All around the world, fear and uncertainty intensifies.
Commodity prices continue to drop despite record monetary injections. News is spreading about the oversupply of oil and how there aren’t enough tankers to store everything that’s being produced. Gold traded to near six-year lows, yet physical demand – in particular, gold coins – are climbing to new highs not seen since the financial crisis.
Every market is being manipulated.
I have been warning about these causations over the last few years and how they will dramatically affect our lives.
Yet, the obscure market woes pale in comparison to world threats, which continue to intensify. Again, I have warned of these scenarios many times before, despite having been called a fear monger for my writing.
Sadly, as much as I would like to be wrong about these warnings, they have proved true.
Today, I want to share with you what may be the most important warning I have ever shared.
But before I do that, I want to give you an update on an opportunity that has presented itself in this manipulated market.
In my last Letter, I wrote about a Gold Company that I believe should be next in line as Canada’s next big takeover.
On Tuesday, this Company made an announcement that not only proves just how big it could become but revealed solid evidence as to why it is one of the top takeover candidates within the sector.
Yet, the market was mostly unaware of just how big the announcement was.
Maybe it was because gold had a tough week. Maybe it was because the announcement fell on a holiday week. Maybe the market simply didn’t understand the magnitude of the reveal.
No matter, the market’s mistake presents a great opportunity.
Let me explain.
Game Changer Confirmed
On Tuesday, Integra Gold (TSX.V: ICG) (OTCQX: ICGQF) revealed a new mineral resource estimate on its Triangle gold deposit that showed an increase of more than 400%:
- Triangle Zone Indicated resources increased 21% from 520,630 gold (“Au”) ounces to 627,810 Au ounces at an average grade of 7.37 grams/tonne (“g/t”) Au (3.0 g/t Au cut-off grade)
- Triangle Zone Inferred resources increased 400% from 174,470 Au ounces to 871,530 Au ounces at an average grade of 6.89 g/t Au (3.0 g/t Au cut-off grade)
The new Triangle resource already has analysts buzzing:
“ICG’s Lamaque project is one of the scarce high-grade 100%-owned assets controlled by a junior in a safe jurisdiction (with infrastructure & near permitted status), associated with a consolidated land position and multimillion ounce potential.” – Macquarie Research
“Bigger, Simpler, Senior-Sized Resource.” – Cormark Securities
“We have concluded that Integra was no longer speculative because of success through the drill bit. Indeed, the resource potential has reached a critical level of mass, and there is more to come.” – Mackie Research
“Game Changer Confirmed! We believe Integra’s proposed Lamaque South development plan is an intelligent market-friendly (low CAPEX, low risk, low-cost) option with a robust IRR, in a good jurisdiction (Quebec) and a valuation that offers attractive upside to investors as well as potential acquirers due to the exploration upside that we see.” – Paradigm Capital
Despite the massive change, the market was relatively quiet. But that’s because it may not yet understand just how big and important the new resource really is.
So let me tell you.
If you missed the last report, you can find it by CLICKING HERE.
Bigger, Simpler, and Senior-Sized
When junior gold explorers announce resource estimates, it often pins the company to a certain valuation based on the size of the resource, grade, jurisdiction, mineability, cost to produce, and of course, the price of gold.
We already knew from Integra’s January PEA that the Company is already well-positioned in many of those categories – keeping in mind that the price of gold is now even higher in Canadian Dollar than it was when that PEA was created:
- Base case pre-tax IRR of 77% and NPV (5% discount rate) of C$184.3M (after-tax IRR of 59% and NPV of C$113.5M)
- Pre-production capital requirements of only C$61.9M
- Pre-production period of only 18 months
- Life of mine cash cost of C$551 per ounce and all-in sustaining costs of C$731 per ounce
There are so many positives to Integra’s asset: great jurisdiction, high grades, low cost, permitted. But if there were any reservations about Integra’s project, they could be:
- Mine Life
Despite great economics, Integra only showed a five-year mine life in the January PEA. But with a resource at Triangle that’s now more than four times bigger than the one used in the PEA, this should no longer be a concern.
In fact, Cormark Securities estimates that “the asset is now large enough to drive a sizable mine for more >10 years.”
That means it’s now big enough for a senior to make a move – and you can bet Eldorado’s* offices are stirring about.
(*If you missed the Last Letter, Eldorado Gold Corporation, one of the lowest cost senior gold producers in the world, recently acquired 15% of Integra. My opinion is that Eldorado did this to gain access to Integra’s data, as well as a position in a senior-sized resource in a prolific Canadian camp. Should Eldorado move to pursue the full acquisition of Integra, it would also benefit from significant tax synergies.)
