The Maven Letter: December 2nd, 2015
In The News: persistence pays for Precipitate and Pure Gold; Lydian finances Amulsar. On The Macro: Uranium Today. New Recommendation: NexGen Energy. And Portfolio News: Dalradian, Inca One, Newmarket, Nevsun, Pilot.
In The News…
We’re all slogging through this market. It’s been no fun for investors to watch as value evaporates and opportunities shrink. But it’s been equally hard for companies – harder, actually. Juniors don’t have a choice: a gold explorer is a gold explorer. Sure, the company can change gears completely and start growing marijuana, for example, but that disregards the inherent value. A good junior is a group of skilled and experienced operators, advancing an asset or portfolio that they believe in based on their past technical and financial successes. Those skills and experiences won’t help much growing weed. Moreover most of these people have been through several sector cycles; they know the upturn makes up for the bad years, if they can just survive until then. So it becomes a question of survival. That can take two forms: doing nothing until the environment improves or finding ways to raise money and advance assets, downturn be damned. The best juniors of course fall into the second category. Two bits of news recently show what can be achieved with ingenuity and perseverance, two traits necessary for success in these markets. The first came from Precipitate Gold (TSXV: PRG). Precipitate is advancing the Juan de Herrera gold project in the Dominican Republic. The team has already made one discovery there, when the first set of drills to test a target called Ginger Ridge returned 18 metres of 4.54 grams per tonne gold, along with several lower-grade intercepts. A follow-up IP survey made those results even more intriguing. IP is a reliable tool in that part of the world, having led neighbour Goldquest Mining (TSXV: GQC) to its 2-million oz. Romero discovery. Precipitate’s discovery hole at Ginger Ridge was at the northern edge of its IP survey. When they extended the survey to the north, the anomaly grew in size and strength. It means the area north of the discovery hole is begging for additional drilling. But drilling costs and it has been very tough to raise cash to drill early-stage gold targets. Precipitate took a moment to think. Ginger Ridge looks great, but it’s only one target. If they drilled and hit, great. If the drill missed…the market would probably discount the whole story, even though there are other interesting areas on the project.
So Jeff Wilson and his small team spent the summer figuring out how to grow the Juan de Herrera story without spending much money (since they had very little). Some desktop work and a mag survey got that process started, but it was an ingenious deal with Goldquest that ramped things up. One interesting part of working in the Dominican is that companies are limited to 30,000 hectares of ground. Goldquest has its 30,000 hectares, and on it a very good gold deposit. But pre-development projects aren’t getting a lot more love than early- stage exploration, so despite a strong PEA and some stellar drill results Goldquest too is having a hard time. Both companies believe the Tireo mineral belt holds huge potential. If others saw the same potential, both companies would benefit. And there was a way to help that along. Enter a data sharing deal. Goldquest has been working in the Tireo gold belt for almost 10 years. In that time they have walked, sampled, surveyed, and assessed far more than the 30,000 hectares they now hold, but data on ground they no longer hold has been gathering dust. The deal gives Precipitate access to that data. A fair bit of it covers PRG’s ground; the rest of it is nearby. Precipitate is working through this trove of information with the goal of identifying new drill targets. Should PRG make a new discovery, Goldquest would benefit from the area play advantage, and because Goldquest got 300,000 PRG shares in exchange for the information. And it gets better. Precipitate went to Strategic Metals (TSXV: SMD), the Yukon-focused project generator that owns 12.5% of Precipitate by virtue of having vended some Yukon projects to PRG in 2012, to tell Strategic about the data deal. It was a standard meeting – Precipitate updates Strategic regularly and has offered Strategic the chance to participate in its financings over the last few years. Strategic has always declined. But on hearing about the combination of the new IP anomalies and the data sharing deal with Goldquest, Strategic president Doug Eaton got interested. Significant data for shares? And enough layers of data that drill-ready targets could result? By the time Jeff Wilson left the meeting, the stage was set for Strategic to fill an $800,000 financing. The funds will enable Precipitate to churn through the GQC data. Should good targets present, Strategic could exercise its warrants, which would put another $1.2 million in Precipitate’s account – enough for a drill program. The ability to negotiate