Expect ‘explosive growth’ from the guys at Grosso and Golden Arrow
For the willing, cooperation can achieve a great deal in a very short time; a fact currently being expertly demonstrated by Golden Arrow Resources Corporation (TSXV: GRG | OTCQB: GARWF)(“Golden Arrow”) and their strategic partners. Already a member of the high-achieving Grosso Group, a pioneering explorer of South-American resources for almost twenty-five years, Golden Arrow aligned with a neighbouring producer in 2015 to achieve a blend of experience and technological capability that would rapidly advance their silver, lead and zinc play by negating the need to build unnecessary additional processing plants. After an eighteen-month pre-feasibility stage, the gang are eminently positioned to achieve full production in record time, and are sitting at double the share value of only twelve months prior.
Given that Silver Standard’s nearby Pirquitas mine is coming to the end of its life this year, combining the two operations was a significantly advantageous move. Golden Arrow will receive a US$15 million option exercise payment from Silver Standard, equal to 25% of Pirquitas mine earnings less certain expenditures incurred from October 1, 2015 to closing, payable on closing, which is expected on or before May 30, 2017. Any investors who wish to benefit from a short-term boost to stocks should get in on the action immediately.
From Golden Arrow’s perspective, Executive Chairman, President & CEO, Mr. Joseph Grosso described the joint venture as:
“A landmark achievement for the Company as Golden Arrow transitions from an exploration/discovery operation into a mining operation.”
Grosso further commented that “Golden Arrow’s shareholders stand to benefit from this profile and strengthened financial position.”
For the longer-term thinker, Pirquitas has around twelve-months of material remaining to process, after which it will switch to receiving the output from Golden Arrow’s Chinchillas project. The recent prefeasibility study (PFS) has revealed that the joint venture contains measured and indicated resources of 29.3 million tonnes, featuring 96 million ounces of silver at a grade 101 g/t, 581 million pounds of lead at a grade of 0.90% and 386 million pounds of zinc at a grade of 0.60%. The omission of a construction stage at Chinchilla, and the introduction of proven people and technology, has rendered the company’s’ project as a promising silver-play-of-choice.
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Average annual silver equivalent production should be 8.4 million ounces over an eight-year mine life at a 4,000 tonnes per day of plant throughput, and operating margins are robust to say the least, based on cash costs of $7.40 per payable ounce of silver sold over the life of the mine. Post-tax net present value is stated as $178 million using a 5% discount rate, and metal prices of $19.50 per ounce silver, $0.95 per pound lead and $1.00 per pound zinc make for an irresistible post-tax internal rate of return of 29%.
First acquired in 2011, the Chinchillas prospect has always shared a road with Pirquitas, a fact that originally compelled the companies to cooperate, as pre-existing infrastructure and local authority relationships mean that logistics and permitting need not be the total headache they are normally expected to be. I can’t stress enough how the simple act of folding together the two operations has created phenomenal synergy that benefits all shareholders involved in either company; the closing-down of a US$300 million facility has been avoided by extending its life by around nine years.
Golden Arrow remains the operator of the studies and the mine as it exists today. Upon completion and publication of proof-of-concept at the end of May, operational control will be handed over to Silver Standard, who will continue to run their proven plant with the material supplied by Golden Arrow. It is important to note that, for all intents and purposes, the project is a go, and formalities such as permitting are all that separate handshakes from shipments. Processing of the Chinchillas material may be over a year away, but the effects of the current transactions have already been felt. Expect explosive growth over both the short-and-long-term from the guys at Grosso and Golden Arrow.
Lara Smith has spent over a decade covering commodity markets. She started her career as a buyside analyst in South Africa where she covered soft ... <Read more about Lara Smith>