By Steven Ralston, CFA
This week, Colt Resources (GTP.V) reported financial results for the fourth quarter and year ending December 31, 2012. For the quarter, the company reported a loss for the quarter of $2,751,021 ($0.02 per diluted share) versus a loss of $2,862,860 ($0.03) in the comparable-quarter last year. Approximately 26% of the net loss (or $725 thousand) was attributable to the non-cash write-down of the Extra High and Gaspésie properties.
For the year, the company reported a loss of $9.40 million ($0.08 per diluted share) versus a loss of $6.63 million ($0.08) for the 12-months ending December 31, 2011. Approximately 15% of the net loss (or $1.40 million) was attributable to non-reoccurring impairments (aka write-downs) of the company’s Santa Margarida do Sado ($671,615), Extra High ($534,012) and Gaspésie ($190,507) properties due to management’s decision to abandon these projects. Administrative expenses increased 22.7% from $6.14 million to $7.45 million, primarily due to higher management fees, office expenses and the costs associated with investor relations reflecting the effort to bring the Boa Fé and Tabuaço projects towards production. Stock-based compensation noticeably declined to $80,482 in 2012 from $1.97 million in comparable-time period in 2011. During 2012, the company received net proceeds of $16,582,296 from the issuance of shares and the exercise of options, which was used to fund exploration efforts and working capital needs. As a result, the total weighted average number of common shares outstanding increased 39.9% to 121,383,520. As of December 31, 2012, the company had $6.47 million of cash & equivalents.
During the fourth quarter of 2012, the exploratory work at Colt Resources focused on the expansion and resource upgrade of the gold deposits at Boa Fé (specifically Banhos, Casas Novas and Chaminé) and the tungsten deposits at Tabuaço (São Pedro das Águias, the Gap area, Aveleira and the Quintã-Távora). Also, a stream sediment survey and geochemical soil sampling surveys were carried out in the Montemor-o-Novo exploration concession, along with geologic prospecting and rock sampling.
At Banhos, a total of 54 diamond drill holes totaling 8,123.8 meters (on a 100 by 50 meter grid pattern) were completed during the quarter. In addition six holes totaling 670 meters were drilled at a satellite occurrence north of Banhos (dubbed Banhos-North). At Casas Novas, two additional drill holes totaling of 308.2 meters were completed, and at Chaminé, five additional holes totaling of 1159.4 meters were drilled in order gather more data to support a resource upgrade. Furthermore, the company tested for the possibility of deep gold mineralization. The drilling results of the first two holes had been announced in late December. Both drill holes confirmed that gold mineralization is present at depth, namely, inclined hole (BFCH-12-041) intersected 2.07 g/t gold over 21.75 meters (including 4.69 g/t gold over 4.93 meters) and inclined hole (BFCH-12-039) intersected 0.60 g/t gold over 14.85 meters. The discovery of gold mineralization below the near-surface gold deposit at Chaminé is a game-changing event in our interpretation of the model of gold deposition along the Boa Fé shear zone. We believed, as did prior lease owners, that the gold mineralization was confined to near-surface kinks and folds of the Boa Fé shear zone. However, the assay results from these two drill holes now indicate that stacked layers of kinks and folds contain additional gold deposits. It is now probable, as management suggests, previous exploratory work has “only tested a relatively minor part of a potentially larger mineralized zone.” The next phase will include the application of downhole geophysical techniques to better target further deep exploratory drilling.
During the fourth quarter, diamond drilling at Tabuaço tungsten deposit area focused on four zones. At São Pedro das Águias, one evaluation hole was drilled to infill the section line. In the Gap area between São Pedro das Águias and Aveleira, three diamond drill holes totaling 364.7 meters were completed during the fourth quarter in order to better grade and delineate the scheelite mineralized skarn. So far, it appears that the Gap area between the São Pedro das Águias and Aveleira deposits hosts a tungsten mineralized skarn which extends over a strike of 275 meters and a lateral down-dip extent into the mountain of unknown dimension. At the Aveleira deposit, six holes totaling 1138.8 meters were drilled, the results of which were announced in early October. And at the Quintã–Távora zone, three diamond drill holes totaling 721.4 meters were drilled in order to investigate the prospective down-dip of the Quintã scheelite skarn outcrop. However, the three holes intersected only narrow skarn horizons (around one meter thick), which assayed between 0.11% and 0.72% WO3.
Lastly, a stream sediment survey, geochemical soil sampling surveys, geologic prospecting and rock sampling were carried out in the Montemor-o-Novo exploration concession, along with geologic prospecting and rock sampling. The stream sediment survey targeted the prospective area northwest of the Boa Fé shear corridor. A total of 116 sampling sites were tested and a number of anomalies (gold and/or associated elements) were identified. The soil sampling surveys focused on the central part of the Montemor concession (Carvalhal Fonte Santa) and the western section of the concession (Grou). A total of 1264 soil samples were gathered from Carvalhal Fonte Santa area and 477 samples were taken from the Grou area. The analytical results of both surveys are pending. Geologic prospecting and rock sampling were carried out at 16 distinct field locations in the western half of the Montemor-o-Novo exploration concession. A total of 81 rock samples were taken from or near outcrops. Six of the 16 locations (25 samples) returned assay results over 1.0 g/t Au, the better ones were obtained from Grou (2.42 to 169.5 g/t Au), Safira (2.45 to 18.9 g/t Au), Carvalhal (1.17 to 9.39 g/t Au) and Regadia-North (1.07 to 5.7 g/t Au).
In an upcoming blog, we will review the major accomplishments of Colt Resources in 2012 and management’s business plan for 2013.
We reaffirm our Outperform rating. Our price target is $2.10, which is based on an estimated share value of attributable resources indicated by Colt’s NI 43-101-compliant mineral resource estimates and utilizes the current prices of gold and tungsten. We consider our valuation model to be conservative in that it also includes prospective developmental costs at Boa Fé and Tabuaço.
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