No matter how well you think you know your stock, you can always know it better.
I thought I knew Brigus Gold (AMEX: BRD), but only after visiting the company's flagship gold mining complex last week did this enticing growth story leap off the page and come to life as a clear top pick among the slew of alluring investments in gold. That journey is the subject of this Motley Fool exclusive.
Smack in the heart of gold country
From the moment you arrive in the town of Timmins, Ontario, there is no mistaking it: You've arrived in gold country. The mining-themed mural at the airport, the historic mine-shaft headframes on the horizon, a billboard for an exploration drilling contractor, and Goldcorp's (NYSE: GG) sprawling Porcupine mine and mill complex on the outskirts of town; everything you see speaks to the legendary productivity of the Destor-Porcupine Fault Zone. This 250-kilometer geological trend has yielded more than 70 million ounces of historical gold production, which today would ring the register at more than $100 billion!
Brigus Gold's producing Black Fox Mine, the nearby high-grade discoveries within the Pike River and Grey Fox project areas, and the Black Fox Mill some 20 kilometers to the west all lie along this proven gold-rich structure. The company also boasts noteworthy mineral assets in northwest Saskatchewan, with 1.09 million gold-equivalent ounces of measured and indicated resources, and will retain enticing upside exposure to recently monetized assets in the Dominican Republic and Mexico. But the Black Fox complex is the springboard for the company's imminent growth and the sole focus of this discussion.
Golden ducks in a row
I chose Brigus Gold for inclusion within my top 10 gold and silver stocks for 2011 because, like my top pick AuRico Gold (NYSE: AUQ) (formerly Gammon Gold), I felt the company epitomized the kind of dramatic turnaround story in the making that offers timely opportunities for investors to build long-term exposure to gold at depressed valuations. Corroborating my observation, the gold gurus at Sprott Asset Management had also initiated a position, which they subsequently increased during the first quarter of 2011. Under new direction from CEO Wade Dawe following the mid-2010 merger between Apollo Gold and Linear Gold, and following the appointment of Richard Allan -- former senior director of mining for Barrick Gold (NYSE: ABX) -- as chief operating officer, a clearer strategic path came into view last year for harnessing the obvious potential of the complex to enhance shareholder value.
Throughout last week's site visit, it became clear that multiple productivity enhancements and pending developments are lining up simultaneously to offer an array of powerful catalysts that I believe will drive Brigus Gold's stock to substantial gains over time. Following a transition during the first quarter, from phase 1 to phase 2 of open pit mining (and the associated removal of overburden during the initial stages thereof), the Black Fox open pit is back into the ore. This is good news for gold royalty company Sandstorm Gold (OTC BB: SNDXF.PK) as well, which holds a 12% gold stream on the Black Fox mine.
At center is phase 2 of open pit mining at Black Fox, which began producing ore in late March 2011. A large third phase of production awaits in the direction of the treeline at left. The gold-bearing ore is the lighter-colored material in the background behind the darker waste material in the foreground.
Descending to the floor of the completed phase 1 pit, and the current portal to the underground mine, I encountered a steady parade of massive 100-ton Caterpillar (NYSE: CAT) haul trucks (Brigus has a fleet of six) carrying high-grade ore up to the surface. There was a team of contractors busy developing additional mining stopes to rapidly expand the number of available underground drilling faces, and the Brigus' miners extracted ore and built out the underground infrastructure; they all worked simultaneously through this subterranean world without impeding each others' progress. I couldn't help comparing the operation to a beehive, where swarms of able individuals conduct their varied operations within a surprisingly orchestrated opus.
These Caterpillar model 777 100-ton haul trucks carry the ore out of the pit, where it is transferred to road-ready trucks for transport to the mill for processing.
Ore is presently emerging from two mining faces, and COO Rick Allan described the rapid expansion to as many as 12 available faces as a key step in optimizing the efficiency and flexibility of underground mining operations. I forecast steady incremental improvements to underground production as the company progresses toward that goal.
The colored portion of this underground development plan indicates the extensive work that has been completed to date, while the array of successive mining stopes still awaiting development speaks to the years of steady underground production that still lie ahead for this portion of the Black Fox complex.
Preparing for the next round of growth
Brigus Gold's Black Fox mill is already capable of processing 2,000 tons of ore per day and recovering an impressive 93% or more of contained gold. With growing mining capacity in the works, Brigus will first pursue a phase 1 expansion plan for the mill that includes the addition of a concentrator circuit, additional leach tanks, and a new circuit to recover gold from "carbon fines" recovered from the leach circuits.
In conjunction with the envisioned fast-track to production for the high-grade darlings of Brigus' ongoing exploration campaign -- the Contact Zone and the newly discovered 147 Zone -- the company is mulling the addition of a SAG mill to substantially increase throughput capacity for the growing Black Fox complex.
The rapidly expanding gold deposits at the Contact and 147 zones, and the additional targets nearby, are of particular interest to Brigus Gold investors. A pre-existing underground portal and ramp at the adjacent historic Gibson deposit offers Brigus the opportunity to fast-track permitting and underground development to potentially initiate production in the span of about one year. Wardrop Engineering is already conducting resource modeling in preparation for an initial resource estimate for the Contact Zone expected for the fourth quarter of this year. The 147 Zone has quickly established a strike length of 250 meters and remains "wide open" to expansion in all directions with five exploration drills active in the zone. Recent drill highlights include 3.66 grams per ton over an impressive width of 66.85 meters, and bonanza grades as high as 136.18 grams per ton (over 4.43m). With multiple assays pending on recent exploration drilling, I anticipate a series of potential catalysts for share-price appreciation over the coming months as the significance of these high-grade deposits -- and the strong potential for fast-tracked production -- comes into clearer view.
Light from my camera's flash is reflected by plentiful visible gold in this segment of exploration drill core from hole GF11-178, from the exciting new 147 Zone discovery, which assayed an eye-popping 136.18 grams per ton of gold over 4.43 meters.
As with any carefully vetted investment that warrants top billing, a truly successful growth story begins with its people. Looking back at the example of Endeavour Silver (NYSE: EXK), I had already been convinced of the company's strong organic growth potential for years before I had a chance to speak with CEO Bradford Cooke, but that encounter brought me to a new level of confidence in what proved to be a monumental growth trajectory. At every turn, I found Brigus Gold's highly capable team visibly excited by the company's growth opportunities and eager to convert the plan into action. This for me was the final step in determining that Brigus Gold deserved an increased allocation within my own basket of gold and silver mining stocks and why I recently doubled my long-term holding in this exciting growth stock.
- Add Brigus Gold to My Watchlist.
- Add AuRico Gold to My Watchlist.
- Add Barrick Gold to My Watchlist.
- Add Goldcorp to My Watchlist.
- Add Caterpillar to My Watchlist.
- Add Endeavour Silver to My Watchlist.
