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Carpathian Gold has the largest undeveloped gold deposit in Europe, and with Forbes and Manhattan's recent takeover of the project, it is now in the hands of experienced mine developers

Carpathian Gold Corp. ( CNSX:CPN) ( OTCMKTS:CPNFF) has the largest undeveloped gold deposit in Europe, and with Forbes and Manhattan's recent takeover of the project, it is now in the hands of experienced mine developers.

Listen to the podcast interview with Scott Moore:
James West: Scott, thanks for joining us today.

Scott Moore: Thanks for having me, James.

James West: Scott, give me an update on what's happening with Carpathian Gold, and how Forbes & Manhattan came to be involved.

Scott Moore: Yeah, I guess it's a bit of a lengthy story. We've certainly over the past about four years, been looking at the Brazilian asset that was in Carpathian Gold, and certainly had teams down there looking to acquire the asset when it ran into a little bit of I guess operational or build issues. And at the same time always kind of slightly coveted the Carpathian asset in Romania, based on its size, you know, it's quite a substantial resource; second-largest gold asset in Europe.

James West: What is the resource?

Scott Moore: You're looking right now at about 7.2 million ounces of gold and about 1.5 billion pounds of copper.

James West: Wow. And what's the grade?

Scott Moore: You're looking at a low-grade, bulk tonnage operation, average grade of about 0.8 with about 0.25 or so kicker of copper. And the original feasibility, or at least the preliminary economic assessment, was running at 40,000 tonne a day operation. So there are some high grade operation potential, so that's one of the things we'll be looking for as we move into feasibility: opportunity to build a smaller, tighter, starter-type project with a lower CapEx, and then build over time.

James West: So the Brazilian asset was sold out of the company?

Scott Moore: Yeah, so that gave us, I would say that over the last three years we put bids into Macquarie at least three times to purchase Rovina Valley out of Macquarie, and of course Macquarie never actually put Carpathian into any kind of process, and then ran the operation to try to maximize the value of the Brazilian asset, and then on the announcement that Carpathian had divested Brazil to Brio, which is a 100 per cent owned subsidiary of Yamana, left Carpathian with Rovina Valley, not really a management team in place, $1 million in the bank and obviously there was an opportunity to approach the company and make a bid to put money into the company and provide a management team and take them forward.

James West: Okay. So now, where does the Romanian asset sit in terms of - didn't Barrick make an investment in that at one point?

Scott Moore: Barrick made an investment back, I think, in 2009, when they bought 9 per cent of the company for $20 million. So this was a not-insignificant price to pay, certainly in the heady days of the mining industry back then, $20 million wasn't big money for a company of Barrick at the time. But you know, the size and scope of the project, at least on the preliminary economic assessment basis, 380,000 ounces of gold equivalent production for 17 years. Long life mine, good exploration potential beyond what's there now, it's a discovery made by Samax, which is the Carpathian subsidiary in Romania, and it's the only deposit in Romania that's 100 per cent owned by a private company.

So the other companies, like Gabriel, of course, we know about; Eldorado's Certej project, these were past government owned, state owned agency projects. So it's 80/20 for both those projects with the government, where this one was a discovery made by Carpathian's team in Romania, so it's 100 per cent owned, which is a little bit different. You don't have that legacy of this was a state-owned asset divested to some private company; this was a discovery made by Carpathian's own team in Romania.

James West: Yeah. Okay, so are there any political issues that you foresee in Romania along the lines of what Gabriel dealt with?

Scott Moore: I don't think that along the lines of Gabriel; you know, Gabriel is a very large project. Again, that's the largest gold mine potentially in Europe, with a lot of archaeological resources, a lot of bulk tonnage cyanidation, heat bleach asset, whereas the project we have in Rovina is much smaller, much tighter. You don't have the archaeological remains around there, you don't have a Roman town built on it, you don't have to move a city. And you can use conventional flotation technology to make an upper gold concentrate and ship it to a number of smelters, but primarily in the pre-feasibility sent to the Freeport smelter in Spain. So not like arsenic the laden smelter that's got to go to another smelter like Tsumeb. Chelopech sends their con to Tsumeb in Namibia. It's not like that.

So again, you have a much tighter project. So we don't feel that we have the political headwinds, as it were, with Gabriel. And in fact, in May of last year, 2015, Rovina and Carpathian was granted a mining license for the project. So that starts the whole permitting process.

Now, that license has to be ratified by a number of departments within Romania, which is an ongoing process, and of course last year there was a change in government in Romania and elections are coming up in November of this year. So our focus will be to understand the issues revolving around getting that license ratified and essentially gazetted in Romania, and we believe that our experience in eastern Europe and Ukraine in particular, and Russia, we certainly have experience in eastern European countries and believe that we can work the right balance to satisfy all the agencies that we've done a good job and a proper job to get that license ratified.

And we look at this kind of like the same as, where does Forbes do a good job? Find an asset that has a little bit of hairs on it but with a good resource that would get turned into a real mine. This reminds us of Sullivan; at the time we took over Sullivan, it had a litigation for seven years, it was a mess, you had to get -

James West: Terrorists.

