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Thursday, 18 October 2012
Bayfield Ventures' Burns Block offers M&A potential as space heats up for Canadian juniors
Bayfield Ventures' (CVE:BYV) flagship Burns Block property is located in the infrastructure-rich, mining friendly jurisdiction of northwestern Ontario – in an area that makes the company a potential takeover target.
The property lies right in the middle of Rainy River Resources' (TSE:RR) project and immediately to the east of that company’s multi-million ounce gold-silver deposit.
Bayfield says it believes its properties in the Rainy River District are “strategically located” and offer the prospect of a potential acquisition by the owners of the neighbouring deposit.
Recent drill results from Bayfield at the Burns Block continue to confirm "just what the company has been looking for", says the company’s CEO, Jim Pettit.
"We had some drill discoveries earlier this year on the east side of Burns, which suggested this new zone might be another one of these higher grade zones that are found intermittently as you go east to west. Rainy River has three of them in their deposit."
Bayfield has one of these higher grade zones already on the western side of the Burns, and has just confirmed that it now has one on the eastern side as well.
"We suspect that Rainy River is testing the up-plunge extension of this eastern high grade zone at the Burns Block, which has a similar directional plunge as the zone on the west side of the Burns."
Pettit says Bayfield will be drill testing the eastern zone further down plunge, or at depth, through an additional six holes. "It could be a mineable underground target for Rainy River in the future should they choose to take us out."
Indeed, Bayfield's plan all along has been to drill up its Burns Block property with the goal of adding value through mineral discoveries, with the ultimate exit strategy of being acquired by Rainy River.
But markets took a turn for the worse in the last 18 months, which delayed plans, as development-stage companies like Rainy River only have "limited capital", says Pettit, and any acquisition at the time would have been too dilutive.
Pettit says, however, that markets are starting to firm up, with many gold stocks starting to move upward.
Rainy River's stock, for example, has bounced off lows of $3.06, almost doubling to hit $6 as the company has made moves to de-risk its project, announcing an updated preliminary economic assessment this summer that lowered costs and improved grades, as well as announcing an increased NI 43-101 resource estimate earlier this month.
The new estimate at the Rainy River gold project expanded measured and indicated mineral resources to 6.2 million ounces of gold and 13.3 million ounces of silver.
"The larger-cap gold companies are starting to get financed as they de-risk projects and combat cost inflation in the current environment to help their situations. Investors are paying heed to this new mandate and share prices are trending in the right direction."
"As share prices move upward, the potential for M&A activity becomes more favourable.
“There is probably going to be a bit of a bubble in the fall with these types of transactions as many have been put off in the last year and a half," Bayfield's CEO says.
Pettit explains that failing any huge macroeconomic shocks, he expects steadily rising equity valuations in the mining sector.
"Our story has always offered investors potential upside from an M&A type of deal. We believe this has never changed, but has just been delayed instead.”
"The future is bright right now for gold and silver. Once precious metals companies’ stock prices and valuations catch up with current commodity prices, there were will be a fair amount of transactions taking place as mining companies look to replenish reserves and resources."
Bayfield's own share price has come off lows of 25 cents and is now trading in the mid 30 cent range.
Last week, the company reported the highest grade gold drill intercept found to date from the continued exploration on the east side of the Burns Block.
Step out hole RR12-30 intersected a "strong interval of gold and silver mineralization", in a position roughly 20 metres down dip from a previously reported hole.
The newest hole hit 19.6 metres grading 5.45 grams per tonne (g/t) gold and 20.63 g/t silver, including 11.8 metres of 8.57 g/t gold and 30.87 g/t silver.
Some more drilling will continue in this zone at depth, with Pettit saying the company will continue hole by hole, with up to six holes planned.
But as the junior explorer finishes drilling at its flagship Burns property, there is still exploration potential at its B Block, which lies 500 metres northeast of the Burns Block.
The company is fully funded, with roughly $3.5 million in the bank to finish its planned 100,000 metre diamond drill program, most of which has already been completed.