Silver Investing News last caught up with Golden Arrow Resources (TSXV:GRG) about a year ago, just after the company had tripled the size of its Chinchillas silver project. Located in Argentina, Chinchillas is part of the Bolivian tin-silver-zinc belt, which hosts some of the largest silver deposits that have ever been found.
The company has been busy since then, releasing a preliminary economic assessment for the project in December and undertaking a drill program in February. In the process, it’s garnered some positive attention — most recently, analyst Thomas Schuster published a report* on Golden Arrow in which he states that its “tight share structure and low enterprise value of just $5.8 million … should serve shareholders very well.”
To find out how the company’s drill program is going and to hear about how it has been able to succeed in today’s less-than-stellar price environment, Silver Investing News (SIN) got in touch with Brian McEwen, Golden Arrow’s vice president of exploration and development. Here’s what he had to say.
SIN: In the last couple of months, Golden Arrow has put out a slew of drill results from a Phase III program at Chinchillas. What results should investors pay particular attention to?
BM: The reason for this drill program is exploration and discovery. We have the main property of Chinchillas that hosts our existing global resource of 104 million silver equivalent ounces, and we picked up an adjacent property called Chinchillas 1, which is basically all to the south and a little to the north. We wanted to expand the resource out into some of those areas. I think the most important thing investors should take away is that we’ve had success, we are getting some big intersections that are going to make a difference to the size of the resource.
Additionally, in some new areas, specifically this one area that we’re drilling now, we’re getting significant zinc intersections. Zinc is common in the Bolivian tin-silver-zinc belt’s major deposits, and we do have an area in the existing deposit that’s rich in zinc, I think about 13 percent of the deposit. But with these other areas that are significantly higher in zinc, I think it’s quite exciting when you look at some of the forecasted prices for zinc. It’s very much a silver deposit, but as we find more zinc it is going to add more and more value.
The other thing that’s really important from a zinc perspective is that there is a smelter in Argentina run by Glencore Xstrata (LSE:GLEN) that could possibly handle our zinc concentrate. That makes things a lot more attractive from a tax perspective because we pay different taxes if we can smelt it in the country.
SIN: What will the company’s next steps be?
BM: We’ve just finished drilling 9,000 meters. It takes about a month to get the results of our assays back, so we’re looking at mid-July. Hopefully by the end of August we will have an updated resource.
Once we go through updating all of our engineering, then the idea is we’ll go back and infill the area and move it towards a feasibility study. So that’ll be in the fall. We’re moving at an amazing speed at this project right now.
SIN: When I spoke with Golden Arrow last summer the company was very well financed. Do you still have lots of money in the bank, or will you have to raise some to pay for those next programs?
BM: We’ve been aggressive in our advancement of the project and we want that to continue, so we will need to look at some different options right now to continue our pace towards production. Particularly, we are looking at a possible financing in Argentina that won’t dilute the share structure.
SIN: Golden Arrow is enjoying a lot of success at a time when many companies are struggling. What are some of the strategies the company has employed to achieve that success?
BM: We’re working in probably the toughest markets ever right now, and like the rest of the sector, our value and potential are not reflected in our share price. But what we are doing is continually adding value to the project. When things do turn around, we will have defined a very impressive resource and will be marching straight ahead towards production. That’s what investors are looking for. I think that with this next resource that we put out we’re going to start getting a lot more attention.
SIN: On a similar note, I understand that insiders, friends and family own 52 percent of Golden Arrow’s shares. How does that speak to the company’s value?
BM: It shows investors that management has faith in the assets of the business and are willing to show it through personal investment. It also means that management controls the company and others can’t try to run the company by buying up shares and getting a controlling interest.
SIN: Is corporate social responsibility still a key issue for Golden Arrow?
BM: The Grosso Group is very well known in Argentina and has been working there for about two decades and never had a problem. [President and CEO Joseph Grosso] takes social responsibility and community very, very seriously and gives them attention. He’s very well known throughout Argentina, in all the provinces, and has won several awards.
So far with Chinchillas we’ve been able to get our licenses and drilling permits very quickly, and we’re told we shouldn’t have any issues with permitting moving forward. It’s really working to our advantage.
SIN: Is there anything you’d like to add?
BM: As far as the project goes, it’s very much on track. What makes it so special is it’s very, very simple from a mining perspective. It’s got a very low strip ratio, the mineralization starts right at the surface. We’ve got areas of high grade that will allow us to pay out capital early. We’ve got a very simple flow sheet, it doesn’t look like we’re going to have any problems with producing a very desirable concentrate. So the story we’ve got is good, and with the expansion potential it is getting even better.
We are also pleased to see more investor support for mineral resources in Argentina, something that was highlighted by the recently announced proposed acquisition of Lumina Copper (TSXV:LCC) by First Quantum Minerals (TSX:FM,LSE:FQM). We foresee a strong future for mining in Argentina, and believe the Chinchillas project will be a part of that.
*To receive a copy of Thomas Schuster’s report on Golden Arrow, please contact Shawn Perger at 778-686-0135 or perger
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Interviews conducted by the Investing News Network are edited for clarity. The Investing News Network does not guarantee the accuracy or thoroughness of the information reported. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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