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How much gold is there at Cow Mountain?

ARKO DATTA/Reuters

Last month, Barkerville Gold Mines Ltd. looked like a great investment, but an announcement Thursday has investors wondering whether its new project may be more hat than cattle.

The company's news release said it would clarify its technical disclosure of the Cow Mountain open-mine gold property because of a review by the British Columbia Securities Commission (BCSC).

This review came after Barkerville issued a release in late June that said Cow Mountain had the staggering "geological potential of 65- to 90-million oz's [of] gold." The release thrust the junior mining company, which would otherwise be a relatively obscure blip on the TSX Venture, into the spotlight. With bonanza numbers like those, investors should have been clambering on board, and the stock price did immediately double its value up to roughly $1.22 a share, but it soon backed off again. The Street was skeptical, and so was the regulator.

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Thursday's release explains that the BCSC sent Barkerville a review letter on July 4, requesting that the company better explain how it arrived at its numbers. Barkerville says it then rushed to put together an incomplete technical report (NI 43-101) and shipped it off quickly. Unfortunately, once the BCSC reviewed the document, it said that the estimate of all those millions of ounces was "inadequately supported in the draft technical report," and the assessment was conducted in a way that was "contrary to normal industry practice."

Several analysts also weighed in on the issue, saying the estimates seemed impossible, considering an assessment of the same area done about six years ago. In that report, the grade and amount of gold was estimated to be vastly less.

In response, Barkerville plans to complete its technical report, which it hopes will "adequately address the recent comments from the BCSC."

And it really must do that. Even though the company was obligated to release it's late-June assessment as soon as it was complete (because it represented a material change, as Mineweb.com points out), it wasn't forced to put out such a boastful original release. The company will have a tricky time drumming up the support and dollars it needs to move forward with its project if the next technical report represents a huge downgrade in the mine's potential.

For now, the market will wait for Barkerville to herd its final report into the Cow Mountain rodeo.

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