But there’s something else even more important: Mineability
In my last report, I mentioned how Integra, through a new exploration approach, has found a substantial new resource in steeper structures that were not only higher grade but more economic:
“Before, they used to think that all of the mineralized veins sat between 40-45 degrees – a more horizontal system. Horizontal veins are harder to mine because you have to pull the rock out along flat drifts. But recent drilling shows that the veins are actually 60-70 degrees, and that means they can let gravity do the work for them, making it cheaper and safer to mine.
…All of this means the economics of the project continue to get better and is substantially bigger than what they ever thought.”
The bulk of the resource used in the January PEA included the more flat-lying structures, which as I already mentioned were more expensive and difficult to mine.
For the first time, Integra has included some of the new steeper structures into the resource. As a matter of fact, 70% of the ounces are now carried within the new wider and steeper structures – structures that are going to be substantially less expensive and easier to mine.
To put this into perspective, the Triangle Zone resource used in the January PEA estimated a production of 230k ounces of recovered gold from a resource of 300k ounces.
The updated Triangle Resource is now at 1.5 million ounces – most of which contain ounces in the easier and cheaper-to-mine steeper structures. That’s a HUGE difference from where they were less than year ago, and that means the new recovered ounces in the next PEA is going to increase quite substantially.
The market may not yet understand the significance of the new resource, but the technically inclined do – and that means you can bet Eldorado and other seniors do as well.
The Simple Math on Value
When it comes to junior explorers, it’s incredibly important to see how effective their use of capital is. And with Integra being the most active junior explorer in the world, gauging this becomes even more important.
Thankfully, it’s easy to see how much value Integra has added – and could continue to add – for shareholders.
The new resource includes 27,815 metres of drilling. Assuming drilling costs around $130 per metre, we could estimate that the new resource was conceived essentially using a $3.6 million drill program.
In the new Triangle Resource Estimate, Integra added nearly 700,000 ounces of gold – depending on what cut-off grade we use.
That means for every $6 spent (or less), Integra was able to add one additional ounce of gold to its resource.
In other words, Integra isn’t just the most active junior explorer in the world, its one of the most successful.
That in itself is extremely exciting math.
If Integra continues with a similar discovery rate – and many signs point to that being the case – Integra could get exponentially bigger.
While the updated resource was a major success, beating analyst and corporate expectations, it didn’t include the thousands of metres that have already been drilled.
Since the cut-off date for the resource estimate, Integra has drilled another 20,000 metres!
What’s exciting is that none of the results from the 20,000 drilled metres have even been released.
That means at any given time we’re about to see more drill results. But not just ordinary drill results.
Integra’s new resource proves that their exploration model is working very well. It also means that its much easier now than before to estimate how many ounces they could be bringing into the resource based off of every drill result.
With 20,000 metres of drill assays already pending, we’re about to get another glimpse of how big Integra’s asset truly is.
Let me show you what the market missed.
Integra’s new resource announcement showed us where gold is located and the specific drill holes used to calculate the resource. Here are the 6 zones, in order:
To visualize these zones, imagine all of the sections stacked on top of each other about 150 metres apart. If you to put these pages together at a 60-degree angle and stacked them up on top of each other, that’s essentially what we’re looking at. So when you start drilling down, you actually go through all six of them.
As you can see, Integra has hit mineralization in every zone going down.
But let’s focus on C4 zone since approximately 35% of the resource thus far lies here.
The results associated with these dots are a lot more important than meets the eye.
For example, take a look at the halo at the bottom of the C4 zone that surrounds drill hole TM-15-08. Extracting that data and that one halo alone contains and inferred resource of approximately 30,000 ounces of gold – all from just one drill hole!
As you can see, almost all of the drill holes have hit mineralized zones, both low and high grade. More importantly, they are all wide.
That means the potential for expansion and further discovery is huge. And that is precisely what Integra plans to find out.
Take a look at this:
Those blue dots are Integra’s planned drill targets over the next year. In fact, 25% of these holes have already been drilled and are in the lab awaiting results.
Remember, that one little halo at the bottom of the Zone C4 contains an estimated 30,000 ounces of gold. Just imagine what the new holes could come up with!
But that’s not all.
Take a look at this:
This is the C5 zone. This page is mainly blank because there haven’t been any drill holes in the area except for the eight that you see. The halo around these eight drill holes contains an estimated inferred resource of 130,000 ounces of gold!
Now this is where it gets exciting.
See the drill targets represented by the blue dots in the C4 zone? Integra is drilling the same pattern on C5 – again, with 25% of the targets already drilled and awaiting assays. That means Integra may be onto yet another big zone at Triangle.
C4 is already looking amazing, and with further drilling could prove to be much bigger. But if the C5 drill results come back strong and proves up, Integra could be dealing with a whole other C4 – which, to refresh your memory, contains 35% of the new resource estimate.
Now, if you continue down the zones, we get Zone C6.
The C6 discovery is yet another discovery. While the C6 zone is lower grade, it appeared exactly where they thought a C6 zone would appear, proving up Integra’s new exploration model.
