Things are certainly looking up for Andes Gold. Corp. (PINKSHEETS: AGCZ) as the gold mining company with operations in Ecuador climbed to a 52-week high of 0.0719 on Monday with trading volume topping the 4.2 million mark. Triggering the spike in share price and volume was AGCZ’s press release on Friday that detailed the company’s financial standing for the year ended December 31, 2011.
It’s hard not to be impressed by a 50% increase in year-over-year revenue and with AGCZ reporting total revenues of $4,447,521 for the 2011 they actually posted an increase of 52%, up from $2,926,000 for the year ended December 31, 2010. More importantly, AGCZ reported net profits of $521,294 for December 31, 2011 compared to $257,289 in 2010, an increase of 103%.
What has been exciting investors is the fact that AGCZ remains aggressive in their mining operations; while their present mining efforts extract and process approximately 50 ounces of gold per day they are looking to increase that total to 100 ounces of gold per day by the end of April. Obviously with gold prices remaining at a strong level the increase could dramatically improve the company’s balance sheet.
AGCZ’s current balance sheet is already in pretty good shape as they noted in Friday’s release “the company reported assets of $2,984,538 and liabilities, including amounts due to related parties, of only $939,315, creating a healthy 3:1 asset to debt ratio.”
As with any small company investors want to see potential and by all appearances AGCZ has that quality, opening the door for additional revenue from their processing of third party ore at their company-owned mill located near their gold concessions in southern Ecuador. Robert Talbot, CEO of AGCZ, has stated that the mill is currently taking in third party ore and processing approximately 20 tons a day and they have the capacity to process 150 tons of ore per day.
This is significant given the fact that Talbot has said AGCZ averages one ounce of gold per ton of aggregate so even if they boost their own total of gold per day to 100 ounces they will still have the ability to process third party ore and generate additional revenue.
Not lost on investors is the approach AGCZ has taken in identifying proven reserves, something Talbot clarified in the company’s March 29, 2012 press release when he stated, “For Andes Gold, we don’t consider reserves ‘proven’ until our mining efforts have reached the gold and we’ve had an assay study done showing us the concentration of gold, its purity, and the extent of the vein.” That being said, Talbot went on to say, “Right now we have proven reserves of over 300,000 ounces. This is gold that we have found, tested and are currently mining.”
The fact that AGCZ has significant proven reserves and can process an ounce of gold per ton of aggregate means that not only do they have valuable concessions but that they can extract and process that gold profitably.
That’s not all though, Talbot continued in that March 29, 2012 release, “In addition, we have located additional reserves on site and have been evaluating these reserves. We expect that, once the evaluation is completed, and the new ore is tested, our proven reserves will increase substantially.”
Some may wonder if this all sounds too good to be true, can AGCZ really be in such a favorable position and still be trading at such a low level? Those questions pick up in intensity when you look back at AGCZ’s press release on March 25, 2012 in which the company detailed their current operations and outlook for the future. In that release AGCZ stated that their two gold concessions in southern Ecuador have “proven reserves of approximately 395,000 ounces of gold. At today’s prices, that represents a value of over $600 million in potential revenue based on an average price per ounce of $1650.”
That’s nearly 100,000 ounces of gold more than what was described as proven reserves just four days later. Perhaps some clarity will help the situation and AGCZ has said they plan to move forward with “regular and consistent communication.” A steady flow of press releases is a great way to keep AGCZ in front of investors and drum up interest as well as shareholder value. AGCZ has acknowledged that in the past they have been discreet in their communications regarding their operations, for strategic reasons, but Talbot has said they are now in a position where the company is “secure in our positions such that we believe it appropriate to implement a program that provides investors with greater insight into our operations.”
Again, on the surface things look positive for AGCZ and if they are able to actually increase their total ounces of gold processed from 50 to 100 by the end of April then their financial position should look remarkable. It should be remembered by investors that the revenues from year ended December 31, 2011 didn’t include AGCZ’s processing of third party ore as those operations only began this quarter. The fact that this revenue, along with their own increase in gold production, possible additional concessions and their own processing mill make them a company that’s hard to ignore.