Great Bear Resources Ltd.
- TSX-V: GBR
- Shares Outstanding: 51M
- Share price C$13.9 (18.06.2020)
- Market Cap: C$715M
Interview with Chris Taylor, CEO of Great Bear Resources (TSX-V: GBR).
An extremely unconventional gold mining success story.
Great Bear Resources is a gold-focussed explorer with assets in Canada. It is led by a team with a track record of success in mineral exploration. In the renowned Red Lake District in Northwestern Ontario, the company controls a prospective 300km² land package across 4 projects: the flagship Dixie Project, the Pakwash Property, the Dedee Property, and the Sobel Property. The 100%-owned Dixie Project itself comprises 9,140 ha of land.
Around a year ago, Great Bear Resources had a share price around C$3. Now, it is over C$14, and there could well be a lot more to come as the market cap is actually lower than gold companies with substantially less in the ground. What is the story behind this remarkable growth? 110,000m of drilling might have something to do with it…
Matthew Gordon talks to Chris Taylor, 19th June 2020
Let’s start with the chief driver behind this success: Great Bear’s philosophy. They “do some things a bit differently.” From the very beginning, Great Bear disregarded the pre-existing model for gold mining in the Red Lake area; it was irrelevant. Instead, the company followed the gold and the data. In fact, the entire process is data-driven, from assaying drill holes top to bottom, to orienting drill core, this is a highly-scientific exploration approach. This is one of the few exploration companies that doesn’t follow a faith-based ‘drill and hope’ approach. Everything is done with purpose.
Mistakes by previous owners of Great Bears’ land package had led to high-grade gold sitting in the core boxes without being assayed and recorded for over a decade.
Some of the recent drill results that have been thrown up are similar to those seen at the “famous” high-grade zone discovery at PureGold’s Red Lake Mine. This includes 15g/t gold over 45m, all at surface. Great Bear has located a massive gold target, and it’s little surprise that gold-amenable investors have responded.
Interestingly, from day 1, Great Bear Resources had no intention of rushing out a maiden resource, and this thinking continues today. Instead, the focus was on relentlessly drilling out the value. The banks didn’t understand this strategy at the time. They do now. The philosophy was aided by Great Bear Resources’ financial status; the company had sufficient cash to not worry about marketing. As Taylor remarks, companies that require imminent financing are on puppet strings held by the financiers. Optionality has been maintained at all times by keeping cash in the treasury and a tight grip on the balance sheet and shares on issue. The company was down to US$20M just last month; it acted quickly to add another US$33M into the treasury via a bought deal. This is junior mining done right.
Great Bear Resources is fully-funded for its drill programmes until 2022. This has given the market a rare degree of certainty: no dilution, no pause in operations. This is the reason that Great Bear Resources’ share price is able to reach its optimal value based on the drill results. In 2020, there will be 300 completed drill holes, and this number will only grow in 2021. Raises are based on expected operational expenditures, but Great Bear Resources actually cares about the share count. This is a rarity in exploration: investors aren’t being coerced into bankrolling a company’s subpar operations. This is responsible mining with shareholder satisfaction remaining a constant focal point.
Moreover, the tight share registry features a hefty piece for the management team, putting their skin in the game and aligning them with shareholders. This stock was acquired “just like everyone else,” on the open market.
Moving forward, Taylor intends to keep following the science, “no nonsense; drill it, and the data will drive the value if the value is there.” He compares the potential of Great Bear’s land package to that of the Canadian Hemlo Discovery: a 20Moz producer. This is a bold claim without a resource, but he bases it on the physical dimensions and the gold distribution.
When will Taylor decide to stop drilling and put a number on it? It is clear that Great Bear Resources could provide a large resource to the market right now, but it wouldn’t be reflective of the true size of the resource, says Taylor. He claims this is a mistake that companies often make. Every Great Bear drill hole goes into the new releases and onto the company’s website: this transparency is keeping investors interested and informed. Investors can actually calculate their own gold resource if they wish, but Great Bear will likely be releasing its own towards the end of 2021. Shareholders are extremely satisfied with the successful path that Great Bear is treading; the company is under no pressure to alter its successful tactics.
COVID-19 doesn’t appear to have been any more impactful on Great Bear Resources’ operations than any other gold mining company. In fact, Red Lake only had 2 COVID-19 cases into total, courtesy of restricting the import of external labour. 5 drill rigs have been reduced to just 3, but this will be rectified in just a month. In fact, Taylor expects to add even more rigs in the near future, in addition to issuing more news to the market regarding extra drilling and other updates.
The company has a strong relationship with its local first nations, and it recently signed a long-term benefits agreement with these groups to place the direct economic benefit into their hands. Great Bear Resources continues to invest into community initiatives. There is a pleasantly ethical angle to this gold mining story: the more work Great Bear does, the better benefits the community will experience.
In time, it could well be a very logical step for Great Bear Resources to join the main TSX. There is some listing criteria, such as having the company’s initial resource published, but this is clearly an option for the future. There has also been a push to get Great Bear Resources listed in London to open the company up to a new international audience; this isn’t a top priority, but it’s developing in the background. However, the company has listed on the OTCQX, (OTCQX: GTBAF).
There has been “aggressive” M&A interest in Great Bear Resources right from the start, and these opportunities continue today. Taylor won’t be making any deals until he feels his company reaches its true valuation. He is in no rush on this front.
In terms of the endgame for Great Bear Resources, Taylor is as transparent as ever: there are no discoveries of this scale that are operated by independent mining companies. As time progresses, Great Bear Resources will continue work to de-risk the project as if the company did intend to put it into production: permitting, environmental baseline studies, community agreements, metallurgical work. Taylor’s background is in gold production, but he is aware that the current set of circumstances that makes production a possibility aren’t likely to remain in effect forever.
In relation to the gold price, Great Bear Resources’ price does not appear to move in tandem with the gold market. A decline in gold price could somewhat affect the company’s valuation, but a discovery of this scale and quality could maintain its economical flexibility regardless of the gold price. The value is insulated from fluctuations in the gold cycle: it is permanent. Great Bear Resources could actually generate the mine in numerous ways, from a bulk-tonnage system to an underground system. This flexibility is key.
In another move the banks didn’t understand at the time, in January, Great Bear Resources spun out Great Bear Royalties in an attempt to capture the value of Dixie. The new company’s initial assets feature a 2% net smelter return royalty on any future Dixie production, in addition to C$1M in marketable securities and C$500,000 cash, which will form the new company’s initial assets. This is yet another attempt by the company to pursue strategic opportunities and create accretive value for shareholders.
A year ago, this level of success looked scientifically possible, but even the most optimistic gold investors weren’t expecting anything like this. Taylor is incredibly humble, putting the success down to his team and the ore body. This is the talk of a leader. We think he should give himself much, much more credit.
What did you make of Chris Taylor and Great Bear Resources? Comment below and we will respond.
Company Website: https://greatbearresources.ca/
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