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Golden Arrow Makes a Big Jump from Junior to Producer -- SECFilings.com

By Editing NAI
04/18/2017 4:10 p.m.

Golden Arrow Resources Corporation(TSXV:GRG)  

SECFilings.com, a leading financial news and information portal offering free real time public filing alerts, recently published an article discussing Golden Arrow Resources' (TSX VENTUREGRG) recent joint venture deal and the impact on the company as it makes the major transition to becoming a producer.

Golden Arrow Resources recently announced a joint venture with Silver Standard Resources -- a $1.3 billion major -- that marks a milestone move from explorer to producer status. In addition to a $15 million payment by May 30, representing its share of profits from the mine since October 2015, the company will receive a 25% equity stake in Silver Standard's Pirquitas mine in Argentina and have a clear pathway for its Chinchillas project.

Under the terms of the deal, Silver Standard gains access to Golden Arrow's Chinchillas project that sits about 42 kilometers away from its open pit Pirquitas mine and is rapidly running out of ore. The Chinchillas project will have easy access to the mill, processing plant, and other equipment as a way to keep production costs exceptionally low. Golden Arrow will benefit from ongoing revenue sharing without the full cost of developing the mine on its own.

The move will also make Golden Arrow one of the few silver pure-plays in the market with its share of output equivalent to roughly two million silver equivalent ounces. This could become an important feature for investors interested in the silver market without necessarily having exposure to other precious metals, as is common among producers.

Golden Arrow and Silver Standard estimate that the Chinchillas project could be developed into an open pit mine capable of producing the silver equivalent of 8.4 million ounces per year over an eight year period at a cash cost of $7.40 per ounce. After tax, the mine could yield a 29% internal rate of return and a $178 million net present value using a 5% discount rate and metal prices of $19.50 per ounce of silver, $0.95 per ounce of lead, and $1.00 per ounce of zinc.

In terms of a timeline, Silver Standard believes that it could begin construction during the third quarter of this year and have the Chinchillas project shipping ore by the second half of next year. Total capital expenditures should be limited to $81 million, which would include a $16 million contingency. This means that the company's shareholders could begin seeing some initial revenue come in as early as next year from the project with a limited cash outlay.

The long-term potential impact on revenue is determined largely by silver prices. In light of the study, the project has excellent leverage to silver prices and really excels with prices of more than US$20 per ounce. The company will face around $20 million for its share of capital expenditures, although that's offset by its $15 million payment as part of its JV and its existing cash and equivalents of C$8.8 million, as of September 30, 2016.

Finally, it's worth noting that the political risk of operating in Argentina has decreased with the new business-friendly regime under President Mauricio Macri. Management's experience in working within Argentina also bodes well for the success of the project.

Golden Arrow CEO Joseph Grosso has been actively involved in Argentina's mining sector since 1993 and was named the country's Mining Man of the Year in 2005. Over the years, Mr. Grosso and his team discovered the Gualcamayo project that's now controlled by Yamana Gold Inc. -- a $2.7 billion major -- and became involved in a legal battle over who rightly discovered the Navidad silver deposit owned by Pan American Silver.

Chinchillas was originally acquired back in 2011 for the equivalent of roughly $1.9 million in cash. In the years afterwards, the company's management team established an indicated resource that amounted to 104 million ounces of silver equivalent. Silver Standard came along in 2015 and began working through a more than $13 million work program to prove up the resources, advance permitting, and move the project to a pre-feasibility stage.

Grosso's management group also runs two other Argentinian businesses -- Blue Sky Uranium Corp. and Argentina Lithium & Energy Corp. -- which have made tremendous progress in their own industries.

Please follow the link to read the full article: http://analysis.secfilings.com/articles/161-golden-arrow-makes-a-big-jump-from-junior-to-producer

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