Golden Arrow has announced a maiden resource estimate at their Chinchillas-project in Argentina’s Jujuy-province. This first resource estimate was much better than our expectations, as the company reported 105M ounces of silver-equivalent over all categories.
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The Chinchillas Silver Project
Golden Arrow has announced a maiden resource estimate at their Chinchillas-project in Argentina’s Jujuy-province.
This first resource estimate was much better than our expectations, as the company reported 105M ounces of silver-equivalent over all categories. As our target was only 50 million ounces of silver-equivalent, Golden Arrow definitely met our expectations. Also keep in mind the deposit seems to be open in all directions.
The company tabled a resource estimate containing approximately 105Moz AgEq based on a cutoff-grade of 50g/t at an average grade of approximately 115g/t silver-equivalent (or a rock value of $83/tonne using a silver price of $22.5/oz). The 105Moz AgEq contains approximately 80Moz silver, 360Mlbs zinc and 410Mlbs lead.
If we use a higher cutoff-grade of 60g/t silver-equivalent, the resource decreases only marginally to 97Moz AgEq, but at a higher average grade of 127g/t silver-equivalent (which is a rock value of $92/tonne using the same silver price).
Golden Arrow is planning to start a Third Phase drill campaign in the third quarter, which will focus on both upgrading and expanding the current resource estimate, and which will be the basis for an NI43-compliant PEA which we expect early next year.
Golden Arrow also already completed metallurgical tests, and according to the company, the samples responded very well to sulphide flotation, with silver recoveries averaging 98.7%, accompanied by very high lead and zinc recoveries.
[pullquote3 align=”right” variation=”silver” textColor=”#969696″]”Samples responded very well to sulphide flotation, with silver recoveries averaging 98.7%, accompanied by very high lead and zinc recoveries”[/pullquote3]
The larger than expected resource estimate and the excellent metallurgical results bode very well for an upcoming PEA which we expect to be released early next year. The PEA will be an important milestone as it will be the first time investors will see an independently calculated Net Present Value on the project.
Now we have a resource estimate in hand, we can start to make comparisons with Mirasol Resources, who sold their 49% stake in the Joaquin Silver project in Argentina to Coeur D’Alene Mines last year. Mirasol received approximately C$1.75/oz in the ground, so if we apply the same value to the 80.4M ounces of pure silver at Chinchillas, the Chinchillas project has a value of C$140M, or approximately C$3.5/share. Half of Mirasol’s ounces were obviously in a higher resource category than Golden Arrow, so a valuation of$1.75/oz for Chinchillas is too high.
In this table you can see the rough value of Chinchillas based on a $0.25, 0.5 and $1/oz value for in situ silver ounces (pure silver, not the equivalent ounces), and what the corresponding shareprice is per GRG share (based on 42M shares).
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| Value/oz | Total Value | Value/Share |
|---|---|---|
| 0.25 | C$ 20.1M | C$ 0.48 |
| 0.50 | C$ 40.2M | C$ 0.96 |
| 1.00 | C$ 80.4M | C$ 1.92 |
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Corporate
On May 17th, Golden Arrow Resources announced the company would not renew the employment contract of Carlos Fernandez Mazzi, their newly-hired CEO. Joseph Grosso will resume his duties as CEO and President of the company.
Conclusion
[pullquote3 align=”right” variation=”silver” textColor=”#969696″]”At $0.5/oz of silver at Chinchillas and working capital, the current value of the company would be approximately C$1.20/share”[/pullquote3]
This first resource estimate at Chinchillas was larger than we were hoping for, and as the deposit is still open in all directions, a considerable amount of ounces could be added to the current resource base. We are looking forward to get to know more details about the Phase III drill program, which will upgrade and increase the current resource base.
Golden Arrow still has approximately C$9.5M in working capital, which equals C$0.22/share. If we use a valuation of $0.5/oz of silver at Chinchillas and add the value of the working capital, the current value of the company would be approximately C$1.20/share, and in this calculation we still ignore all of Golden Arrow’s other projects such as the Mogote Project where the company has a Joint Venture with Vale.
With this first resource estimate in hand and with excellent preliminary metallurgical recoveries, the future looks bright.
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Disclosure: Proto Resources & Investements Ltd. is a sponsoring company. Please see our disclaimer for current positions.