Scott Moore: Terrorists, drunk guys, whatever it was, you had to get through that. We got through that, we did a proper engineering study, proper environmental impact study, got the permits, and ultimately before we were able to build, it was taken over by Rio Alto and then Rio Alto was subsequently taken over by Tahoe Resources. So it fits our model of what we like to see; you know, Avion in Mali was the same thing. You had a mine there from Nevsun, didn't work. We had to do the technical work to turn it around. So that's the opportunity we see: we've got a big resource, big junky resource, low grade, but again, a big bulk tonnage operation can work there in stages, and if we come into a good bull market, it's an excellent project.

James West: Right. So the other elephant in the room is the 750 million shares outstanding?

Scott Moore: Well, I think post-closing it's like 904. That's a big number, and no, at some point, and of course we're also listed on the Canadian Securities Exchange which is through the whole Macquarie management of Carpathian, they took it off the main board and dropped it down to the CSE to save costs and fees and such. So we're looking at opportunities to take us back to the main board and look at what we do, at some point, certainly up to shareholders whether we have a consolidation back to a more manageable Canadian-sized company, not a Aussie company as it were.

James West: Yeah, right!

Scott Moore: At 900 million shares would be great on the ASX, but the TSX is perhaps a little different.

James West: Yeah, okay. So now what's the timeline that we can expect to see go into the development of this project?

Scott Moore: Certainly we'll spend, we've already started, but in the next three or four months to get that mining license ratified. That'll be our number one goal, while we put together the technical team, and then move towards a full feasibility study over the next twelve months, taking into consideration some very good work done on the resource and the current preliminary economic assessment.

But once you have that mine license ratified, it starts the whole process for all the permitting for the project, for the construction license, the EIA and everything. So that'll be part and parcel, in tandem with moving with the feasibility, doing the entire permitting work and all the social work and environmental impact studies that you would need to get that construction license granted concurrently with moving fowards on the feasibility study.

James West: And so now, so Barrick put in $20 million; how much in total has gone into this project before you guys got it?

Scott Moore: I guess, certainly Macquarie had put $250 million in, primarily to Brazil. So I don't think - I'd have to look at exactly what's happened on the financials, but there hasn't been an awful lot of money spent on Romania other than, they did drill 140,000 metres, so there's been a good, and a good PEA done. So in terms of the engineering work and the resource, and the drilling on that has been quite a bit of money spent on that. I'm sure that's where the bulk of Barrick's money was spent, specifically on the Rovina asset. But the bulk of the company, the money has been spent, several hundred million dollars, unfortunately sunk into Brazil.

James West: Right. So now, so there's nothing in Carpathian in Brazil anymore?

Scott Moore: Yeah. So the transaction closed on April 28, where a Yamana subsidiary named Brio, which we all know, is now holding the bulk of the Brazilian assets, purchased the RDM mine from Macquarie and from Carpathian for $45 million and wrote off the balance of any debt owed to Macquarie, and Brio had to put $1 million USD into Carpathian by way of a private placement.

James West: Okay. I saw that. The private placement was at $0.015.

Scott Moore: Yeah. $0.018, so 70 million shares.

James West: And you guys put money in at...

Scott Moore: $0.07.

James West: Right. Which strikes me as a very non-Forbes & Manhattan kind of transaction. You guys pay the less and the next guy pays more.

Scott Moore: Well, I guess we like good assets, and whether we pay $0.04 or $0.05 or $0.07, this is either going to be worth $5.00 or it's not. The assets of this quality and this size are extremely hard to come by. When we took over Verena Minerals in Brazil, they had a million ounces and we did a market deal at whatever, $0.25, $0.35 at the time, and then we drilled out 8 million ounces, and Belo Sun is now a $350 million, $400 million market cap company. So in this situation, we don't have to do that quality of drilling to add those ounces, they're already there, but the hairs on the project were the permitting, the lack of capital to spend on Romania because they were focused on trying to turn around Brazil.

So it just gave us the perfect storm, and whether we end up paying, pre-money, $10 million more or $15 more, at the end of the day it's either going to be worth $1 billion company or it's not. So paying upfront $0.01 or $0.02 is really small potatoes in the scheme of things.

James West: Right. Great. Let's leave it there for now; we'll come back in six months and see how you're making out. Thanks for your time.

Scott Moore: Okay, thanks, James. Appreciate it.
James West is an investor and the author of the Midas Letter, an investing research report focused on Canadian markets.The views expressed on this podcast - edited for clarity, brevity and compliance with securities laws - are his own and are presented for general informational purposes only. They should not be construed as advice to invest in any securities mentioned. James West and/or associated funds do not own shares in any securities mentioned in this article. For the full Midas Letter disclosure policy, click here. Postmedia and Midas Letter have a revenue sharing arrangement.

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Podcast: Carpathian Gold CEO Scott Moore on building the next gold mine in Romania

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Carpathian Gold has the largest undeveloped gold deposit in Europe, and with Forbes and Manhattan's recent takeover of the project, it is now in the hands of experienced mine developers Carpathian Gold Corp. ( CNSX:CPN) ( OTCMKTS:CPNFF) has the largest undeveloped gold deposit in Europe, and with Forbes and Manhattan's recent takeover of the project, it is now in the hands of experienced mine developers.