a data sharing deal has turned everything around for Precipitate. Instead of a bleak 2016, the company has new data to assess, new money to do so, and a path to drilling. The second deal that served to remind me about the power of persistence came out of Pure Gold (TSXV: PGM) this morning. Pure Gold is also an early-stage gold explorer, focused on the Madsen project in Red Lake, Ontario. This is a perfect example of the value inherent in a good junior explorer: the Pure Gold team has decades of experience exploring and mining in Red Lake and they chose Madsen because a perfect storm of circumstances meant these grounds had not seen modern systematic exploration. These guys should absolutely be exploring for gold in Red Lake, not growing weed. But they need money. PGM still has $2.9 million in the bank, thanks to a $5.7-million raise in February. But given exploration work that’s already been done at Madsen, the only real way to develop momentum is to hit with the drill and drilling can eat through a few million pretty quickly. So Pure Gold inked a deal to sell about 10% of its property to Premier Gold Mines (TSX: PG). The claims in question are on the northeast edge of Madsen, adjacent to Premier’s Hasaga property. They do not include any of Pure Gold’s primary exploration targets; in fact the claims do not even host the mafic-ultramafic contact along which Pure Gold has been finding high-grade gold. The deal comprises $2.5 million in cash and $2.5 million worth of Premier shares, plus a 1% net smelter royalty on the claims. With this injection of cash Pure Gold can confidently prepare for its 6,000-metre winter drill program. ------
Lydian International (TSX: LYD) just demonstrated that money is available, for the right projects on the right terms. Lydian announced a US$325-million construction financing package for its Amulsar gold project in Armenia. Orion Mine Finance and Resource Capital Funds are backing the deal, which is not exactly straightforward. The financing comprises: US$60-million gold and silver stream covering 2.1 million oz. gold and 700,000 oz. silver. US$80-million private placement US$160-million term loan facility US$25-million cost overrun facility
To access these funds Lydian has to raise US$25 million on the markets. Lydian is also working to cement a US$70-million equipment lease facility. All these components together should fund Amulsar’s US$395-million capital cost. It’s a complicated financing deal, for sure. And while Lydian says it “greatly reduces dilution compared to traditional project finance structures”, the fact is Lydian’s current 185 million share count will grow by probably 400 million shares as the company raises US$25 million in the markets and US$80 million from its backers, given that its shares are trading at $0.275 today. Nevertheless, congrats to Lydian on getting it done. It has not been easy getting Amulsar to this stage: a series of government dictates made it difficult to permit the heap leach facility, social support was limited in an area un-used to mining, and metal prices are way below where they were when I visited the project in 2010. I was talking to the CEO of a different development-stage copper-gold company earlier this week. His approach is to de-risk the asset but spend as little money as possible until the markets improve, at which point his group will push through the final bits of feasibility work and start looking for development capital. “I’ve seem projects get pushed ahead in bad markets and it’s the death of the asset,” he said. “That is what we don’t want. That being said, I’ve also seem teams push through and then get the timing just perfect, with their mine going into production just as the bull market gets going again, and those guys look like geniuses. But it’s hard. Timing is hard.” Here’s hoping Lydian is timing it right.
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As one of the groups backing Lydian, Orion Mine Finance is also trying to time things right. It was interesting that I read about the LYD deal right after reading about what Orion CIO Oskar Lewnowski said in his presentation to the Mines and Money conference currently underway in London. “We are going to see a pretty broad cross-commodity leg down, where US$900-an-ounce gold is more than just a possibility,” he said. “US$1.80 a pound for copper is likely. I don’t think we’re going to see much relief until 2018.” Lewnowski has experience. He co-founded metals merchant and hedge fund Red Kite more than a decade ago. In 2013 he spun Orion out to focus on mine financing. Lewnowski wasn’t the only experienced mine financier or builder to step out last week with bearish sentiment. Mark Bristow, CEO of Randgold Resources (one of the best gold miners in the world from the perspective of financial management) also spoke at Mines and Money and also sees more downside ahead. “We have quite a bit of pain to go through,” he said. “We’re still in the denial phase…the longer we live in denial the longer the workout is going to be.”
