On the surface, things seemed relatively quiet for Gold Terra Resource (TSX.V: YGT, FSE: TX0, WKN: A2P0BS) during the summer. Behind the scenes, however, the company laid the groundwork for dynamic future growth. The share price has already reacted to this change, recording a strong recovery since early September. Can this dynamic upward trend be sustained?
Since early September, the share price of the Canadian gold explorer has risen by 170%. However, when Gold Terra’s share price began its upward trend from a level of CAD 0.05, it started from a low, undervalued point rather than an reasonable level. As such, it is at least questionable whether the company led by CEO Gerald Panneton is currently at an appropriate valuation with a combined 1.84 Moz on the books..
In any case, at no point since November 2021, was Gold Terra given any credit by the stock market for the company’s opportunity to acquire 100% of the Con Mine, a historic mine that produced 6.1 million ounces at 16–20 g/t near a city with existing infrastructure. Instead, Gold Terra was seen as one of many explorers developing one of the countless properties in Canada. The share price was correspondingly low.
Investors are slowly turning their attention back to Gold Terra
The share price thus conveyed a completely different picture than the situation on the ground, because Gold Terra not only has a district scale large project in terms of area with the Yellowknife project, but also has a 1.8 million ounces combined resource on the Campbell Shear, a 70 km long structure with a past production of 14 million ounces at 16-22 g/t. The infrastructure is also readily available, as the city of Yellowknife is adjacent to the project. Power lines and roads are in place, and the region is also easily accessible by a permanent road from Edmonton and a regional airport.
Moreover, the pro-mining labor market in Yellowknife is currently at risk , as the diamond mines operating in the Northwest territories are gradually closing their doors. By 2026, probably only one of them will still be in operation, but its closure is already looming on the horizon. For the city, which is in proximity, and its residents, this means that many miners are currently fearing for their economic livelihood. However, there is still some hope, and that hope has a name: Gold Terra.
Four years ago, the Company signed an option agreement with Newmont to acquire the Con Mine. The Con Mine is too small for the world’s largest gold producer, which is why it would rather get rid of it sooner rather than later. For a small company like Gold Terra , however, the Con Mine is a stroke of luck in many ways. The former mine was shut down in 2003 when the price of gold was $340 U.S. per ounce and left an historical non-compliant resource of 650,000 @ 12 g/t Au in the mine which was drilled from underground. In addition, the Company has outlined 109,000 Indicated Ounces and 432,000 Inferred Ounces with a near surface drilling program in 2021-22 on the Con Mine Option property based on a cutoff grade of 3.5 g/t and a gold price of US$ 1500 per oz. Today with gold price above US$ 4000 per oz, the situation is quite different, and lower cutoff grade can be use to unlock so much more gold in its planned release of the next Mineral Resources Estimate for 2026.
Parallels to Detour Gold’s Success Story are Unmistakable
Although the Con Mine (CM) is currently shut down, the shaft and most of the tunnels are in good condition and can be quickly restored to production with not too much effort or cost. The situation was similar at Detour Gold around 20 years ago. Detour went public in 2007 and, like Gold Terra, had a historic mine that could be quickly brought back into production, because the CM has a mining lease and surface rights associated with it. This saved the company a lot of time and money and significantly shortened the lengthy permitting approval and infrastructure in place . Detour Lake for example went back into production from a January 2007 Initial Public Offering (IPO)to gold profuction in February 2013 in 6 years and was sold in 2018 for CAD 4.9 billion.
This is where we come full circle, because Gerald Panneton, the man who took Detour Gold public and brought it into production in a very short time, is now at the helm as CEO and Chairman of Gold Terra Resource. He knows how attractive the project is and has already proven impressively in the past that he can turn an old, abandoned mine back into a proverbial gold mine.
The key to making this plan work for Gold Terra Resource is the resource. 1.8 million ounces is a “nice start”, but Gold Terra cannot and will not stop there. There are two reasons why this statement can be made with relative certainty today.
The sharp rise in gold prices to over $4000 U.S. dollar per ounce plays into Gold Terra’s hands
The first reason is the company’s planned drilling activities. Bythe end of this year , Gold Terra intends to carry out aggressive drilling program at the CM and also north of town. The Company will be focusing on the Campbell shear from surface to -800m along a stretch of almost 5km south and north of the CM. It should then only be a matter of time before Gold Terra is able to significantly increase the existing resource.
The second aspect that argues for a timely expansion of the resource is the massive increase in the price of gold. It was considerably lower (US$ 1500) when the calculations for the current resource were made. For this reason, Gold Terra worked with higher cut-off grades than can be assumed today. Thanks to the higher gold price, ore bodies that could not be considered for production four or five years ago can now be mined economically.
In view of these positive factors, there appears to be good potential for Gold Terra Resource to continue its upward trend. Of course, there is no guarantee of this, and especially in the case of exploration companies with their increased risk, the share price does not simply continue to rise indefinitely. However, in our opinion, there is definitely potential for Gold Terra Resource to extend its upward trend if drilling is successful and the market environment remains positive.