What could that mean?
C6 is very much like the upper portion of the resource at C3 – not a lot of mineralization and lower grade. But what’s important is that the structure is there.
As we go from the C3 zone to the C4, we notice things get substantially better.
So while the C6 discovery is not as strong as C4 or C5 (at least not yet given the limited amount of drill holes), it does prove that Integra’s model is consistent and that a continuing structure could have the potential to include a bigger and better C7 zone.
Given all of the information Integra has already provided the market, it won’t be hard for analysts and institutions to conjure up their own resource estimates as drill results are released.
What’s really important is that all of the new ounces being discovered is close to existing ounces, meaning that in a mine plan down the road there’s no need to talk about new infrastructure.
Which is precisely why Integra has no plans to stop drilling. And why should they? Their drill programs, as I mentioned earlier in my back-of-the-napkin calculations, has been extremely successful. It’s no wonder they are actively drilling around 10,000 metres per month.
Earlier this week, Integra drilled a 1000 metres in just one day!
Compare that to the many of the active junior explorers who have drill programs that consist of just a few thousand metres for the entire year.
With 100,000 metres of drilling planned for next year and tens of thousands of metres awaiting results and not included in the new resource, we have a lot to look forward to.
You would be hard-pressed to find an analyst that doesn’t have good things to say about Integra, or one that hasn’t raised its target price for the Company. One of them even doubled their target price based on the significance of Integra’s updated resource. Take a look at some of the new target prices:
I am betting that once the market understands the significance of the news release from Tuesday, shares will react accordingly. Bid support is extremely strong and deep, which shows me that there are some very technically sound people looking to buy.
They know drill results are coming, they also know construction is underway, and they know the seniors are watching closely – especially Eldorado. And in just a few months, Integra is going to get a lot of press through its Gold Rush Challenge.
All of this makes for a very compelling investment opportunity.
Integra Gold Corp
Canadian Symbol: TSX.V: ICG
US Symbol: OTCQX: ICGQF
Friday the 13th: The Warning
Today, my latest warning is one that I have quietly shared before, but after the recent Friday the 13th Paris terrorist attacks, want you to take more seriously than ever.
We are in danger.
Our new Canadian Prime Minister, Justin Trudeau, is about to fast-track 25,000 Syrian refugees into Canada before the end of the year.
Via Globe and Mail:
“The deadly terror attacks in Paris will not lead Canada to change course on its two main policies in relation to Syria: welcoming 25,000 refugees this year and ending Canada’s bombing campaign in Iraq and Syria.
… Mr. Trudeau did not speak to reporters Saturday, but a senior official from the Prime Minister’s Office confirmed Saturday evening that the government stands by its refugee plan and its position on the role Canada should play in the Syrian conflict.”
US President Barrack Obama plans to do the same.
“The Obama administration is moving to increase and accelerate the number of Syrian refugees who might be admitted into the United States by opening new screening outposts in Iraq and Lebanon, administration officials told Reuters on Friday.
The move comes after President Barack Obama pledged in September to admit an additional 10,000 refugees in 2016 from Syria…”
But I warned that bringing in that number of refugees from a terrorist-ridden nation such as Syria is extremely dangerous.
Because it only takes one terrorist out of 25,000 refugees – that’s only 0.004% – to pose as a refugee and sneak into our Canadian borders.
This may sound harsh, but the recent terrorist attack in France just proved how dangerous our humanitarian efforts are to our families here at home.
On Saturday, the Greeks revealed that “AT LEAST one of the terrorists responsible for the slaughter of 129 people in the Paris terror attacks was a Syrian refugee.”
Is it really difficult for a terrorist to pose as a refugee?
I urge every one of us to be careful because, in less than a few months, we could be in danger.
By no means am I saying we shouldn’t help, but perhaps there are ways to do it without endangering our own families? Perhaps there is way to do it without globalizing terrorists?
Let’s just hope the screening process can protect us while helping those who need it.
Remember, all it takes is a 0.004% chance of a mistake.
There is no room for error. We are at risk.
Seek the truth,
The Equedia Letter
We’re biased towards Integra Gold Corp because they are an advertiser. We now own shares of Integra which were purchased in the open market following our initial report. We also own options in the Company. You can do the math. Our reputation is built upon the companies we feature. That is why we invest in every company we feature in our Equedia Special Report Editions, including Integra Gold Corp. It’s your money to invest and we don’t share in your profits or your losses, so please take responsibility for doing your own due diligence. Remember, past performance is not indicative of future performance. Just because many of the companies in our previous Equedia Reports have done well, doesn’t mean they all will. Furthermore, Integra Gold Corp and its management have no control over our editorial content and any opinions expressed are those of our own. We’re not obligated to write a report on any of our advertisers and we’re not obligated to talk about them just because they advertise with us.