Guyana Goldstrike (OTC: GYNAF): This undervalued growth play could be acquired by a larger gold company, unlocking outsized gains

The potential of the Marudi Gold Project is yet to be fully priced into GYNAF’s stock.

Emerging Growth Company
Guyana Goldstrike (OTC: GYNAF): This undervalued growth play could be acquired by a larger gold company, unlocking outsized gains

Miami, FL–(EmergingGrowth.com Newswire – April 9, 2019) – EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Guyana Goldstrike, Inc. (OTC Pink: GYNAF).

The price of gold has steadily increased over the past three quarters, coming from a low of $1176 per ounce on August 16, 2018 to $1300 per ounce in the week ending March 22, 2019.

Gold has staged a strong recovery, and the outlook remains strong; Source: www.goldprice.org  

Gold’s strong recovery – which has also been mirrored in the price movement of SPDR Gold Trust(NYSEARCA:GLD), one of the world’s leading gold-backed exchange traded funds (ETFs) – has primarily been driven by political and macroeconomic developments in the U.S., Europe and China. 

The ongoing trade war between the U.S. and China, the world’s two largest economies, has heightened uncertainty in global equities and fixed income markets, consequently strengthening gold’s appeal as a safe haven asset. Likewise, simmering political tensions within the EU, largely driven by hot-button issues such as immigration and Brexit, have elevated risk levels in European markets, leading investors to increase their portfolio allocations to safer assets like gold.  

With no concrete solutions to these global challenges in sight, analysts expect continued upward pressure on the price of gold. This outlook is further reinforced by theFed’s recent decision to halt its rate hike campaign, a move that will further strengthen demand for gold as low interest rates typically make asset classes that compete with gold, like bonds and other fixed income securities, less attractive.   

Investors looking for outsized gains

While the bullish outlook for gold presents a compelling investment opportunity, growth-hungry investors have limited room for participation in the current rally. This is because holding on to bullion is a preserve of Central Banks, while ETFs and major gold mining stocks traditionally trade within tight 52-week spreads. ETFs and major gold mining stocks therefore require substantial capital allocations to deliver meaningful returns, locking out growth-hungry investors looking for outsized gains. 

As an example, Barrick Gold Corporation (NYSE: GOLD), the largest gold mining company in the world, had a 52 week high of $14.18 per share against a low of $9.53 per share, as at the time of writing. While this spread provides reasonable room for gains, it at the same time requires substantial capital allocation to reap meaningful returns.   

“Investors looking for outsized returns in the gold sector – especially now that the fundamentals are strong and gold prices are tracking upwards—need to look at undervalued junior miners with highly promising projects and strong prospects of being acquired by majors,” says Peter Berdusco, the President and CEO of Guyana Goldstrike Inc.(TSX.V:GYA, OTC:GYNAF, FSE:1ZT), a Canadian gold exploration and development company.

Mr. Berdusco, whose company is in advanced gold exploration with a focus on near-term production through an open pit model in the Republic of Guyana, South America, spoke exclusively to Emerging Growth about the company’s prospects. 

According to the senior executive, who has more than 20 years of distinguished corporate leadership experience under his belt – ten of them leading junior resource companies listed on the TSX Venture Exchange – advanced exploration provides an opportunity for growth investors to ride the gold rally.   

A project with the right qualities 

“Growth is our focus and is important if you are in advanced exploration in the right jurisdiction and have a promising project that possesses all the right qualities – like a mining license, current mineral resource estimate, and room for resource expansion,” notes Mr. Berdusco. He adds that these qualities typically put junior miners in the crosshairs of mid-tier and major players, who are looking for ounces to replenish their diminishing production reserves.  

GYNAF is currently developing its Marudi Gold Project in the Republic of Guyana, a South American English-speaking country operating under British Common Law with a rich history of gold mining and an established mining act. The project, which is 13,500 acres in size, has an 18-year mining license in good standing, all-season road access, infrastructure in place and an established camp serviced by employees.

There has been 42,000 meters of drilling (141 holes) completed on the project by prior operators that have delineated two zones of mineralization: Mazoa Hill and Marudi North zones—the Mazoa Hill zone has a resource estimate of 259,100 indicated gold ounces within 4,428,000 tonnes grading 1.80 g/t and 86,200 inferred gold ounces within 1,653,000 tonnes grading 1.60 g/t.

The company has recently discovered a third mineralized zone: Toucan Ridge, which carries as much if not more potential than the first two. “We are focusing on resource expansion with an objective of reaching well over a million ounces. With the Toucan Ridge discovery, we are well on course to delineating further ounces, bringing us closer to this goal. Compliment this with the fact that 85% of our property still unexplored, we are very confident in our ability to expend the mineral resource in a significant manner”, ventures Mr. Berdusco. 

Major gold miner snaps up strategic stake

Keen to capitalize on the potential of the Marudi Gold Project as an early first mover, a major gold player has already snapped up a strategic stake in GYNAF. 

Gold Mountains Asset Management Ltd, (Zijin funds) which is part of the Zijin Mining Group, the largest gold producer in China, has a 24.4% equity ownership interest in GYNAF. Listed on Hong Kong and Shanghai exchanges, Zijin fund’s stake in GYNAF is an acknowledgment of the potential in the underlying asset.

