HRA Advisories Comment on Bravo's Resource Update

Bravo Ventures (BVG-V; off  2 cents on 892K at $0.22) released an updated 43-101 resource estimate for its Homestake Ridge project and it definitely wasn’t a pleasant surprise.  Independent engineers Roscoe Postle calculated Indicated and Inferred resources for the Main Homestake zone of 191,000 ounces and 184,000 ounces respectively at grades of 6.69 g/t and 5.02 g/t gold plus 3.2 million silver ounces in both categories.   The Homestake Silver zone was reported to contain 164,000 ounces of gold and 6.1 million ounces of silver at grades of 4.25 g/t gold and 158 g/t silver respectively.

The total resource is roughly equivalent to the original resource estimate from 2007.  The reason the resource was not larger is that the engineering group calculating the resource concluded that Homestake should be viewed as an underground only operation with no open pit or starter pit.  This led to an increase in the cut off grade from 0.5 g/t to 3.0 g/t, which had a huge negative impact on the resource calculation.  In addition, the engineers cut the high grade intersections severely in many areas for the purpose of the calculations, which may have reduced the total contained ounces by as much as 20-30% in addition to losses from the higher cut off grade.  The search radius for the drill holes was also reduced from 100 metres to 75 meters.  This led to a number of gaps for which ounces were not calculated, particularly in the Silver zone which has lower drill hole density.

While we are not sure we agree with the underground only model we’re not the engineers and are not privy to the report.  It’s highly likely that more drilling can bring some of the higher grade sections and material in the gaps between drill holes back into the resource but that won’t have much short term impact on the stock.  BVG plans to start a 12,000 metre drill program in four weeks that will focus on the Silver zone and on six new target areas.  A new discovery would be the shortest route to regaining some market favour though expansion testing at Silver should also help.

Although the ounce total is disappointing they are much stronger ounces than those in the previous estimate. We’ve always viewed the end game for Bravo as a takeover by a producer.  We don’t think that potential outcome has gone away.  Anyone interested in a deal would be doing their own DD and are unlikely to be swayed much by a 43-101 report in any case. BVG is undervalued for the ounces in hand and the potential to continue growing the resource but its going to take a lot of trading volume to clean up the stock.  It’s a safe buy in this range if you are willing to wait for this summer’s drill results to begin arriving.
http://www.bravogoldcorp.com


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