South American Gold looks to ride the Colombian gold wave

The recently re-minted South American Gold (SAGD-O) is looking to tap into Colombia’s gold potential.

To do so the Richmond, Indiana-based company is aiming to acquire privately-held and Colombian-based Kata Enterprises and its 85% stake in the Narino gold project located in Narino province of Colombia

While Narino is in the most south-westerly portion of Colombia, a fair ways from the two most noted gold regions in the country – California-Vetas in the north east and the mid-Cauca gold belt in the north-central part of the country – South American Gold’s chief executive Raymond Demotte believes in the region’s upside.

“We believe in the potential of Colombia and we believe it is still a very under-explored country,” he says. “So we see this area as having high potential.”

South American is currently doing its due diligence on the project and will look to close the deal by the end of January next year.

If the due diligence process goes well then the acquisition will happen in stages with the company initially taking a 25% stake in Kata for $1.5 million in cash and two million of its common shares.

It would then hold an option to buy the remaining 75% in three separate tranches each made up of a $2.5 million cash payment and 2 million shares of common stock to Kata.

All told the acquisition cost would amount to $9 million in cash and 8 million shares.

In New York on Dec. 22, the company’s shares were up 5% or 4.5¢ to 95¢ on 60,000 shares traded. Over the last 52-weeks its shares have moved between 10¢ and 99¢ and the company has 214.6 million shares outstanding.

At the end of August the company’s shares were trading for under 20¢.

Since then it has made a remarkable run giving the company a nearly $200 million market cap. Those gains have come despite the company not releasing any news outside of today’s letter of intent.

The gains have also come despite the company not yet having a website and having only two board members listed on Bloomberg’s company profile site: Demotte and chief financial officer Camilo Velasquez.

South American Gold changed its name from Grosvenor Exploration in October of this year. South American Gold is not to be confused with South American Gold and Copper (SAG-T) which has gold and copper assets in Chile.