The Humboldt Range West-Central Nevada |
Midway
Reports 361 Meters of 1.47 gpt Gold by Barrick at Spring Valley, Nevada
"Denver,
Colorado – Midway Gold Corp. ("Midway" or the "Company")
(MDW:TSX-V; MDW:NYSE-MKT) provides an update on progress at the Spring Valley
Project, Pershing County, Nevada. Development drilling, designed to upgrade the
quality of the resource, continues to produce excellent intercepts. Barrick Gold Exploration Inc.
("Barrick") is earning into the project and their 2013 budget for
Spring Valley includes $10 million for exploration and development.
Ken
Brunk, Midway’s President and CEO said, “Barrick continues an accelerated pace
to earn-in at our Spring Valley project. Based on their 2013 budget, we expect
Barrick to earn a 70% interest in the fall of this year. We were very pleased
to receive yet another set of positive results from their current exploration
work and we anticipate this year will bring additional good news as the project
advances through scoping and into pre-feasibility.”
Development
Drilling
Development
drilling in the resource area is designed to expand the resource within the
estimated pit perimeter and to upgrade the quality of those resources for
future engineered reserve calculations. Additional expansion potential remains
at depth and to the north of the deposit.
Recent
drilling highlights include:
- SV13-621: 361 meters of 1.47 grams per tonne (gpt) gold starting at 35 meters depth. The interval included 21 meters of 7.54 gpt gold and 23 meters of 3.02 gpt gold
- SV13-620: 120 meters of 0.75 gpt gold including 18 meters of 2.43 gpt gold 35 meters of 0.79 gpt gold including 1.5 meters of 4.08 gpt gold and 21 meters of 1.20 gpt gold including 1.5 meters of 5.59 gpt gold
During the first quarter, Barrick completed 4,552 meters of reverse circulation (RC) and 3,148 meters of core drilling. This drilling included nine core holes and six reverse circulation holes. An additional five holes were in progress at the end of the first quarter. Assays remain pending for most of the 2013 drill holes.... Barrick has reported the internal scoping study is still in progress by the project’s evaluation group. This will advance into a prefeasibility study if approved by management after a peer review. Work underway includes:
- Resource modeling
- Metallurgical testing
- Hydrologic data for dewatering studies
- Core drilling for waste rock and ore geochemical characterization
- Design and evaluation of initial mine layout alternatives
- Initial pit slope stability studies
- Initial base line surveys
Earn-In
Update
In
April, Barrick reported that they had exceeded the cumulative expenditure
requirement of $30M to earn a 60% interest in the property. They also exercised
their option to spend an additional $8 million to earn a 70% interest.
Significant Drill Results at Midway Gold’s Spring Valley JV with Barrick Gold Confirm Potential for Terraco’s Royalty Interest
"Last week, Midway Gold (MDW :NYSE.MKT, MDW :TSX)
updated their investor base with news highly significant to Terraco Gold, their
neighbor to the south of the JV’s Spring Valley project. MDW reported several
results from development drilling underway at Spring Valley. Two intercepts
were of note:
- Hole SV13-621 returned 361 meters of 1.47 grams per tonne (gpt) goldstarting at 35 meters depth. The interval included
21 meters of 7.54 gpt gold and 23 meters of 3.02 gpt gold
- Hole SV13-620 returned 120 meters of .75 gpt gold
including 18 meters of 2.43 gpt gold;
35 meters of .79 gpt gold including 1.5 meters of 4.08 gpt gold and; 21 meters
of 1.20 gpt gold including 1.5 meters of 5.59 gpt gold.
Furthermore, MDW’s joint venture partner on the
project, Barrick Gold (ABX :NYSE),
has completed its requirement for a 60% earn-in on the project (by having spent
$30 million on the property) and will be spending at least an additional $8
million in 2013 to attain a 70% share of the project. It appears to us
that these drill results indicate a major structure at Spring Valley.
We offer our congratulations to the team at ABX /
MDW for their many successes, particularly Ken Brunk. We want to draw your
attention to the potential benefits this news has for TEN and their royalty
interest in Spring Valley. As a brief refresher, TEN has up to a 3% NSR on the
Spring Valley property, so as the resource grows, so, too, does the value of
the royalty. This is a crucial point of potential wealth creation to
remember. Make no mistake, we believe these new intercepts may
significantly increase the potential for wealth creation Below we include a map
of the Spring Valley deposit (outlined in black) showing TEN’s royalty
interests. The drill results mentioned above are located in the red shaded area.
