Wednesday, October 24, 2012

North Country Gold Really Is Way Up North

North Country Gold (NCG in Toronto, or NCGDF on the Pink Sheets) is exploring for gold on a property with some exploration history way up in the far north of Canada.  Their main property is in a cold, remote area so I sure don't plan on heading up there any time soon for a look around.  I much prefer the warmer climes of the San Francisco Bay Area where women walk around in revealing attire.  There's none of that on display up in the frozen tundra.  Let's talk about NCG anyway despite the uninviting location.

First of all, their CEO is a geologist.  You know I've complained in many past blog articles about exploration companies run by non-geologists, so finally here's one run by someone professionally qualified to do so.  I am curious how a geologist can found ten separate companies over 17 years in mining and find time to make them all successful.  That's hard to do if you only spend about a year and a half with each one, or juggle three or four of them over a period of several years, or whatever.  I can't figure that schedule out and I have enough trouble juggling my own schedule.

Check out their most recent financial statements from May 31, 2012.  They have $3.3M in cash on hand and burn about $200K/month from operations, so that cushion will last a little over 16 months before they have to raise more money.  Please note that I'm ignoring the flow-through share premium described in note 8 of their consolidated statements; that is an accounting treatment with no bearing on operations.  They'll need to demonstrate some progress by the time they'll need to raise more capital, specifically towards an updated 43-101 report that includes proven and probable reserves.

The property is in a part of Canada that is frozen in for much of the year, with no permanent road access to ports or the national highway system.  Assuming they can grade iced roads during the winter months for a couple of million dollars per year, the capital they'll have to raise to fund ice roads will dilute existing shareholders.  The photographs from the investor relations slideshows they have on their website do not show any access to the national power grid, so they'll have to truck in fuel from ports that are iced over in winter or from nearby rural communities.

They seem to have thought through the logistics of operating during warmer months, with an airstrip visible to fly in supplies and fly out gold dore bars processed on site to reduce bulk.  It would be useful to know whether the cost of regular flights is factored into their estimate of the cash cost of production, because that will be variable during warmer months given the unique logistics of operating that far north.

This one's not for me.  There's a lot of risk in their Three Bluffs gold project and not enough confirmation of high metal grades to get me interested.

Full disclosure:  No position in NCG / NCGDF at this time.