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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Executive Summary GOFF’s Corporate Description: “Goff Corporation is a U.S.-based public company. Its wholly owned subsidiary, Golden Glory Resources S.A. is engaged in gold exploration with a view to developing highly prospective gold projects. The Company's primary interest is the LGC15011 or "La Frontera" Gold Project in Aguadas, Dept. Of Caldas, Colombia. The project is being assessed for its potential as a low-grade, large bulk tonnage gold and silver prospect. Colombia is currently one of the leading gold mining areas in the world producing over 55,509 kilograms of gold (2011), primarily from the region where Goff's subsidiary Golden Glory Resources holds leases on the La Frontera Property.” ABX Performance and Gold Outlook: Following are select results for Barrick Gold (NYSE: ABX) for 20121: ABX revenue grew 2% to $14.5 billion Adjusted earnings fell 18% to $3.8 billion ABX also reported 259 million oz. gold resources and reserves Gold production for 2012 was 7,765,000 oz. The recent market cap of $29 billion is approximately 2x revenue, 7.6x adjusted earnings, and $112 / oz. of combined gold resources and reserves. Over the last 12 months, Barrick Gold (NYSE: ABX), has fallen over 1/3rd from $44 to $28 as the price of gold has fallen less than 5% to a little over $1,600 recently. While a range of forecasters are predicting near term price declines in the price of gold, there are also those who believe what appears to be a serious economic slowdown in the Euro zone and projected slower growth in the developing world, as well as monetary policy, will lead to higher gold prices. This camp includes CNBC contributor Peter Schiff, who views precious metals as the ultimate insurance against courts, banks, stock exchanges and central governments2: “Pressure is building in all parts of the world for solutions to the debt crisis that many nations face. The classic way for governments to deal with excessive debt is by debasing the currency, i.e. inflation. This has already started, with the U.S. Federal Reserve printing trillions of new dollars since 2008. Many observers think the world's only superpower is heading toward bankruptcy. And there is no one big enough to bail us out. This means inflation of historic proportions. Potentially sending gold prices higher than most hard money investor would ever dream.” Outlook for GOFF: GOFF reported 3/15/13 that its Golden Glory Resources wholly owned subsidiary has acquired 100% interest in the 1,227 hectares La Fontera Prospect in Colombia, which some estimate may have doubled its gold production country-wide in 2012 relative to 2011. Additionally, GOFF has begun outlining its diamond drilling exploration program and has announced that drilling is expected to commence within the next 90 days. Like every equity, the potential price range for GOFF is somewhere between $0 and a theoretically unlimited upside. Additionally, GOFF faces a number of significant operational and financial challenges as the Company works to move from exploration to production. However, for those who view gold as a necessary part of a broader investment strategy, as an attractive standalone investment, or protection against fiscal and monetary policy, GOFF may be of interest to those willing to accept the highly speculative risk of an exploration stage company. GOFF has not yet reported what size resource may be present at La Frontera, but if the Company is able to demonstrate that the potential resource and reserve may be significant, the market may push GOFF’s valuation metrics multiples higher than those of ABX in anticipation of future production by GOFF or perhaps by an acquirer, and perhaps in anticipation of the possibility of GOFF continuing to identify more resource at La Frontera and/or new projects. 100,000 oz of annual gold production theoretically would produce $150 million in revenue at an average price of $1,500 / oz. Over the coming quarters, Murphy Analytics expects that if GOFF’s exploration program is successful and if the Company is able to demonstrate the potential for the La Frontera project to ramp up to 100,000 oz. in gold production, the market may reward GOFF with a valuation typical of faster growing companies, say as high as 7x revenue, which could imply a price as high as $4.00 for GOFF.
GOFF Recent Price Outstanding Share Estimate Market Cap Estimate Estimated 12 Month Price Potential for GOFF 1 2
$0.40 286,000,000 $114.4 million $4.00
Please review the risk factors outlined later in this report and the important disclosures and disclaimers at the end of this report.
