Mining investors looking for promising upstarts are often left with the daunting task of sifting through a raft of companies and reports to separate the wheat from the chaff and maximize potential gains. It’s worth the time, though, because there is a wide gap between the number of developmental companies and companies in production. Smaller outfits that make the swing into production typically see a substantial rise in valuation which rewards their existing shareholders quite well and draw the attention of the investment community, including retail, funds and institutions.
The prescient moves by Discovery Ventures Inc. (TSX-Venture: DVN) in targeting mining projects with infrastructure intact and extensive exploration already conducted should leapfrog years of studies and millions of dollars for drilling and make the company a junior producer in the mid-term. Investors are taking notice of Discovery as evidenced by a stark rise in trading activity during October, basically doubling share value to a high of 31 cents last week.
In the three months prior to October, Discovery traded less than 40,000 shares per day on average. In October, the pace has escalated more than ten-fold to about 550,000 shares per day. With a tight float and only about 26 million shares outstanding (fully diluted), shares move quickly on small amounts of buying pressure.
The Vancouver-based explorer has a solid portfolio containing three projects and an executive team that makes the mining faithful take notice. For brevity’s sake, just the highlights will be covered. Further due diligence can be performed at the Discovery website at www.discoveryventuresinc.com.
Its Bralorne property lies northeast of Vancouver and totals 5,090 hectares. The largest historic gold mine in the Canadian Cordillera, 4.15 million ounces of gold from 52 veins was mined at Bralorne over 40 years of production. At today’s $1,700 per ounce price, that equates to $7.05 billion. The mine was shuttered in 1971 when gold was only fetching $50 per ounce; leaving expansive amounts of ground between each historical mine and untapped deep veins behind that could support decades of mining activity going forward.
The Redbird/Rabbitt claims consist of 4,085 hectares in southern British Columbia in the Similkameen Mining Division. Not that it is pertinent, but one of the two deposits at the property is actually called “Motherload.” The Rabbitt Gold Mine was in production between 1938 and 1941 and again in the 1970s. In the earlier production, the mine was reported to have produced 1,304 tonnes of ore grading a stellar 25.7g/t gold and 14.0g/t silver. Recorded mineral recovery for this period was 1,078 ounces of gold and 584 ounces of silver. Much like Bralorne, production stalled due to low gold prices. The property has undergone historic drilling, but additional diamond drilling is required to expand upon and extensive survey program conducted by Discovery in 2008 and 2009.
Discovery also has an option to earn a 50 percent interest in the Big Creek property located northeast of the Taseko Mines Ltd. (TSX: TKO) Prosperity Porphyry copper deposit. The Prosperity deposit is a gold/copper porphyry with a 1.0 billion tonne measured and indicated resource with grades of 0.41 g/t gold and 0.24% copper.
For most juniors, these assets alone present a value proposition, but the company’s latest news of signing a Letter of Intent to potentially acquire up to 80 percent interest in the mineral claims located in the Slocan Mining District of British Columbia known as the Willa Deposit, further sets Discovery apart from peers.
The 5,328-hectare property has been extensively explored and developed to by several operators including Noranda (NYSE: NOR), Rio Algom, BP Minerals, Bethlehem Resources Corp., International Northair Mines Ltd. (TSX-Venture: INM) and Hudson Bay Mining & Smelting. Data from nearly 600 drill holes testing almost 60,000 meters of ground have combined with 17,150 analyses of geophysics and soil samples to help define gold, copper and silver resources at Willa.
National Instrument 43-101 report by Chapman and Makepeace in 2005 shows approximately one million tonnes (Measured, Indicated and Inferred) grading 6.3 g/t gold, 10.77 g/t silver and 0.79% copper. More than $15 million in exploration and development has been done at Willa to put the infrastructure (including underground development) in place to move directly into production upon proper production permits being secured. The property is accessible by highway and, in a phone conversation with the Discovery, we were told that the company has identified a nearby mill that has the capability of processing all the ore extracted from Willa.
In short, Willa represents a true turnkey mining opportunity for Discovery that could take the company into the revenue stage within one year. That is not a situation that is afforded to the vast majority of junior explorers and can provide cash flow to work properties like Bralorne back to producing.
Discovery is led by experienced and successful businessmen, notably director Matt Wayrynen. Wayrynen is a former director of Quinto Mining Corporation, which was acquired by Consolidated Thompson Iron Mines in 2008 for a share value equal to $175 million. Subsequent to that acquisition, Wayrynen was instrumental in the 2011 acquisition of Consolidated Thompson Iron Mines by Cliffs Natural Resources in a deal valued at $4.9 billion.
Wayrynen is also an original co-founder, former President and CEO of TrichoScience Innovations Inc., which was acquired by Replicel Life Sciences Inc. (OTCBB: REPCF). In addition to his role at Discovery, Wayrynen is also a director and senior officer of several other reporting issuers in the resource and energy sectors. Additionally, Mr. Wayrynen is the former President and Chief Executive Officer of Bralorne Gold Mines Ltd. If the name sounds familiar, the aforementioned Barlorne mines are now a strong asset in the Discovery portfolio. Mr. Wayrynen clearly knows his way around and is very well-connected in the mining space. His merger and acquisition talents speak for themselves; assets which bodes very well for the future of Discovery.
The company released news today that it has put cash in its account through the exercise of 3.4 million warrants at 20 cents per share for total proceeds of $ 679,866. This is important as the company now has no outstanding warrants and still maintains a tight share structure. Further, it supports the idea that the company is confident that in share value continuing to appreciate. In many cases where companies are shaky and the stock continues to slide in value, warrants will be re-written to lower exercise prices.
The word “anomaly” is used in mining to define areas that are different from the ground that surrounds it. This is often where the valuable metals are located. In a small and micro-cap environment that is packed with juniors looking to rise, Discovery Ventures is looking like an anomaly itself.
