Brent Cook: Revisiting Barkerville Gold, Now BGM

POSTED ON February 08, 2016 BY Brent Cook
CATEGORY Barkerville Gold, Brent Cook,

Exploration Insights
by Brent Cook
www.explorationinsights.com

Issue No. 362
February 7, 2016

Carter Smith, videographer for Tommy Humphreys’ CEO.CA resource-focused website and chat room, caught Joe and I taking a first pass look at a few mineral projects being advanced around the world. For those of you interested, the following videos provide a good first hand perspective of our look at a number of projects: the geology, the people, the company’s financial strength, and future plans. Obviously we are not about to make investment decisions on the spot, but the question and answer session works as a good screening process for follow up investigations-- or not. We have pushed Joe’s “walk down the Core Shack” videos off until next week’s letter.

Next stop is an old favorite of ours. We take an 11-minute look at Barkerville Gold (BGM.V, C$0.315) a company many of you may recall has been featured in EI several times. Since the debacle of a “tea party” style 10 million ounces @ 5.6 grams per tonne gold, plus a potential 90 million ounces somewhere over the rainbow was announced in the summer of 2012 (see EI Aug. 19, 2012, “How many ounces does it take to fill the Albert Hall”) the company has gone through many changes. The President and all-star promoter Frank Callaghan is gone, the resource estimator has been disciplined, and his estimate declared null and void. A new, more “conservative” estimate by Snowden in 2012, using Multiple Indicator Kriging* (MIK), found an indicated 1 million ounces grading 2 grams per tonne gold, plus an inferred 3.9 million ounces grading 2.74 grams per tonne gold. Snowden updated this in 2015 to an indicated 2.8 million ounces grading 2.4 grams per tonne gold plus an inferred 2 million ounces grading 2.3 grams per tonne gold. There is an additional indicated resource of ~102,000 ounces grading 7.6 grams per tonne gold at Bonanza Ledge.

*Sidebar from Joe: Multiple Indicator Kriging (MIK) is the resource estimation methodology that was derided by Strathcona’s Farquharson with respect to Pretium’s (PVG.T) high grade underground Brucejack project in late 2013 (link). The disagreement generated class action lawsuits that are frivolous, in my opinion. My previous review of the reconciliation of the bulk tonnage sample at Brucejack with the various applied estimation methods indicated that most methods get close on tonnage, but no method can accurately predict grade, due to the high coefficient of variation (extreme nugget effect). MIK was applied to the high-grade population of the High Grade Domain at the Valley of Kings. The method has no top cut on extreme grades so it allows very high-grade numbers to be incorporated that would not normally be included in other methods (Inverse Distance, Ordinary Kriging) that include top cuts. The MIK method tries to reduce the influence of these extreme grade intersections without reducing their absolute value. A normal top cut if applied to Brucejack would probably kill it.

On the corporate front, Barkerville’s share count has more than doubled since its cease trading order was lifted in 2013 to ~259 million. Eric Sprott has become a major shareholder (~21%) by way of loans and placements. This past week, Osisko Royalties (OR.T) closed a financing and royalty deal whereby OR purchased 32 million flow-through shares at C$0.32, and a 1.5% royalty on the Caribou project for C$25 million. Osisko now owns ~17% of BGM and has the right to a streaming deal upon completion of a feasibility study.

The BGM Core Shack video is linked here. My post tour comments follow:

As you will note, Barkerville has done its best to distance itself from its past. Barkerville is no longer prominently displayed on the posters; the new and improved BGM logo sets the stage. Regarding the Caribou project, I have never had any doubt there is gold there, or that there is probably some sort of economic deposit to be had. The problem has always been with the resource estimate, technical and financial disclosure and, management. It is positive that VP Exploration Peter Geddes acknowledges problems with the most recent estimate by Snowden, is in the process of fixing problems in the old data (core recovery for one) and, more significantly, plans to tie the resource estimate to the geology via tight, 25 meter, infill drilling. As you will see, I was able to walk through the cross sections for BC Vein and connect the vein on 25 to 50 meter sections. It appears vein continuity is good, but, as expected, the mineralization is variable and nuggety.

BGM is not a stock I intend to buy, at least not until the new and improved resource estimate is released. There are too many moving parts, deposits, royalty and streaming deals to account for, a plan to generate free cash flow mining the remnants of the Bonanza Ledge underground and possibly open pit, and in fact an updated feasibility study in the works. BGM may be a good speculation but it is not one that Joe or I feel we can come to terms with (value) without an extensive review and site visits. I think our time here at EI is better spent on cleaner situations.

Disclaimer

This letter/article is not intended to meet your specific individual investment needs and it is not tailored to your personal financial situation. Nothing contained herein constitutes, is intended, or deemed to be -- either implied or otherwise -- investment advice. This letter/article reflects the personal views and opinions of Brent Cook and that is all it purports to be. While the information herein is believed to be accurate and reliable it is not guaranteed or implied to be so. The information herein may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. Research that was commissioned and paid for by private, institutional clients is deemed to be outside the scope of the newsletter and certain companies that may be discussed in the newsletter could have been the subject of such private research projects done on behalf of private institutional clients. Neither Brent Cook, nor anyone else, accepts any responsibility, or assumes any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information in this letter/article. The information contained herein is subject to change without notice, may become outdated and may not be updated. The opinions are both time and market sensitive. Brent Cook, entities that he controls, family, friends, employees, associates, and others may have positions in securities mentioned, or discussed, in this letter/article. While every attempt is made to avoid conflicts of interest, such conflicts do arise from time to time. Whenever a conflict of interest arises, every attempt is made to resolve such conflict in the best possible interest of all parties, but you should not assume that your interest would be placed ahead of anyone else's interest in the event of a conflict of interest. No part of this letter/article may be reproduced, copied, emailed, faxed, or distributed (in any form) without the express written permission of Brent Cook. Everything contained herein is subject to international copyright protection.

Brent Cook

bcook@explorationinsights.com

Brent Cook

bcook@explorationinsights.com

Disclaimer:

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