Bristow is a skilled, experienced mining man, but I would disagree that we are still in the denial phase. In fact, looking back on 2015 I think the biggest change of the year was a shift from “I can’t wait until the market turns around” to “the market isn’t going to improve anytime soon, so let’s figure out how we can we make things work today”.
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On The Macro: Uranium Today
Uranium uranium uranium. Wherefore art thy price movement uranium? Coming. Raymond James analyst David Sadowksi does some of the most thorough uranium analysis out there. His latest report maintains his overall view that the world will run very short of uranium starting in 2020 if prices do not rise enough to incentivize new mine builds. Sadowski is not alone in this. Most, if not all, uranium analysts see serious supply shortages looming if prices do not increase. A strong new addition to Sadowski’s research is his Dynamic Uranium Incentive Price model. His team evaluated almost 60 projects, from mine expansions to new mines and mine restarts. They built discounted cash flow models for each project in order to calculate what uranium price it would take for each to produce a threshold rate of return. The result is below:
Each bar represents a project; the width of the bar is the asset’s maximum annual output. The height is the price needed to incentivize development. The takeaway is that current prices support very little new production. In fact, there is only one uranium mine under construction in the world today (it’s in China). Higher prices are needed. Specifically, Sadowski estimates that in order for enough new mines to be built by 2025 to avoid what will otherwise be a 65-million lb. deficit, prices need to reach US$70 per lb. I don’t think prices are suddenly going to jump to that level simply because the data say they should. However, uranium is a forward-looking market. Utilities running nuclear reactors cannot flirt with running out of fuel, which is why they generally cover their needs at least three years out and as much as a decade out. That contract model means a deficit looming in four years should start to influence prices soon. There is evidence the influence is already at work. At a recent Cameco investor workshop, president and CEO Tim Gitzel said utilities are starting to look around for new long-term contracts. The backstory here is that many utilities freaked out when uranium prices shot up in 2007 and locked in long-term contracts, to protect themselves from further price appreciation. Of course the opposite happened: uranium started to weaken of its own accord and then Fukushima hammered it down. Those 2007 contracts, though, were binding. As such many producers are selling uranium for 50% above spot or better, and those sales have kept producers alive. But they were generally ten-year contracts, which means the time to ink new deals is nigh. Add in that the spring is traditionally ‘mating time’ in the uranium sector – when buyers and sellers generally discuss long-term contracts – and we could be looking at a near-term price lift that starts a long, slow ascent. The other reason to enter uranium today is slightly counter intuitive. The contrarian uranium argument is getting old. It has now been almost five years since the Fukushima disaster and uranium consumption is still below pre-accident levels, while stockpiles are higher. Arguments for a price rebound have been around for years but so far the upside has been minimal. That means even contrarian investors are limited – the space is being ignored. Share price multiples for pounds in the ground keep sliding.
I realize the same can be said for other metals, but there’s a difference. With gold, there is no structural supply-demand argument. Same with copper and silver, platinum and palladium. Zinc is the only other metal facing a significant supply shortage. Given all the uncertainty in mining, I like a story supported by fundamentals. Supply shortages for an essential commodity like nuclear fuel fit that bill. [Thanks to David and Raymond James for permission to use their charts in this article.]
