Monday, August 1, 2011

Augen Gold




Trelawney Makes Hostile Bid to Consolidate Timmins Style Gold Camp



Augen Gold Corp

GLD:CDNX
AUGNF:OTC

SP… $0.32
Shares Out… 127.7M
Market Cap… $41M



Augen Gold (GLD) CEO David Mason is in the fight of his life to retain control of his company as Trelawney Exploration (TRR) has launched a hostile takeover bid for the shares of Augen in an all share deal at 0.066 per share of TRR. The deal values Augen Gold at roughly $0.32 or a $50M market cap company fully diluted. Augen Gold has one of the most sought after gold exploration and development properties in Ontario located in the South Swayze Greenstone Belt between Timmins and Sudbury. This area is thought to be the next Timmins or Kirkland Lake style gold camp.

Augen Gold owns the dominant 40km long land position in the area which surrounds TRR’s recent discovery at Cote Lake at the east end of the property. This emerging gold camp has added 5M oz’s in 2011 between GLD and TRR. Augen recently announced a 1M ounce inferred resource at Jerome at the west end of the gold belt and Trelawney announced a 4.2M oz maiden resource at their Cote Lake discovery. These two multi-million ounce resources at either end of the gold belt demonstrate the blueksy potential of the area to host several multimillion ounce gold deposits.



Trelawney Bid Grossly Undervalues Timmins like Potential

Trelawney’s discovery at Cote Lake has pushed the share price from $0.80 to over $5 and a lofty $700M valuation. The huge rise in share price has allowed them to announce an all share deal that takes advantage of the recent gains made by Trelawney and severely undervalue Augen’s assets. The bid is opportunistic and predatory as Augen’s land position is 4 times the size of TRR and they have already identified 3 bonafide mulit-million ounce gold targets on their massive project.

Their gold project contains…

  1. A former producer with a NI43-101 resource of 1 million ounces at the Jerome Mine
  2. A promising high grade gold discovery just east of the Jerome Mine at North Shore
  3. Claims surrounding one of the hottest gold discoveries of the past year at Cote Lake coming within 200 meters of 520 meters @ 1.44 g/t of gold.

Each of GLD’s projects could justify a $30M - $40M market cap gold company with multi-million ounce discovery potential at all three sites. GLD valued on its inferred resource alone trades at $40 per ounce where Trelawney trades at $166 per ounce of gold. Four times the value!!!This just starts to demonstrate the extreme discount that GLD trades at compared to TRR. Augen has four times the land position in an area that has seen little exploration and is projected to be the next hot gold camp in Ontario. If Augen was valued similarly to Trelawney on just an ounce to ounce basis, GLD should trade closer to $1.20 than $0.32. Trelawney has jumped at the chance to consolidate this very valuable land package that has the potential to support several operating gold mines and produce over a million ounces a year.

The Swayze Greenstone Belt has all the characteristics of another Timmins or Kirkland Lake gold camp. If Trelawney consolidates a gold camp that produces over 50M oz’s of gold over its lifetime, then TRR is truly committing grand theft larceny against Augen Gold shareholders.

The two reasons why TRR can’t pass up GLD at the current prices…
  1. W. COTE LAKE
  2. Long term TIMMINS camp potential

Cote Lake, Cote Lake, Cote Lake!!

From all indications the Cote Lake deposit dips towards Augen’s lands and in certain sections the border comes within 200 meters of open mineralization. The deposit dips to the north at depth which leaves a good chance that the source of the gold deposit lies on the border at depth or even run entirely onto the GLD property. The richest zone of Cote Lake comes within 200 meters of the border with Trelawney’s best hole on the project intersecting 520.28 meters grading 1.44 g/t au. Chances are very good that GLD hits this summer. When GLD announced plans to drill the border fall of last year, the share price shot up from $0.20 to $0.65.



