Golden Arrow Resources Renegotiates Indiana Project Deal; Ready for Drilling and a Potential New Precious Metals Bull Market

The Critical Investor provides an update on this explorer's Indiana project in Chile.

Golden Arrow Resources Corp. (GRG:TSX.V; GARWF:OTCQB; G6A:FSE) recently came out with some pretty interesting news on its Indiana gold project in Chile. The company managed to amend the definitive agreement with the property owner, Mineria Activa (MSA), a Chilean private equity investment management firm focused on exploration to production-stage assets in mining. Golden Arrow now has the right to earn 100% of Indiana over a 74-month period, expiring in December 2024, and the total cost of US$15.1 million has not changed.

However, the payment of US$1 million due to the end of 2019 was reduced to US$150,000, and the subsequent payment of US$2 million due in one year is reduced to US$200,000. Another great advantage is moving US$7 million of the total US$15 million payment obligation for the 25% MSA interest during production after a production decision, meaning that MSA will be bearing execution risk now. This is obviously a great advantage to have as hard dollar commitments have been scaled back significantly this way, and that money can be spent at exploration.

I was interested in the fact that this agreement could be adjusted so considerably after a relatively short period of time, during what seems to be the first innings of a new precious bull market. After asking VP Exploration and Development Brian McEwen a number of questions about this, he had the following insights to share:

"Indiana is a narrow vein project with very good potential for expansion of resources, and when you include the possibility of adding ounces from surrounding prospects of very interesting targets. The difficulty in projects like this the cost of proving up resources. It is very expensive to drill it off to the required spacing to meet 43-101 standards. Given this point we went back to Mineria Activa (the vendor) and said we are willing to honor our total commitment to pay $15 million for the project, but with a different strategy of initially drilling off enough to prove up a feasible operation and then making the payments out of cash flow.

"At first they were not interested in this option as it means they need to accept some of the mining risk, which before they did not. We presented a staged plan with the possibility of obtaining a mining partner and said we would start right away with mobilizing a drill this month. Mineria Activa are reasonable partners and accepted the proposal. This is all very good for GRG as we now have two years to prove up a workable plan requiring minimal vendor payments. We also now earn 100% of the project, where before Mineria Activa had the option to maintain a 25% interest."

On my follow up question of what really changed, as the needed dense grid spacing was probably apparent from the start, both for GRG and the vendor, Brian answered:

"We went back to square one with the drill hole data and questioned some of the interpretations, mostly this had to do with the size and extent of the high-grade ore shoots. This needs to be tested. At the same time, we had the idea that if we can delineate high-grade ore shoots with enough certainty, why not start to mine them and create cash flow. If we can do this, we can pay the vendor without having to raise money in the market. At the same time, we can be expanding our resources in the area. This idea of mining first, pay second was presented to Mineria Activa and after a period of negotiations, we came up with a new deal."

So, it probably boiled down to the fact that geologists can only do so much due diligence for an agreement, and when an exploration program is being set up, they go much deeper into the available data, and can run into unexpected conclusions. After this I asked Brian if he has a good idea of staging in their new plan for Indiana now. He stated:

"Staging now is:Define high grade tonnage in ore shoots through initial 2,500m program for approximately 160K ounces