go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
Great Basin Gold is currently in late stage development at two projects in the world's two most well known gold producing regions. The Hollister project is located on the Carlin Trend in Nevada, USA and the Burnstone project is located on the Witwatersrand Basin in South Africa. The company currently has a substantial resource base of 13 million ounces in the measured and indicated category.
Hollister
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https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
In 1997, Great Basin Gold acquired Newmont's 75% interest in the Hollister Gold Property (formerly known as the Ivanhoe Gold Property) in Nevada for US$6 million. Two years later, the company increased its interest to 100% through the purchase of the stake held by Touchstone Resources. Great Basin Gold explored the property from 1997-2001. In mid-2002, the company entered into earn-in and joint operating agreements with Hecla Mining, in which Hecla was to undertake the underground access and exploration program at the Hollister Property, and to complete the development and to operate the mine.
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
Hecla had the option to earn a 50% working interest, but in 2007, the company decided to sell their 'earned in to date' interest in Hollister to Great Basin Gold for $60 million.
Hollister is a very high grade orebody, over 1 0z/ton, which is bonanza grade. However, the gold and silver veins are complex, which is one reason why some companies have passed up on the mine. Hecla could have optioned 50%, but they took the $60 million and ran.
One of the other issues with the mine is it currently doesn't have a mill to process the ore. Great Basin Gold looked at the option of building a mill on site but decided that the cost weren't beneficial. Technically Hollister is still in the "trial" mining phase, and during this phase a majority of the mined ore was actually sold to Newmont Mining, which processed the ore at their Midas mill. But doing this is somewhat costly for Great Basin Gold, so in 2008 they purchased the Esmeralda mill, which is located 290 miles away from the Hollister mine. About half of the ore from Hollister is now processed at the Esmeralda mill, eventually all of it will be processed there. And yes, they are trucking the ore 290 miles to the mill, which is costing them about $75 per oz in transportation cost.
Burnstone
Burnstone will be GBG's flagship mine once it enters production, which should happen later in 2010. Great Basin acquired the project in 2004, and has spent roughly $250 million on construction cost. Burnstone is an underground mine and should produce roughly 250,000 oz of gold per year for 19 years. It does have an advantage over other underground mines in South Africa in that it's a relatively shallow deposit, only 300-500 meters. This will give the mine a much lower cash cost than other gold mines in the region.
One of the issues affecting the South African mining industry is the power shortages being experienced in the country. Due to a failure to keep upgrading the power supply, the country has fallen behind on the supply curve as demand continued to increase. The country is currently building new power stations, and industries are going to have to help pay for this build-out. Over the next 3 years, companies(including GBG), will see a 25% increase in power rates each year. This obviously will result in higher overall cash cost for Burnstone, and even then there is still no guarantee that there won't be more increases.
Financials and Production
Q2 2010 highlights:
* Net revenue improved significantly to a quarterly record of CDN$34 million.
* 39,418 gold equivalent ounces were sold during the quarter (compared with 6,108 Au eqv oz in the quarter ended March 31, 2010).
* Production cost for metal recovered through the Company's Esmeralda mill decreased 20% quarter on quarter and contributed to achieving a gross profit (revenue less production costs) of CDN$13 million (CDN$0.04 earnings per share) for the period.
* After non-cash charges, including depletion, foreign exchange movement and share based compensation of CDN$8.6 million (CDN$0.03 per share), resulted in a net loss of CDN$5.4 million (CDN$0.02 loss per share) for the quarter.
* The Esmeralda mill's operational performance improved 36% quarter on quarter; A total of 21,819 tons were processed in the quarter, with a recovery of 17,789 Au eqv oz, and will improve further as the optimization project was only completed during July 2010.
As of June 30 2010 the company had $39 million in cash and $183 million of debt.
348 million shares outstanding
Great Basin also has 57 million warrants that expire in October 2010, this has been weighing on the stock as the exercise of these warrants will cause a 17% dilution in shares. GBG should see proceeds of $92 million once these warrants are converted.
GBG has a few exploration properties but they are still early stage so there isn't much point in discussing them.
2010 Production Guidance
go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
Conclusion
I'll admit, GBG is not my favorite gold stock. It just seems like the company has a lot of obstacles to deal with. You have the complexity issues at Hollister, the power issues at Burnstone, the warrant overhang which will result in some pretty serious dilution in the shares, and the balance sheet is still a little weak even with the proceeds from the warrants.
Before I can become more constructive on the company I want to see some of these issues resolved. The warrants will be converted, so share dilution is already being priced into the stock. However there are another 27 million warrants that expire next year, so that is even more dilution. The proceeds from the warrants will strengthen GBG balance sheet, so I guess the "good news", if you want to call it that, is these two issues(warrants and weak balance sheet) will come to a close in a few months.
That leaves us with the issues at Hollister and Burnstone. Let me be clear, GBG's future is all about Burnstone. Hollister will provide solid cash flow to GBG if they can successfully "map" the complex vein structure. But the real potential for GBG is with Burnstone. The mine is going to be a fairly large size, the problem is it's in South Africa and premiums aren't being paid for SA gold mines right now due to their high cost. If Burnstone can come online and actually produce gold at a low cash cost then I think shares will get re-rated.