http://www.barrick.com/investors/annual-report/financial-highlights/default.aspx http://www.europacmetals.com/
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Initiation Report – Table of Contents GOFF Management and Share Information
Page 3
GOFF Provides Operational Overview
Page 4
GOFF Exploration Program at La Frontera
Page 12
IMF World Economic Data and Outlook
Page 13
Outlook for Gold Prices
Page 14
Gold Price Charts from Kitco
Page 16
Overview of the County of Colombia from the CIA Factbook
Page 17
Discussion of GOFF Financials
Page 18
Benchmark Indices (Funds)
Page 19
Relationship between the U.S. Dollar and Colombian Peso
Page 20
GOFF and Comparable ETF Performance Chart from quotemedia.com and Barchart.com
Page 21
GOFF Risks
Page 22
Murphy Analytics Disclosures and Disclaimers
Page 24
GOFF Company Contact Investor Relations Tel: +011.57.4.605.2537
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
GOFF Management and Share Information Warwick Calasse - President, Chief Executive Officer, Treasurer, Secretary, and Director: Mr. Warwick Calasse has an extensive entrepreneurial and operational management background working in the private sector in both the United Kingdom and Southern Africa. From 2006 to 2010, Mr. Calasse held various training and management positions with horse farms and stables in the United Kingdom and Zimbabwe. From 2006 through 2008, he was employed as a trainer at Clare House Stables in Dullingham, Suffolk, United Kingdom. From February 2009 through February 2010, he served as Manager at Sambok Farm, Marondera, Zimbabwe where he managed a staff of 60 and stable of 120 horses. From March to August of 2010, he served as Manager of the Tippits Polo Yard in Midhurst, United Kingdom. Since August, 2010, Mr. Calasse has served as executive officer and director of Raftec Investments, a firm which he owns and controls. Raftec is a chemicals importer located in Harare, Zimbabwe and focusing on foam rubber products and chemicals for the mineral exploration industry. Mr. Calasse is 30 years of age. Manuel Vasquez Sema – Director: Manuel Vasquez Serna has over 30 years of experience in mineral exploration acquired in Colombia as an engineer and exploration consultant. Since 1979, Mr. Vasquez has been the owner and chief executive of Explotarcol LTDA., a consulting firm based in Barranquilla, Colombia which provides drilling and land development services to a range of mining and energy companies and consortiums across Colombia. Prior to entering the private sector, Mr Vasquez served as an Army Captain of the Body of Engineers (Colombia) - first as an engineer specializing in heavy equipment, and later as an expert in rock movement and the use of mining explosives, a field in which he has published several manuals and reference articles. Since 1985 Mr. Vasquez has also served as a lecturer and professor at several of Colombia’s most esteemed engineering faculties including Universdad Del Norte (1985-1988), Universidad De Los Andes (1993-1997), Universidad Javeriana (1995-1999, 2005-2009), Universdad La Gran Colombia (1994-1999) and Universidad Del Norte De La Ciudad De Barranquilla (2003-2012). He is a graduate of the Military School of Engineers (Colombia), a Member of the Society of Columbia Engineers, of the International Society of Engineers in Explosives (ISSE) and past President of the Regiment of Military Engineers (Colombia, Northern-Zone). A Colombian citizen, Mr. Vasquez in 67 years of age and resides in Barranquilla, Colombia.
GOFF Share Information: Authorized Common Shares:
1,875,000,000
Outstanding Shares:
286,000,000 (as of 1/22/13)
Authorized Preferred A Shares:
100,000,000 (as of 3/11/13)
Preferred A Voting Rights:
75 votes per Series A Preferred share
Preferred A Conversion Rights:
30 common shares per preferred
Major Holder:
CEO Warwick Calasse beneficially owns 350,000,000, or approximately 94.8% of shares directly and through voting control of Golden Glory Resources. His holdings include Preferred shares as well as:
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108,750,000 common shares acquired 2/26/13 for $25,000
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100,000,000 issued 2/28/13 as part of consulting agreement
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
GOFF Provides Operational Overview 3 La Frontera Project Location and Access: “The LGC-15011 Project, known as “La Frontera” or “The Frontier”, is located in the northern department of Caldas, Republic of Columbia (LGC‐15011 has 30% area in the department of Antioquia), in the village of Puente Piedra, in the municipality of Aguadas. The Project is situated in the Cordillera Central of the Andes Mountains and is bounded by the Magdalena River on the east and the Cauca River on the west. The county of Aguadas sits approximately 40 kilometers away from La Pintada (Antioquia) and may be accessed from la Pintada by unpaved road with an approximate aggregate travel time of four hours. Travel from La Pintada is by unpaved road through Aguadas (40 kilometers /90 minutes) and Encimadas (20 kilometers over 90 minutes). From Encimadas, which sits at 2,400 meters above sea level (masl), the project site is accessed by descending to an elevation of 1,8000 masl to the river Arma. Travel is by unpaved mountain road with highly variable conditions. Travel time from Encimadas is approximately one hour and fifteen minutes. The site is accessible year round and exploration activities are not subject to seasonal interruption. Local Resources and Infrastructure: According to the Departamento Administrativo Nacional de Estadistica (“DANE”) census of 2005, the municipality of Aguadas had a population of 22,307. Basic resources are available in the municipality of Caldas including emergency medical services, temporary accommodations, and fuel. Any mining development on the Project would have access to the national electrical transmission grid. Water supply and cellular phone coverage in the area are limited. Legal Status: The mining concession contract LGC-15011 was registered in the National Mining Registry of August 21, 2012 and expires on August 21, 2042. It is in the first year of the concession contract term. According to the certificate from the National Mining registry, the mining concession contract is duly registered and is in the exploration phase. Collectively, the title covers approximately 1227.94 hectares made up of 21 exploitation licenses. In accordance with Colombian law, the holder of the mining licenses has a right to access the parcel of land covered by such mining Licenses and may perform exploration and exploitation work on them, subject to indemnification for damages to the owners of such parcel of land that may arise from such access, and the activities carried on by the holder of the mining licenses. The limits of the Project were map-staked and therefore no boundary markers exist. As of the date of this report, none of the licenses have been surveyed. Mineral Licenses in Colombian Law: Mineral rights in Colombia are reserved to the federal government and governed by the Colombian Mining Code. The Colombian Mining Code has been changed and amended on several occasions. The oldest version relevant to the LGC-15011 Project is Decree 2685 of 1988 (the “Previous Mining Code”), which has been replaced and superseded in its entirety by Law 685 of 2001, as amended by Law 1382 of 2010 (the “Modified Mining Code”). The mining law is administered by the Ministry of Mines and Energy. By means of Decree 4134 of 2011, Ingeominas, the former mining Authority, was liquidated and divided into two entities: the Agencia Nacional Minera (National Mining Agency), which grant mining concessions and perform follow-up and control duties on granted mining titles, and the Servicio Geológico Colombiano (Colombian Geological Survey), which is in charge of performing studies to identify the availability of natural resources in the Colombian subsoil.