Terraco Gold's Royalty on the Barrick-Midway Spring Valley Gold Project (Click on image to enlarge) |
What is important here is that the two holes we
mentioned above, SV13-620 and SV13-621 are located right in the middle of the
claim block where TEN holds the net smelter returns royalty interest. The
implications of this are straightforward – as Spring Valley continues its
development and ostensibly becomes a larger more valuable deposit, the royalty
interest TEN has on the property also increases in value.
In an era where junior mining finance is more than
challenging, to say the least, a royalty such as this provides TEN CEO Todd
Hilditch flexibility (we have called this “optionality” in the past) in terms
of how he and his team choose to push forward with their two properties –
Moonlight in Nevada and Nutmeg Mountain in Idaho.
Based on our conservative “back of the envelope”
math, the royalty interest could be worth as much as $80 million to TEN today.
We want to stress that we are using data provided from MDW’s NI 43-101 on
Spring Valley and adding our own assumptions to arrive at this number.
The Disconnect
What is notable is the value of the royalty
interest ($80 million) versus the current market capitalization of TEN: ($19.22
million fully diluted). We believe there is a very clear disconnect between the
intrinsic value of the company and its market value.
The Rationale for Considering TEN as an Investment
We view the rationale for owning TEN as
straightforward. As the global economy struggles to get back on its feet,
Central Bankers are adamant in fomenting economic growth and inflation through
expansion of their balance sheets. As we have demonstrated in recent editions
of Morning Notes,
this policy has not had its intended effect.
Recent discussions of “tapering” quantitative
easing programs in the US are likely just Chairman Bernanke “jawboning” the
markets and do not appear to be realistic. As a result, additional balance
sheet expansion and printing of money seems likely which means a weaker dollar
in the long run. This bolsters the case for gold in a portfolio as a hedge
against eventual inflation and as a store of value.
This would include ownership of gold junior mining
shares where the possibility exists to profit from share price leverage. Those
juniors that can demonstrate financial sustainability and profit from
production in a non-dilutive manner should be given consideration by you in
your own due diligence processes. We continue to believe Terraco Gold is one
such opportunity and have valued it thus on the DiscoveryScoreboard. It is a true contrarian play at
this point because we think it is sustainable.”
Chris Berry Bio:
With a life-long interest in
geopolitics and the financial issues that emerge from these relationships,
Chris founded House
Mountain Partners LLC in 2010. House
Mountain firmly believes that the emerging Quality of Life Cycle emanating from
Asia is a "game changer" which will affect every one of us throughout
the world for decades. With that in mind, the firm focuses on the intersection of
three topics: the evolving geopolitical relationship between emerging and
developed economies, the commodity space, and junior mining and resource stocks
positioned to benefit from this phenomenon. Chris spent 13 years working across
various roles in sales and brokerage on Wall Street before founding House
Mountain Partners. He also co-authors a newsletter with his father Dr. Michael
Berry, "Morning Notes by Dr. Michael Berry". He holds an MBA in Finance
with an international focus from Fordham University, and a BA in International
Studies from The Virginia Military Institute.
Thursday June 6, 2013, 4:30pm PDT
By Andrew Topf -
Exclusive to Gold Investing News
"A gold
junior with a net smelter returns royalty on a property in Nevada
joint-ventured between Barrick Gold (NYSE:ABX, TSX:ABX) and Midway Gold (TSXV:MDW) has been getting traction in the
market and is on the radar of at least one influential commodities analyst/
newsletter writer.
In a note to shareholders published on May 30th,
Terraco Gold (TSXV:TEN) said that Barrick (NYSE:ABX, TSX:ABX), the world’s second largest gold
company by market cap, now holds a 60 percent interest in the Spring Valley
project located in Pershing County, Nevada — which it earned by investing over
$30 million in exploration expenditures.
That is significant for Terraco because the
Vancouver-based junior has a net smelter returns (NSR) royalty at Spring Valley
whereby Terraco has the option to acquire up to a 3 percent NSR on claims
covering the ore body.
