The state of Nevada has always been a source of fascination for me ever
since 1982 when I was in the early stages of my career as a stockbroker. I
was chatting with our mining analyst at the time and in response to my
inquiry as to whether he had any "good gold plays" that I might
recommend to my clients, he mentioned a highly speculative junior exploration
company listed on the old infamous Vancouver Stock Exchange called American
Barrick Resources Corp., which was attempting to produce gold from an open
pit located in Eureka County. The knock, he said, was that the CEO was a
failed promoter called Peter Munk whose Clairtone deal had blown up a few
years earlier and this exploration deal was to be his resurgence.
There are countless versions as to the steps preceding the
"event," but one version was that just before the seasonal break,
two employees instructed to drill a hole into the open pit were actually
goofing off with a case of beer and a deck of cards when they were busted by
the general manager and subsequently ordered to drill a 500-foot hole by the
morning or there would be no Christmas bonus. Allegedly, they drilled well
below the bottom of the pit and through 300 feet of three-quarter-ounce gold
sending the stock screaming northwards and stenciling the name
"Goldstrike" into the hearts and minds of every speculator on the
planet.
The discovery of the new Betze-Post zones eventually became a deposit that
was 6,000 feet (1,800m) long, 600 feet (180m) thick and 800 feet (240m) wide.
In 2007 the average processed gold grade was 0.136 troy ounces (4.2 g) per
ton of ore, with a recovery rate of 85.5%. Goldstrike went on to produce over
42 million ounces of gold as of 2016 but the performance of the stock after
the discovery was astounding. I owned 2,000 shares bought at $1.85 in 2002
and sold it into the discovery mania at $8.00 and thought I had won a
lottery. Ten years later, it was a $2,000 stock (adjusted for splits). This
Nevada discovery ended up building an entire industry in Nevada, a hospital
wing in Toronto, and countless millionaires along the way, which is why the
state of Nevada is always on my radar screen.
In mid-2016 I was introduced to a private company called Buena Vista Gold
Inc., which was in possession of two large project areas with six identified
gold and base metals targets located in both Getchell and Northern Nevada
Rift trends, both of which have a combined gold production exceeding 130
million ounces. It was all pretty standard "grassroots" exploration
until 2017 when it completed an aeromagnetic survey on their flagship Hot
Springs Peak property (HSP), which revealed a very large Carlin-style
footprint over a 3 km by 2 km area. By comparison, the geophysical signature
that became the Goldstrike deposit was 0.5 km by 1 km in area. It was
followed up earlier this year with an I.P. (induced polarization) survey
revealing extremely high chargeability/resistivity usually associated with
sulphide mineralization and possibly silicification.
Furthermore, surface rock chip sampling confirmed the presence of multiple
elements of a gold-mineralized system that occur at surface and follow the
geophysical responses in the sub-surface. These elements included the very
important pathfinder minerals commonly associated with gold deposits and they
include gold-arsenic mineralization, widespread spotted hornfels alteration
and silicification. Above the central portion of the IP target is the
presence of waste dumps surrounding mine shafts created by prospectors likely
in the early 1900s mined underground from gold enriched silicified fault
zones along the side of the ridge, leaving behind waste dumps that
were tested last year and confirmed gold grade as high as 0.701 ounces per
tonne (OPT).
A foundation of a small crushing plant was located last year. The
old-timers sunk shafts on the quartz vein structures where crushing and
panning produced "color" and the old timers normally did not leave
high grade on the dump. That leaves the question of "What was the grade
they hauled away?" Also, gold in Carlin-style systems is normally micron
in size and not readily recovered by panning, hence no placers and visible
gold is not observed in the silicification.
Pivotal to the success of any investment is a process called due diligence
and an integral part of the process is understanding management. In the
exploration game, it has always been said that successful geologists rarely
make just one discovery; they usually repeat the feat sometimes multiple
times. The experience of correlating the data and selecting a target is many
times an "ad hoc" decision and involves more "gut feel"
than analytical certainty. The Qualified Person for this project is Tim
Master, who obtained his Masters of Science degree from the University of
Wyoming in 1977 and has worked in generative exploration through resource
development over a 40-year period with the majority of work in Carlin-type
systems but also porphyry copper and epithermal gold of which the Getchell
Gold projects are part. Tim put together the Railroad-Pinion Project for
Royal Standard Minerals who sold it to Gold
Standard Ventures Corp. (GSV:TSX.V; GSV:NYSE); he put together the
resources and did the land-lease consolidation and targeting of the
discoveries by Gold Standard Ventures made in 2015 (and resulted in a tenfold
increase in GSV's stock price). To have an individual in the field of Tim's
caliber and experience is an obvious advantage when deciding to invest as it
meets the initial minimum threshold of due diligence.
I met with the chairman, CEO, and director of BVG, Bill Wagener, in
Toronto this month and was impressed with his adherence to detail in areas
pertaining to finance and listings. We discussed GTCH securing a QB listing
in the U.S., which makes it infinitely easier for U.S. investors to trade.