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From 8-K filed 3/12/13
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Exploitation Licenses, as governed by Decree 2655 of 1988, are legal permits to exploit minerals in a map-staked area. These Licenses were granted for a term of ten years, and as provided in Article 46 of Decree 2655, it is possible for the title holder to opt for one of two Options at the end of the ten-year period: (i) an extension of the License for another ten years, after which there is no legal possibility to extend the exploitation period, or (ii) conversion into a Concession Agreement, covering a map-staked area and in good standing for a period of up to thirty years, with additional extensions possible. Both Exploitation Licenses and Concession Agreements are drawn using the UTM co-ordinate system. In Colombia, mineral Concession Agreements consist of three phases, namely, the exploration, construction, and exploitation phases, and are governed by Law 685 of 2001 as modified by Law 1382 of 2010. Under the Modified Mining Code, the exploration phase is for a three-year period, which can be extended for up to four additional twoyear periods for a maximum of eleven years. During the exploration phase, annual surface payments, Cánon Superficiario (“Canon”), are payable to the Colombian government on the basis of one minimum daily salary per hectare. The current Canon rate is COP18.856 per hectare (approximately US$10.6/ha). The surface payment is calculated as one minimum daily wage per contracted hectare per year for the first five years of the exploration phase. During years six and seven of the exploration phase, the payment increases to 1.25 minimum daily wages per contracted hectare per year, and in years eight to eleven it increases to 1.5 minimum daily wages per contracted hectare per year. Upon completion of the exploration phase of a Concession, the construction phase is for a period of three years and may be extended for a period of one year, after which it enters its exploitation phase, in which Canon fees are no longer payable but are replaced by a production royalty payable to the Colombian government. Regulation of Exploitation Licenses, on the contrary, is not divided into three phases but consists of a single ten-year period in which exploitation can take place, and in which production royalties are payable to the Colombian government on the basis of grams extracted. No Canon fees are payable for Exploitation Licenses. Under Decree 2685 of 1988, Exploration Licenses were granted as a previous stage to the granting of an Exploitation License; under those, the title holder was entitled to explore the area for the purpose of determining the existence of mineral reserves, for a term of one to five years, depending on the area to be explored. Exploitation Licenses were granted for small scale mining not exceeding 250,000 m 3 of extraction per year per License. Permitting: Under an exploration License, early stages of exploration including geological mapping and stream or soil geochemistry do not require permits, as long as the surface of the License is not disturbed. Exploration activity involving soil disturbance, including trenching and road and drill pad construction requires an environmental management plan. Drilling requires a take water permit and a water discharge permit. The Client is in possession of all permits required for surface exploration and has submitted environmental management plans for the proposed work. Historical Exploration and Artisanal Mining: Traditional (Artisanal) mining has taken place on the La Frontera Project, which poses potential for liability based on the frequent violation of mining and environmental laws by traditional miners (including their use of hazardous substances such as cyanide). Accordingly, requests have been filed for the suspension of exploitation activities on La Frontera Project by such traditional miners Geological Setting and Mineralization - Regional Geology: The La Frontera Property is situated within the Eastern Cordillera in northeastern Colombia. The Eastern Cordillera bifurcates at a point south of the Maracaibo Basin. The western branch swings to the northwest, while the eastern branch maintains the northeast trend and continues as the Sierra de Merida in Venezuela, to the east of the Maracaibo Basin (Figure 1).
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Figure 1. Caribbean plate tectonics. It is believed that the migration of the Caribbean Plate to the east is responsible for the splitting of the Andean Cordillera in the three branches (Western, Central, and Eastern Cordillera). This process is thought to have incorporated subduction events (Figure 2) which were responsible of the magmatic events in the area, both porphyries and volcanics.
Figure 2. The presence of a subduction zone explains the presence of the magmatic events in the region. The picture also reflects the environment for the back-arc basin.
