Lindero project site plan (Company)

Lindero project site plan (Company)

Another good sign for the resource equity markets; Paul Matysek’s Goldrock Mines (GRM:TSXV) quietly raised $9.24 million by way of strategic investment by Austral Gold (AGD:ASX) consisting of units at $0.80 per share (with an $0.80 warrant).  This represents a 51% premium to yesterday’s closing price.  After closing, Austral will own approximately 15% of Goldrock.  Austral’s Chairman, Eduardo Elszstain, is a powerful Argentinian entrepreneur heads one of the country’s most respected group of companies including gold and silver mining interests in Chile and Argentina.

Here’s the release: Goldrock Announces $9.24 Million Private Placement

Austral Chairman Eduardo Elsztain

Austral Chairman Eduardo Elsztain

Eduardo Elsztain, non-Executive Chairman of Austral Gold, commented: "This is an excellent transaction for Austral Gold, and it marks the next step in our strategy of creating a leading South American-focused precious metals resource company. We are pleased to build a strong relationship with Goldrock and gain access to the impressive Lindero gold development project located in the province of Salta, where I have the privilege of investing in other industries for decades. Our technical team is very encouraged by this project and its unlocked value, and, once our initial investment is concluded, we will focus on working with Goldrock's team to bring the project into production."

The market closed up $0.06 on a measly 250k shares to close at $0.59 today.  Even though Lindero is fully permitted and construction ready, GRM trades at $25 per reserve ounce.  Even more, at $1,300/oz gold, the after-tax NPV of Lindero is $168 million (roughly 4.5 times the current market cap of $38 million).  Although the company is not funded for development, a large (60-80% of initial capex) project finance debt package should not be hard to attract.

These types of low initial capex (>$150 million), large, open-pit heap leach gold projects are hard to come by as they represent the ‘low hanging fruit’ and are a favorite among institutions and private equity groups I speak with given their technical simplicity and high ROI's