Invest in GOD???
Goldrush Inks Promising Partnership in Burkina Faso
By Michael J. DesLauriers
12 Jan 2006 at 03:24 PM EST
TORONTO (ResourceInvestor.com) -- Last June your correspondent pointed out to readers the likely outcome for minnow Jilbey Gold, partnered with High River [TSX:HRG] in Burkina Faso, when the stock was 68 cents.
At the time, it was noted “…as High River continues to expand and diversify its production profile, JLB will become a logical take-over target if they can find enough material at Bissa...As Taparko goes into production and Bissa advances, the logical leap in terms of JLB’s future is not hard to make. Investors interested in the junior market can feel quite a bit more secure in a strategic play of this nature than in your run of the mill exploration shot.”
Less than two weeks later, HRG bought out the company at C$1.02, for a 50% gain.
Goldrush Resources [TSXv:GOD] has just executed an agreement with High River that essentially makes the company an exact analog of what Jilbey was – which means that buying shares at this level, 20c per share, with a market-cap of only C$3.8 million, should be a lay-up. Indeed, if readers missed the Jilbey play, GOD would appear to offer redemption.
That being the case, we thought it might be useful to provide readers with an overview of the story.
Concept
The concept behind the deal is simple. In the company’s own words:
“The Agreement positions Goldrush for accelerated growth with a highly regarded strategic partner. High River's stated strategy is to directly focus on advanced projects and to maintain exposure to potential discoveries, on prospective properties within trucking distance of its existing and future processing facilities, through preferred status agreements with well-managed exploration companies.”
“Access to High River's Taparko-Bouroum mill will permit Goldrush to place satellite discoveries into production without the capital costs associated with the construction of stand-alone milling facilities.”
A win-win situation.
Properties
Goldrush gets 21 exploration permits in Burkina Faso from High River, totaling approximately 4,690 square km, in return for 20% of the company.
High River will then have, “a one time right, in the event a deposit is discovered on Goldrush's ground, to purchase a 50% interest in each property at a cost of 1.5 times Goldrush's actual out-of-pocket costs to date on that property. If the 50% interest is purchased, a joint venture will be formed and High River will be the operator during the mine development and production stage.”
More detailed information about the specific properties involved is available in the company’s press release, linked above.
Going Forward
Goldrush is having a 43-101 conducted on the property package, and once that is completed, making everything compliant, the company should be ready to close this deal with all of the necessary approvals.
At that point, management will look to raise awareness and about C$2.5 million, with which the company will launch an immediate preliminary exploration campaign including surface work, and a number of R/C or RAB holes, to get a feeling for some existing targets and to help identify new areas which merit exploration work.
With any luck, GOD will be on the ground by the end of March, with news and project results starting to flow in the weeks after that.
Structure
Management owns between 20-25% of the company’s 19 million outstanding shares, and can account for around 70% of shareholdings within a group of about 20 people. GOD has 26 million shares fully diluted, and 10-cent warrants are currently being exercised keeping a lid on the stock for the time being, and providing what is most-likely a fleeting opportunity for new entrants to get their fill at this level.
Conclusion
Company president Len Brownlie, who has been in the business for many-a-year, highlighted the merits and uniqueness of the deal that GOD has put together, and how it separates the company from the large pool of listed juniors.
He told Resource Investor “It’s rare that a junior has the opportunity to walk into a new area with so much already accomplished – a strong ground presence, and mill capacity which can lead to cash flow generation without major cost, or dilution.”
Smart money will be sitting on the bid religiously, hoping to soak up as much GOD as possible at 20 cents, because it seems fairly obvious that Goldrush could share the same fate as Jilbey which had exactly the same deal with High River, and was taken out at C$1.02.