However, Mr. Berdusco notes that it takes more than just a compelling resource estimate to convince a major player to back your project. 

“The fact that we have a very strong potential of hitting our targeted resource goal certainly played a role in whetting the appetite of our partners. Nevertheless, what made the difference was a broader combination of selling points, such as the favorable political and regulatory environment in Guyana, the location of our project in the unexplored southern part of the country, a mining license and our undervaluation in the market,” he says.

When operating projects in frontier and emerging markets, it is critically important to ensure you have a favorable political and regulatory environment. The Republic of Guyana meets this crucial requirement. It has a democratically elected President. Guyana also has an economy that is heavily dependent on foreign direct investment (FDI). As a result, the government places a strong emphasis on creating a conducive regulatory and political environment for foreign investors. 

As an example, British-Australian giant Rio Tinto(NYSE: RIO) and American company Alcoa(NYSE: AA) are heavily invested in Guyana’s mineral industry through their subsidiaries. In more recent years, the government has been increasingly warming up to Chinese investors, including in the mining space where China has been on a sustained charm offensive in the Global South, building much needed public infrastructure in exchange for favorable mining terms.

Support for Chinese investment in Guyana comes from the highest levels of government: Prime Minister Moses Nagamootoo has on several occasions reiterated this, including at a reception to commemorate the 68th anniversary of the founding of the People’s Republic of Chinawhere he stated: “Guyana looks towards China as it continues to negotiate for additional funding and assistance for projects that will boost multi-dimensional and multi-faceted development.”

Against this backdrop, GYNAF is well positioned for growth in view of the significant stake held by a major Chinese gold producer; as well as the fact that it is domiciled in Canada, one of Guyana’s key trading partners and an English-speaking country under British Common Law just like Guyana.

“It is always easy to overlook the softer issues like language and foreign policy objectives, but they matter tremendously when operating in a politically sensitive space like mining,” notes Mr. Berdusco. “These are some of the factors that appeal to many of our key shareholders, like Zijin funds.”The reason why a project in the southern part of Guyana has a particularly strong appeal is that gold exploration and production is currently concentrated to the north of the Republic. This is despite the fact that the whole of Guyana falls under the wider Guiana Shield – a gold rich region in South America covering parts of Venezuela, Guyana, French Guiana, Suriname and Brazil that has geological continuity with the gold-rich West African Birimian Shield, which spans countries like Ivory Coast and Ghana. 

Guiana Shield has geological continuity with gold-rich West African coast; Source: Company Reports

By focusing on the south, and with a mining license already in place, GYNAF has an early mover advantage in an area with strong potential for major gold deposits. “Being among the first to close in on the opportunity in the southern part of Guyana puts us in a very unique position, in view of the fact that any competitors will first need to obtain a mining license, which is a rigorous and laborious process that takes some time,” observes Mr. Berdusco. 

This gives the company sufficient time to reach and surpass its resource estimate before any serious competitor establishes a strong footing. This first mover advantage should also allow the company to negotiate for better acquisition terms should a large gold producer seek to offtake the property for future production. 

GYNAF’s positioning as an acquisition target couldn’t be timelier in view of Guyana’s growing profile among major gold producers such as Barrick Gold. The gold giant already has  a 19.9 percent stake in Reunion Gold(OTC: RGDFF), a junior exploration company active in the Guyana Shield. The companies recently signed a Strategic Alliance Agreement giving Barrick Golda right of first refusal in connection with the sale of any of Reunion’s mineral projects. The gold major could potentially be looking for other promising projects in South America besides Reunion Gold, making GYNAF a potential target.

Importantly, GYNAF will adopt an open pit mining model should it progress to production. This is less costly compared to other models, further strengthening GYNAF’s credentials as a potential acquisition target. Gold has become costlier to produce in recent years. Companies are therefore looking for low cost mines. They are also looking to develop economies of scale through consolidation. 

Successful capital raise

The company is currently in the process of a significant capital raise. This raise enables the company to fund its aggressive resource expansion drive. The key element in this raise is that Zijin funds has elected to participate in the placement on a pro-rata basis in order to maintain its 24.4% ownership interest in the Company as a strategic partner.

Zijin fund’s move to ring fence its stake indicates that it is confident that this capital raise will be successful. Moreover, the Chinese giant is keen on maintaining a strategic holding potentially because it believes that the consequent dilution from this private placement will be offset once the potential of the underlying Marudi Gold Project is priced into the stock. 

“The fact that our main strategic partners is continuing to contribute their investment dollars with us demonstrates that there is value in making a medium-to-long-term investment in our company. They wouldn’t be defending their stake if they didn’t believe this,” notes Mr. Berdusco. 

Conclusion

The potential of the Marudi Gold Project is yet to be fully priced into GYNAF’s stock. Assuming the company hits their mineral resource goal  – which is likely given the momentum garnered relative to the expansive size of the property – the current stock price can be preserved as greatly undervalued, given its current market cap of $7.27 million. The possibility of it being an acquisition target as it inches closer to production further sweetens the pot. GYNAF is a buy-to -hold gold play that could generously reward patient long-term shareholders. 

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