7:00 am Pacific
BMR has turned more bullish than ever on its outlook for Greencastle Resources (VGN, TSX-V) given what has transpired with related company Seafield Resources (SFF, TSX-V) which is strong again in early trading today. We expect that the changed fortunes of Seafield following the release of a world class drill result from the company’s Miraflores Gold Property in Colombia Friday are going to have a fundamental impact on Greencastle, and we’ll explain why in this article. There is no question that the “Perfect Storm” has indeed formed for VGN.
First, let’s review the latest important developments with Greencastle.
We added VGN to the BMR Portfolio in mid-October (at 14 cents) when the company announced it had entered into an option to acquire a 100% interest in a property covering 13,000 hectares (28 claims) in the Nechako Plateau region of central British Columbia, very close to the potential multi-million ounce Blackwater Project of Richfield Ventures (RVC, TSX-V). This move by Greencastle was highly significant because it showed the company was getting active once again in the Gold exploration space (Greencastle holds two promising properties in Nevada that it hasn’t worked on for a few years). Greencastle immediately launched a heli-borne magnetic and electromagnetic survey over its Nechako Property and is currently reviewing the geophysical data to aid in identifying drill targets for the calendar 2011 field season.
Other significant developments have occurred regarding Greencastle over the last several weeks, giving further credence to the argument that something potentially very big is brewing with this company. President and CEO Tony Roodenburg has hired not one but two IR firms for Greencastle, a highly unusual step for Roodenburg who has traditionally shunned this sort of thing which we consider important as it enables a company to gets its story out to investors a lot more effectively in a crowded marketplace.
Then the kicker – a very strong suggestion in the final sentence of the company’s most recent news release (November 30) that Greencastle is in the process of hunting down an “advanced” Gold project. Not just a few untested claims somewhere but an “advanced” Gold project. To us that means a property that possibly could already have ounces in the ground.
It appears certain to us that Greencastle is “going for the gusto” in this extremely bullish environment for Gold and junior mining companies.
The nice thing is, Greencastle is an ideal position financially to acquire a major project. The company is sitting on piles of cash (working capital of $6 million) with $100,000 or more arriving in its mailbox every month from oil royalties. We can’t remember the last time the company had to do a financing.
So let’s add this all up:
- 13,000 hectare Gold property in one of the hottest areas of British Columbia right now;
- 2 highly prospective Gold properties on the Battle Mountain trend in Nevada (Indian Creek and Jewel Ridge) – Greencastle drilled 40 metres of 2.1 g/t Au at Jewel Ridge in 2004;
- Monthly cash flow of at least $100,000 from an oil royalty valued at $5.2 million by an independent engineering firm last December;
- $6 million in working capital;
- “Advanced” Gold project potentially on the way
If that’s not enough, the Seafield Factor has now come into play.
Roodenburg, of course, is also President and CEO of Seafield. He has turned that company around from near-extinction in 2008/2009 into a rising new star on the Colombian Gold scene. To facilitate that, he brought some “heavy hitters” to the plate with Seafield who helped finance the company and pull things together. It only makes sense that at least some of these players, after a profitable experience with Seafield, will follow Roodenburg into his next potential major success story, Greencastle.
We suspect that Roodenburg himself has caught “Gold Fever” and is determined to acquire a similar type of advanced project for Greencastle that has produced a massive increase in market capitalization for Seafield. Perhaps not in Colombia but maybe in another hot area of Canada?
We have an enormous amount of respect for Roodenburg who’s a smart businessman and knows how to handle money and build a company. He’s a steady and experienced hand at the wheel for both Greencastle and Seafield, and has become very market savvy as well. He is opportunistic, which one needs to be in this business. He has also become very comfortable and effective operating in the Gold exploration space.
Anyone who has followed Greencastle over the last number of years knows how explosive this stock can be.
In clockwork-like fashion, Greencastle has experienced three powerful moves (very sharp spikes) over the last seven years (late 2003, early 2006 and mid-2008). 2006 was more intense than 2003, and 2008 (when the stock ran from 13 cents to 63 cents over just 21 trading sessions) was stronger than 2006. We’re certain that a very powerful fourth major move in VGN is now well underway, driven by the company’s recent shift in corporate strategy to get much more active on the Gold exploration front, which could ultimately take VGN to new all-time highs.
Volume has picked up dramatically in this stock since late October which is what one would expect in the early stages of a major move. Volume on Friday, when the stock hit a new 52-week high of 35 cents, was the highest we’ve seen in Greencastle since its spectacular run in 2008. The share price has more doubled in value over the last 30 trading sessions. But VGN‘s market cap is still only a very modest $16 million with just 45 million shares outstanding.
When you’re hot, you’re hot. And right now Roodenburg is on fire and that means some exciting days ahead for Greencastle Resources.
Note: The writer continues to hold a position in Greencastle Resources (75,000 shares).
