YGC Resources has to be one of the most underestimated gold miners on the market. They fly under the radar of many goldbugs, due to a lack of effective public relations. But the management of YGC has a core competency in producing gold, not producing slick marketing campaigns. This is good news for anyone reading this article and getting in before the resource update shines a light on the value and potential of this little Canadian miner.
YGC Resources is focused on the discovery and development of gold ore deposits in North America. The company holds a diverse portfolio of gold, silver, zinc and copper properties in the Yukon Territory and British Columbia in Canada and in Arizona in the United States. The primary focus is the exploration of its 100%-owned Ketza River property, which consists of 308 mineral claims and leases, a gold mill from past operations and all associated equipment.
YGC has an estimated 1.8 million ounces of gold resources and is expected to be bring the Ketza River property back in production in 2008. They have the cash necessary to move towards production, having recently closed $8.25 million in a private placement. This has been followed by a series of announcements detailing promising drill results. An updated resource estimate will be carried out as part of the pre-feasibility study due for completion by the end of December 2006. We expect these results to surprise even the most optimistic predictions and send the share price rocketing. The Yukon government recently assigned a project coordinator to assist in advancing the project through the assessment and regulatory stages, towards the ultimate goal of production.
A production decision is expected by the end of March 2007. YGC is looking at the potential of a 2,000 tonne per day open pit mine. We see little chance of the company not moving toward production and expect the mine to be operational by mid to late 2008.
Management is highly competent, led by President Graham Dickson, who has over 20 years of experience in the mining industry and has brought nearly 20 mines into production. YGC Director Don MacDonald also serves as Senior VP & CFO of NovaGold Resources Inc. and has over 20 years of experience in the mining industry. He has been directly involved in the operation or development of ten mines in North and South America with four different mining companies. This degree of experience is hard to come by in the mining industry, which makes YGC all the more attractive.
YGC may seem expensive at current prices ($1.59 CDN). It has already doubled since the beginning of 2006 and while the HUI corrected 18% in the last 3 weeks, YGC’s share price has increased by 18% in the same time period. But we are of the opinion that $1.59 will look cheap by the end of the year and be viewed as ridiculously inexpensive after the results of the pre-feasibility study.
At $1.59 per share with 56.5 million shares outstanding, the approximate market cap of YGC Resources is only $90 million. With 1.8 million ounces of gold and using industry norms, the company should be valued somewhere closer to $180 million. Many are predicting that the pre-feasibility study could increase the estimated resources to over 3 million ounces. So even using current reserve estimates, YGC’s share price could easily double from here. If the pre-fesability study comes back with a significant upside revision, YGC could provide one of the best returns of any miner during this bull market. Given the series of private placements that took place this year, YGC is also very well funded and has the cash necessary to move to production without any significant share dilution in the near future. With all of this upside potential and little risk, YGC is a no-brainer that should be a part of any gold investor’s portfolio.
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