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
Hollister and Burnstone will produce 370,000 oz of gold per year once they both fully ramp up to 100%. GBG stock price isn't reflecting that production volume simply because of the reasons stated above.
go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
Great Basin Gold is currently in late stage development at two projects in the world's two most well known gold producing regions. The Hollister project is located on the Carlin Trend in Nevada, USA and the Burnstone project is located on the Witwatersrand Basin in South Africa. The company currently has a substantial resource base of 13 million ounces in the measured and indicated category.
Hollister
go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
In 1997, Great Basin Gold acquired Newmont's 75% interest in the Hollister Gold Property (formerly known as the Ivanhoe Gold Property) in Nevada for US$6 million. Two years later, the company increased its interest to 100% through the purchase of the stake held by Touchstone Resources. Great Basin Gold explored the property from 1997-2001. In mid-2002, the company entered into earn-in and joint operating agreements with Hecla Mining, in which Hecla was to undertake the underground access and exploration program at the Hollister Property, and to complete the development and to operate the mine.
go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
Hecla had the option to earn a 50% working interest, but in 2007, the company decided to sell their 'earned in to date' interest in Hollister to Great Basin Gold for $60 million.
Hollister is a very high grade orebody, over 1 0z/ton, which is bonanza grade. However, the gold and silver veins are complex, which is one reason why some companies have passed up on the mine. Hecla could have optioned 50%, but they took the $60 million and ran.
One of the other issues with the mine is it currently doesn't have a mill to process the ore. Great Basin Gold looked at the option of building a mill on site but decided that the cost weren't beneficial. Technically Hollister is still in the "trial" mining phase, and during this phase a majority of the mined ore was actually sold to Newmont Mining, which processed the ore at their Midas mill. But doing this is somewhat costly for Great Basin Gold, so in 2008 they purchased the Esmeralda mill, which is located 290 miles away from the Hollister mine. About half of the ore from Hollister is now processed at the Esmeralda mill, eventually all of it will be processed there. And yes, they are trucking the ore 290 miles to the mill, which is costing them about $75 per oz in transportation cost.
Burnstone
Burnstone will be GBG's flagship mine once it enters production, which should happen later in 2010. Great Basin acquired the project in 2004, and has spent roughly $250 million on construction cost. Burnstone is an underground mine and should produce roughly 250,000 oz of gold per year for 19 years. It does have an advantage over other underground mines in South Africa in that it's a relatively shallow deposit, only 300-500 meters. This will give the mine a much lower cash cost than other gold mines in the region.
One of the issues affecting the South African mining industry is the power shortages being experienced in the country. Due to a failure to keep upgrading the power supply, the country has fallen behind on the supply curve as demand continued to increase. The country is currently building new power stations, and industries are going to have to help pay for this build-out. Over the next 3 years, companies(including GBG), will see a 25% increase in power rates each year. This obviously will result in higher overall cash cost for Burnstone, and even then there is still no guarantee that there won't be more increases.
Financials and Production
Q2 2010 highlights:
* Net revenue improved significantly to a quarterly record of CDN$34 million.
* 39,418 gold equivalent ounces were sold during the quarter (compared with 6,108 Au eqv oz in the quarter ended March 31, 2010).
* Production cost for metal recovered through the Company's Esmeralda mill decreased 20% quarter on quarter and contributed to achieving a gross profit (revenue less production costs) of CDN$13 million (CDN$0.04 earnings per share) for the period.
* After non-cash charges, including depletion, foreign exchange movement and share based compensation of CDN$8.6 million (CDN$0.03 per share), resulted in a net loss of CDN$5.4 million (CDN$0.02 loss per share) for the quarter.
* The Esmeralda mill's operational performance improved 36% quarter on quarter; A total of 21,819 tons were processed in the quarter, with a recovery of 17,789 Au eqv oz, and will improve further as the optimization project was only completed during July 2010.
As of June 30 2010 the company had $39 million in cash and $183 million of debt.
348 million shares outstanding
Great Basin also has 57 million warrants that expire in October 2010, this has been weighing on the stock as the exercise of these warrants will cause a 17% dilution in shares. GBG should see proceeds of $92 million once these warrants are converted.
GBG has a few exploration properties but they are still early stage so there isn't much point in discussing them.
2010 Production Guidance
go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
Conclusion
I'll admit, GBG is not my favorite gold stock. It just seems like the company has a lot of obstacles to deal with. You have the complexity issues at Hollister, the power issues at Burnstone, the warrant overhang which will result in some pretty serious dilution in the shares, and the balance sheet is still a little weak even with the proceeds from the warrants.
Before I can become more constructive on the company I want to see some of these issues resolved. The warrants will be converted, so share dilution is already being priced into the stock. However there are another 27 million warrants that expire next year, so that is even more dilution. The proceeds from the warrants will strengthen GBG balance sheet, so I guess the "good news", if you want to call it that, is these two issues(warrants and weak balance sheet) will come to a close in a few months.
That leaves us with the issues at Hollister and Burnstone. Let me be clear, GBG's future is all about Burnstone. Hollister will provide solid cash flow to GBG if they can successfully "map" the complex vein structure. But the real potential for GBG is with Burnstone. The mine is going to be a fairly large size, the problem is it's in South Africa and premiums aren't being paid for SA gold mines right now due to their high cost. If Burnstone can come online and actually produce gold at a low cash cost then I think shares will get re-rated.
go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
Hollister and Burnstone will produce 370,000 oz of gold per year once they both fully ramp up to 100%. GBG stock price isn't reflecting that production volume simply because of the reasons stated above.
go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/great-basin-gold
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