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
The emplacement of porphyry bodies is usually controlled by regional fault structures and zones of fractured rock. The intrusive bodies themselves may be composed of a single intrusion or, as is more likely the case at La Frontera Project, of multiple intrusions. Geological evidence shows that the igneous bodies that generated porphyry ores were emplaced at relatively shallow levels in the crust (less than 4 km) and that they might have provided the magma source for the generation of large volcanoes on the surface which have since been eroded away. Where several intrusions of magma are present, it is common for mineralization to be related to the latest intrusions, which tend to be most differentiated. This is the working model for La Frontera Project. The presence of phenocryts in the intrusions indicates that their magmas were partially crystalline when emplaced and that crystallization of the remaining melt occurred rapidly. The worldwide distribution of porphyry deposits is controlled by orogenic belts, where deformation of the crust is caused by the collision of two of the Earth's tectonic plates. Two types of orogenic belts host porphyry deposits: those created by the subduction of oceanic crust beneath continental crust along a continental margin, as in this case, and those found along island arcs where two oceanic plates are colliding. The numerous deposits located along the west coast of South America are perhaps the best example of a group of porphyry deposits formed by subduction along a continental margin. A look at the age of the different intrusives within the Western, Central, and Eastern Cordillera clearly indicates an increase in age towards the East, which supports the author idea of the influence of the Caribbean Plate on the fragmentation of the Andean Cordillera within Colombia. The regional geology consists of a collation of Paleozoic metamorphic rocks belonging to the Cajamarca Group, whose general directional train is N - S to N - NE, in the Jurassic intruded by the batholith Sonson. In general, the metamorphic grade is observed in the outcrops is medium to low Fig. 3).
Figure 3. Regional geology of the area. In yellow the Sonson Batholith
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Cajamarca Group: Metamorphic rocks belonging to the Cajamarca group include the following: - Pes - phyllites and quartzschists: The phyllites, outcrop in packages elongated north south direction. Rocks are finely laminated, commonly folded with veins and milky quartz lenses parallel to the foliation with quartz and sericite as major minerals, epidote seen as accessories, plagioclase and ilmenite. - Pev - green schist: Chloritic schists actinolitícos Son-green, interspersed sequentially with sericíticos quartz schists. The foliation is well defined. The main minerals are quartz, chlorite and actinolite, a lesser amount of epidote is observed bands. - Jds Sonson Batholith: Granitic rocks, medium to fine grained, light gray, with quartz, plagioclase, muscovite and hornblende less. Metamorphic rocks intruded Cajamarca group, and emerges to the East and West of the study area. A sequence of rocks ranging from granite to diorite cuarzodioritas through granodiorites. - Kia Cretaceous sedimentary rocks: Sedimentary rocks for conglomeratic deposits, clay and shale. - Quaternary deposits: Conformed by sand and silt, located in the alluvial terraces of rivers and streams in the region. Local Geology: The veins on the property are embedded in metamorphic rocks belonging to the Cajamarca Group which is affected by the Sonsón Batholith. They note two main structural trends N45 ° E and N70-90 ° W, which correspond with the trends of the veins in the area mapped.
Figure 4. Local geology of the license.
Metamorphic Rocks: In an area were observed greenish black shales with chlorite and actinolite (Fig. 5). These shales are interbedded with black shales and phyllites gray along the creek Peñoles.
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Figure 5. Green schists from Los Peñoles Creek The direction of the foliation in these rocks has a NS trend also shows a strong jointing. On the Peñoles Creek GOFF report finding quartz-schist outcrop with graphite (Figure 6) that show a predominant foliation N10-20 º W E/45-55 in contact with the batholith with a porphyritic texture. There is also a zone of lighter quartzites with carbonatic alteration. The presence of disseminated sulphides in shales is moderate, mainly filling fractures.
Figure 6. Quartz graphitic schists in the area Igneous Rocks: These rocks are observed mostly towards the outspring of the Quebrada Peñoles, intruding the metamorphic rocks of the Cajamarca complex. They are intrusive igneous rocks, which correspond to granodiorites and diorites belonging to Sonson Batholith. Examples of these rocks can be found on the road leading to the house of Mr. Fernando Candamil to births of Peñoles Quebrada (Fig. 7) and in the middle of the Q. Peñoles near the house of Mariano Candamil where there is an intermediate phase of the batholith; porphyritic igneous rock found in small size and without tectonic deformation (recent intrusions) towards SE - NW, which controls the course of the creek for a distance of 50 to 60m (the general trend of the gorge is NE).
