Back in June, I published this piece covering a Nevada based US gold mining company called US Gold Corp (USAU). At the time, the company had just merged with a New Jersey-based entity called Dataram and I took a look at its lead mining resource, the Keystone Project, in an attempt to identify what we know and what we don’t.
The crux of the article was this: the company had initiated a drilling program last year that was forced to halt due to adverse weather conditions and this meant that getting any degree of insight into how much gold is at Keystone and, in turn, whether the project is economically viable or not, was difficult and limited to relying on historical data. I noted that management expected to complete this delayed program during 2017 and, to pull a quote directly from the article:
“The data from these holes, in combination with the mapping, will provide an as yet unparalleled overview of the potential of the project.”
It’s been a two and half months since that piece and US Gold Corp. just published the data markets were looking for.
In attempt to update readers as to where things stand now and how the latest developments feed into my previous thesis on this company, here is what we learned from the most recent results and what I’m looking for going forward.
By way of a quick introduction, the Keystone project is located along the Cortez trend in Nevada, tucked in between some of the region’s largest and most established mineral deposits. Newmont Mining Corp (NEM) mines multi million ounce deposits along this trend, as does Barrick Gold Corp (USA) (ABX). Indeed, one of Newmont’s ex-senior geologists that was responsible for the discovery and exploration of some of these deposits is now Vice President of Exploration at US Gold Corp., but that is a story for another day.
The project has been the subject of some drilling, with numerous companies and the United States Geological Survey having collected data in the region over the last 50 years or so and with said data pointing towards mineralization. However, it has never been drilled using modern methods and the drilling program that US Gold Corp. is currently undertaking is an attempt to remedy this fact.
So, the latest report details four holes that were drilled as part of a scout program that, as the name suggests, is a program designed to inform a larger exploratory advance into the region in question.
Three of these holes are of particular interest but we will look at all four in the interest of full disclosure.
So, let’s get the first one out of the way first.
The first one is a hole called Key17-1c. It was a core hole drilled to 1605 feet and this one essentially completed the scout drilling program mentioned above (more on why there are three more in focus in this piece in a minute). The hole encountered granodiorite intrusive, of probable early Tertiary age, at collar to 92 feet, then locally hornfelsed upper plate argillite, sandstone and siltstone to 359 feet interpreted to be upper-plate rock. This interval brought with it scattered weak gold anomalies of up to 0.079ppm. Go a little deeper and the hole identified anomalous gold up to 0.031ppm and, beyond that, it was all copper, lead and zinc.
For those not familiar with these geological formations, each represents a formation associated with gold mineralization, so that’s classed as a positive find. The weak mineralization, however, takes the shine off the geology somewhat. If it was just this hole that was reported, we would have to refrain from getting overly excited about the results.
It’s not just this hole, however.
Another one of the scout holes, called Key16-03c, had to be terminated at a depth of 753 feet because of difficult drilling. When the results from this hole came in, however, the exploration team decided that, despite the difficult drilling, three follow-up holes should be drilled in order to build on the data collected from the abandoned Key16-03c.
Specifically, the results showed anomalous gold up to 0.217ppm, with moderately strong pathfinder metals in strongly oxidized and broken, silicified upper and lower-plate rock units – that’s nearly a three times multiple on the highest (the shallow) concentration of gold identified in the above mentioned Key17-1c and a close to ten times multiple on the low (the deeper) grade mineralization.
So, on the back of these results US Gold Corp. drilled three holes: Key17-01rc, Key17-02rc and Key17-03rc.
The first of these holes identified a chunk of what’s called silicified Devonian Horse Canyon calcareous siltstone to 700 feet. Calcareous here basically just means it’s limestone, which is correlative with Carlin style deposits. Gold is generally formed at geothermal vents but it can then intrude into other rock types. In Carlin style deposits, this rock type it intrudes into is often limestone.
In other words, that there’s a big chunk of limestone there is great news. And the numbers support that statement – 75% of this Horse Canyon siltstone unit is anomalous (>10ppb) in gold up to 0.181ppm (which falls roughly in line with the data from the Key16-03c hole).
The second hole, Key17-02rc, was similar. It intersected Horse Canyon formation from 40 to 580 feet and around 60% of the formation was anomalous in gold in multiple zones up to 0.080ppm. Further, multiple thick zones of anomalous gold, up to 1.05ppm, were encountered within the underlying limestone.
Finally, Key17-03rc turned up a 705-foot-thick zone of anomalous gold up to 0.731ppm and a 190-foot-thick layer of strongly anomalous gold, up 0.320ppm, within the limestone in the hole.
Here’s what management said about the scout program:
“Open-ended, southeastward-most hole Key 17-03rc is significantly more encouraging than Key 17-01 and 17-02, and it is probable that this mineralization characteristic is providing a direction to vector toward more significant gold mineralization.”
The take away here is that not only did the scout program provide evidence of mineralization, it also served to confirm expectations that the geology of the Keystone project is very similar to that of surrounding projects owned by the above-mentioned Barrick and Newmont.
Next, then, comes further drilling to build on these results, and this is this drilling that is going to provide catalysts throughout late 2017 and 2018.
Disclosure: the author owns no stocks mentioned in this piece.