Things are finally looking up for CORE GOLD INC (OTCMKTS:CGLDF) after trading in a range for the better part of the year. Price action is pointing to further movements on the upwards as the stock threatens to break out on improving investors sentiments.News about high-grade Gold results and discovery of a second high-grade Au structure at The Linderos Project in Ecuador is the latest catalyst that has strengthened investor confidence on the stock. However, the company’s high debt levels is a concern that could affect its sentiments going forward. CGLDF Daily ChartWith the stock currently trading in an uptrend, it needs to close above the $0.29 level to affirm the emerging bullish trend. On the downside, immediate support is at the $0.22 handle, below which the stock could drop to this year’s low of $0.19 a share.Given that trading volumes have already surged to highs of 2 million, it looks like the stock could continue powering high going forward.What Does Core Gold Do?Core Gold bills itself as a mining company. The company is engaged in the exploration and development of concessions in Ecuador. It is currently focused on Gold production through its wholly owned Dynasty Goldfield project at Zaruma mine in Ecuador.The development stage company also owns other significant gold exploration projects in Southern EcuadorDiscovery Of High-Grade Gold StructureThe discovery of 10 additional trench results in addition to the previously announced 29 trench results, at the Linderos gold project in Southern Ecuador, is the catalyst pushing the stock up the charts. The two sets of trenching results provide, compelling evidence of high-grade mineralization reported over a 150-meter strike.The discovery of a second high-grade gold bearing structure further expands Core Gold footprint of high-grade mineralization to the south of the Linderos project.
“These additional high-grade results along with the extension of structure […] strongly support our thesis that Linderos represents a uniquely high grade, near the surface gold mineralized body. That is striking both in terms of its average grades of almost 10 g/ton within the high-grade shear structures as well as the very large footprint of gold mineralization that has markedly increased the probability of defining a gold deposit,” said CEO Keith Piggott.
Core Gold is in the process of pursuing permits which if granted will pave way for it to test the depth of the mineralization and confirm its geological model.Soaring Debt Levels Core Gold’s has been aggressive in the debt markets, as it continues to look for additional capital to fund the development of its gold projects in Ecuador. The mining company has already confirmed plans to conduct an offering on a non-brokered private placement of up to 14.2 million units, priced at $0.30 a unit.Each unit on offer consists of one common share of the company and common share purchase warrant. The company expects gross proceeds of about $4.3 million. Part of the net proceeds is to be used for the restoration of the company’s wholly owned Ecuadorian subsidiary Elipe S.A’s.Core Gold has been in discussions with local liability holders as part of an effort that seeks to normalize payables and stabilize operations at Elipe S.A.
“If the Company was not for any reasonable to rectify the situation in a timely manner, there is a risk that the Representative could take legal action against Elipe, which could involve, among other things, dispositions of assets in order to fund outstanding liabilities,” Core Gold in a statement.
The representative has already agreed to restore Elipe back into good corporate standing, on Core Gold making additional payments that have lowered local liabilities.Late last year Core Gold issued 4.1 million units at a price of $0.30 per unit for aggregate proceeds of CAD$1.2 million. Oversubscription on the offering forced the company to issue a total 7.3 million units for aggregate gross proceeds of CAD$2.2 million.The mining company followed the offering with yet another non-brokered private placement whereby it issued 3.2 million units for aggregate gross proceeds of $1.3 million.In all the offering Core Gold has reiterated its intentions to use the net proceeds for working capital and general corporate purposes.A point of concern to investors is that the aggressive issuance of shares could lead to over dilution of the stock considerably affecting earnings per share.What Does the Future Hold for Core Gold? Judging by the recent price action, Core Gold could break out of the tight trading range, it has been limited to, in recent months. The positive gold exploration results from the Linderos project should continue to strengthen investor’s confidence on the stock as trading volumes continue to peak.The icing on the cake would be authorities granting the company the much-needed licenses to test the depth of the mineralization of the Linderos project needed to initiate a drill program.That said, investors should pay close watch on the price action as a close above the $0.29 mark would affirm the bullish trend, thereby making Core Gold an exciting pick as a long-term investment.Disclosure: We have no position in CGLDF and have not been compensated for this article.
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