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Figure 7. Dioritic dyke of the Sonson batholith intruding metamorphic rocks of the Cajamarca Group. Sedimentary Rocks: The Quaternary deposits are characterized by matrix-supported flow dissected exposed in some areas along the creek. Overlying this unit and other in-situ rocks GOFF reports there arealluvials/delluvial sedimentary formations dominated mainly by fragments of block size and some igneous metamorphic rocks. Within these deposits one can find some quartz blocks up to 1m in diameter. The latter may come from the veins found in the middle of the creek. Structure: In the vicinity of the study area the main structural feature is oriented N45 º E which is the main orientation of the Peñoles Creek, plus small faults trending NW, as mapped in some of the adits. Structurally the middle of the creek Peñoles presents an interesting layout of multiple veins with three main trends: N58-60 º E/7090 º W, N30-35 º E/50-80 ° E and S55-80 ° E/80 ° E. These faulting allowed multiple intrusions of small igneous intrusions. Mineralization: The mineralogy of the epithermal gold deposits is highly diverse. In general, gold-rich pyrite is the major ore mineral. Cu sulphides, Cu-Bi sulphides, and various tellurides including Au tellurides, Au-Ag tellurides, hessite, Te-bearing tetrahedrite-tennantite, and native Te occur. Native Au is commonly enclosed in pyrite, tetrahedrite, and bornite. W-bearing phases, such as Cu-W sulphides and huebnerite, may be locally abundant and the alteration halo of mineralized veins consists of alunite, jarosite, kaolinite, and quartz. Phyllic and propylitic alteration has also been described. The geological setting as interpreted by the Author indicates the evolution of a subduction zone probably associated to an interaction of the Caribbean Plate with the Andean Cordillera. There are evidences of a multiple-pulse intrusion, especially shown by the overlap of the different hydrothermal aureoles. A rapid cooling of some of these magmatic bodies is evident from the presence of porhyritic structure.
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Geologist current interpretation of the model of mineralization consists of a large tonnage, low grade disseminated gold, porphyry with subordinated amounts of silver and lead. Within the intrusive, GOFF reports finding zones of increased fracturing (breccia to tectonic gauge) that served as a conduit for the hydrothermal fluids and they form quartz veins or highly silicified zones with moderate to abundant sulphides, including significant amounts of galenite. These are low tonnage, high grade bodies, which are the main targets of the artisan mining (Fig. 9.
Figure 9. Quartz vein with abundant sulphides, including galenite.
Alteration: There are abundant indications of hydrothermal alteration in the area, including iron oxide, argillic, kaolinite/alunite, and silisic alterations (Fig. 10). All of them are indicative of hydrothermal alterations associated to felsic intrusives. The company intends to purchase satellite images for the interpretation of hydrothermal alterations.
Figure 10. Abundance iron and hydroxile alteration with a significant amount of manganese.”
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
GOFF Exploration Program at La Frontera GOFF to begin 5,000 Meter Diamond Drilling Program by 6/25/13: Goff announced 3/25/13 that the company plans to invest $1.6 on this Phase One gold exploration program at La Frontera. GOFF Receives NI43-101 Report4 on La Frontera Gold Project: Although no Mineral Reserve or Mineral Resource Estimates are applicable at this time for the report, following are excerpts from report author P. Geo. Ricardo A. Valls of Valls Geoconsultant, who, after reviewing the existing data,” recommends that a diamond drilling program be implemented to determine resources over the know targets.” Interpretation and Conclusions: “The LGC-15011 Project consists of a mining title in the district of Caldas. The mining title is underlain by prospective lithologies of the Sonson Granite, which appears to be the controlling structure to mineralization in the area. Artisanal mining is currently not taking place in the area. The LGC-15011 Project is located within a porphyritic intrusive body intruding older metamorphic sequences along the Peñasco Fault. The main targets appear to be hosted by a felsic unit composed of porphyritic tonalities to granites, fine grained granites to microdiorite, and very minor dykes of andesite and basalts. The Author suggests that there are two types of mineralization. A disseminated type related to the intrusive, and a vein type related to the stockwork of the intrusive. Work to date by ColGold included mapping, channel sampling of adits and trenches and some stream sediments. No resources have been identified and in the opinion of the author the regional trend of mineralization has not yet being identified.” Recommendations: “The Author is of the opinion that the LGC-15011 Project covers highly prospective ground and merits continued significant gold exploration, including exploration diamond drilling. The program includes the following aspects: -
Geological mapping, prospecting, and sampling on all licenses; Logging and sampling of all adits within the client licenses; Interpretation of a licence wide soil sampling program; An approximate 5,000 metre diamond drilling program with oriented core to define inferred resources in close proximity to the known; and Consider opportunities to acquire additional ground along the prospective corridor to cover airborne geophysical anomalies, if any.
Table 4 shows the estimated cost of the exploration program being in the order of C$1.6 Million:”
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http://www.goffcorporation.com/pdf/Golden-Glory-Resources-NI-43-101.pdf
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
IMF World Economic Data and Outlook Updated October 2012 and entitled “Coping with Higher Debt and Sluggish Growth”5, the International Monetary Fund (IMF) update calls growth in developed economies to slow to have a meaningful impact on unemployment and the IMF lowers its estimates for GDP growth to 1.5% in advanced economies and 5.6% in developing economies. Following are various data from the report: GDP Estimate:
5
Global Headline Inflation Estimate:
http://www.imf.org/external/pubs/ft/weo/2012/02/index.htm
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Outlook for Gold Prices World Gold Council Gold Demand Trends6 Report Highlights Record Gold Demand in 2012: The World Gold Council is the market development organization for the gold industry and an association whose members comprise the world’s leading gold mining companies, representing approximately 60% of global corporate gold production. Citing China and a 48 year high demand from central banks as drivers in 2012, the report tracks the last decade of price growth:
Goldman Sachs cut its 2013 gold price forecast to $1,600 an ounce from $1,810 an ounce: The bank also cut its 2014 forecast to $1,450 an ounce from $1,750 an ounce. The bank’s comments on the change included the following explanation: “The decline in prices since last fall and our updated forecast suggests that the turn in the gold price cycle is likely already underway," Goldman said. "As a result, although our U.S. economic forecasts point to modest near-term upside to gold prices, we believe that a sharp recovery in prices to our previous price forecast is unlikely. In fact, we suspect that if indeed our forecast for further declines in gold prices proves correct, the fall in prices could end up being faster and larger than we expect as net long positions across COMEX futures and ETFs remain near their record highs.”