New Recommendation: NexGen Energy
Price (close today) $0.64 Shares outstanding 254M Fully diluted (post financing) ~300M Cash ~$15M ($35M post financing)
Of late I’ve been focusing on short-term opportunities, and for good reason. The market is not going to improve anytime soon, but I see opportunity to lock in gains of 20 to 30% by playing seasonality. Other ways to play pop up if you are watching, like the 30% upside offered through the Sunridge Gold (TSXV: SGC) arbitrage. That being said, it is also important to watch for chances to position for the longer term. Hence my decision to delay Tax Loss Buying, Part III, until next week and instead offer a new recommendation with a longer-term outlook.
The stock is Nexgen Energy (TSXV: NXE). It is a story I have been watching for some time. In fact, I owned a chunk of NexGen that I sold in the fall of 2014 – I hadn’t fallen off the story but I was up nicely and had a new business to finance! Since then I have watched with increasing interest. The fact that the stock has done well in the interim is not necessarily a bad thing – many technical traders will tell you never to buy a stock below its 200-day moving average, which means only rising stocks are in contention. It’s a momentum argument and one with merit. NexGen is currently right at its 200-day moving average. It spent most of 2015 above it, though, and I’m moving on the stock now because an in-progress financing has the stock pinned to the financing price, which is $0.64. The raise was unexpected, in that NexGen already had almost $20 million in the bank. However, ongoing drilling, permitting, environmental work, met testing, and so on would have worked through much of that cash before the end of next year. Raising now quiets the When are they going to finance? question, which should let the stock trade based on merit. And this is a stock with merit. The Arrow discovery is one of the best uranium zones ever found in the Athabasca Basin, which is arguably the best uranium jurisdiction in the world. Given my positive outlook on uranium, it only makes sense to go long the best uranium exploration story out there.
The Arrow Discovery Arrow is on the Rook I property, which lies along the southernwestern edge of the Athabasca Basin. Remember, the Athabasca is the Holy Grail of uranium. Athabasca mines tap in grades that are 100 times the global average mined grade. Arrow is at the west end of Rook I, which butts up against Fission Uranium’s (TSX: FCU) Patterson Lake South project.
The key characteristics at Arrow are: Basement hosted mineralization. Many Athabasca deposits are along the unconformity and extend up into the sandstone, a much less competent host than the crystalline basement rocks. Land-based exploration. There are no bodies of water overlying Arrow. Four sub-vertical shear zones. Mineralization starts 100 m below surface and to date has been tracked to 920 metres depth. Current strike is 645 metres, with 235 metres width. Core zone delineated this summer hosts incredibly high uranium grades. NexGen put its first hole into Arrow in February 2014. Less than two years later, the company is awaiting the final results from its 25,000-metre summer drill program before starting on an initial resource estimate. The zone has grown quickly for several reasons. First, NexGen has not been scared to take big stepouts. Second, angled drilling has proved an efficient tool. Third, NexGen’s technical team deserves major credit for understanding the system so quickly and collaring holes that have hit mineralization 95% of the time. Fourth, the stacked nature of Arrow’s four lenses means one hole usually punches through several zones.
The latest set of results included one of the best holes ever drilled in the Athabasca (a not uncommon occurrence with NexGen drill results). Hole 57c3 cut 31.5 metres of 10.03% U3O8, including 5 metres of 49.6% U3O8. The result extended the strike of the core zone by 40 metres to 203 metres. Results from two core zone infill holes are pending. Meanwhile, two other holes tested the A3 shear and returned 50.5 metres of 2.74% U3O8 and 29.5 metres of 5.89% U3O8. It is possible a high-grade core is developing at A3 as well. I could go through reams of drill results, but these few give a good idea of what Arrow has to offer. Good lengths of moderate mineralization (a few percent U3O8) surrounding shorter lengths of incredibly strong mineralization. With grades like that, it does not take much strike length to build pounds quickly. At this point analyst estimates for the initial Arrow resource range from 70 million lbs. U3O8 to 200 million-plus lbs. U3O8. We will know who is right in March or April, when the estimate comes out. Before the numbers are tabulated NexGen will be back on site to kick off a winter drill program that will include big stepouts to the southwest and northeast, further defining the high-grade zones within the resource, and testing some regional targets.
