Valor Gold Strikes Pivotal Deal with Paramount Gold & Silver

By
A A A

Submitted by Mike Anthony as part of our contributors program .

Valor Gold ( VGLD ) recently acquired 3,000 acres and 148 unpatented lode mining claims from Paramount Gold & Silver ( PZG ). The project's name is Reese River, and it is strategically located near the Battle Mountain Cortez Eureka mineral belt. Reese River adjoins one of Valor Gold's major projects, Red Rock. Valor Gold paid with 6 million of its own shares, thereby making Paramount an 8% owner in Valor Gold.

This deal is pivotal for Valor Gold for three main reasons. First, Valor Gold not only acquired valuable land and additional mining claims, but it also received a vote of approval from a large neighboring company. Second, the project increases Valor Gold's exploration area within a significant gold region. Finally, the consolidation of land makes Valor Gold more attractive for acquisition by one of the larger gold producers in the area, such as Allied Nevada ( ANV ), Barrick Gold ( ABX ), and Newmont Mining ( NEM ).

Paramount Is a Partner With a Vested Interest, Not a Passive Seller

Paramount's sale of its Reese River project is not an asset disposal in any sense. Valor Gold acquired the project in exchange for giving Paramount an 8% equity stake and an option for one director nomination. Paramount maintains a vested interest in the property and will self-evidently support Valor Gold's efforts to increase the property's value.

Currently, Valor Gold counts two gold exploration companies as partners that both have significant land packages: Paramount and Pershing Gold (PGLC). Having access to these nearby gold companies strengthens the position of Valor Gold. Additionally, there is strong overlap between the shareholders of Valor Gold and these neighboring companies.

While many exploration companies fail due to financing problems, another common reason for failure is inability to advance the company beyond the exploration phase toward actual production. Fortunately, Valor Gold already has a management team with extensive experience in driving companies toward actual production. For example, Arthur Leger leads Valor Gold, an executive with years of experience in the mining industry, having served as a geologist at Pershing Gold, Nevada Gold Holdings, Snowstorm, and Gold Banks Ventures.

Recall that Paramount now has the right to nominate one board director to Valor Gold. A couple possibilities for this nomination include Eliseo Gonzalez-Urien, a veteran exploration geologist with decades of exploration experience and senior posts at major producers like Placer Dome (now Barrick). Another Paramount geologist who could be nominated is John Carden who discovered a major gold deposit in White Pine County, Nevada during his tenure at Echo Bay (currently part of Kinross Gold).

Valor Gold Increases Its Exploration Area and Prospects

Prior to the Reese River acquisition, Valor Gold owned two projects.

1. North Battle Mountain: encompassing 1,520 acres and 72 unpatented load mining claims where drill targets have been identified.

2. Red Rock: located at a crossroads of three proven gold trends: Caetano Caldera, Rabbit Creek, and Battle Mountain Eureka Gold. Valor Gold's Reese River project is adjacent to Red Rock and will increase Valor Gold's land holdings by over 30% (3,000 acres). Red Rock is situated on 5,600 acres, and Valor Gold has ownership of 269 unpatented lode mining claims. Importantly, the Reese River project proximity to a water source, making this region attractive for gold miners. (Water is important in the gold cyanidation process, which is the most common way of extracting gold from lower-grade ore.)

In addition to an attractive geography, the Reese River project is 7.5 miles east of the McCoy-Cove open pit gold mine (originally developed by Echo Bay) and 15 miles northwest of the Phoenix mine in the Battle Mountain district. According to a technical study completed in 2006 by X-Cal, the predecessor of Paramount in the Reese River project, all random samples of soil contained gold. Prior to X-Cal, Placer Dome and Barrick Gold had already explored for gold in the Reese River area, confirming X-Cal's recommendation for a more extensive drilling program.

Valor Gold Emerges as an Attractive Acquisition Target

Following the acquisition of Reese River, Valor Gold is now a more significant gold exploration company and thus more likely to attract interest from a major producer. Possible suitors in Nevada include Barrick Gold, Newmont, Allied Nevada, Agnico-Eagle Mines, and Coeur d'Alene Mines. Valor Gold's proximity to water may even make Valor Gold an attractive target for a newcomer to Nevada's gold scene.

Summary

The recent acquisition of Reese River by Valor Gold is a strategic move and advances the company to the next stage of its corporate life. Within its first year as a corporate entity, Valor Gold is rapidly positioning itself to become a large player in this key area of Nevada. The company has also aligned itself with friendly neighbors who can help it to advance its exploration projects. Finally, Valor Gold is reaching a size that could attract the attention of a mid-tier or major gold miner in Nevada. Investors looking to invest in a junior gold exploration company might want to consider the prospects and risks of this unique company.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: ABX , ANV , NEM , PZG , VGLD

Trefis

Trefis

More from Trefis:

Related Videos

Living the Life of Pie
Living the Life of Pie              

Stocks

Referenced

86%
100%
100%
100%

Most Active by Volume

76,804,975
  • $63.93 ▲ 0.85%
56,138,918
  • $3.35 ▼ 0.45%
52,878,077
  • $15.69 ▲ 5.66%
50,540,730
  • $64.97 ▲ 3.52%
45,147,565
  • $15.60 ▲ 0.13%
38,745,424
  • $32.89 ▼ 0.72%
37,512,306
  • $26.32 ▼ 0.19%
35,614,433
  • $95.39 ▲ 0.04%
As of 7/9/2014, 04:08 PM