Gold Bag Inc.
(OTCBB:GBGI)
CEO:Grant White
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Interview Transcripts:
Juan Costello: Good day from Wall Street. This is Juan Costello, senior analyst with The Wall Street Reporter and joining us today is Grant White, CEO for Gold Bag Incorporated. The company trades on the Bulletin Board and their ticker symbol is GBGI as well as over the counter, same ticker symbol, GBGI. Thanks for joining us today there Grant.
Grant White: Thanks for having me.
Juan Costello: Anytime. Now starting off, give us a brief history and overview of Gold Bag for some of our listeners here that are new to your story.
Grant White: Yeah, for sure. Gold Bag, I joined early September. Gold Bag was effectively a public company without a lot of assets in it. And I’ve been an investment banker since 1992 doing a lot of mergers and acquisition work, and financing work in Canada since 2002. And I approached the company with a strategy of really developing a private equity venture capital model to the gold mining space.
If you look at every other sector, there’s a significant amount of funding that comes in a private way to early stage companies to help them develop and grow. Historically in mining, these companies have been going public really with just an asset and some green field projects and without a depth of management or capital. And what happens is they go public. They have a tiny market cap. They raise a little bit of money then they run out of money and the asset can’t be developed.
So with my background and some of the team we’re putting together, we’re really looking to provide a private equity hub for good gold assets primarily in the Americas with our exploration team to look at them in detail and then help develop these assets and when they’re ready to stand on their own, then we’ll spin them off into their own public companies or sell the assets but in the interim, we can provide our expertise to help develop and grow the businesses without them being burdened by public company cost, etc.
Juan Costello: Certainly. And so bring us up to speed on the recent agreement to acquire Fairfields Gold through your subsidiary Focus Gold.
Grant White: Yeah. That was consistent with our strategy. We’re focused in the Americas primarily. That was our second acquisition. We’re due to close it soon here. But we’re looking for both a good team of people in a good market location as well as good assets. So with that acquisition, we get a great management team that comes on board, very well connected to Mexico which should allow us to find other assets in that market but also we get an asset that has had very positive historical drilling results.
It’s an old circle mine from the early thirties so there’s a lot of tunnel infrastructure already in place. But what was most attractive to us was in the recent drilling done in 2006 and some of the recent samples we’ve taken, the grades are very high grade. You know anywhere from 10 to 30 grams a ton of gold. When you have those types of grades, you don’t have to have a massive mining operation to make significant cashflow.
So our approach to that asset can be three-fold. It’s never been heavily explored so we’re developing an exploration program as we speak to help build the resource there. We got nine existing veins. We’re going to develop those out and see how much gold resource we can put on that. We have a stockpile that we can process right away that should generate some cashflow for the company. And then we should be able to put into small-scale production, 100 to 200 tons a day within the next nine to twelve months. But at those grades, 200 ton a day is over 30 million a year of revenues and our cost to put that into production at that is very minimal. So we’ll look to have a three-pronged approach there, develop it out. And with that management team, we should be able to add some other high quality assets in Mexico which is a country we like right now.
Juan Costello: Certainly and bring us up to speed on the two gold properties that you acquired from Victoria Gold near Timmins.
Grant White: Yeah, we did an option agreement there. The Timmins area is one of the most prolific gold areas in the world. And there was some good historical data on both of those assets that we got from them. They’re not huge land packages but it’s sizable enough to do something with.
We got a team of people now working up there looking to hopefully broaden our land package. That one was a little earlier stage than our Mexican operation but the upside is significant there because of the historical data of the amount of gold operations in the area. And the three dimensional data that we have would lead us to believe that there is some decent gold in those properties. So, we’re going to launch an exploration program in 2011 there and hopefully develop those out and continue to grow them.
Juan Costello: Well great and talk to us a little bit about some of the trends right now in your sector Grant and obviously with gold and how well-positioned you believe the company is to capitalize on them?
Grant White: Yeah, I mean the fundamentals of starting this entire company is based on our view of the gold will continue to do well and continue to improve. I mean if you look at it’s performance over the last five to ten years, it’s been done fantastically well. All macro-economic factors, we have reason to believe that it should continue to do well.
Gold is really a currency. It’s one of the few metals that’s taken from the ground that isn’t used for you know, end uses like jewelry and things like that. It is used for that but that’s not what drives the price. It’s all based on supply and demand as gold as a currency. With the weakening of the European economy and the US economy, gold is a safe haven for people. And we think it’s going to continue to do well. And our goal is to accumulate not just the two assets we have now but several more assets in good jurisdictions. Develop them out so that as gold performs, our company should perform very well as well.
Juan Costello: And so what would you say makes the company unique from some of the other players in your sector?
Grant White: Well most of them are…there aren’t really many public companies executing our strategy. If you look, there’s over 2,000 public companies on the TSXV up in Canada that are very small, single asset project plays, raising a little bit of money in [indiscernible][0:06:32] liquid. Then you have the big guys, you know the Barricks, the Newmonts, all those guys that are focused on big projects, massive exploration and massive resource deposits.
And there’s very few focused on this sort of sweet spot that we like to look at here which is early exploration through to maybe small-scale production. And that’s really the sweet spot where we see to get the highest returns. We’re looking for assets that need half a million to five million dollars to invest in them, to develop if successful, and that investment approach, the asset should deliver significant returns to investors.
So we’re playing not only the gold price. We’re the only going after the sweet spot of smaller scale assets that can become quite large. Because of our backgrounds, we should build access capital and develop them. And as we do, we’ll be able to spin them off when they’re ready into their own public companies in the future or sell off the assets at a significant profit.