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http://www.gold.org/investment/research/regular_reports/gold_demand_trends/
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
HSBC7 Trims Near Term Price Forecast to $1,700 but Remains Bullish: As reported by Francesca Freeman of DowJones: “HSBC's forecast shift reflects gold's lackluster price performance since the start of the year, driven by growing expectations that the U.S. Federal Reserve may curb its gold-supportive quantitative easing program sooner rather than later, said HSBC analyst James Steel. “We view this shift as only a short-term phenomenon, however, and we remain bullish on gold. We slightly trim our average price forecasts for this year to take into account weakness year-to-date but nevertheless expect a recovery in prices from current levels as the year continues," said Mr. Steel.” Many supportive factors for higher gold prices remain, said Mr. Steel. These include rising global liquidity as the likes of the Bank of Japan ramp up quantitative easing, rising inflation expectations, currency depreciation and geopolitical tensions, he said. Gold tends to be sought as a store of value at times of economic insecurity, currency debasem*nt and deflation. Gold prices should also find support from improving demand for gold exchange-traded funds, ongoing central bank demand and strong jewelry demand, said Mr. Steel.” Recent WorldBank8 Forecast Forecasts Gradual Gold Price Decline through 2025:
Recent Bloomberg Gold Analyst Survey9 Illustrates Gold Price Behavior Relative to Global Crises: Citing the market’s reaction to Cyprus, the survey shows the flight to gold that occurs in response to some global crises as well as to expectations of loose monetary policy: “There’s a dawning realization that the crisis is unfortunately far from over in Europe,” said Mark O’Byrne, the executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores bullion coins and bars. “Ultraloose monetary policies are set to continue for the foreseeable future and that would suggest that gold prices could go higher as long as that’s the case.”
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http://www.advfn.com/news_HSBC-Trims-2013-2014-Gold-Forecasts-Retains-Bull_56784170.html http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1304428586133/Price_Forecast.pdf 9 http://www.bloomberg.com/news/2013-03-22/gold-seen-extending-rebound-as-cyprus-revives-bullscommodities.html 8
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Gold Price Charts from KITCO®10
10
http://www.kitco.com/charts/CPM_charts.html
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Overview of the Country of Colombia from the CIAFactbook11 Country Background: “A nearly five-decade long conflict between government forces and anti-government insurgent groups, principally the Revolutionary Armed Forces of Colombia (FARC) heavily funded by the drug trade, escalated during the 1990s…In October 2012, the Colombian Government started formal peace negotiations with the FARC aimed at reaching a definitive bilateral ceasefire and incorporating demobilized FARC members into mainstream society and politics. The Colombian Government has stepped up efforts to reassert government control throughout the country, and now has a presence in every one of its administrative departments. Despite decades of internal conflict and drug related security challenges, Colombia maintains relatively strong democratic institutions characterized by peaceful, transparent elections, and the protection of civil liberties.”
Area: 1,138,910 sq km, 26th globally. Slightly less than twice the size of Texas. Population: 45,745,783, 29th globally. 90% Roman Catholic. Capital: Bogota Official Language and Currency: Spanish; Colombian Peso. Economy: $500 billion, 29th globally. Roadways: 141,374 km in roadways, 33rd globally. Government Type: Republic; executive branch dominates government structure. Economic Overview: “Colombia's consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to face external shocks. Real GDP has grown more than 4% per year for the past three years, continuing almost a decade of strong economic performance. All three major ratings agencies have upgraded Colombia's government debt to investment grade. Nevertheless, Colombia depends heavily on oil exports, making it vulnerable to a drop in oil prices. Economic development is stymied by inadequate infrastructure, weakened further by recent flooding. Moreover, the unemployment rate of 10.3% in 2012 is still one of Latin America's highest.” 11
https://www.cia.gov/library/publications/the-world-factbook/geos/co.html
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Discussion of GOFF Financials Unaudited Balance Sheet as of 12/31/12 Assets
$5,653 in cash and total assets.
Current Liabilities
$26,000 consisting primarily of Note payable – related party.
Working Capital
A working capital deficit of $20,000.
Stockholders Deficit
Stockholders’ deficit of $20,000 with an accumulated deficit of $48,000.
Unaudited Statement of Operations for the Period Ended 12/31/12 Revenues
As an exploration stage company, GOFF has generated no revenue since inception.
Expenses
$11,000 for the quarter ended 12/31/12.
