Dakota Gold (NYSEMKT: DC) stock has jumped 100% this morning premarket. This appears to be a result of reconsideration of their recent change in their market listing.
The company was, as Dakota Territory Resource Group, listed on the OTCQB market. The majority shareholder at that point was JR Resources, with perhaps 51% of the equity. There has been a slightly complex series of mergers among the varied entities which ends up with the one company, Dakota Gold, which then moved its listing up to the NYSE American market.
It’s entirely possible that this produces a rise in value, of course. For two reasons – the first and most obvious being that with listing on a larger and more liquid market, we’d expect to see a stock price respond to that. The second isn’t all that much less obvious. JR Resources used to own 51% and stockholders in Dakota Territory, therefore only owned 49%. Now, stockholders in the one company, Dakota Gold, own 100% of it all.
A 100% rise is still a bit of a shock as it’s not obvious that such technical changes are worth quite that much.
As to what the company actually does it prospects for gold in the Dakotas – South Dakota, to be more precise. It’s following an entirely viable strategy in doing so as well. Essentially, it’s doing “earn in” agreements, some of which are with Barrick Gold. The idea here is that there are known formations, Possibly mined in the past, or just identified. But those were perhaps mined out or never even really developed using old exploration and mining techniques.
As we know, both exploration and extraction techniques develop over time and as has been proven again and again with gold a good place to go looking for places to apply the new techniques is where there was gold but not enough for the old techniques. Perhaps tech has developed enough to make uneconomic deposits economic now?
That this is a proven technique does not mean that it proves profitable in every instance – just that it has worked often enough for it to be something worth trying. Which is, largely and stripped of all detail, what Dakota Gold is doing here in the Homestake Formation.
What will determine the long-term value offering at Dakota Gold will, of course, depend upon what is actually found. Not the prospect of what might be, as at present, but what is. That being something that we’ll all find out as a result of the drilling programmes the company is undertaking.
The volume of trade yesterday was, according to NYSE American, some 800k shares. Which is a lot for such a small issue. Whether the price rise will be sustained remains to be seen. It could be a revaluation, it could just be one of those passing fancies.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.