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If You Believed. . .Bob Moriarty I wrote a piece about gold and gold shares, I posted it on November 30th. One of the companies I wrote about is named True Gold. They were $.32 a share then. They are up 25% to $.40. It took three weeks but to my credit, gold is down slightly since then. All of those stocks I wrote about are 1st tier. They are some of the best stocks around yet have been hammered through no fault of their own. Many of them are down because of forced selling from the gold funds. They were sold not because they had flaws but because they were in the portfolios of the biggest and best gold funds who were hit with waves of selling. I visited Burkina Faso in mid-November and wrote a longer piece. The article pretty much covered the most important issues. True Gold has a major gold property in Burkina Faso called the Karma project. They intend to run an open pit, heap-leach gold mine there starting in late 2015. They show over 3 million ounces in a 43-101 resource. Last week True Gold released the promised update to their feasibility study showing an impressive 43.1% IRR at $1250 gold. The company can produce 97,000 ounces of gold a year and only requires $131 million in capex. Total cash operating costs would be in the range of $720 an ounce. The FS gives the company an NPV of $178 million at $1250 gold and a payback period of an impressive 1.4 years. They haven’t bothered to say how much better things are going to get in the future. You see what they plan on mining at Karma is just the beginning. This is going to get a whole lot better and a whole lot cheaper. Pay attention to the constant flow of news from drilling at Kao. Those ounces they are finding aren’t in the 43-101 yet. Power costs are a giant issue now with diesel costing $1.37 a liter and the company planning on using gensets. The company has factored that into their numbers but the country plans on putting the nearby city of Ouahigouya some 23 km distant onto the national power grid in 2-3 years. That’s going to drop the cost of energy by 75%. On the 18th of December, the government of Burkina Faso issued the exploitation permit to True Gold for Karma. True Gold was anticipating the permit in January and obviously this is a big deal for them. The company is on track for production in about 24 months. When I was there, True Gold President Dwayne Melrose explained to me that the entire theory at Karma was that of scaleability. They will put the project into production at a low capex but keep drilling and adding ounces at the same time. Their costs will be the highest in the startup period due to the high cost of energy but as the project matures, the power grid will move to them. Karma isn’t the only arrow in their quiver and in my mind, it isn’t even the biggest. Their 2nd gold project in Burkina Faso is called the Liguidi property and is nested in a cluster of 5 million ounce plus deposits. True Gold has completed a lot of basic ground work but has yet to complete sufficient drilling to come up with a resource. I could easily be wrong but I suspect Liguidi is going to surprise even True Gold. It’s going to be bigger than Karma but Karma is going to pay for all the drilling and development. Remember when considering an investment in True Gold who is behind the company. The legendary Mark O’Dea started the company and he’s the best guy in the business for monetizing assets. One day the company will be for sale and it will be selling for a lot more than the tiny $106 million market cap of today. True Gold is an advertiser and I am biased. Do take some responsibility for your own investment decisions and do your own due diligence. True Gold Mining ### Bob Moriarty 321gold Ltd |
