Sulliden Gold isn’t the first component of the Ubika Gold Index to be acquired and it likely won’t be the last. The newest addition to the Ubika Gold 20 is thought to have the highest grade, undeveloped deposit in the world.
Sulliden Gold isn’t the first component of the Ubika Gold Index to be acquired and it likely won’t be the last. On May 21, 2014, Ubika Gold 20 Index component Sulliden Gold (TSX: SUE) announced that it had agreed to be acquired by Rio Alto Mining (TSX: RIO), creating a Peru-based, mid-tier gold producer with near-term production potential of about 300,000 ounces of gold annually.
Other companies in the Index that have been taken over in the past include Avion Gold, Gold-Ore Resources, PMI Gold Corp., Rainy River Resources, and RX Gold & Silver.
The Ubika Gold 20 Index is comprised of 20 promising junior gold producers and developers, chosen based on various proprietary criteria including Net Asset Value (NAV), resource analysis and earnings, in addition to qualitative factors such as management and geographical risk.
So far in 2014, five of Ubika Gold 20 component stocks have gained more than 100%: Sulliden Gold (TSX: SUE), Romarco Minerals (TSX: R), Guyana Goldfields Inc. (TSX: GUY), Rubicon Minerals Corporation (TSX: RMX), and Dalradian Resources Inc. (TSX: DNA).
The Ubika Gold 20 is a successor to the Ubika Gold 50 Index, created in February 2010, which since its inception has generated a return 25% greater than that of TSX Venture exchange.
The company set to replace Sulliden in the Ubika Gold 20 is Roxgold Inc. (TSXV: ROG). Stefan Muchal, Gravitas Financial’s lead analyst in the selection of the Gold 20 component companies, explained his decision to include Roxgold in the index:
“Since the early 2000’s gold grades have decreased from around 2.5 g/t to 1 g/t; it’s no surprise mining costs are at all-time highs. Small can be beautiful, not having to move massive amounts of earth makes the entire project simpler and can lead to increased returns. Roxgold has the highest grade, undeveloped deposit in the world, with a resource grading over 15 g/t. It is no surprise that all-in sustaining costs are under $600 g/t,” he said in an interview with SmallCapPower.com.
Roxgold is a gold exploration and development company, with its key asset being the Yaramoko Gold Project located in the Houndé greenstone belt of Burkina Faso, West Africa. In April 2014, the company released Feasibility Study results for Yaramoko’s 55 Zone, which outlined an after-tax IRR of 48.4%, with a 1.6 year payback on initial capital, based on a gold price of US$1,300 per ounce. To date, Roxgold’s gold resource stands at about 800,000 Indicated ounces in addition to approximately 300,000 ounces of Inferred gold.
The company is spending $5 million towards exploration in 2014, with its Bagassi South region being identified as the next potential resource on the Yaramoko permit. Roxgold is planning to release an updated resource estimate sometime next year, which will include Bagassi drill results. The company anticipates production of 100,000 ounces of gold per year from Yaramoko.
For investors that have concerns or know little about Burkina Faso, it should be noted that the African nation is the fourth-largest gold producer in that continent and eight new mines have been commissioned there during the past six years. IAMGOLD Corporation, for example, has been operating its Essakane Mine in Burkina Faso since 2010 following its 2009 acquisition of Orezone Resources.
Roxgold currently has about 246 million fully-diluted shares outstanding, up to 70% of which are institutional held, with a market capitalization of approximately $200 million. The company has about $30 million in cash on hand at this time.
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