Looking Ahead for Value So Arrow has grade. But it takes more than grade to turn a discovery into a success. Deposits are geologic curiosities unless they can be mined. Arrow is shaping up as a deposit that can be mined. First of all, the zones are vertical. Vertical is always better for underground mines, because gravity is on your side. Second, it is in the basement rock. That means the host rock is competent. Many other Athabasca deposits are surrounded by water-saturated sandstones, about as challenging a host rock as there is. Third, there is no lake above Arrow. The usual comparison, Fission’s PLS project, is saddled with a lake. Combined with a shallower, sandstone-hosted deposit, the lake means a mine at PLS would be a complicated endeavor. Not so at Arrow. I realize it is early to talk mining method, but perhaps not too early in that Arrow is not the only uranium discovery in the Athabasca and, at the end of the day, discoveries compete with each other. The best discovery will win takeout offers, financing bids, mine development capital, shareholder support – and best does not only mean highest grade, but actual value. To have value, it has to be mineable. Many questions yet remain, of course. This is still an early-stage discovery. But signs to date suggest Arrow has all the right boxes ticked.
The Recommendation Rationale There should be a rationale backing every decision to buy a stock. For NexGen, the near-term rationale is clear and while the long-term trajectory is unknown there are several good options. This asset should gain in value as it grows. The initial resource will highlight how quickly NexGen has turned Arrow into a world-class deposit. From there, NexGen has its sights set on taking Arrow all the way into production – and the company is well positioned to take Arrow a long way. The team has deep experience building and operating mines, both uranium and other. And they should look towards production: in my opinion management teams should always be focused on the ‘real’ goal of getting into production because, if they do a good job, they will get taken out along the way. That brings us to the common question: Who could take a run at NexGen? Fission Uranium just tried to sell itself, literally hanging out a For Sale sign, and got no good offers (to make a very long story very short). So who would bid for NexGen? There are candidates. Asian utilities, Areva once it gets its house back in order, Rio Tinto, or perhaps a smaller uranium player like Paladin Resources could bid. You can argue that none of these players is ready to move soon, but that both is and isn’t true.
It is true in that miners – uranium miners included – are still focused on strengthening their balance sheets, so acquisitions remain sidelined. However, the reality of mine development timelines mean they cannot wait that long. Say it takes eight to 10 years to get a deposit into production (and that’s optimistic). Then look at Cameco as an example. Cameco is currently focused on Cigar Lake, but the mine life there is only 12 years. They could extend if they find more ore but, given how long it takes to plan, permit and build a mine, Cameco needs to start figuring out a Cigar Lake replacement within the next year or two. Cameco has a few options in its portfolio, the best being its 70-million lb. Millenium project in the southeast Athabasca, but the point is that miners need long-term outlooks. Even if no bigger fish tries to eat NexGen for a year or three, the asset and company should grow in value. We are getting in pretty early in the discovery phase and resource expansion alone should provide lots of room to grow. Uranium price performance would amplify the gains. The last part of the rationale is: Why enter now? The answer is that NexGen’s current financing is creating an opportunity. While NexGen works to close the $20-million raise, the stock will stay pinned to the financing price of $0.64. Once the deal is done, I think the stock will rise a few cents in fairly short order. From there on, this is a value story. Strong news flow – drill results and that resource estimate – should maintain interest. If a surge of spring contract negotiations support the price of uranium, all the better. And if the spring isn’t particularly strong, this discovery is. Arrow is set to advance alongside a rising uranium price. It should make for a perfect storm.
