Best Drill Interceptions In The Metals Mining Sector For The Week Ended February 2, 2020

(Source: Exploration Insights)

Introduction

If you’re into investing in the mining sector, you should know the above chart very well. This series covers the three projects with the most significant drill interceptions over the past week, as well as the prospects of the companies which own these projects. I will use data from the weekly bulletin of Opaxe, which can be found on its website. Note that the drill interceptions are converted into grades of gold equivalents using the following formula:

Inserting image...

(Source: Opaxe)

Opaxe has chosen gold as the metal equivalent for all conversions, as it considers gold to be the most widely used and best-understood benchmark to determine or appreciate the grade tenor of a drilling intercept.

(Source: Opaxe)

1) Queensway gold project in Canada

On January 28, Mexican Gold (OTCQB:MEXGF) announced that 19m @ 92.86g/t Au from 96m was intersected in hole NFGC-19-01 at the soon-to-be-acquired Queensway project. This is equal to 1,764(AuEq.)m and the true width of this intercept is estimated to be 70% based on drill core angles and correlation with historic drilling.

(Source: Bonanza King)

Queensway is owned by New Found Gold, which is in the process of merging with Mexican Gold through a reverse takeover. Both companies are backed by Canadian resource-focused merchant bank Palisades Goldcorp. The new entity will be named Bonanza King Mining Corp. and will have some C$19 million in working capital. Based on the latest share price of Mexican Gold, Bonanza will be valued at C$89.3 million.

Queensway, also known as Linear, is located in Central Newfoundland near the town of Gander.

(Source: New Found Gold)

The project is within the Linear Gold Belt and is crossed by the Trans-Canada Highway. It’s also traversed by three high voltage power lines. A total of 196 holes for more than 21,000 meters were drilled on the northern part of Queensway by various operators between 1985 and 2012. Previous owner Noranda delineated a resource at the Knob deposit of around 78,000 ounces from surface to 100m vertical depth at an average grade of 10.3g/t.

(Source: New Found Gold)

The southern portion of the project looks interesting as it has a strike length of 60 kilometers and has seen almost no drilling.

Hole NFGC-19-01 was drilled at the Keats zone is the first drill hole to be released from a 1,985-meter 10-hole diamond drill program completed in December 2019. The Keats zone is known to extend for over 300 meters along strike and there’s a low-grade gold halo with widths of up to 100 meters. It’s open along strike and at depth and

2) Red Chris copper-gold mine in Canada

On January 29, Imperial Metals (OTCPK:IPMLF) released its Q4 2019 update on production and exploration activities at the Red Chris mine. The best interception during the period was 720m @ 0.59 g/t Au and 0.56% cu from 394m in hole RC595, which is equal to 878(AuEq.)m.

(Source: Imperial Metals)

Imperial owns 30% of Red Chris and the remainder is held by Newcrest (OTCPK:NCMGF). The mine is located British Columbia:

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(Source: Newcrest)

In 2019, Red Chris produced 71.9 million pounds of copper, 36,471 ounces of gold, and 133,879 ounces of silver. It has a mineral resource of 14 million ounces of gold and 4.1 million tonnes of copper. The mine life of the project currently extends to 2043.

Red Chris is a pretty significant copper-gold project and Newcrest paid $804 million for its 70% stake in August 2019.

3) Cowal gold mine in Australia

On January 29, Evolution Mining (OTCPK:CAHPF) also posted its released Q4 2019 production and exploration update and the best interception was 7m @ 124.72g/t Au from 833m in hole 1535DD544B at the Cowal mine. This is equal to 878(AuEq.)m and drilling at the mine during the period was focused on expanding the mineralization footprint at GRE46 and Dalwhinnie systems beyond the December 2018 resource shapes.

(Source: Evolution Mining)

Cowal is located in New South Wales and Evolution bought it for $550 million in 2015:

(Source: Mining.com)

Today, it’s the company’s largest project with a production of 65,080 ounces of gold at AISC of A$898 per ounce in Q4 2019.

(Source: Evolution Mining)

The mine has reserves of 3.88 million ounces of gold and a resource of 7.42 million ounces of gold.

Conclusion

The first drill hole from the 2019 drill program at Queensway looks great, and I can’t wait to see the results for the remaining nine. Bonanza King is shaping as an interesting company, and with a working capital of C$19 million, it will have more than enough funds for a significant drill campaign in 2020. Definitely one to watch.

Red Chris is a fantastic mine in a great jurisdiction, and I think it has a very good exploration potential. Imperial’s 30% stake is valued at $344.5 million based on the transaction with Newcrest and the company has over C$100 million in cash as of September 2019. I think Imperial is very undervalued at the moment considering its market capitalization is below $200 million.

Evolution Mining has been delivering very good drill results from Cowal, and it plans to boost the mine’s production to more than 300,000 ounces of gold per year. It’s a fantastic mine, and I think it was a steal for $550 million back in 2015. However, I think that Evolution is overvalued at the moment as its market capitalization is more than $4 billion.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am not a financial adviser. All articles are my opinion – they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading.

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