VG Gold Corp. (TSX: VG) (FRANKFURT: VN3)(OTCQX: VGGCF) shares have jumped 21% this week on good trading volume and the stock is now near its 52 week high. The stock closed at $0.85 cents on Dec 1, 2010.
Ubika Research has provided extensive coverage on VG Gold Corp. All research reports on VG Gold Corp can be found on its online hub here.
See the latest video interview with Tom Meredith, President and CEO of VG Gold Corp. on SmallCapPower here.
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 gold mining camp in Northern Ontario. Since the Sep 29th merger announcement (when the stock was trading at $0.51) the stock has seen a steady climb on rising volume.
Ubika Research initiated coverage on VG Gold Corp in July 22nd 2008 with a report titled “Deeply Discounted Miner In The Heart Of Prolific Gold District”. At the time, VG’s stock price was $0.23 and its market capitalization was $19.8 Million. Since then the market capitalization of VG Gold has jumped to $153 Million (up 672%) and the stock price has jumped to $0.85 (up 270%). The VG Gold Share price has now surpassed the Ubika Research Model Price of $0.82. By reading our research reports on VG Gold, investors will see that our stated views on the underlying potential in VG may be starting to materialize.
It appears that as this merger news is being digested and understood by market participants, more people are falling in line with our stated view that this development represents a net positive for VG Gold.
We had commented then that this merger, would confirm the strong exploration potential VG Gold displays and will make it a major exploration play in Timmins gold mining district. 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 more and more investors are warming to the idea that VG Gold is moving in the right direction with this move. We believe that this will propel the company into a new league by raising its profile tremendously in the market and making it the 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 moves eastward towards the Dome Mine. It will also have enough cash 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 cash, people and expertise to VG Gold.
With a market value of approximately $150 million, VG Gold is much less expensive for investors to get exposure to the Timmins exploration play than, say, exposure to a company like Lake Shore Gold (TSX: LSG) which has a market value of approximately $1.5 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 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.
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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.
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