Gold Dynamics Poised To Continue Bull Run As A Takeover Target

Submitted by David Gould through our Trefis contributor tool

One of the hottest basic materials on the Street right now is Gold Dynamics (GLDN), an emerging precious metals explorer that soared 57.5% on the close of Friday’s trading. The rise appears to have been driven in part by the firm’s takeover of the Lake Ste-Anne project in Canada, which is home to 6 silver and gold plays. As Goldcorp continues to increase in scale, it will drive greater operational efficiencies and reduce risk through the joint diversification.

Even excluding the accretive value of the Ste-Anne project, Gold Dynamics is, in my view, substantially undervalued. Based on the current price of gold and the adjusted production potential of Gold Dynamics’ inferred holdings at the Santiago Gold Project, this explorer may be poised for triple-digit returns.

The company’s Santiago Gold Project is located in Durango, Mexico and spans 315.7 hectares around the “Sierra San Francisco” mountain range. Consisting of five contiguous mining concessions, samples from this project have yielded a value more than 50 g/t. It is located relatively proximal to Goldcorp’s (GG) newest cornerstone mine in Mexico, “Penasquito”, which is estimates to yield a respective 11M oz and 616M oz worth of gold and silver over its 22-year life. Below is a map the Santiago Gold Project.

Goldcorp is not the only firm, however, that would benefit from acquiring Gold Dynamics. Silver Wheaton’s (SLW) interest in Promontorio is located 7km north of the Santiago project. Promontorio has been one of Mexico’s most lucrative sites and has a historical resource size estimated at 12M oz of gold. Silver Wheaton is trading at less than two-thirds of its historical 5-year average PE multiple and, accordingly, will be one of the driving forces in sector-wide appreciation.

One of the mining concessions of Santiago, Bella Vista, is undergoing a drill project and has an inferred total gold resource size of 71,343 oz. Assuming a 5% loss of gold from mining production and an 85% recovery factor off of this figure, Bella Vista alone is worth nearly $100M!

Bella Vista has an Au-dominated and low-sulfidation epithermal activity that is ideal for mining. Exploited ore shoots at the vein have been estimated to have Au grades ranging from as low as 8 g/t to 35 g/t. For investors looking for safety from macro volatility but also solid upside, Gold Dynamics is one of the most attractive picks within the small cap universe. Click here to read more about the firm.

DISCLOSURE: The distributor of this research report, Gould Partners, is not a licensed investment adviser or broker dealer. Investors are cautioned to perform their own due diligence as information contained within this report has been derived from public sources and cannot be guaranteed by us to be fully accurate. We are a consultant to a third-party EAG, representing Gold Dynamics and have received one thousand dollars for independent research. Always discuss investments with a licensed professional before making any financial decision. Statements made herein are often “forward-looking statements” as stipulated under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. Since these statements are uncertain, actual results may be materially different from those expected.