News >> International news

Cangold May Be Small But It Could Play An Interesting Role As A Consolidator

The chief executive of Canadian listed Great Panther Resources, Bob Archer, was in London last week to talk about his company’s silver mines in Mexico – Topia and Guanajuato – where profitable production is on the increase. Bob reckons that the institutional fund managers are hibernating until there is real evidence of an upturn in metal prices next year, but retail investors are still on the prowl. The UK has nothing like the retail base of Canada, thanks to the negative attempts at regulating distribution of research by the FSA and compliance officers, but shares move when the bloggers and bulletin board jockeys are in pursuit. This is one of the reasons why Commodity Watch, owner of minesite.com, has just merged with Rivington Street Holdings as the latter has a database of over 60,000 high net worth investors.
Bob has another junior exploration company in his stable called Cangold and it is worth taking a look at this as it exemplifies the action that many of its peers should have taken earlier this year when the dark clouds began to gather. First, it raised just over C$1 million late in March by the sale of  shares and warrants to fund continuing exploration at its Los Venados and Plomo properties which are also in Mexico. Second, it  sold its 51 per cent interest in the Thorn property in northern British Columbia to its partner Rimfire Minerals  which has other projects in that part of Canada. The terms for this deal involved Rimfire paying  Cangold C$100,000  in cash and issuing 100,000 shares to it  upon signing. Cangold stands to receive 25 per cent of any cash payments and share issuances resulting from the future option and/or sale of the property to a third party. In addition, Cangold will receive $1,000,000 or 250,000 Rimfire shares  should the property be placed into commercial production while Rimfire owns at least 10 per cent of the property. 

These two deals gave Cangold operational focus  and a financial  cushion and may be of interest to Minesite readers to note that they followed swiftly on the appointment of Malcolm Burne as a director of  Cangold. Malcolm is also a director of Commodity Watch and it was he who first suggested the merger with Rivington Street,  while maintaining that we should retain our own editorial independence within the enlarged group. He will  be chairman of the enlarged Rivington Street Holdings, but it was his activities as a fund manager during the last bear market  when he acquired significant stakes in distressed companies which provided  the original base of Golden Prospect PLC, another AIM listed company which was acquired by Ambrian Capital. He is now chairman of Golden Prospect Precious Metals which is a closed ended fund based in Jersey and its ‘vulture’ investments could be worth following. He also  sees Cangold as a potential vehicle to pick up under-valued assets.

At the time Cangold sold off Thorn it also announced that it had identified two new gold zones  on the Plomo property which expanded the prospective area significantly. The first new area of gold mineralization, within the Pavorreal area, is located between the Pavorreal and San Perfecto structures, and has been mapped along a 600 metre trend with widths to 100 metres. Initial rock sampling along the new structures included values to 10.8g/t gold   from a grab sample and 5.82g/t gold over 2.0 metres. The second new area, Culebra , is associated with the shear which presently defines the southeast side of the prospective area.. Historic workings contain secondary copper mineralization, and sampling has demonstrated the presence of gold. Initial rock sampling returned values to 4.28g/t gold and 0.21% copper over 0.85 metres, 0.25g/t gold and 3.43% copper from a grab sample, and 0.93g/t gold and 1.65% copper over 3.0 metres.

The Phase 1 core drilling programme at Plomo, now completed, consisted of approximately 1,500 metres in 9 holes. The plan was to gain a better understanding of the structural control of the gold mineralization and to look for areas where the flat-lying gold-bearing structures coalesce into a larger zone with resource potential. In this the widely spaced  drilling proved successful as  it confirmed that  the flat lying structures observed on surface play an important role in localizing gold mineralisation. It would appear that another set of controls, such as cross-cutting structures, is required in order to upgrade the gold so detailed geological mapping and rock sampling continued after the drilling was completed. The data from all this will be used to identify new targets, but they may not be drilled in a hurry as Bob Archer wants to conserve his cash.

So why pick on Cangold for comment at the moment? Its shares do not stand at a discount to cash assets and it has not made a big discovery … yet. What it does have is a couple of interesting assets and the expertise of its board. Bob Archer and chairman Kaare Foye have brought two mines into production and they know how to assess a project at an early stage. Not for them the route of teenage scribblers who put a value on metals in the ground well before  a feasibility study has been carried out.  Bob and Kaare do their homework meticulously and they know what they are looking for. Add in Malcolm’s trading ability and experience and Cangold  has an ideal team for these times supplemented, as it has been, by the addition of Martin Carsky to the board. Martin has over  fifteen years experience in capital markets, mergers and acquisitions, restructuring, and corporate governance and is a director of a number of public companies.  An interesting picture of Cangold, the mini-acquisitor, starts to emerge.