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Portfolio News
Dalradian Resources (TSXV: DNA) – BUY, Medium Term Dalradian has been busy collecting and integrating all the data needed for its feasibility study while also advancing its underground adit and drilling, but the company also found some time for a bit of regional exploration. Dalradian controls 840 sq. km of ground around its flagship Curraghinalt deposit. In its latest regional effort, Dalradian checked out an area 12 km southwest of Curraghinalt and found gold- bearing quartz veins. Samples from outcrop in this new area, dubbed Rylagh, returned best results of 168 g/t gold, 139.5 g/t gold, and 42.4 g/t gold. Dalradian crews found several veins, including one that was exposed for almost 4 metres. The find was lucky in that extensive peat and clay obscure most exposures.
While meaningless to DNA’s share price, the results are positive in that regional potential – the potential to find another source of mill feed – makes every potential mine stronger.
Inca One Gold (TSXV: IO) – BUY, Medium Term “That’s why they call it due diligence.” That’s how Inca One VP Finance George Moen described the stumble IO just took along its path to acquire Standard Tolling. Inca made a bid for Standard in early October, offering 0.55 IO shares for each TON share. The deal represented a 23% premium based on each company’s 10-day volume-weighted price. Then the last day of November brought news that the deal is being redone. More precisely, the binding letter of intent on the merger has been terminated and a new one is being hashed out. The reason: “several significant issues connected with the long-term viability of permitting at Standard’s Minera La Quinua plant (MLQ plant) at the Huamachuco property came to light.” The biggest issue is that it seems the regional authority intends to withdraw the MLQ plant permit. The press release paints a clear picture, saying Inca and Standard understand they will be unable to operate the MLQ plant as either a toll milling operation or a mineral depot at the current location. “The regional authority sent Standard a notice saying the permit would be rescinded,” Moen said. “We still don’t know the basis of that. While we figure it out we are assessing where the plant can be moved, where our northern ore depot can be located, and both parties are still working on a deal. We are getting full cooperation from Standard.” Now, the fact that Inca is already assessing new locations leads me to think they do know why the permit is being retracted, but at the end of the day that detail may not matter. The detail that does matter for now is that the renegotiated deal will no longer be a takeover. Instead, Inca is angling to buy assets from Standard – the equipment that makes up the MLQ plant and Standard’s ore buying debt facility. If you recall, I said when Inca announced the Standard deal that the point was not to start processing ore at MLQ. The deal was aimed at Standard’s ore note facility and its network of miners in the north, where Inca had few inroads. The plan was to use the MLQ plant, with its scale and assay lab, as a northern ore depot. Those goals are still achievable. We’ll just have to wait and see on the terms. “The toll milling process in this country is still evolving, but if you’re able to work through the challenges of any jurisdiction there are huge payoffs – and those payoffs exist precisely because there are barriers to entry,” Moen said.
Newmarket Gold (TSX: NMI) – BUY, Medium Term As an upstart gold producer, Newmarket Gold has been focused squarely on operational excellence and resource expansion at its three operating mines in Australia. With those goals being met, the company is now paying attention to some of its other assets. To that, Newmarket announced a drill program at its Esmeralda project, which is only 7 km away from the Union Reefs processing facility that underpins the Cosmo mine in Northern Territory. Newmarket is punching 80 short reverse circulation holes and seven diamond holes into the deposit, a work program that should cost US$425,000. Esmeralda is already home to 1.06 million inferred tonnes grading 2.06 g/t gold, based on drilling done in the 1990s, and the resource sits near surface. The diamond drill holes will collect geotechnical data needed to design and permit an open pit plan, while the RC holes are designed to increase the resource confidence and perhaps grow the deposit while also providing material for metallurgical work. Newmarket is also advancing its Maud Creek project, which is 108 km to the south. There a shear- hosted gold deposit was mined for a short time in the late 1990s and still offers 7.7 million indicated tonnes grading 3.5 g/t gold and 4.2 million inferred tonnes averaging 2.5 g/t gold. Newmarket is largely done a preliminary economic assessment of Maud, which is due out in the first quarter of 2016. It will be interesting to see what Newmarket’s team of mining legends wants to do with a 1.2-million oz. gold deposit. Newmarket’s share price is holding up well, relative to other gold miners. The company has the advantage of being up on the year, so it is not being dumped in tax loss sales.
