It could be one of B.C.'s biggest gold discoveries – but neither the market nor regulators trust it.
On June 28, Vancouver-based Barkerville Gold Mines Ltd. (TSX-V:BGM) announced an estimate of 10.6 million ounces of high-grade gold at its Cow Mountain deposit. Within a day, its stock jumped 50%. However, as of press time, company's stock had not only lost those gains but slid further.
"The market's really skeptical, and I'm somewhat skeptical as well," said analyst Matthew Zylstra of Northern Securities, who covered Barkerville until April, when Northern Securities dropped coverage.
Zylstra said Barkerville's stock isn't trading based on a normal valuation of the gold estimate.
"This thing is valued at $12 or $13 an ounce when you'd expect it to be worth $50 to $100 an ounce," he said last week.
What's causing the distrust?
"It's just the sheer size of [the deposit]," he said. "10.6 million ounces is a hell of a lot of gold."
Zylstra said he, like the market, is waiting for the company to release a second report, due within 45 days of the first, that will detail the methodologies used for the estimate.
"If you're at all nervous about the numbers – which the Street is, and I've got a lot of questions, too – wait for that report and it should give you the details."
Geologist Brent Cook of resource publication Exploration Insights, also questioned the likelihood of the estimate being accurate.
"It's a pretty astounding resource," he told Business in Vancouver. "[It] ranks as one of the biggest gold discoveries in the decade at least."
Cook emphasized that his concerns weren't about fraud but rather the geostatistical methodology used to calculate the resource estimate.
"Was it appropriate for this type of deposit?" he asked.
On July 12, Barkerville revealed that the BC Securities Commission (BCSC) had been asking some of the same questions and had requested additional information to support the indicated resource estimate. Barkerville further disclosed that, after seeing that extra information, the BCSC expressed concerns that the estimate was "inadequately supported" and "estimated in a manner that appears contrary to normal industry practice and therefore could be construed as misleading."
Barkerville confirmed that it would file a technical report with details about its methodology "as soon as possible" to respond to the BCSC's concerns.
"The company ... is confident that the supporting appendices to [the company's] draft technical report, which had not been completed and provided to the BCSC in the first instance, will adequately address the recent comments from the BCSC," the company said in its July 12 update.
Barkerville Gold did not acknowledge multiple phone and email interview requests.
In the company's June 28 resource estimate release, Barkerville president and CEO Frank Callaghan conceded that managementhad "received heavy opposition to the expanded drill program this past winter from the brokerage community as reflected in Barkerville's share price."
But he added that "we believed strongly in our team of highly skilled geological professionals and are proud of our results."
Last month, the BCSC fined one of Barkerville's then-directors, Farshad Shirvani, after he admitted to making "materially false" filings for Casa Minerals Inc., Doubleview Capital Corp. (TSX-V:DBV) and Next One Capital Corp.
Shirvani has since resigned as a director of Barkerville. •