So a lot of people are focused on single assets. They fall in love with their own projects and that’s all they are. We’re really and M&A group, private equity group with significant gold exploration management on our board and as part of our advisory board to make sure we don’t over invest in any one project that doesn’t deserve it. And really provide a diversified play on smaller scale to mid-scale gold assets with the view that hopefully we’re going to turn some of them in to quite sizable.
Juan Costello: Certainly. And perhaps you can walk us through your background and experience Grant and talk a little bit about the management team as you recently added Larry Segerstrom to the board.
Grant White: Yeah. And we actually added Dusty Nicol today as well. My background as investment banker in the US in ’92 through the whole nineties from start at First Boston and then at now west markets in a place called [indiscernible][0:08:29]…primarily doing mergers and acquisition work and some high yield that worked.
I probably did 20 to 30 billion dollars of M&A deals and was well trained by some of the best in the business down there. And then I came to Canada in ’02 and was a head of investment banking here at a place called Blackmont Capital from ’05 to ’08 and helped grow them significantly. We tripled revenue in two years and really helped grow that business with resources, oil and gas and mining being our two primary sectors.
So through my experience in Canada, I’ve learned a lot about the mining space. It’s definitely a commodity-driven country from that point of view. And have made a number of connections in the mining area which helps get us deal flow access to capital and the network of people in that are good resources for me to lean on when we’re looking at projects or to strategies etc.
There are a number of people I can contact because of my background to get their input on what makes sense and what doesn’t. And then in terms of the team, what we’ve looked to do to surround my background obviously is not into the rocks and geology. The fact that Larry Segerstrom in the board last week, he’s 30 years in the exploration business, very experienced geologist with a great resume. He’s seen at all places in the business and very valuable in looking at projects. And then just today, we added Dusty Nicol who is the CEO of Tournigan Energy. Again, a 35 year geologist, all over the world, very experienced at looking at things, a lot of gold background as well. So I now have two geologists on my board that I can lean on in any project we’re looking at.
We’re also created something called an investment advisory board which are people that are not on the fiduciary board but we’ll be looking to be helpful in terms of when I’m looking at assets, people I can lean on and get their different opinions and we can collectively draw on their experience to be helpful.
So we’ve added Chris [name][0:10:35] on the advisory board. He’s a CEO of Paramount Gold and Silver which obviously has done quite well. And we’ll continue to look some people to that advisory board as we go forward.
So again, we will look at a CFO and a chief geologist shortly here. And we’ll continue to add out to round up the team as we go forward. We’ll never be a very highly administrative intensive organization. I believe in keeping costs down at the head office level and spending the money where it needs to go into the ground. So that will be our strategy.
Juan Costello: Certainly. And what are some of the other goals and objectives that the team is hoping to accomplish over the course of the next year?
Grant White: I think we’re always on a dual path here. We’re always looking at acquisitions that we think will be creative and worthwhile to investors. I mean that’s a big part of our strategy. So we’re focused on countries where we think the political stability is such that we can make money off of being there without wasting it.
We will be opportunistic so I don’t like to put a complete line in the stand of we will be in this country or we won’t be in that country because at some level, it’s a function of weighing an asset for versus what we think it’s worth out the other side.
We will look at assets over the next twelve months for sure. We’re going to look to get Mexico into production so that we’re cashflowing nicely. That cashflow should help fund some of our other growth plans. And also when you’re cashflowing, it’s always good. You don’t need to raise money in the public markets just to finance your operations.
We look to broaden out our Canadian exposure. I liked to be in the US within the next twelve months. Some more assets in Mexico and then we’re looking at South America as well and continue to add to our team members. We really want to build this out with a high quality team of people that investors would have confidence in.
Juan Costello: And when it comes to investors and the financial community Grant, do you believe that the Gold Bag story, your message, and the company’s upside potential are completely understood and appreciated by the financial community?
Grant White: Oh, I don’t think so yet. I mean we’re just getting going. I came on board in September. We’ve just got the two assets now. We’re starting to generate some trading flow but the reality of what we’re putting together if you look at where gold is and the leverage on gold against your cash cost to put things into production these days.
And just when announced that gold is worth versus your development cost and the scale we’re going to create in this business, and the diversification of it against single asset plays worth. If their gold is in the ground or it’s on economic, people continue to spend to try to justify their existence. We’re not going to be a single play like that with that kind of risk exposure. I think we’ll provide the best of both worlds and with where we see gold going, the cashflow profile that I can see for the company going forth as well as just the underlying asset value of the company going forward, I think we’re at early days and hopefully we can take this company to.
Juan Costello: Certainly. And so once again, joining us today is Grant White. CEO for Gold Bag Incorporated. The company trades on the Bulletin Board as well in the pink sheets. Ticker symbol is GBGI, currently trading at 74 cents a share.
Before we conclude Grant, to recap some of your key points here, why do you believe that investors should consider Gold Bag as a good long term investment opportunity?
Grant White: For sure. I think the industry fundamentals are terrific. To be in gold and looking at these assets especially private assets so we can provide public shareholders access to. I think our management team’s very strong in what we’re putting together. Not just me but also the team of people around it and the group that we have coming around it.
Our first two assets are very attractive if you look at our cost to acquire versus the cost to put in the ground and what the upside potential can be. You know if we can the Mexico assets, even the small scale production, as I said, we should be 20 to 30 million of revenue per year. You look at that against our market cap and we’re very undervalued against that type of cashflow.
You know I came into the area. We developed that out as well as some of the other acquisitions we’re looking at. We should be able to create a lot of scale and liquidity in the story that will be very exciting for people looking to not only play gold but also to look at assets that have some real high return on investment characteristics.
Juan Costello: Certainly. Well we look forward to continuing to track the company’s growth as well as report on your upcoming progress. I like to thank you for taking the time to join us today Grant and update our investors on Gold Bag.
Grant White: Thank you very much for your time and I appreciate it. Thank you.