Unfortunately relations between the two companies have soured to the point where both companies stopped drilling in that area so not to lose a negotiating position to the other party. These claims have been the subject of bitter fighting between Augen and Trelawney ever since. Augen stopped drilling because they needed to implement a shareholder rights plan to protect shareholders from a takeover bid by Trelawney when they hit at the border. In TRR’s case, they stopped drilling because every stepout hole brought Cote Lake mineralization closer to the GLD/TRR border and made GLD’s claims about the source running onto W Cote Lake that much more credible.

GLD is extremely undervalued and TRR needs the West Cote Lake claims irrespective of mineralization or not. Every second TRR delays, means that Augen Gold moves closer to a discovery on their side of the border.

TRR announces new outcrop 500 meters south of Cote Lake

Recent developments from Trelawney should actually convince GLD shareholders not tender their shares and for newcomers to buy as much as they can at current prices.

TRR announced a mineralized outcrop 500 meters south of Cote Lake on the same lines where all the speculation at the border is. This gives added credence to the theory that there may be a secondary north south relationship to mineralization at Cote Lake extending from the main zone on either side. There is a very good chance that GLD will drill long intervals of gold at the border this summer sending Augen Gold’s share price through the roof on a discovery similar to that of TRR.

That is… if Augen can hold out long enough to get the results back.



Any discovery made at Cote Lake on GLD lands strengthens GLD’s bargaining position exponentially. To the point where TRR will be forced to pay 3 or 4 times the current bid as speculators will run to the discovery forcing the share price much higher. It could also induce a new bid from another buyer. When you consider they are already extremely undervalued based on their Jerome project alone, most shareholders outside of the group with TRR will not tender their bids at the current price. If GLD can resist the first takeover bid by TRR then things will look much different 3 months from now. It is why TRR is acting to move fast in a hostile takeover ignoring the shareholders rights plan.

David Mason is on the verge of several multi-million ounce discoveries over the next couple years.

If GLD shareholders give in to TRR now… they lose their leverage to what was going to be very big drivers of this stock. Yes they will gain a quality development play at Cote Lake which will eventually be a $20 stock on its own, but they lose the four digit type leverage that comes with a small cap developer in what is going to be a very hot gold camp. The hostile takeover makes GLD a very compelling buy. It is a play on TRR in the very least with a free option. If TRR fails in the current bid, they will be forced to sweeten the deal fast as they have tipped their intentions regarding GLD and more investors will come to the play driving up the stock. Especially since Greg Gibson is trying his best to head off a Cote Lake discovery on Augen lands. With 2 major drill programs at either end of GLD's massive property, things are just heating up at Augen Gold.

How often do you get that kind of deal?

You buy GLD to get a top 5 development play and a blue sky lottery ticket!



Big time high grade discovery in the making at North Shore

The latest round of results at North Shore indicate a very large and extensive high grade gold system covering 1.8km of strike with at least 8-10 identified structures. Recent drilling has hit 5 holes above 20g/t that cover more than a kilometer of strike length between the high grade intersections. The 3 highlighted holes below cover over 600 meters of strike length outlining an extensive shallow high grade zone.
  • 10.6 g/t au over 10.50 meters including 66.8 g/t au over 1.5 meters
  • 6.72 g/t au over 11.19 meters including 24 g/t over 1.5 meters
  • 6.58 g/t au over 4.12 meters including 23.2 g/t over 1.12 meters
The North Shore is starting to show an very high grade nature to the mineralization on the West side of the South Swayze Greenstone Belt. TRR is not matching these results in exploration at their medium grade Chester Mine. If Greg Gibson of TRR doesn’t act now, he may never get a better opportunity to run away with GLD at such discounted prices. Investors will eventually realize the importance of the high grade discovery at North Shore that extends mineralization at the million ounce Jerome Mine several kilometers to the east where the North Shore discovery is. 5 of 11 holes above 20 g/t is well above average, if not spectacular.



As GLD continues to produce high grade results and better define the zones to depth at North Shore, it will quickly develop into a very rich deposit capable of supporting a mine at much lower gold prices. Cote Lake may have difficulty making money much below a $1000 gold price as the mineralization is low grade. Chasing 20g/t rock over decent widths will always be profitable, no matter what the price. With a core high grade zone covering over 1000 meter strike length within an 1800 meter long zone... it makes North Shore a large and very exciting high grade project to develop with consistent high grade hits.

