Joseph Grosso has a profitable affinity for Argentina and its precious metals and hopes to continue this success through his company Golden Arrow Resources (TSX-V: GRG | US-OTC: GARWF). With the company’s Chinchillas property on the way to production and an extensive exploration portfolio, Grosso’s Golden Arrow is an attractive investment to profit from precious metals price gains and exploration discovery.
Mr. Grosso became one of the early pioneers of the mining sector in Argentina in 1993 when mining was opened to foreign investment. He made quick work and started assembling a land package in Argentina. In 1996, he discovered the Gualcamayo gold mine which is currently operated by Yamana Gold (TSX: YMR). He also discovered Pan American Silver Corp.’s (TSX: PAAS) Navidad, one of the world’s largest silver deposits. Most recently, his company, Golden Arrow, partnered with SSR Mining (formerly Silver Standard Resources Inc.) (TSX: SSRM) for the Chinchillas mine in order to fast-track the deposit into production.
This is a positive signal in an industry where people often overreach their area of expertise. He is a proven explorer with decades of experience in Argentina and will continue to focus and build on his competency, exploration, discovery and working with senior mining companies.
His track record and knowledge of Argentina was instrumental in attracting a premier team which led to the founding of Golden Arrow Resources in 2004. Brian McEwen, vice president of exploration and development at Golden Arrow, is a professional geologist with more than 30 years of exploration and production experience in open-pit and underground mining projects and operations. His experience is global, managing numerous projects in Canada, US, Europe, Asia, Africa and throughout Latin America. Mr. McEwen's previous roles include more than a decade with MRDI (AMEC Peru) where he was responsible for project management, economic resource and reserve calculations for various precious and base metal companies worldwide, including BHP Billiton, CM Antamina, Teck, Hochschild and Phelps Dodge among others.
On May 31, 2017, the company formed a joint venture with SSR Mining and others, Puna Operations Inc., combining the Chinchillas project with the producing Pirquitas Mine into a single new operation. Puna is producing silver concentrate from the Pirquitas operation. SSR is developing the nearby Chinchillas silver project, which has more than 8 years of forecast production. The Puna joint venture will be 75-per-cent owned by Silver Standard and 25-per-cent owned by Golden Arrow. SSR will be the operator. Upon closing of the agreement, Golden Arrow received $17.5 million (CDN) from production since Sept. 2015 representing its 25% share of Pirquitas and will continue to be attributed 25% of production revenue in the future.
The company's investor presentation estimates that net revenue could reach over $1 billion with post-tax cash flow of $267 million, a 29.1% internal rate of return, and a 3.5 year payback period. These are compelling economics for a company that's valued at less than $60 million (CDN). Moreover, that valuation doesn't assign any value to the company's Antofalla project that could have equally-promising results and long-term potential.
Chinchillas is expected to supply the Pirquitas operation with milling ore in the second half of 2018, and average annual silver-equivalent production is anticipated to be 8.4 million ounces over an eight-year life of mine at a 4,000-tonne-per-day plant throughput. Golden Arrow's 25-per-cent share of average annual production will therefore be equal to 2.1 million ounces of silver equivalent, representing total attributable after-tax undiscounted cash flow of $66.75-million (U.S.), according to the recently published prefeasibility study.
After Gualcamayo, Navidad and Chinchillas, Golden Arrow's strategy is to capitalize on its corporate expertise and exploration talent of the Grosso Group team to find the Group’s fourth significant deposit in Argentina. The exploration portfolio comprises seven properties across four Argentine provinces; Jujuy Province: Chinchillas; Catamarca province: Antofalla; La Rioja Province: Don Bosco and Caballos, and San Juan Province: Pescado, Mogote and Portrerillos. Golden Arrow is actively exploring on its more than 200,000 hectares of properties in Argentina.
Golden Arrow's portfolio of exploration prospects in Argentina, covering up to 215,000 hectares, have been transferred to a newly incorporated, wholly-owned B.C. subsidiary called New Golden Explorations Inc.. All future exploration will be conducted through New Golden, as a separate exploration division of Golden Arrow. A 3,000-metre drill program is planned at the Antofalla silver gold project set to commence in the fourth quarter of 2017 in Catamarca Province where initial results from soil sampling and surface surveys have been encouraging.
The first part of the $1.64-million (CDN) exploration program at Antofalla is now complete, and the budgeted 3,000-metre drill program is planned to commence in the fourth quarter of 2017. The company is also planning an exploration program for the Pescado gold project in San Juan Province.
Current exploration efforts are focusing on the Antofalla silver-gold-base-metal project in Catamarca province. The company has identified drill targets through soil sampling and surface surveys. In the interim, the field team will be commencing exploration at the 22,000-hectare Pescado gold project in San Juan province. Details of the program for Pescado will be announced soon.
Golden Arrow intends to fund New Golden’s initial working capital requirements through a one-time seed private placement of up to $1 million (CDN). The hope is that New Golden's operations will become self-financing, and will raise capital by equity financings, expected to commence with an initial public offering in the near future.
Golden Arrow will retain a controlling share position in New Golden Explorations. As well, if New Golden is successful in outlining mineral resources on any particular project, the company intends to enter into discussions for joint ventures with major mining issuers on such specific projects.
Recent Market Activity
In the past 12 months the stock has reached a high of $1.29 (CDN) back in August 2016 with a low of 53 cents on the TSX Venture Exchange. The company has $21 million (CDN) in the treasury. SSR Mining owns approximately 5% of the outstanding shares. With 111,188,192 shares outstanding fully diluted and currently trading at 56 cents, the company has an approximate market capitalization of $62.3 million.
Golden Arrow's stock is trading about 17% lower so far this year as the silver sector still remains on sale. This decline is due primarily to the precious metals sector along with early investors taking profits following the partnership deal. The optimistic outlook is that new investors may want to consider purchasing a stake at these depressed levels to take advantage of the potential rise as it moves into full production (expected second quarter of next year) and discovery potential in the company’s exploration portfolio. Investors should also consider the combined upside potential of silver as it moves into a bullish market phase. The upside potential is very enticing here as I believe Golden Arrow will outperform other junior silver companies in the next move higher in the next bull run.
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