Lago Dourado just weeks away from drill results

At thirty-four, Forbes Gemmell is likely one of the younger chief executives of a publicly listed mining company.  

Six months ago he abandoned his career as a research analyst and took a pay cut to join Lago Dourado (LDM-V), a junior whose flagship Juruena property lies in the heart of mining friendly Brazil.   

“I wasn’t looking to move,” says Gemmell, who admits he was quite comfortable at Raymond James where he had research coverage of ten gold companies. “I wouldn’t say the analyst world is cozy but there’s a lot more security there and I had done the hard yards and was just starting to reap the rewards from that.”

But the 6 foot 2 inch Australian also recognized a juicy project when he saw one.

“As an analyst you see a lot of junior stories coming across your desk and there are very few that have an exciting project in a favorable location with good people behind it,” he says.

“This is not one of those low-grade projects that is being dusted off because the gold price is at US$1,500 per oz. and it is now economical — it’s been held in a legal stalemate for the last five or six years. We’ve cleared that situation up now and we are ready to take the project forward.”   

Previous disputes between Geomin, a private Brazilian consulting firm, and Talon Metals (TLO-T), over interlocking exploration licences, had kept the Juruena deposit in limbo since the mid-2000s.

Lago Dourado consolidated the property by acquiring Talon’s exploration licences and signing an option agreement on Geomin’s licences, and today owns 100% of the property.

In making his decision to join the company, Gemmell adds that part of the attraction was that it was just months away from drilling.

“It’s not as though you’ve got another two years of geophysical and geochemical work before you start drilling,” he explains.  “That work has already been done and the key structures that potentially brought all the gold to surface are already being drill targeted. So from that perspective it was an exciting entry point as well.”

Lago started drilling Juruena in December 2010 and assay results from the first thirteen holes are due out in the next few weeks. Currently three drill rigs are turning on the property and the company has extended its fully funded, first-phase drill program to 18,000 metres from 12,000 metres.  

The deposit lies in the northwestern part of Mato Grosso, near the state’s boundaries with Pará and Amazonas, and has one of the most extensive (10 sq km) gold-in-soil anomalies in the country. The deposit is on the Alta Floresta gold belt, a regionally extensive granite belt with multiple intrusive events that stretches to the east and west for more than 400 km and has produced more than 10 million ounces of gold betwen 1979 and 1997.

Other companies active in the belt include Rio Novo Gold (RN-T) with its Guaranta project, Golden Star Resources (GSC-T, GSS-X), and ECI Exploration, a private company.

Until record taking lapsed in 1992, artisanal miners or garimpeiros had carved out roughly 450,000 ounces of gold on Lago Dourado’s property, and continue to find new zones today.

Currently there are about 100 garimpeiros on the property, digging into layers of alluvial and saprolite to average depths of about 30 metres, and accessing mineralization through a combination of narrow trenches and pits on the higher grade narrow veins and small open pits.

One of the garimpeiros cleared an estimated US$5 million in 2009. “He was digging on one side of the road for fifteen years and then his wife had a dream telling her that God had put the gold on the other side of the road, and he pulled out an estimated 10,000 ounces there in one year alone,” Gemmell says.

But for Lago Dourado, the real juice of the story is the fresh ore and anything it finds in the saprolite is just “icing on the cake” Gemmell says. “In that sense we are not competing for the same ore. This has provided a platform on which to build positive community relations.”

The company has already upgraded the local school and is in the process of making improvements to the local health facility. Several garimpeiros are now working for the company and there are plans to further recruit from the local community as Lago Dourado grows.

While it’s still early days, Gemmell says management believes they’re looking at a bulk tonnage type open-pit deposit.

Highlights from historic drilling (about 90 holes by Ourominas Minerals ), include 21.8 metres of 21 grams gold per tonne, 36 metres averaging 2.7 grams gold per tonne, and 3.7 metres of 131.3 grams gold per tonne at about 71 metres.

A month after Gemmell joined, Lago Dourado raised $9.2 million in an IPO in November 2010, issuing 18.4 million shares at 50¢ apiece.

Today the junior is trading at about 81¢ per share, but in the intervening months has touched highs of $1.15. 

Management and directors hold about 11% of the company, with Rosseau Asset Management holding 23% and Pinetree Capital 10%.

It was Warren Irwin of Rosseau Asset Management and Pinetree who helped put together the original deal on the land package. 

Rosseau Asset Management has returned 26% per year over the last twelve years, Gemmell says. Irwin has picked a lot of the big exploration plays early on, he adds, including Aurelian, Guyana Gold Fields (GUY-T), Gold Eagle Mines (GEA-T), Aquiline Resources (AQI-T) and Virginia Gold (VGQ-T).

“Warren is a big believer in this project,” Gemmell says. “Having that kind of long-term backing is very important.”

The company also counts Thomas Obradovich as its non-executive chairman. It was Obradovich, a key player behind Aurelian who also put the Young-Davidson land package together for Northgate Minerals (NGX-T), who hired Gemmell for the top job.

“I wanted someone who could run a company,” he told The Northern Miner. “He is not over promotional and I feel he has the rare ability to under-promise and over-deliver. And the fact that he agreed to leave his job to become chief executive is a testament to the company’s assets,” Obradovich said.

“They wanted a younger guy who is hungry, keen and enthusiastic and understands the markets,” explains Gemmell. “I know a lot of the sell-side analysts on the street and some of the key buy-side guys. When we do start getting drill results my job will be to aggressively market the company in North America and Europe. The story really hasn’t been taken outside the Toronto market yet because we’ve been in a limbo period waiting for the drill results start to come in.”

The tale of Gemmell’s meteoric ascent in the mining world really begins during a beach volleyball game in Sydney.

It was there that the graduate in actuarial science from Macquarie University and an equity analyst at wealth management group Colonial First Street, met the woman – now his wife – who would lure him to a new life in Canada.

“She was in Australia studying for her master’s degree in business and law but she’d been away from home for four years so I said I’d give Canada a try,” he says in a candid interview at his new office on University Avenue.

“When I arrived in Toronto it was April and cold and wet and 5 degrees outside,” he recalls. “I moved into a basement apartment and watched it rain all day for days. I told myself I’d give it month but I didn’t think I could handle it.”

Fortunately a job offer as a research associate at CIBC covering financial services companies quickly turned up, and Gemmell started making friends playing Aussie Rules football and learning how to play ice hockey.

As luck would have it, many of the people he met playing football were Australian geologists like Dan Noone, the vice president of exploration at Guyana Goldfields,
who had spent twenty years in Papua New Guinea, Indonesia and South America. (Noone is also a director at Lago Dourado.)

“I would hang out with these guys and I heard about the gold industry and it sounded a lot more exciting and dynamic compared with looking at insurance companies and asset managers,” Gemmell says.

So when a job opening at CIBC came up researching precious metal companies, he jumped at the opportunity. After three years at CIBC he joined Raymond James in April 2008.

“It has been an interesting transition,” he says.

And with a steady stream of drill results to come in through the course of the year, Gemmell says, life is about to get even more interesting.