The latest drill results published by Midway Gold on May 29th
showed high-grade gold at Spring Valley, including intercepts of 1.47
grams per tonne including 21 meters of 7.54 g/t and 23 meters of 3.02 g/t.
“The Barrick path to production and therefore
potential future cash flow from the project should create sizeable value with
Terraco’s (up to) 3% NSR royalty and royalty option on
claims covering the known ore body at Spring Valley,” Terraco said, noting that
Barrick plans to spend another $8 million to further drill the property, which
would hike Barrick’s interest to 70 percent.
“Barrick’s continued great work at Spring Valley is a
definite highlight for the mining space and the project is one of the fastest
advancing path to production gold stories in Nevada.”
The deposit contains an NI 43-101 compliant 4.1
million ounces of gold, with Barrick’s 2009 and 2010 drilling confirming gold
mineralization open to the north and at depth.
Terraco drilling approximately 3,400 ft north of the Barrick discovery along the Blackridge Fault (Click on Image to Enlarge) |
The market has rewarded both Midway Gold and Terraco
for their recent progress at Spring Valley. Midway’s stock has risen 6 percent
over the past three months and 20 percent over the past month, while Terraco’s
has done even better, with an 11 percent and 25 percent gain over the same time
frames.
Terraco has not escaped the notice of House Mountain
Partners founder Chris Berry, who wrote in a recent edition of Morning Notes that the growth of
the resource at Spring Valley also means significant upside potential for
Terraco:
“It appears to us that these drill results indicate a
major structure at Spring Valley,” wrote Berry. “Make no mistake, we believe
these new intercepts may significantly increase the potential for wealth
creation.”
How much wealth? Berry estimates in the note that the
royalty interest could be worth as much as $80 million, which is roughly four
times the market cap of Terraco, making the company significantly undervalued:
“We believe there is a very clear disconnect between the intrinsic value
of the company and its market value.”
Berry also observes that the NSR provides Terraco with
options to move forward on its other main projects, Moonlight in Nevada and
Almaden-Nutmeg Mountain in Idaho. Of those two properties, Almaden is the more
advanced, with 864,000 ounces of gold in the measured and indicated
categories. Moonlight is about 8 kilometers north of the producing Coeur
d’Alene Rochester silver-gold mine and has been minimally explored.
Securities Disclosure: I, Andrew Topf, hold no direct
investment interest in any company mentioned in this article."
TEN Chart June 2010 - Present (Click on image to Enlarge) |
Johnston-Sequoia Commentary:
As many of our readers know - I've tracked the development of this Humboldt Range in West-central Nevada since May 27th of 2008. I've never believed more in the potential and significance of the this evolving precious metals district as I do today. Midway and Terraco will both benefit (from my perspective) greatly from this discovery as Barrick continues to refocus Nevada.
As the premium paid for physical gold continues to decouple from the paper market (which is seemingly happening at an alarming pace) - new discovery's will be the only place left to capture a position if (or more realistically - when) paper markets and precious metals ETF's become exposed.
As the premium paid for physical gold continues to decouple from the paper market (which is seemingly happening at an alarming pace) - new discovery's will be the only place left to capture a position if (or more realistically - when) paper markets and precious metals ETF's become exposed.
A picture as they say is worth 1,000 words:
10,000 people line up to buy gold in China - submitted by Zerohedge (Click on Image to Enlarge) |
Just as a frame of reference Barrick's and Midway's latest hit at 1.47 gpt gold would be the equivalent to the Almas Tower in Dunbai from top to bottom.
Finally, as you see in the chart above - TEN's share price has declined by - 48.28% (since December 22nd 2011) in the same time period that the company acquired approximately $80,000,000 in assets and $6,000,000 in cash without issuing a share.
Almas Tower - Dubai |
Finally, as you see in the chart above - TEN's share price has declined by - 48.28% (since December 22nd 2011) in the same time period that the company acquired approximately $80,000,000 in assets and $6,000,000 in cash without issuing a share.
Johnston-Sequoia Capital Corp. owns shares in Terraco Gold - I own shares in Terraco Gold and am an advisor of the company.
To all of our readers both young & "distinguished" - Happy Fathers day and hope you're all enjoying the weekend.
As always, please do your own due diligence.
As always, please do your own due diligence.
Your editor standing on the Blackridge Fault approximately 3,200 ft north the Barrick discovery (Click on Image to Enlarge) |
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