Thursday Report

In keeping with attempting to post a comment weekly, it looks like Thursday is the day this time around.

source: http://www.jsmineset.com/2011/07/06/in-the-news-today-913/

Note that the number $1444/oz. U.S. on the illustration is the exact number of the halfway point in the daily gold price chart since GBN.V started producing gold. This was on the daily gold price chart in $CDN posted last week. In using this average number, you can conduct your due dilligence by calculating to the best of your ability what the company is worth.

Corporate Materials Quote

From the corporate materials subsection of the company website, you have some very good sources of information on just how much the company is worth based on various prices of gold, production costs, currency impacts. The company was attempting to stave off declines in the share price by revealing some of the information that had been omitted up until that time. The presentations make a good starting point to undertake a due diligence before reading all of the news releases and technical reports.

The company had known by the time a new NPV was calculated that it would likely be producing 70k+ oz. per year. This is a mill rate of 700 tpd @~9g/t. They also took into account a $900/oz. U.S. gold price.

These numbers are recent enough that they will not vary greatly unless the gold price goes much higher, which it has.

(from the Sept. 2008 presentation)

The payback period will be foreshortened, and the company will probably add projects (Amisk/Jolu - Decade) As you can see, cost per ounce is quoted variously in the high 300's to the low 400's.

You can see on the Jolu/Amisk mine plan from Carona/Mahogany minerals an open pit at surface on the Amisk zone, but the deposit is part of an extension of the Rod Zone.

http://www.goldenbandresources.com/i/pdf/gbn-agm-2008-ppt-show.pdf

In reviewing those mine plans, the Saskatchewan Minister Of Energy And Resources website detailing Mallard Lake deposits, these mine plans clarify what they're describing:

Jolu

"8 May 1986 920,000 tons grading 0.6 oz/ton Au (cut and diluted)."

That's 500k+ oz.

"1986 Property reserves: at least 450,000 tons Mahogany Minerals

of ore grading 0.74 oz/ton Au. Canadian Premier"

http://www.ir.gov.sk.ca/dbsearch/MinDepositQuery/default.aspx?ID=1877b

Decade:

"1 February 1988  Reserves above the 800 ft level: 390,000  Royex Gold Mine
                 tonnes grading 0.34 oz/ton Au.            - Northern Miner"

http://www.ir.gov.sk.ca/dbsearch/MinDepositQuery/default.aspx?ID=0901

That's ~132koz.

Since the gold price is 60% higher than foreseen in the new NPV calculation, its probable that the IRR will be proportionately higher, reaching 200% easily should the gold price continue to rise.

Pre-Production Costs

•

Production Financing (per April ‘08 PEA)

• Primarily debt instruments with possible equity

component dependent on market conditions (including repurchase of Santoy minority interests)

$38,000,000

As it turns out, the company did not use that much in the way of debt instruments and used equity financing. If the company is operating @700tpd as of now, then the payback period could be finished by early fall, far ahead of schedule, which co-incides with the payback of Sprott.

Environmental Permissions

Environmental Permissions for Mill zone deposits have been in place since the 1980's which were transferred to GBN.V when it finally took over the properties in 2002 and were re-instated by the province in 2007:

http://www.environment.gov.sk.ca/2007-108MinisterialDecision

Identifying The Factors

The factors that drive arbitrage price theory are as follows:

"As a practical matter, indices or spot or futures market prices may be used in place of macro-economic factors, which are reported at low frequency (e.g. monthly) and often with significant estimation errors. Market indices are sometimes derived by means of factor analysis. More direct "indices" that might be used are:

• short term interest rates;
• the difference in long-term and short-term interest rates;
• a diversified stock index such as the S&P 500 or NYSE Composite Index;
• oil prices
• gold or other precious metal prices
• Currency exchange rates"

So you can see why with a decline in short term interest rates, a zero, or negative interest rate directly affects price arbitrage in stocks like GBN.V, or why when gold prices are up, that gold mining shares are down. It all has to do with Arbitrage Price Theory.

It also determines when GBN.V can release news, which is highly likely to be on a rise in the discount rate, to be followed by a decline in share price.(or sometimes news is released after hours if interest rates don't comply) Or why, perhaps a nickel company with no relation to GBN.V has seen the same rise and decline in share price. Its because the whole index is shorted. Netolitzky is either a player in price arbitrage, or defers to the big money players in price arbitrage.

Very likely big money players in price arbitrage will not have anticipated negative interest rates. The stock has become unusually oversold as if in a crash - this is not what you would expect for a company in commercial production.

http://en.wikipedia.org/wiki/Arbitrage_pricing_theory

Peter Coven, Financial Post

"Citing data from the Society of Economic Geologists, Ms. Curtis noted that the number of deposits and total ounces found peaked in the 1980s “and have been steadily declining ever since.”

Additionally, the cost of discovery has increased from US$10 per ounce in the 1980s to more than US$47 an ounce in 2009, and there has been a decline in the average gold mining grade from 10 grams per tonne (in 1965-1975) to less than one gram in 2008, according to the data."

http://business.financialpost.com/2011/07/07/high-quality-gold-discoveries-becoming-more-precious/

http://business.financialpost.com/2011/07/07/gold-stocks-to-outsparkle-gold-in-post-qe2-world/

Note: The company should, at the very least be able to produce gold at the previous world gold grade average of 10g/t..

-F6