November 5, 2012
Goldrich Mining (GRMC): On the Verge of Production
Goldrich Mining Company (OTCBB: GRMC) is a precious metals exploration and development company focused on Alaska’s promising Chandalar gold district. After already drilling out approximately 250,000 ounces in 2007 and completing a production test in 2009, the company has secured $8.5 million in financing and is prepared to enter production in less than eight months.
With gold prices on the rise, the company could be worth a second look for investors seeking an exploration-stage gold mining stock with near-term commercialization prospects as a higher potential alternative to more established players like Yamana Gold Inc. (NYSE: AUY) and Goldcorp Inc. (NYSE: GG) that are already trading at lofty valuations.
Chandalar Property Looks Promising
The Chandalar property encompasses approximately 22,858 acres along a regionally mineralized schist belt that extends east-west across the 600-mile width of Alaska and south flank of the Brooks Range. With geology and mineralization similar to many important productive gold deposits, Goldrich Mining believes the property has enormous potential for development.
The company has already produced over 2,000 ounces of gold in 2009 and 2010 and completed a Phase I drilling program in November of 2011. The 25-hole program showed gold-bearing intercepts in 72% of the holes, with many having multiple intercepts. These included 6.57 g/t on the Aurora prospect and 6.02 g/t on the Rock Glacier prospect.
Goldrich had originally planned on continuing its exploration efforts during 2012, but wasn’t able to proceed due to poor market financing conditions. With principal exploration targeting a newly identified hard-rock stratabound gold target, the company estimates that the total cost for the program would come in at around $1.5 million to $2 million.
The property also includes substantial exploration infrastructure, including a 25-person camp, equipment, 4,400-foot airstrip and a network of road providing all-weather access to all of the major gold prospects. Combined, these features make it easy for the company to explore the property efficiently without a significant capital investment.
On the Verge of Production
In May of 2012, the company signed an agreement with NyacAU LLC, a large private Alaskan placer-mining company, to bring its Chandalar placer gold properties into production. The agreement provides the company with $8.5 million in financing to bring the alluvial deposit in Little Squaw Creek into production and partially finance the drilling activities of its exploration program.
Full production is expected to begin by June 2013 with an initial goal of 8,500 ounces of fine gold in the first year and approximately 10,000 ounces per season thereafter with a 25-year mine life. But, this figure could substantially increase with a second gold recovery plant running by 2014. The mine will pay itself off and generate about $1 million in cash for the company in the first year. Beginning in the second year, the company estimates it will generate about $4 million to $4.5 million in cash per year with their 50% stake per plant.
A Great Investment Opportunity
Goldrich Mining Company (OTCBB: GRMC) trades with a market capitalization of just $8.7 million, despite being very close to opening a mine capable of profitably generating $4 million to $4.5 million per year in revenues. Meanwhile, the 250,000 ounces could be recovered more quickly with a second plant that could increase this amount.
Finally, the fact that NyacAU – an established miner in Alaska – was willing to put up $8.5 million – nearly GRMC’s entire market capitalization – for a 50% interest in just the placer properties represents a strong vote of confidence in the stock. As a result, this is one company that investors may want to consider buying into sooner than later to capitalize on its discount.
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