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Tuesday July 20, 2010
Golden Predator (GPD): Yukon speculation
by Brien Lundin, editor The Gold Newsletter  (Editor's note: We generally avoid very low priced stocks on this site; one exception, however, is Brien Lundin, a highly regarded analyst who specializes in junior mining issues -- many of which typically trade at "penny" prices.)With fully 25,000 meters of drilling planned in 2010 for its five major gold projects in the Yukon, Golden Predator (Toronto: GPD) ranks right at the top of my list of high-potential Yukon exploration plays. Drilling has already begun at its Brewery Creek and Eureka projects and will soon begin at Gold Dome, Clear Creek and Antimony Mountain. This massive exploration program is all part of Golden Predator’s unique business plan to create a self-funded gold exploration company. The brain child of roll-up specialist and company Chairman and CEO Bill Sheriff, this plan involves over C$1 million per year of royalties from an impressive collection of US-based gold holdings and the cash flow to be generated by near-term, small-scale gold production in Nevada and surrounding states. The long-term health of Golden Predator’s royalty stream recently got a boost, thanks to an announcement by leaseholder Midway Gold that it plans to have a gold mine up and running at the Pan project by 2013. 
It’s all part of a deal that gives Golden Predator a sliding scale gross production royalty set at 4% if the gold price is greater than $450/oz. It also includes advance royalty payments indexed to the price of gold. The Pan royalty stream is but one of several flowing into Golden Predator’s corporate coffers. And between its royalty revenues, the cash flow potential of its gold production plans and the cash and marketable security position it already holds, the company’s current market cap is, arguably, fully accounted for. That means if you build or add to your position in GPD at current levels, you’ll get its enormous exploration upside in the Yukon essentially for free. Thanks to the aggressive drilling campaigns already underway at Brewery Creek and Eureka (and those soon to be underway on its other Yukon projects) we won’t have to wait long for a steady stream of news to begin flowing. On the premise the best place to find gold is in and around where it has already been discovered, Brewery Creek makes a very attractive target. It generated 279,541 ounces of heap-leach gold between 1996 and 2002. Management has high hopes that its re-interpretation of the mineralizing structures at Brewery Creek will lead to the discovery of significant high-grade deposits below the previously tested areas there. Meanwhile, the Eureka project gives Golden Predator a wealth of potential as an exploration target in its own right. The property sits near the headwaters of one of the Yukon’s many placer mining districts. Overall, these two programs at Brewery Creek and Eureka are part of a 25,000-meter program that Golden Predator will conduct in the Yukon in 2010. It is arguably the most aggressive and most well funded exploration program that this red-hot gold district will see this year. Given the company’s current share price, Golden Predator makes for a highly attractive bet on the new Yukon gold rush. And, thanks to the company’s self-funded business model, it’s a bet that’s strongly protected to the downside. From a risk-reward perspective, this well-managed junior is probably the best buy in our extensive list of gold exploration companies. Learn more about this financial newsletter at Brien Lundin's The Gold Newsletter. |
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