Net Loss
$11,000 for the quarter and $15,000 for the six months ended 12/31/12.
Liquidity and Capital Needs
$14,000 in net cash used in operating activities was funded by $18,000 in net cash provided by financing activities. The continuation of the Company as a going concern is dependent upon the continued financial support from management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. GOFF intends to conduct exploration activities on its newly optioned property over the next twelve months. GOFF estimates its operating expenses and working capital requirements for the next twelve month period to be $580,000, including $300,000 for exploration, $200,000 for general / corporate / admin expense, and $80,000 for property option payments.
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Benchmark Indices (Funds) PowerShares Zacks Micro Cap Portfolio 12
iShares MSCI Global Metals & Mining Producers ETF 13
Recent 52 Week Performance:
Recent Top Holdings:
Recent Top Holdings: Gray Tele Vision Inc 0.42% Travelcenters Of America Llc 0.38% Republic Airways Holdings Inc 0.36% Quiksilver Inc 0.36% Virginia Commerce Bancorp 0.34% Voxx International Corp 0.33% Vringo Inc 0.33% Manitex International Inc 0.32% Sierra Wireless Inc 0.32% Tuesday Morning Corp 0.32%
Bhp Billiton Ltd 12.63% Rio Tinto Plc 7.78% Bhp Billiton Plc 7.20% Anglo American Plc 4.35% Vale Sa-Pref 3.92% Xstrata Plc 3.87% Freeport-Mcmoran Copper 3.40% Rio Tinto Ltd 3.13% Vale Sa 2.58% Glencore International Plc 2.33%
Recent Select Metrics:
Recent Select Metrics:
Price/Earnings Multiple: 19.74x Average Market Cap: $511 billion Price / Book: 1x Return on Equity: 6.1% 1 Year Performance: 19.7% Ticker: PZI Methodology: The Index is designed to identify a group of micro cap stocks with the greatest potential to outperform passive benchmark micro cap indexes and other actively managed U.S. micro cap strategies. Due to their low correlation to large, medium and small sized companies, micro caps may complement existing blended portfolios by improving risk adjusted performance. The Fund is rebalanced and reconstituted quarterly.
Price/Earnings Multiple: 18.2x # of Holdings: 284 Price / Book: 1.96x Top 3 Countries: UK, Australia, US (total 55%) 1 Year Performance: 5.1% Ticker: PICK
12 13
Methodology: POTENTIAL USE: Express a sector view and diversify your global stock portfolio. EXPOSURE: Global metals and mining stocks (excluding gold and silver) FUND NAME: iShares MSCI Global Select Metals & Mining Producers Fund
http://www.invescopowershares.com/products/overview.aspx?ticker=pzi http://us.ishares.com/product_info/fund/overview/PICK.htm
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Relationship between the U.S. Dollar and Colombian Peso The following graphic from Yahoo!Finance shows the relationship over the last 2 years between the US Dollar and the Colombian Peso, which had a recent exchange rate of:
$1.00 = 1,829 COP
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1 COP = $0.00055
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
GOFF and Comparable ETF Performance Chart from quotemedia.com and Barchart.com
ABX:
Barrick Gold Corporation
AU:
AngloGold Ashanti
GOFF:
Goff Corporation
NEM:
Newmont Mining
PICK:
iShares MSCI Global Metals & Mining Producers ETF
PZI:
PowerShares Zacks Micro Cap Portfolio
QQQ:
Powershares QQQ
XAU:
PHLX Gold/Silver Sector
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
GOFF Risks As reported in significantly more detail in Company filings, which should be read in addition to this report, GOFF and its investors face a variety of operating and other risks, including: -
The fact that GOFF has not earned any operating revenues since incorporation raises substantial doubt about the ability to continue to as a going concern.
-
GOFF is in the exploration stage. There is no assurance that GOFF can establish the existence of any mineral resource on GOFF property in commercially exploitable quantities. Until GOFF can do so, GOFF cannot earn any revenues from operations and if GOFF does not do so GOFF will lose all of the funds that GOFF expends on exploration. If GOFF does not discover any mineral resource in a commercially exploitable quantity, the business could fail.
-
Mineral operations are subject to applicable law and government regulation. Even if GOFF discovers a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If GOFF cannot exploit any mineral resource that GOFF might discover on GOFF property, the business may fail.
-
If GOFF establishes the existence of a mineral resource on GOFF property in a commercially exploitable quantity, GOFF will require additional capital in order to develop the property into a producing mine. If GOFF cannot raise this additional capital, GOFF will not be able to exploit the resource, and GOFF business could fail.
-
Mineral exploration and development is subject to extraordinary operating risks. GOFF does not currently insure against these risks. In the event of a cave-in or similar occurrence, GOFF liability may exceed GOFF resources, which would have an adverse impact on the company.
-
Mineral prices are subject to dramatic and unpredictable fluctuations.
-
The mining industry is highly competitive and there is no assurance that GOFF will continue to be successful in acquiring mineral claims. If GOFF cannot continue to acquire properties to explore for mineral resources, GOFF may be required to reduce or cease operations.
