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Orca Gold: location, reputation, and cash in the bank could equal next Red Back Mining

Published: 10:05 23 Jul 2013 EDT

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Orca Gold Inc. (CVE:ORG) might be a new company, but the Vancouver-based junior explorer comes with a pedigree its many competitors can only envy, being one of the direct descendents of Red Back Mining, best known for its major discoveries and subsequent billion-dollar acquisition by a tier one producer.

The project itself could be seen as a continuation of sorts of the earlier company in that Red Back Mining also focussed its attentions on Africa, operating both the Chirano gold project in Ghana and the Tasiast gold mine in Mauritania, where one of the biggest discoveries in decades caught the eye of market giant Kinross Gold Corp. (TSE:K) (NYSE:KGC). The Canadian-based mining-giant bought up all outstanding shares of Red Back in August 2010 for a price tag topping $7 billion – a number that came in at 15 per cent above the cost of Red Back stock at the time

Unusual for a company of its market capitalization, Red Back had a very lean corporate staff, five of whom decided after the company’s obligations to Kinross had been discharged in mid-2011, that they wanted to continue working together.

So is Orca Red Back Mining, version 2? “Let’s hope so, that would be awesome!” says president, CEO, and director Simon Jackson.

The new company is in the happy and unusual position of not needing to raise money for exploration -- which Jackson allows would be “tough” in this market -- due to funding stemming from the reverse takeover of Canaco Resources Inc, a junior miner focused on Tanzania, which left the company with a treasure chest of $60 million.

Orca’s options amount to an embarrassment of riches: the land available to the team is highly prospective, the site of historical mining “to Pharoanic times,” and more recently, to extensive activity from many artisanal miners.

The company has used the work done by these previous miners to provide targets for further exploration, even taking the expedient of examining detailed satellite imagery to identify areas of previous disturbance.

“There are numerous of these types of targets,” says Jackson. “Our challenge here is prioritising these artisanal targets; we’re working through those.”

The land that Jackson describes as “phenomenal” is also vast, with Orca’s three packages, (Blocks 14, 67, and 68) together constituting a holding in excess of 20,000 sq km. Block 14 alone constitutes an 8,000 sq km licence. The chief executive describes the area as “real Wild West stuff”, proffering the information that at the furthest reaches, crews have come across ghost towns “that no-one knew were there.”

“We sit here now with just over 20,000 sq km of land in Sudan that has never been explored by a Western company, $60 million in the bank and the Red Back exploration team on the ground in Sudan exploring.”

“We think we’re probably onto something; we’re doing work to assess the size and scale of our first asset and in the meantime we’re looking for our second.”

For now, drilling has ceased due to a combination of Ramadan and the heat of the time of year as well as the backlog of 8,000 samples outstanding, or as Jackson puts it, “We’re taking a break to let ourselves get caught up and get some ideas. Some results are coming down the line that will give more information about the potential size and scale [of the asset].”

Although Jackson stresses the plan for Orca is not that it only have a focus on Sudan, he points out that the east African country is an excellent place to start.

Officially termed the Republic of the Sudan and sometimes called North Sudan to distinguish it from the new nation of South Sudan, the Arab state has a troubled past and it is to this that Jackson attributes the dearth of exploration conducted on  the exposure of Precambrian crystalline rocks that runs through nine nations, known as the Arabian-Nubian Shield, thus far.

“We decided that the best place in Africa to go looking for gold is the Nubian Shield because it’s so underexplored and the most underexplored portion is in Sudan because no one has been in there [owing to local troubles].”

Jackson says he has every expectation that the country will soon be a site of great interest as its troubles recede into the past. “Part of our strategy here was to be one of the first movers. Politically and on an international scale, Sudan continues to improve -- other companies will be drawn to those rocks.”

Even now other gold exploration companies are busy at work in Sudan, with Jackson mentioning “around 5” in the area.

Orca Gold’s spending in Sudan is likely to clock in this year somewhere in between $5 million and $7 million, although that budget is highly variable, and as the CEO says, “we recognize that given the current marketplace we can take our time and do the work thoroughly and prudently. It’s methodical exploration of what is a very prospective massive land position.”

So why would the investor willing to put money into the junior mining space choose Orca Gold over the next company?

“We have three things the others don’t: We’ve got a very prospective land position. The property’s size, location, the fact that it’s had no modern exploration on it in its history - - those opportunities just don’t come up anymore. I can’t think of anywhere else in the world where you could have a land position like we’ve got. 

“We also have the Red Back exploration team doing the exploration – these are the guys that found Tasiast, these are guys who have found mines before,” he adds.

Finally, perhaps most importantly in today’s distressed junior market, is the fact that the company is cashed up. “So we’re not going to dilute anybody and we don’t need to do anything for years.” That is, the company can bide its time until conditions suit.

With its mix of location, reputation, and money in the bank it will be interesting to see where Orca Gold goes from here.  The company’s shares are trading at around 48 cents, giving it a market cap of just over $51 million. 

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