through feasibility. Once we’ve done that we get our interest and then it will be 75%/25% between us and Brigus, so the plan is to take it through to production as quickly as we can.

 

Rick: What’s our share structure and treasury like at the moment, Bob?

 

Bob: After the release of six million shares to Brigus we have 34 million shares on issue. We have paid the $1 million to Brigus on signing and cleaned up some old payables, etc. so we have about $3 million in the treasury.

 

Rick: For this asset the deal is not onerous.

 

Bob: Over three years it’s $10 million cash, 20 million shares, and then when we get into commercial production we have to pay $5 per ounce of proven and probable reserves from the feasibility study.

 

Rick: We’re not going in there with a huge drill program to drill it off for two years, we’re walking in and we’re taking over something that’s considerably advanced already down the path towards a mine.

 

Bob: Given the level that the project is at we don’t have to do much in the way of drilling. We will do some confirmation drilling, a few in-fill holes, some metallurgical testing, but predominantly the work we need to do is engineering studies.

 

There is still tens of thousands of meters of drill core sitting in racks from all the previous drilling. So we have access to that, Linear Gold were the ones who originally discovered this, going back to 2004. They did a really good job. They kept a very good data base, and we have all of that, we’ve got all the data, so we can put it into our models and as I said, the resource is already compliant. So, it’s a great project to come in at this level and then just advance it as quickly as we can.

 

Rick: What would the engineering studies entail?

 

Bob: We’ll organize the data, feed it to the engineers and they can look at optimizing the open pit shell, what the pit might look like, and then where is the best place to locate a plant and the tailings pond and all those sorts of issues. So, a lot of this is just really done in the office. There will be some field studies taking samples and that sort of thing.

 

Rick: It’s a huge property, anything else going on in other parts of it?

 

Bob: Well the project is very well located from a regional standpoint in that it’s at a triple point junction between three tectonic plates. So, it’s a region with a lot of structural and volcanic intrusive activity, basically it’s a real hot spot in terms of generating mineralizing fluids.

 

There are volcanoes all around, some fairly recent, so it’s a very well-mineralized district, we currently have seven or eight different zones on the property that are viable targets in their own right. None that have as much drilling as Campamento, but certainly they are good viable targets, and they’re all within a kilometer or two of each other, so within easy reach, and we plan to evaluate each of these as the project moves forward, but certainly the main focus will be on Campamento and bringing that to production.

 

Rick: All of this goes back to what I keep saying over and over again; that in no way is investing in junior resources a crap shoot. It’s a matter of putting your money behind quality management teams and riding the story as it plays out. How you make your money in this game isn’t through trading, it’s by finding quality people, investing in them, then sitting back and letting them go to work.

 

I think that Cangold’s an excellent example of my philosophy. I firmly believe that this project was there because of the quality of management of Cangold.

 

Bob: That’s absolutely correct Rick. I can say that matter-of-factly because we did not know the principles of Brigus Gold.

 

Brigus came about through the merger of Linear and Apollo, so the guys running Brigus now, are the guys who were running Linear at the time this discovery was made. We did not previously know one another, we had to do a bit of due diligence on the other management group to see what kind of partners they would make, and they had never heard of Cangold.

 

But once they found out that it was the same management team that had built Great Panther into the success that it is today, then they got a ringing endorsement from some of our major shareholders, like Sprott, who are also shareholders of Brigus. They helped convince Brigus we were a good group to deal with, well established in Mexico, good contacts down there, we know how to work there, and so we were a good group to back in terms of being able to put something like this into production. That we were not just going down there as a bunch of newbies in a new country and trying to reinvent the wheel. We’ve been there for a number of years and we know how to work in Mexico.

 

Rick: Great Panther’s in acquisition mode, is Cangold, or are we happy just to digest this for now?

 

Bob: For now we’re happy to digest this one, and I think it would send the wrong message to our new partners at Brigus and also to the investors if we suddenly picked up another major project elsewhere and then started to shift our focus a little bit. Having said that, we are taking another look at doing some field work at our Plomo Project in Sonora as we would like to have a project that will generate some news flow. While we’re going to stay focused on Ixhuatan and Campamento for the time being, the pre-feasibility nature of the project won’t generate a lot of news and we need to keep shareholders engaged. However, once we’re comfortable with that project, when it’s up and running, well-staffed and humming along, then yeah, we might take a look at other acquisitions beyond that.

 

Rick: So tell me Bob, am I going to be able to put a gold bar from Cangold beside my silver bar from Great Panther?

 

Bob: I certainly hope so Rick. That would be ideal. I’d love to add that to my collection as well.

 

Rick: Anything you want to add Bob?

 

Bob: Just on the share structure of Cangold, given that because of the rollback and the new financing, which at this point is still in the 4-month hold period, and the shares going to Brigus, which will be escrowed and our own management shares, which were also escrowed, there’s really not much of a float out there in Cangold, so once we actively start to promote it and shop it around, go on road shows and stuff like that, the share prices should react fairly smartly, just because there is not a lot of stock out there.

 

Rick: Thanks Bob, a pleasure as always. 

 

Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com

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Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 300 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

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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. 

 

Cangold Limited TSX.V - CLD is a sponsor of Richards site aheadoftheherd.com

 

Richard does not own shares of Cangold Limited TSX.V - CLD

 


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