Ventana 2.0? Ross Beaty invests heavily in CB Gold

Mining magnate Ross Beaty has agreed to invest $11 million in Colombia-focused junior gold explorer CB Gold (CBJ-V) just days after the company announced a major discovery at its main Vetas gold project.

Beaty is buying 10 million units at $1.10 per unit through his private resource investment company, Lumina Capital LP, with each unit comprising one share and half of a warrant exercisable at $1.40 for three years.

The Vetas project is 10 km south of the high-grade La Bodega and La Mascota gold deposits formerly owned and explored by Ventana Gold, another Vancouver-based junior in which Beaty was a major shareholder. Brazilian billionaire Eike Batista’s EBX Group acquired Ventana for $1.5 billion earlier this year. 

On Oct. 24, CB released assays from a single drill hole at Vetas which targeted a previously untested portion of the Real Minera stockwork zone. The hole returned 115 metres grading 7.57 grams gold per tonne and 1.48 grams silver per tonne starting from a 31-metre depth, and included a 41-metre section near surface grading 17.1 grams gold and 2.4 grams silver. The major intersection was followed by a barren zone between 146 metres and 173 metres, and then a 13-metre section grading 1.63 grams gold and 3.05 grams silver.

Assays from a further five holes drilled in the area are pending. The company says all six holes contained intercepts of visible gold in drill core and found the same structural zone.

Beaty’s first disclosed placement in Ventana was in April 2009, when Lumina purchased 4.3 million shares at $1.40 along with an equal number of warrants exercisable at $2. He purchased another few million shares in the open market at an average of $2, bringing his total holdings to 9.1 million shares and 5.3 million warrants. 

A year later, he loaned Ventana US$10 million to help buy complete rights to the La Bodega project after a dispute with the vendor. The short-term loan came with a 110,000-share drawdown fee that could alternatively be paid out in cash for $1.1 million at Ventana’s discretion.

Although it is difficult to calculate Beaty’s net profit from his investments in Ventana, it is possible to produce a rough back-of-the-napkin style estimate. 

According to Lumina’s insider trading reports filed on SEDI, the investment company sold close to 4.5 million shares on the public market around $10 a share after exercising the same number of warrants at $2, resulting in proceeds of $45 million on $9 million invested. Lumina received $118 million for its remaining 9.1 million shares purchased at $1.40 and $2, and sold under EBX Group’s $13.06 all-cash takeover bid. After taking into account another 855,000
unexercised warrants, Lumina should have received a total of $172 million on its $23-million investment, for a return of 650% in a little less than two years.

CB Gold’s Vetas property is home to nine small underground mines and contains several high-grade vein systems spread throughout the project. 

In addition to the new high-grade area found in the stockwork zone, CB has discovered porphyry mineralization, from which drilling earlier this year returned a 220-metre intercept grading 1.38 grams gold. 

The company anticipates 35,000 metres of drilling at the property this year, with 24,500 metres drilled to date using three rigs.

The company may postpone a maiden National Instrument 43-101 resource planned for early 2012 because of positive drilling results. 

The proposed private placement with Lumina would increase CB Gold’s outstanding shares from 131 million to 141 million, or 172 million fully diluted. 

CB’s president, mining engineer turned mining financier Giles Baynham, and CEO, Fabio Capponi, hold 10.8 million shares each. They previously worked together at Endeavour Financial. Non-executive chairman Peter Barnes, meanwhile, owns 4.3 million shares. His previous roles include being chief financial officer of Wheaton River Minerals and CEO of Silver Wheaton (SLW-T, SLW-N). Director Hernan Martinez, Colombia’s former Minister of Mines and Energy, holds 1.1 million shares, while vice-president of business development Ana Milena Vasquez owns 3.1 million.

News of the private placement sent CB Gold’s shares up 20¢ to $1.34 on Oct. 27, with 5.02 million shares traded. The stock has a 52-week range of 51¢-$1.54.