In a recent article on Alphastoc.com Equitas Resources (TSXV:EQT; FSE:T6UN) discussed agreement to merge with Alta Floresta Gold.
This deal, when completed, will generate an operating mining division providing for recurring cash flow to enable EQT to withstand even the worst part of this severe resource sector bear market. While work will continue on the 100% owned highly prospective Garland nickel exploration property in Labrador the opening of doors to the new venture of gold production in Brazil, management believes will create a very unique opportunity for all shareholders. The goal of this venture would be to not only continue to generate cash to the bottom line but to give management a constant stream of capital to fund its ongoing exploration and development activities.
It feels as if this merger with Alta Floresta is a perfect fit and the timing may not have come at a more opportune time. While technically gold is not in a bull market, the severe 5 year downtrend is potentially nearing completion and Equitas will be there with a positive cash flowing gold asset. This diversification from pure high-risk nickel exploration in the remote Labradorean lands to a low cost gold mine in Brazil means one thing – CASH FLOW. This also means risk of further shareholder dilution to continue exploring the Garland and any other prospective projects is greatly reduced and essentially gets answered with those two words ‘CASH FLOW ’to fund future exploration down the road.
We all understand that markets are cyclical so we don’t need to comment on the cliché phrases like ‘buy low’ and ‘sell high’. Unlike the previous five years, it does feel like 2016 has the potential to emerge back into a full bull cycle. Gold has been showing signs of being a safe haven for investors to consider and bullion holders will attest to this. The leverage of gold stocks to physical bullion has been shown in past cycles to provide exceptional returns. If the merger between Equitas and Alta Floresta creates this opportunity then it gives shareholders of EQT a major leverage in their share price.