This is critical for many of my U.S. friends who show continuing interest in
Canadian resource companies and since this is strictly a Nevada play, it
makes good sense. Bill also recognizes the need to market the story
aggressively, and that is important in maintaining and enhancing shareholder
values.
In addition to HSP, the Company has five other assets contained in the
Buena Vista portfolio and is in the process of interpreting aeromagnetic
IP/Resistivity surveys on the second-ranked project, an oxide copper-gold
porphyry prospect, mined near surface, with a geophysical signature
indicating sulfides and a possible intrusion below the oxide copper,known as
Star Point. The remaining four Buena Vista properties are Star South, Gold
Knob, Gold Knob South-West, Jasperoid Peak and the latest discovery of the
Hot Springs Canyon Carlin-style target generated from mapping and recent
geophysics, to be released in the near future. The first two are
porphyry-skarn-type targets, the second two are Carlin-style, while while
Jasperoid Peak is a hot spring bonanza vein-type where prior drilling
revealed 1.5 meters of 8 g/t Au material. The company intends to entertain
joint venture proposals on the southern half of Buena Vista due to the
enormous size of the project (15 km X 3 km),but well-located assets that
could become a source of financing down the line.
Buena Vista Gold Inc. recently merged with CSE-listed Getchell
Gold Corp. (GTCH:CSE); the shares will be posted for trading on the
Canadian Stock Exchange under symbol GTCH on December 3. The company recently
closed a small private placement consisting of a $0.45 unit including a full
warrant at $0.52, the proceeds of which will finance four reverse circulation
drill holes at HSP by year-end in order to better understand the geophysical
signatures of the surface alteration and gold-copper mineralization outlined
in Phase 2 of the NI 43-101 report. This is a sound move as it will serve to
further de-risk the project and fine tune targeting for core drilling in the
spring.
The first hole is to be drilled to a depth of 500 meters into an area of
an intense magnetic low with corresponding highs in chargeability and
resistivity, reflecting what is believed to be a continuation of the surface
hornfels alteration into the sub-surface where the high chargeability indicates
the presence of sulphide mineralization. Hole #1 is an attempt to drill into
the top of the central zone of the system where the chargeability and
resistivity responses are 1,000 meters wide. Hole #2 is targeting the area
below the high-grade dumps mentioned earlier. Hole #3 will be drilled to the
northeast end of the system where limestone is expected to be intersected
with similar geophysical responses. The fourth and final hole will be drilled
into an area two kilometers to the south where surface mineralization
included turquoise, cinnabar and copper up to 3.86%.
The Importance of "Scale"
In summary, what large professional and institutional investors look for
in junior exploration companies are 100%-owned projects that contain
sufficient "scale" so as to potentially qualify as a
"world-class" asset, in that they are the "tier ones" of
this world. They are called "tier one assets" because they are so
rich, they stand apart from others, are able to destabilize economies, can
disrupt the overall demand-supply balance and be the springboard for building
mighty mining companies. In the two main projects discussed earlier, Hot
Springs Peak and Star Point, the geophysical signatures have confirmed this
degree of scale while the geochemistry has provided surface evidence of the
right pathfinder minerals such as mercury and arsenic and of the sought-after
metals themselves, gold and copper. As with all exploration programs, it will
all boil down to core drilling and metallurgical testing to define the size
and recoverability of the mineralization found. However, since the Hot
Springs Peak project has already been prepared for drilling by way of money
spent in 2017 and 2018, the upcoming drill program will be an exciting launch
for all Getchell Gold Corp. shareholders, both current and prospective.
The base case for investing in GTCH lies in the history of Nevada
discoveries with major gold discoveries being immediately revalued
significantly higher. Gold Standard Ventures, mentioned earlier, trades at a
$480 million market cap (up from $40 million pre-discovery) after having made
the Railroad-Pinion discovery in 2015. Using the $0.45 unit price from late
October as a bid price, the fully diluted market cap for GTCH is in the $15
million range for an extensive land package in a mining-friendly
jurisdiction, which is reasonable given the upside potential. Drilling begins
mid-to-late November.
Symbol: GTCH:CSE. Begins trading on Dec. 3, 2018.
Target price: C$1.42 (6 month) (C$50 million market cap) subject to
revision post-drilling.
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Charts and images courtesy of Michael Ballanger.
Michael Ballanger Disclaimer:
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the data provided. Nothing contained herein is intended or shall be deemed to
be investment advice, implied or otherwise. This letter represents my views
and replicates trades that I am making but nothing more than that. Always
consult your registered advisor to assist you with your investments. I accept
no liability for any loss arising from the use of the data contained on this
letter. Options and junior mining stocks contain a high level of risk that
may result in the loss of part or all invested capital and therefore are
suitable for experienced and professional investors and traders only. One
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