Nevsun Resources (TSX: NSU) – BUY, Medium Term Nevsun has one of the biggest bank accounts of the world’s mid-tier miners, but despite years of trying the company cannot find an asset worth buying. Instead focus has shifted inward, to exploring for new resources to feed and potentially expand the Bisha mine. Harena is the first major result of that effort and ongoing drilling just returned the thickest zone of massive sulphide to date. Hole HX-69 cut 115.2 metres grading 0.79% copper, 4.95% zinc, 0.45 g/t gold, and 14 g/t silver. The intercept included 39.6 metres averaging 10.2% zinc.
Two other holes returned notable massive sulphide intercepts: 49.7 metres of 0.66% copper, 7.94% zinc, 0.32 g/t gold, and 17 g/t silver in hole HX-71 and 38 metres of 0.86% copper, 7.3% zinc, 0.35 g/t gold, and 13 g/t silver in hole HX-68A. Like Bisha, Harena is a zoned deposit. A sphalerite and pyrite-dominant upper zone is rich in zinc; the lower zone comprises more chalcopyrite and is copper rich. Results from the lower zone include 2.84% copper over 9 metres, 3.53% copper over 6.5 metres, and 2.31% copper over 24.2 metres. There is also a layer of copper-rich stringer mineralization with elevated gold and silver beneath the sulphide layers. The stringer zone generated two impressive intercepts: 24.7 metres of 1.95% copper, 1.25% zinc, 0.93 g/t gold, and 86 g/t silver and 42 metres of 1.11% copper, 0.93% zinc, 1.46 g/t gold, and 55 g/t silver. The Harena zone sits 10 km south of Bisha. The zone does not carry a defined resource yet but current drilling is primarily infill, designed to tighten drill spacing to 100-metre centres. Harena will undoubtedly figure in the new Bisha mine plan that Nevsun is developing. As a steeply dipping, high-grade deposit, it is perfect for underground mining. Harena also remains open along strike and at depth. Nevsun has been successfully using borehole transient electromagnetic surveys to guide exploration. The method works well here because the zinc-rich zones are moderately conductive, while the copper-rich sulphides are high-conductance.
Importantly, models of the conductance data suggest mineralization is likely to continue down dip and along plunge.
Pilot Gold (TSXV: PLG) – BUY, Long Term Pilot Gold’s first drill holes into the Goldstrike project in southwest Utah have returned shallow oxide gold mineralization over 1.2 km of strike. Here are the best results from the first ten holes: 39.6 metres grading 1.01 g/t gold 41.1 metres grading 0.84 g/t gold 22.9 metres grading 1.68 g/t gold, including 12.2 metres of 2.67 g/t gold 36.6 metres grading 1.06 g/t gold Pilot picked up Goldstrike in August 2014. The project is a past producer, with gold hosted in sedimentary rocks. Pilot spent 15 months understanding historic data and outlining drill targets. The effort seems to have paid off. Those are some pretty good numbers for a first-pass drill program. The best case scenario here: Goldstrike becomes the team’s next Long Canyon, the Carlin-style sedimentary hosted gold deposit that Newmont Mining bought for $2.3 billion. The team behind Fronteer Gold, which discovered Long Canyon, is the same group behind Pilot Gold. Of course, there are no guarantees. This is Pilot’s first drill test. The setting does makes sense: the Goldstrike mine produced 209,000 oz. gold in an open pit, heap leach operation between 1988 and 1994. The property came with an extensive exploration database, including numerous shallow, unmined intercepts. Pilot’s plan is to find new oxide mineralization near the historic pits, but under shallow cover where it would not have been sought previously. It’s how they succeeded at Long Canyon and it’s the premise they are using at Kinsley. Pilot’s chief geologist, Moira Smith, is arguably the best Carlin geologist on the planet.
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