As Gold production and exploration costs rise, it is becoming more economically viable for the major gold producers to buy gold projects than investing.
World gold production is rapidly declining, so the major miners wish to uptake interesting gold projects to replace depleted reserves. They can do this by 2 ways:
Exploration and development of their existing mining portfolio of assets, which requires a great number of time, financial capital and managerial risk. Very lengthy project to develop.
Buying via Take Over or Joint Venture Arrangements. Take overs are usually done after a gold junior has presented a large JORC Gold Reserve ounce estimate and entered into a pre feasibility stage with average cash costs per ounce. The bigger the head grades, and more extensive the Reserves are, the more economic it is to mine, with average cash costs lowering.
Target companies/ projects possess the following :
A potential to produce at least 150,000 to 200,000 ounces a year A extended mine life of at least 7 years or greater A large resource base with the possibility to upgrade or extend reserves. Low cost operations with the average cast cost being between $400 to $600 an ounce.
Notable take overs include:
Lihir's 2008 take over of Equigold for US$ 1075 back in 2008 with Gold Resources base of 2 million ounces and 2 million in Reserves.
Cour D'Alene take over of Bolnisi for $US 1100 with a base of 4.7 million ounces.
GoldCorp take over of Andean Resources which was listed on the ASX with a base resource estimate of 2 million ounces of Silver and 20 million ounces of silver.
What makes the TRF allegiance more fascinating with Orinoco Gold, that this could be a part of a very large rare IOCG system. IOCG's can be very profitable mines like the Oz Minerals discovery a few years back. Orinoco Gold tenement also has very Tungsten credits around 50k a tonne and has just hit very rare Cobalt around 27k a tonne. This Cobalt discovery is in infancy and will have to be proven up. But the grade of more 1% is a good lead to begin with. Sirius Resources Nova project has proved up extensive Cobalt recently with 50,000 tones very profitable.
Although at very early stages this could be later on a world class deposit. A good investment strategy by TRF management with considerable upside potential. This could grab a lot of attention in the wider market particularly with fund managers and institutions if they come onto the share register at a later time through funding news.
I'm looking forward to reading this growing story in the AFR and Business Australian soon.
Arlberg1
TRF Price at posting:
12.5¢ Sentiment: LT Buy Disclosure: Held
