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Top Story: Timmins Gold Junior jumps 43% on merger announcement
VG Gold Corp. (TSX: VG) jumps 43% in share price since Sep 29th merger announcement on heavy trading volume - 12 million shares traded in the last 6 trading sessions.
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Ubika Research has provided extensive coverage on the VG Gold Corp. All research reports on VG Gold Corp are FREE and can be found at its online hub at here.
The latest video interview with Tom Meredith, President and CEO of VG Gold Corp. can be viewed here.
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Further to the Ubika Research commentary on VG Gold (TSX: VG) and Lexam Exploration (TSXV: LEX) merger on Sept 29, 2010 and titled “VG Gold Corp. (TSX: VG) and Lexam Exploration (TSXV: LEX) to combine - A big endorsement for VG Gold’s exploration potential” the stock has made big gains and has traded heavily. It appears that as this merger news is being digested and understood by market participants, more people are falling in the line with our stated view that this development represents a net positive for VG Gold.
On Sep 29th, VG Gold Corp. (TSX: VG, OTCQX:VGGCF) announced that it has reached an agreement in principle with Lexam Explorations Inc. (TSXV: LEX) to combine the two companies to create a new well funded exploration company named Lexam VG Gold Inc. The new company will be focused on the Timmins mining camp in Northern Ontario.
We had commented that this agreement, if approved, would confirm the strong exploration potential VG Gold displays and will make it a major exploration play in Timmins. The deal will provide VG Gold access to a strong treasury with $15 million in cash, and will imply a ringing endorsement from Mr. Rob McEwen, the former CEO of Goldcorp and one of the most respected mining investors and professionals in North America, who will also become the Chairman of the combined company. Rob is the founder and former CEO of Goldcorp Inc., which grew under his leadership, from a market capitalization of $50 million to close to $10 billion.
We think that increasingly more investors are warming to the idea that VG Gold is moving in the right direction with this move. This will propel the company to a new league by raising its profile tremendously in the market and making it a play of choice for many in the Timmins area.
Once this merger is complete, VG Gold will have a strong war chest to expedite its exploration programs at its West Paymaster property which it optioned from Goldcorp Inc. (NYSE:GG; TSX:G). This property is situated very close to Goldcorp's Dome Mine, which so far has produced over 17 million ounces of gold. VG Gold has been obtaining excellent drill results as it move eastward towards the dome mine. It will also have enough in the arsenal to explore at the Davidson-Tisdale, another highly prospective property that has potential for very high grade at depth. For exploration companies like VG to succeed, it must continue with a rigorous exploration which can be very expensive. Therefore, the importance of a strong treasury can’t be underestimated, and this agreement provides both cash, people and expertise to VG Gold.
At a market value around $100 million, VG Gold is much less expensive for investors to get exposure to the Timmins exploration play than say an exposure to a company like Lake Shore Gold (TSX: LSG) which has a market value of approximately $1.3 billion. It is interesting to note that Lake Shore Gold’s announced NI 43-101 compliant gold resource estimate is close to 1.5 million ounces, whereas, VG Gold already had 1.2 million ounces of NI 43-101 compliant resource estimate at its various properties in Timmins and is exploring actively at various properties including West Paymaster and Davidson Tisdale property. Granted that Lake Shore (TSX: LG) has close to 800,000 ounces of gold in reserve category at its flagship Timmins Mine project; and is close to commencing small commercial production at this property, which is fuelling strong interest in the company. However, we believe that VG Gold has strong exploration potential, is relatively inexpensive and its current resource base is not being fully valued in the market.
The key focus for VG Gold is Paymaster, which it optioned from Goldcorp Inc. (NYSE:GG; TSX:G). This property is situated very close to Goldcorp's Dome Mine, which so far has produced over 17 million ounces of gold. Other discoveries have been made in the area, including one by West Timmins Mining Inc., which was acquired this year by Lake Shore Gold Corp. (TSX:LSG) for more than $400 million. VG Gold also announced a huge drill result on July 12, 2010, that returned almost an ounce of gold per ton over 25 meters.
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Disclosure
Ubika Research has received compensation from VG Gold Corp (TSX: VG) to provide research coverage.
Except for the historical information presented herein, matters discussed in this document contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements.
Ubika Research and www.smallcappower.com (are both divisions of Ubika Corporation), and are not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this report. For making specific investment decisions, readers should seek their own advice. For full disclosure please visit: http://smallcappower.com/disclosure.aspx |
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