CANARC RESOURCE CORP. ANALYSIS-Revised on 2/5/2011
Canarc Resource Corp. is a growth-oriented, gold exploration company listed on the TSX (CCM) and the OTC-BB (CRCUF). Canarc is currently focused on exploring its recently acquired Tay LP gold property in south-central Yukon and seeking a partner to advance its 1.1 million oz, high grade, underground, New Polaris gold mine project in north-western British Columbia to the feasibility stage. In the third quarter of 2010, Cap-Ex Ventures Ltd. (TSX-V: CEV), ("Cap-Ex") who have an option on Canarc's Tay-LP property in the Yukon completed a 470 kilometer, helicopter-borne, VTEM geophysical survey over the Tay-LP gold property. Upon receipt of the geophysical data and interpretive maps from the geophysical contractor, Cap-Ex will prioritize the most favourable targets for follow-up in 2011 with more detailed ground geophysics, geological mapping and diamond drilling.
Canarc's management continues to seek strategic alternatives such as a joint venture or other means to advance the New Polaris high grade gold project to mine development and a full feasibility study. The New Polaris project is situated in northwestern British Columbia, 100 km south of Atlin, B.C., and 60 km east of Juneau, Alaska consists of 100% interest in 61 crown granted mineral claims and 1 modified grid claim totaling 2,956 acres. Historically, the Polaris Mine operated at a rate of 200 tons per day. Ore was crushed through primary and secondary crushers, and ground in a ball mill. A standard flotation circuit was used to concentrate the ore prior to being shipped off site. Historical gold recoveries averaged 90% and concentrate grades ranged from 3.5 - 5.0 oz per ton gold. New Polaris lay dormant for 30 years until exploration resumed in 1988. Canarc acquired New Polaris in 1992 and since has drilled 241 holes totaling 64,000 m of core, outlining significant new ore below and beyond the old mine workings. Canarc constructed a new office complex at the New Polaris mine site and the camp is now capable of supporting 35 people. Several existing buildings have been refurbished and serve as both sleeping quarters and the kitchen facility. The machine shop has also been maintained as a maintenance facility. In recent weeks, Canarc has initiated discussions with a number of interested parties regarding a possible strategic or financial partnership to advance the New Polaris gold mine project through a mine development and feasibility program to a production decision.
On Feb. 2, 2011 Canarc announced that it has commissioned an updated NI 43-101 preliminary economic assessment report ("PEA") for the New Polaris gold mine project in northwestern British Columbia.The updated study will be done by Moose Mountain Technical Services (Moose Mountain") who completed the previous PEA studies for Canarc to build an 80,000 oz per year gold mine at New Polaris. The revised PEA will review capital and operating cost estimates and examine the effects of higher gold prices and lower cutoff grades on gold production, mine-life and project economics compared to the previous PEA report dated December 23, 2009.The previous study, based on a gold price of $US900 per oz, $CA/$US exchange rate of 0.95 and cash costs of US$383 per oz, resulted in a discounted (5%) after-tax Net Present Value ("NPV") of CA$68.6 million with an after-tax Internal Rate of Return ("IRR") of 25.8% and a 2.7 year pay-back period. The year-old study also included an after-tax cash-flow sensitivity analysis that, based on a US$1100 gold price and all other factors held constant, resulted in a discounted (5%) after-tax Net Present Value ("NPV") of CA$130 million.The lead Qualified Person ("QP") for Moose Mountain pursuant to NI 43-101 for both the previous and proposed preliminary economic assessment reports is Jim Gray, P. Eng.
A recent event that turns the tide in the direction of Canarc becoming a producer in the short term and it's commitment to expand its resource base is the purchase of the Relief Canyon Gold Mine assets in Nevada. Canarc announced on December 21nd 2010 that it was the successful bidder to acquire a largely built and permitted, open pit, heap leach gold mine through a bankruptcy court auction held in Reno, Nevada. Canarc has agreed to purchase the Relief Canyon gold mine assets from Firstgold Corporation for US$11 million, subject to a due diligence period expiring February 4, 2011. As of February 4th Carnac decided to pass on the acquisition of the mine for the time being out of do diligence caution and instead retained the lab physicality which were part of the original deal.
What this shows is Canarc's effort to be a producer on the short term and with both the Tay LP gold property in south-central Yukon and the 1.1 million oz, high grade, underground, New Polaris gold mine project in north-western British Columbia as future developments. Canarc's management is expanding their options now as either a producer that will stay independent or as a take over by a larger company. With Barrick Gold Corp. as a shareholder in Canarc and the coming year funding in place for 2011 and an expanding asset base in projects, Canarc stands as a good buy out target for a major company like Barrick. The buying out of junior companies like Canarc by the big producers that are hungry for resource base replacement will increase into a frenzy in the next two years until it ends in a bidding war for the junior exploration companies. With this in mind you can be sure that Canarc will be a prime target and that it's share price will reflect this. Canarc needs to hold out as long as possible to bid up it's share price before a buy out offer is made which will give the best share swap ratio with the new big company stock that current share holders will get. It is possible that Carnac will keep forming joint ventures with smaller companies but I expect that the frenzy for resource asset base will mushroom and Canarc will be capture by a large company like Barrick which will be a major plus for the current stock holders of Canarc.
An email confirmation from Gregg Wilson of Carnac on 10/21/2010, states that Carnac owns 8% of Aztec Metals Corporation(see post regarding Aztec profile). Although not confirmed I believe that Canarc holds approximately 1.6 million shares, or about 7% of Caza Gold Corp.
