Stock Preacher

Great Basin Gold Ltd. (AMEX: GBG)

Great Basin Gold Ltd. (GBG) is engaged in the business of acquiring ownership of or interests in, exploring and developing precious metals deposits. The Company has two material projects: the Hollister gold project, acquired in 1997, which is located on the Carlin Trend goldfield in Nevada, United States of America (the Hollister Property), and the Burnstone gold project, acquired in 2002, which is located in the Witwatersrand Basin goldfields in South Africa (the Burnstone Property). The Company also holds interests in early stage mineral prospects known as the Ganes Creek Property in Alaska, and through Rusaf, the Tsetsera Property in Mozambique, properties in Tanzania and Iturup (Kurils) Islands (Russian Federation). The Company acquired Rusaf Gold Ltd. in April 2008. The Company also purchased the Esmeralda Property on December 16, 2008, from Metallic Ventures (U.S.) Inc.

The Company was founded in 1986 and is based in Sandton, South Africa.

Source: Reuters.com, SEC Filings.

Financial Summary

Gross revenue of CDN$28.2 million, before toll milling charges of CDN$6.3 million, was realized from the sale of 26,517 gold equivalent (”Au eqv”) ounces (March 2009 – 18,189 Au eqv ounces) from trial mining at Hollister during the quarter. A total of 18,442 tons of ore (at a grade of 0.99 Au eqv ounces 1 per ton or 34.1 g/t), containing 18,219 Au eqv ounces, was extracted during the quarter.

The Company incurred a loss of CDN 4 cent per share, which is similar to the loss incurred for the March 2009 quarter. Cash costs, excluding milling costs, were CDN$439 (US$375) per ounce (March 2009 – CDN$397 or US$320 per ounce). Quarter-on-quarter cash costs per ton decreased by 15% to CDN$434 (US$371).

The Company’s cash and equivalents balance exceeded CDN$110 million, as of June 30, 2009. At June 30, 2009, the Company had working capital of approximately CDN$106 million. Historically, GBG’s sole source of funding has been the issuance of equity securities for cash, primarily through private placements to sophisticated investors and institutions.

Analyst Consensus

Consensus estimates, $CDN

Source: Yahoo! Finance, SEC Filings.

The five polled investment analysts rate GBG with “Outperform.”

Source: http://markets.ft.com/tearsheets/analysis.asp?s=GBG%3AASQ

Investment Highlights

The Company, which was until recently recognized as an emerging producer, migrated to the ranks of the junior gold producers as its Hollister Project on the Carlin Trend in Nevada, and the Burnstone Project in the Witwatersrand Goldfields in South Africa commenced commercial gold production.

During the last quarter, at Hollister Property, the Company’s resource estimate increased by 27% to 2.9 million Au equivalent ounces. Moreover, GBG recovered 26,517 gold equivalent ounces from the sale of 27,860 tons of ore before toll milling charges and succeeded to decrease by 15% the cash cost per ton. Pre-development expenses for the Hollister property increased from CDN$5.2 million to CDN$8.5 million, quarter-on-quarter. To date, an amount of CDN$70 million has been expensed through the income statement for the Hollister operations.

Progress continues to be made with the development of surface and underground infrastructure at the Burnstone Project. As at August 9, 2009, 7,709 ft (2,336 m) of decline development had been completed. The cross-cut to Block B 3 has accessed the Kimberley Reef and production stopes are being established. As at August 9, 2009, a total of 6,134 tons have been accumulated on the surface ore stockpile. A total of 40 ft (12 m) remains to access Block C before stope establishment for mining commences. Sinking of the vertical shaft at Burnstone continued and at August 9, 2009, the shaft had reached a depth of 1,188 ft (360 m) below surface with 436 ft (133 m) remaining to shaft bottom. At a depth of 1,181 ft (358 m) the shaft also intersected the Kimberley reef at the expected elevation, at which the cover diamond drill hole graded 7.54 g/t over 116 cm (for 874 cmg/t). Samples have been collected for assaying. The final depth of the shaft is planned at 1,624 ft (492 m). The refurbishment of the mills continues to be on schedule and the civil excavations for the Metallurgical facility are planned for completion by September 2009, after which the Metallurgical Plant construction will commence. For Burnstone, CDN$33 million (Mar ‘09 – CDN$7 million) was capitalized in the quarter.

As a result, an updated mineral resource estimate for Burnstone Project has been completed inclusive of all surfaces drilling up to July 2009. At a cut-off of 400 cmg/t, the total Measured and Indicated resources have increased by 6% from approximately 10.9 million ounces to 11.6 million ounces Au and the Inferred resources have increased from approximately 2.4 million ounces Au to 4.6 million ounces Au.

The refurbishment of the Esmeralda Mill was completed and commissioning commenced in July 2009. A total of 3,000 tons have been shipped to the site and milling has commenced. It is planned to initially fill the plant with low grade material until the delivery and installation of the float and gravity section has been completed by October 2009. Permission by the Nevada Department of Environmental Protection to construct a refinery on site can only be granted once an analysis of the milled material from the operational plant has been completed. The process typically takes six months to complete. Until then Au concentrate will be shipped off-site for recovery.

GBG obtained credit approval, thereby securing the finance facility for its Burnstone Project in South Africa. The facility consists of a USD$106 million senior debt facility and a USD$23 million standby debt facility to be utilized for potential cost overruns. The Company does not plan to draw down on this facility until the end of 2009. The facility will be provided by Investec Bank Ltd., Nedbank Capital, ABSA Capital (a division of Absa Bank Ltd.) and the Development Bank of Southern Africa, and will have a maximum term of seven years with interest repayment commencing December 30, 2010, and capital repayment commencing on June 30, 2011. The senior debt facility carries interest at the Johannesburg Interbank Agreed Rate (JIBAR) plus a margin of 5% pre-completion and JIBAR plus a margin of 4.5% post completion.

In March 2008, gold prices hit a record high of $1,033 an ounce as the gold bull market entered its seventh year of life. In recent months, gold rose to a record high on speculation that currencies will depreciate, spurring inflation and boosting the appeal of the precious metal for investors seeking to preserve their wealth. Thus, year-to-date, gold has risen 18%. In early October, gold futures climbed as high as $1,045 an ounce in New York, topping the previous record of March 2008. The slumping dollar helped propel gold above the previous record. Analysts project the metal will reach $1,200 by the end of the year and $2,000 by 2012.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

GBG is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

GBG’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, GBG is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

The MACD for GBG currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

The outlook for gold remains positive and with the expanding production and operations at Hollister and Burnstone Projects, the Company should report stronger revenue and turn to profitability within next couple years.

Source: Thomson Financial, Yahoo! Finance, Analyst estimates.

Insider Trading Activity

Net Share Purchase Activity

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