Monday March 16: Top News Releases (Part 1)

POSTED ON March 16, 2015 BY James Fraser
CATEGORY Argonaut Gold, Golden Reign Resources, Mart Resources,

Here are a look at my favourite news releases from this morning with some thoughts on each. I will do another post on some more news releases later today.

Mart Resources (MMT:TSX) - Mart announced this morning that the deal previously announced with Midwestern is now a definitive arrangement. Each Mart shareholder will receive 80 cents per share in cash in exchange for each common share of Mart held. The deal does represent a 40.3% premium to the closing price on February 27,2015 and a 28% premium to the 20 day VWAP. The deal is well below the 52 week high of $1.80 and the fact that Mart was well above 80 cents for most of 2014. The collapse in oil prices really hurt Mart at a time when debt started to become due as well as delays on closing the OML 18 transaction (government approval).The deal is expected to close in mid June with a $5.8 million break fee payable either way if the deal does not close. Long time Mart shareholders will remember when the company received a takeover several years ago for I think 16 cents when the company was trading at the 10 cent level. Fortunately this deal did not go through and Mart ended up hitting a high of $2.31 and paying out several dividends along the way.

Nigeria will hold elections on March 28th which where previously postponed from February 18th. Nigeria has always been known as a corrupt country and unfortunately this continues today. The most populous country in Africa is full of opportunity though and this can be seen in oil as wells routinely flow 3000 bopd. Major companies such as Shell have been trying to divest assets for a reason though.

Read: Mart Enters Definitive Arrangement Agreement With Midwestern or Nigerian oil play Mart Resources has turned a corner.. I hope!

Golden Reign Resources (GRR:TSXV) - Impressive numbers out from Golden Reign on a PEA on the San Albino-Murra property, Nueva Segovia, Nicaragua. Highlights from the PEA using $1250 gold show an after tax return of 37.5% with an NPV (8%) of $63.3 million and a pay back period of 2.2 years. The initial capex is only $13.9 million and the mine is expected to produce 21,800 oz of gold per year at 8.02 g/t AUeq. All in sustaing cash costs are $460 per ounce. Using a 250 tpd scenario the average after tax cash flow is projected at $9.4 million.

Kim Evans, Golden Reign President and CEO, states, "Our San Albino Gold Deposit is a low tonnage, high-margin gold project with a robust estimated average mined grade of 8.02 g/t gold equivalent. Our strategy, which is now well advanced to being realized, is to establish a financeable, low cost, profitable cornerstone operation at San Albino - an area that represents only 2% of our landholdings - with the aim of self-funding exploration and growing our operations in a non-diluting manner, through free cash flow. Golden Reign's vision is to replicate the success of the San Albino mine development throughout our highly prospective 138 sqkm land package."

A study has also been done on different scenarios of 250 tpd (base case), 350 tpd, and 500 tpd. The numbers improve the higher the throughput but it comes at a higher initial capex of course.

Marlin Gold (MLN:TSX) does have a gold streaming agreement in place with Golden Reign which looks like it will cover the costs of construction.

Stream transaction details:

Marlin will provide $15.0-million (U.S.) to be used for construction and development at the San Albino gold deposit. The designated area comprises a total of 3.5 square kilometres.
Marlin's wholly owned subsidiary, Sailfish, will be entitled to purchase 40 per cent of gold production at $700 (U.S.) per troy ounce (1) until an amount of $19.6-million (U.S.) (2) is recovered by Sailfish and 20 per cent of gold production at $700 (U.S.) per troy ounce (3) thereafter.
Prior to commercial production, Sailfish will be entitled to receive an 8-per-cent semi-annual coupon payment on the purchase price.

Golden Reign stock is trading at a market cap of $10.5 M this morning which appears cheap to me at a quick glance. I have added the stock to my watch list.

Read: PEA Results for San Albino Op/Ug Gold Deposit Indicates All-In Sustaining Cash Costs of US $460/oz Gold & Average Grade of 8.02 g/t AuEq

Argonaut Gold - (AR:TSX) - Argonaut stock has been extremely volatile with the moves in the gold price. The stock is back trading ($1.34) close to the 52 week low of $1.24 after being as high as $3.03 on January 20th. Financial results for the fourth quarter and year end 2014 were released this morning. In the fourth quarter of 2014 AR ended up losing 5 cents per share on revenue of $48.9 million.

Peter Dougherty, CEO "The Company is providing guidance for 2015 of 135,000 to 145,000 gold equivalent ounces with an overall cash cost of $700 to $750 per gold ounce (including 85,000 to 90,000 GEOs at El Castillo at $750 to $800 per gold ounce and 50,000 to 55,000 GEOs at $600 to $650 per gold ounce at La Colorada).

Argonaut struggles to make a profit at the current gold price mostly due to mining lower grade material (0.33 g/t) in the fourth quarter. The stock does have tremendous leverage to the gold price.

Cash and cash equivalents was $51.4 million with current liabilities of $46.5 million as of December 31, 2014.

I will be listening to the conference call replay later this morning and will update this post if needed.

Read: Argonaut Gold Announces 2014 Revenue of $166.3M, $42.5M in Cash Flow from Operations before Changes in Non-Cash Operating Working Capital and Other Items

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This is not investment advice. All facts are to be checked and verified by reader. As always please do your own due diligence. Author owns a position in Mart Resources and therefore is biased.

James Fraser

Mr. Fraser joined CEO.ca in October 2014. He is passionate about the mining industry. His passion led to co-authoring the e-book "Mining Stocks Investor Guide: A Guide to Investing in Mining Companies." He has a finance background and has completed his Canadian Securities Course (CSC) and Conduct and Practices Handbook (CPH). When Fraser is not "digging" up the latest mining stock, he can be found enjoying a wide variety of sports or travelling the world. More →

Twitter: @miningstocks

james@miningstocksguide.com

James Fraser

Twitter: @miningstocks

james@miningstocksguide.com

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Always do your own due diligence. We seek safe harbor.