“It appears we are well into defining what could be the largest gold occurrence in the entire South Swayze gold belt form Jerome to through to and including Chester Township.”

David Mason, CEO of Augen Gold




Forget about the Cote Lake battle for a minute. Mason doesn’t even care about Cote Lake and is a secondary focus to Augen Gold. Mason thinks he has hooked a much bigger fish at North Shore. Results are backing up the theory of the Jerome Extension covering several kilometers of strike. Jerome and North Shore have the potential to have high grade from surface to depths of well over 1000 meters typical of Timmins and Kirkland Lake…. the Jerome Extension, particularly the North Shore could easily grow into a project greater than 10 million ounces of gold.

The Last Stand… GLD’s Shareholder Rights Plan

There is a huge opportunity for investment in GLD as TRR most likely won’t gain a permitted bid under the shareholder rights plan the first time around. It grossly misvalues Augen’s projects and is opportunistic in nature and most GLD shareholders know it. The investors who locked up their shares to Trelawney have a bias in ownership towards TRR so they benefit even at a discounted price with the transaction essentially being a transfer of title for guys like Sprott and Pinetree. The shareholder rights plan requires an additional 50% of the shares other than the group that is trying to takeover. TRR’s original lock down was 42% which means TRR needs another 24% of the outstanding shares for a total of 66% to be a permitted bid according to the rights plan. Currently TRR has locked up another 5% and has 3% ownership which means TRR needs 16% more of the shares to qualify as a permited bid.

Neither party at present knows if TRR will gain the shares to allow a permitted bid so at the moment it is nail biting time, but it does look likely Augen will survive this first round. It will buy GLD a bit of time to come out with some market moving results from Cote Lake or the North Shore... if they survive the initial bid. It also gives them time to look for a white knight or even let TRR sweeten the bid. The big hope for Augen Gold’s David Mason is to try and hold out long enough to prove that the Cote Lake deposit does extend on their land which will force TRR into making a much bigger bid. With drilling resumed at W. Cote Lake and a major discovery at north shore in progress, GLD is just starting to unlock their true value which is well over $1. The longer GLD shareholders can hold out and resist the TRR bid… the more Augen Gold can capitalize on the short term wealth drivers and ultimately force a much higher bid for the company.

TRR’s Bid Grossly Undervalues Augen Gold’s Assets

People just don’t go to these lengths to fight over a property if there wasn’t something there. With control over the Swayze Greenstone belt being fought over twice in the past 18 months, this has been a highly contested property. GLD has 3 drivers of growth coming from the value of a million ounce resource, extending Cote Lake onto GLD land and an exciting high grade discovery at North Shore… the time to buy GLD is now.

The takeover battle makes this story that much more exciting and puts a floor in the share price with little risk. TRR sees the extreme value opportunity that GLD represents or wouldn’t be offering $0.32 in an initial opportunistic hostile bid. They wouldn’t have tipped their hand this soon if they didn’t think GLD has the goods. The shrewd investor should read between the lines here and see the big league potential of this hot story and a takeover battle brewing. GLD is a company that is on the extreme buy list when you add the takeover factor and possibility TRR will be forced to make a higher bid.

Buying GLD is the same as putting in a bid for Trelawney, with the added bonus' of a sweetened offer and a major discovery at Cote Lake on GLD lands.

How often do you get that kind of deal? Buy GLD to get a top 5 development play and a free option on several triple digit drivers. If GLD can hold out long enough and hit on the border… then TRR may have to pay in excess of $1 for GLD.

4 times the current value!!!


As an investment... GLD is a win-win situation

The downside… a top 5 development play in TRR in a consolidated Timmins style gold camp

The upside... a blue sky multi dollar stock in the middle of takeover battle

Augen Gold is on the conviction buy list anywhere under $0.50.


Christopher Skidmore

Beat the Market Stock Picks

No comments:

Post a Comment