Original Alert Email – September 5th, 2017 to Equity Grade Subscribers
SPECIAL REPORT: Velocity Minerals Ltd. (TSXV: VLC)
From company formation to pulling out drill results in under five weeks, Velocity Minerals Ltd. (TSX-V: VLC) is certainly living up to its name. The Company just released drill results from its gold exploration project in a developing mining region in Bulgaria.
The Company has the rights to earn a 70% interest in the advanced Rozino gold project, located within the Tintyava prospecting and exploration licence area in southeastern Bulgaria. Velocity has partnered with a Bulgarian mining company, Gorubso Kardzhali, from whom they will earn the interest. Gorubso is operating the underground Chala gold mine.
This is a very productive part of the world with recent successes such as as Mariana Resources’ high-grade copper-gold discovery at Hot Maden in Turkey and Reservoir Minerals Timok discovery in Serbia, which were acquired by Sandstorm Gold and Nevsun Resources, respectively.One newsletter writer offered her opinion that if Velocity pulls out a result like that from the only previous hole drilled to the northeast, 68 metres of 3.15 g/t gold, the market will quickly take notice.
Well, guess what…the Company just received laboratory results for the first two drill holes. Velocity’s drilling intersected 74 meters of 2.35g/t gold including 39 meters of 4.11 g/t gold at the advanced Rozino Gold Project, Southeast Bulgaria.
“These results are among the best grades ever returned from the project and the drill holes clearly demonstrate the potential for thick, high-grade gold mineralization between the historical drill fences.” stated Keith Henderson, Velocity’s President & CEO.
Velocity only just listed on the TSX Venture back in late July in this reincarnation and very quickly released these results. Wow, early investors must be pleased with the sheer velocity of its exploration program. The Company is still flying under the radar of most investors…just the way we like it. These results are likely the first step in changing that. Upon announcing these first 2 holes, the stock traded nearly 1.5M shares and saw its share price move up from the high 20 cent range to hit an intraday high of 47 cents. Since then, the share price has settled back down near 30 cents. (An additional 2 holes were just announced this morning: SEE NEWS RELEASE)
These drill results are providing early confirmation of the Company’s theories about the potential of Rozino to host an economic gold deposit. The Company’s exploration model is that gold mineralization is controlled by northwest-trending, steeply dipping structures. Most historical holes were drilled vertically or angled parallel to what is believed to be controlling structures. These previous approaches did not adequately test mineralization only clipping the edges of the mineralization.
It was back in 1980s, when Bulgarian state geologists first drilled the project. Their model predicted a flat-lying gold deposit, so they drilled vertical holes. In the case of Rozino, the gold was not in a flat lying body but in steeply dipping structures that the vertical drill program almost completely missed.Velocity’s drill program at Rozino is ongoing with a total of +12,000 meters planned, 7,000 meters of which could be completed before year-end. Initially, Six 50-metre step-out drilling holes will investigate the continuity of the newly discovered high-grade mineralization. An additional three holes will focus on high-grade trench samples located next to Rozino where previous drill testing was absent or ineffective. We’re hearing that the Company is even considering adding another drill rig. That’s like music to an investor’s ears, seldom does a company add drill rigs unless they are very happy with what they are seeing and it will mean constant news flow from dozens of drill hole assays. We note their new online investor presentation calls for about 35 diamond drill holes at Rozino…only 4 have been announced so far!
The share structure will help create the potential for strong price moves if the stock gets more eyeballs. If you look at the Company’s news releases, directors have been buying chunks of shares at $0.25 and $0.075. Initially, Velocity had fewer than two million shares out but had some debts. Management cleaned up its debts with a private placement which resulted in 14 million new shares and 14 million warrants, priced at $0.075. Velocity issued another 18 million shares to buy its current portfolio of assets which are held by the Velocity founders and are in super escrow.
All of its 14 million warrants were exercised, putting about $1 million in its treasury, and the 14 million shares that went to the founders are now in escrow. The deal also involved a private placement at $0.25, which raised another $2.1 million. Most of Velocity’s shares are held by the founders of the private company and cannot be traded for a long time.Little of the free trading stock was acquired for less than $0.25, which creates a strong support for shares at that price. The Company will likely have to do another round of financing shortly, as the $3 million raised will not last long given aggressive pace of drilling and sampling at its two projects, while employing personnel to work the Chala mine data. Given this capital structure, the share price should move up on good Rozino results and attract more investors at a higher price than previous financings. We expect the rest of the initial drilling results at Rozino to trickle out and be used to secure a top-up financing ($1 to $2 million) from some strategic investors so they can keep the drill rigs turning and news flowing for investors.
Besides +6 months of planned drilling at Rozino, Velocity’s flagship project, the Company is also exploring the Ekuzya project, which straddles the Chala mines southern boundary and is located within the mining concession. It has been explored before in the 1980s but previous exploration was focused on base metals and only. When Gorubso did some trenching in the 1990s, they encountered significant gold results. They’ve never drilled this as the property is only a few hundred meters away from the Chala mine underground development and they’ve been focused on mining and not exploration. Hence Velocity’s strategy and the deal at Ekuzya is that Velocity can earn into 50% of the project by spending $1 million on exploration. Pretty sweet deal to be in bed with such a strong mining partner.
As a part of its option at Ekuzya, Velocity also received a 12-month exclusivity for due diligence at the contiguous Chala Gold Mine to negotiate with Gorubso to acquire an interest in the Chala Mine. Currently, Velocity is compiling, assessing, and digitizing all of Gorubso’s data from 10 years of mining at the Chala gold mine. The goal is to understand the extent and nature of Chala’s high-grade gold mineralization and introduce modern mining expertise to find more. Once, the Company has gone through the data and figured out a plan, the partners will forge a deal for a possible working relationship. We don’t believe Velocity will be too anxious to do much exploration work at Ekuzya until it has successfully negotiated a deal for an interest in the Chala mine due to the two projects being contained within the same mining concession.
These results from its flagship Rozino project are just the proverbial tip of the iceberg when it comes to determining the value of Velocity. The Company is proving their exploration model by pulling out results that were missed by previous drillers. Second, the Company has exploration potential at its Ekuzya project and finally, the Company has partnered with an experienced mining company that knows the region well and happens to be the first (and only) company in Bulgaria to have secured a cyanide operating permit and since 2011 has operated the Kardzhali CIL processing plant. These factors plus the Company’s tightly held share structure will create market activity and we antipcate this Company will be the new kid on the block and taken under the wing of the newsletter crowd that loves the stability of mining in Eastern Europe.
In our opinion at CAD $0.32/share, Velocity certainly “Makes the Grade.” We will be buyers in the market.