The residents of Yellowknife, Canada, have high hopes for Gold Terra Resource (TSX.V: YGT, FSE: TX0, WKN: A2P0BS). Moreover, in the city of Yellowknife and its immediate surroundings, Gold Terra Resource has become an economic aspiration of hope for many, as the company aims to revive the historic Yellowknife Gold Camp, which has produced over 14 million ounces of high-grade gold in the past.
The question of whether Gold Terra Resource, which looks very undervalued on the charts, still offers reason for economic optimism will interest far more readers here in German-speaking countries than the residents of Yellowknife. Nevertheless, we must address the latter first to be able to adequately answer the question of hopes for the future, which is of more interest to the majority.
If one asks about the reasons why mining projects can be successfully realized, two essential aspects always come to the fore alongside the quality of the properties themselves: the quality of the management and the support of the local population. Both aspects are very important to realize and develop projects without failing. That is why it makes sense for every investor to take a close look at them.
Gerald Panneton’s Resume is Essentially a Job Application
In the case of Gold Terra Resource, the question of management is quite easy to answer. As a mine developer, the company, like most other explorers and developers, is reliant on raising capital, especially in this challenging market environment wherethere is no money to give away. That is why, to be prudent, every dollar is turned over twice or three times before it is spent once on an activity that makes little sense.
As a result, the company has few employees, but these are top-class minds. At its head is Gerald Panneton, the company’s CEO and an industry veteran. He was the founder and long-standing CEO of Detour Gold and transformed the company from a initial public offering (IPO) in January 2007 into a sought-after takeover target within just a few years, ultimately changing hands for several billion Canadian dollars in 2018.
In his career, Gerald Panneton has built up several mines from scratch. He knows the difficulties that can be expected along the way and knows how to deal with them. His entire professional life has been a constant learning and confirmation phase at this point. During this phase, he quickly realized that it is a great advantage for a project to be developed on an existing infrastructure and the associated permits.
A mine infrastructure that does not have to be laboriously built up first saves a lot of time and money. If not only existing facilities but also the permits associated with the project can be taken over, this saves not only money but also an extraordinary amount of time. Gerald Panneton at Detour Gold has shown what this means for the shareholders invested: The long, expensive and, for the invested shareholders, also quite risky path of mine development could be shortened from eight to ten years to less than two years after you secure the Detour Lake Mining lease and surface rights.
The Parallels to Detour Gold are Remarkable
As with Detour Gold, Gerald Panneton therefore also relies on the decisive key factors for Gold Terra Resource: The Con Mine, which produced 6.1 Moz at 16-20 g/t gold is located in a legally secure, mining-friendly region, has excellent infrastructure such as green power, roads, airport and workforce, and includes valid permits and licenses that do not have to be applied for in a laborious and time-consuming manner.
Detour Gold not only had an excellent infrastructure, as Gold Terra Resource does now. The local population was also behind the project. When Detour Gold was taken over and the company’s history came to an end, many members of Canada’s indigenous peoples were not only shareholders in the company’s success, but were also directly connected to it as employees.
The goals of the First Nations thus coincided with those of the company and in the end both profited considerably. A similar situation is now emerging at Gold Terra Resource. The company is still too small to be a significant employer in Yellowknife and its immediate surroundings. But the hope of one day working for Gold Terra at the reopened Con Mine is already held by many in the city and its immediate surroundings.
When Yellowknife Faces an Uncertain Future of Mining Development…
With a population of around 23,000, Yellowknife is not a large city. An important road coming from the south ends here. For Gold Terra Resource, this means inexpensive logistics compared to other mine developers without similar infrastruture. For the citizens of Yellowknife, the road and its end in the town means that, on the one hand, they have a good connection to the rest of the country that is easily accessible all year round and, on the other hand, their options are limited.
If you can’t find work in Yellowknife and its immediate surroundings, you either have to travel long distances or move away completely. The city has been shaped by its history as a mining region. Initially gold was mined here, but diamond mines currently dominate the landscape. However, their end is already clearly on the horizon. For the people of Yellowknife, this prospect is anything but pleasant, because when the diamond mines close, there is nothing and no one to fill the gap.
For Yellowknife and its citizens, the anxious question is therefore whether the city and region will sooner or later mutate into a mining museum or whether Gold Terra Resource will succeed in initiating a counter-trend by reopening the Con Mine. This counter-trend could well ignite its own dynamic, as Gold Terra controls not just a single abandoned historic mine, but an entire mining district.
The Harsh Either-Or of an Inevitable Decision
If it is systematically explored and brought into production, not just a few, but hundreds of jobs can be preserved and secured in the long term. The members of the First Nations also know this. They therefore have a very natural self-interest in ensuring that Gold Terra Resource is not just a small success, but a resounding one.
The alternative at this point is quite brutal: either Gerald Panneton repeats the success he had with Detour Gold more than 15 years ago, or Yellowknife missed on a timely golden opportunity. .
Investors who understand this context and the hopes and fears of the people of Yellowknife realize that First Nations people will do everything in their power to do their part to ensure that Gold Terra Resource succeeds. This turns an important risk factor into a powerful support.
The Market and its Own One-Sided View of Opportunities and Risks
There remains the question raised at the beginning, but not yet answered, as to whether the investors have reason to hope. The latter is just as justified as that of the inhabitants of Yellowknife and its surroundings. Although there is of course no guarantee in either case, there is undoubtedly a high probability of a smaller (than Detour) but high grade -type success story.
With Gerald Panneton and some loyal companions from previous projects, mining experts are on board who know how to write success stories in mining. At present, the market is not rewarding this expertise or the exceptional quality of the deposits with their high gold content. If one converts the current market capitalization to the ounces of gold already proven in the ground, each ounce is valued at just ten dollars.
This gives Gold Terra Resource a valuation that assumes that pretty much everything that can go wrong will go wrong in the coming months and years. Could the market be right? Yes, it could. What is much more likely, however, is a scenario that makes it clear that this pure pessimism is completely misplaced.
It would not be the first time, and certainly not the last, that Mr. Market has been quite wrong in his assessment of an anticipated end of the world, creating a unique entry opportunity for courageous investors.
