Investment Comment Goldenbell shares could triple: report

Vancouver-based Goldenbell Resources is still awaiting the results of an enviromental study before it can proceed to production at its Pine Tree gold property in Mariposa Cty., Calif.

Assuming it is given the go- ahead, Goldenbell could offer some significant investor value, according to a research report by Gardiner Watson Institutional of Toronto.

Since the company has arranged all the financing required to place its $52 million(US) Pine Tree project into production and since all the permits should be in place by year-end, mining analyst Gordon Bub is committed to a share price target of $15.

At presstime Goldenbell was trading on the Toronto Stock Exchange at $6, just below its 52-week high of $7 but well above its $2.65 low point. That’s up from $5.38, when the Gardiner Watson report was written.

While potential production from the Pine Tree project forms the basis of Mr Bub’s bullish outlook, there are a number of reasons why investors should take a close look at this soon-to-be-producing company, he says.

For example, on the basis of Gardiner Watson’s earnings-per-share forecast (based on a gold price of $450), Goldenbell’s common shares are trading at less than one- half of other emerging gold producers’ price/earnings ratio. Earnings Ratios He notes that Sonora Gold Corp. with 105,000 oz and Hope Brooke Gold (126,000 oz) had price/earnings ratios of 14:4 and 13 respectively during their first year in production. In its first production year, Goldenbelle’s P/E ratio will be 6:3, he says.

“In comparison with a number of similar-sized established producers, Goldenbell’s shares are trading at about one quarter of the average price/earnings ratio,” said Mr Bub.

“Expressed in terms of annual production, per $1,000 of market capitalization, Goldenbell has more than twice the gold leverage of emerging gold producers and over four times that of established producers with a similar size.” However these estimates depend on the success of the Pine Tree mine which in turn is tied to steady gold prices. “This project is a winner, assuming the gold price holds at about its current level ($450),” Goldenbell President M. G. Berretta has said.

Scheduled to be in production by mid-1988, the property is capable of producing 130,000 oz annually at an operating cost of $229 per oz. Milling rate is expected to be 8,000 tons per day.

As reported (N.M. Dec 8/86), diluted mineable open pit reserves are set at 17.4 million tons grading 0.058 oz. Geologically inferred underground reserves add up to 15 million tons grading 0.06 oz. Gold loan Capital costs for the project are estimated at $51.8 million but with $36.8 million cash and a $35-million gold loan, Mr Bub says Goldenbell is in an excellent position to cover its costs.

According to the Gardiner Watson research paper, the only remaining stumbling block is a the Enviromental Impact Report which could delay the mine permit until early next month. The report is currently being reviewed by the Mariposa Board of Supervisors.

“However, the company has not encountered major opposition to the project and we expect no problem, other than the review process in receiving the necessary permits,” said Mr Bub.

Assuming that Goldenbell reaches its production targets, Mr Bub believes the shares could easily triple from the current level by mid- 1989 when the mine is expected to be in full production.

With full production at 128,000 oz in 1989, he sees earnings per share of 85 cents (with an impact of 29 cents for each $50 change in the price of gold) on revenues of $54.72 million and cash flow of $21.47 million.

While the Pine Tree project is Goldenbell’s only property on record, the company is part of the abm Mining Group which is developing the Sonora Gold project also in the famous Motherlode district.

According to Goldenbell’s 1986 annual report, Pathfinder Gold Corp. has been granted an option to earn a 30% interest in a joint venture formed with Goldenbell. Under the agreement the latter company was slated to earn $2 million for exploration and development at Pine Tree.

Pathfinder has subsequently elected not to exercise that option.