-
GOFF intends to issue additional shares of common stock or preferred stock, which would reduce investors' percent of ownership and may dilute GOFF’s share value.
-
If GOFF does not obtain additional financing, the business will fail.
-
Because GOFF officer and directors have other business interests, they may not be able or willing to devote a sufficient amount of time to GOFF business operations, causing GOFF business to fail. GOFF officer and director, Warwick Calasse, will only be devoting limited time to GOFF operations. Mr. Calasse will handle most of the company's day to day operations and intends to devote 10 to 20 hours of his week to GOFF business affairs until such a time as a cash salary can be drawn. Because GOFF’s sole officer and director will only be devoting limited time to GOFF operations, GOFF operations may be sporadic and occur at times which are convenient to him. As a result, operations may be periodically interrupted or suspended which could impede the development of GOFF business or result in the cessation of operations.
-
Because GOFF’s sole executive officer has no experience or training in the field of mineral exploration the business has a higher risk of failure. GOFF’s sole executive officer, Warwick Calasse, does not have experience or training in the field of mineral exploration. Because of this lack of experience there is a risk that some of the strategic or operational factors needed to achieve exploration or production milestones may be overlooked. If GOFF is unable to achieve exploration or production milestones required to exercise
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
GOFF option to purchase La Frontera Project, the business could fail or require additional financing beyond GOFF current budget. -
Because GOFF’s sole executive officer has limited training and experience in financial accounting and management, the business has a higher risk of failure.
-
Because GOFF’s sole executive officer controls 66.37% of the voting rights attached to GOFF issued and outstanding securities, he can make and control corporate decisions that may be disadvantageous to minority shareholders.
-
U.S. investors may experience difficulties in attempting to effect service of process and to enforce judgments based upon U.S. federal securities laws against the company and its non-U.S. resident officers and directors.
-
GOFF has limited experience as a public company.
-
GOFF does not expect to pay dividends in the foreseeable future.
-
Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of GOFF common stock and make it difficult for GOFF stockholders to resell their shares.
-
GOFF stock is a penny stock. Trading of GOFF stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell GOFF stock.
-
Any additional funding GOFF arrange through the sale of GOFF common stock will result in dilution to existing shareholders.
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Initiating Coverage: Goff Corporation (OTCBB: GOFF)
March 27, 2013 Equity Research
Murphy Analytics Disclosures and Disclaimers This report by Murphy Analytics LLC and the Analyst (together referred to as “MA”) on Goff Corporation (the “Company”) is to be used for informational purposes only. Nothing in this report should be construed as investment advice or as an offer to buy or sell any securities. This report is based on information assumed to be reliable and accurate, but MA does not guarantee or make any representation with regard to its reliability, accuracy or completeness. MA made no attempt to independently verify the reliability, accuracy or completeness of this information utilized in the writing of this report. The opinions expressed in this report are subject to change without notice. MA accepts no liability with regard to any loss arising from any use of this report. Past performance of the Company should not be taken as an indication or guarantee of future performance, and no representation or warranty, expressed or implied, is made by MA regarding future performance. Any security discussed in this report may be deemed speculative and therefore not appropriate or suitable for all investors. This report contains statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on estimates and projections made by the Company and/or by MA. These estimates and projections are derived in part on assumptions, and are not guarantees of future performance. Because future performance is quite difficult to predict, actual outcomes and results may differ materially from what is expressed or forecasted in forward-looking statements due to numerous factors. Such factors include, but are not limited to, the Company's ability to execute effectively its business plan and acquisition strategy, failure by the Company to retain key personnel, changes in the markets in which the Company operates, the development of new products and services that compete with those offered by the Company, competitive pressures, economic and political conditions, changes in consumer behavior, the introduction of competing products having technological and/or other advantages, and other risks not contemplated by the Company or by MA. These and other risks are described in the Company's filings with the Securities and Exchange Commission. These filings should be read in conjunction with the MA report. MA was compensated $5,500 in advance of the publication of this report. MA assumes no responsibility to update information concerning the Company. MA owns no shares in the Company. No part of the compensation to MA is tied to any content contained in this report or any view expressed in this report. The Analyst for this report Patrick J. Murphy, CFA, has nearly 20 years of investment and transaction analysis across a range of asset classes including microcap equities, commercial real estate debt and equity, municipal derivatives and public finance, venture capital, fixed income, commercial MBS and mortgage REIT's. Additionally, Murphy Analytics sometimes provides analytical services to various venture capital firms, privately held companies, non-profits and investor relations firms. Mr. Murphy is an alumnus of the University of Notre Dame (1991), with an undergraduate degree in Economics, and earned a Masters Degree in Finance from St. Louis University in 1997. Mr. Murphy is a CFA Charterholder and a member of the CFA Society of St. Louis. I, Patrick J. Murphy, hereby certify that all views expressed in this report accurately reflect my personal views about the Company, and that no part of my compensation was or will be related to the views expressed in this report.
Analyst Contact Information: Patrick J. Murphy, CFA Analyst Murphy Analytics www.murphyanalytics.com [emailprotected]
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