Thursday, December 27, 2012

Barrick Hits 118.9 meters of 2.33 gpt gold at Spring Valley, Nevada

Spring Valley looking South from Terraco Gold's Moonlight Project (Click to Enlarge)
Barrick Hits 118.9 meters of 2.33 gpt gold at Spring Valley, Nevada

Midway Gold Corp. (TSX.V: MDW | AMEX: MDW) reported on the development at Spring Valley, where Barrick Gold Exploration Inc. ("Barrick") (TSX: ABX | NYSE: ABX) is earning into Midway's multi-million ounce gold project in Nevada.

Drilling Highlights

"...An infill drill program within the existing deposit boundaries has continued to increase the certainty of the current resource, including several intercepts well in excess of the current resource grade. Highlights included:

  • SV12-561c 18.6 meters of 6.79 gpt gold
  • and 118.9 meters of 2.33 gpt gold, including 17.1 meters of 8.06 gpt gold

  • SV12-583c 58.8 meters of 1.06 gpt gold, including 1.5 meters of 12.00 gpt gold
  • SV12-584c 36.3 meters of 1.92 gpt gold, including 3.2 meters of 14.67 gpt gold
  • SV12-594 27.4 meters of 1.68 gpt gold, including 1.5 meters of 12.79 gpt gold

Additionally, drilling at the northerly extent of the resource area indicates the potential for expansion of the resource to the north and at depth.

Earn-In Update

Barrick has accelerated their rate of expenditures to earn-in to Midway's Spring Valley project, where Barrick can earn a 60% interest in the project by completing expenditures totaling US$30 million before December 31, 2013. Projected expenditures by Barrick in 2012 amount to $10.2M, which combined with spending through 2011 of $17.7M at Spring Valley (see April 11, 2012 press release), would bring total cumulative expenditures by Barrick to approximately $27.9M by the end of 2012. Based on the rate of expenditures through the third quarter of 2012, it is expected that Barrick will complete their earn-in of 60% of the Spring Valley project by early 2013. Barrick may further elect to spend an additional $8 million on or before December 31, 2014 for a total expenditure of $38 million to increase their ownership interest in Spring Valley to 70%.

Please see Barrick Gold Corporate video below:

Development Activity

Within the quarter, additional development drilling has gathered metallurgical, hydrological and geotechnical data to be used in a scoping-level economic evaluation. Metallurgical samples were collected for a second round of metallurgical testwork that is currently in progress. Hydrological work is underway to better characterize groundwater conditions for a potential open pit. Further development activities included potential pit slope stability studies, mine facility design, seismic hazard analysis, and humidity cell tests..."

December 6th, 2011 Spring Valley advanced from Barrick's Exploration team to their Mine Development Group:

Barrick Gold Weekly Chart 2012-12-27
Q3 Drill Results

"...During the third quarter, Barrick completed 3,072 meters of reverse circulation (RC) and 2,387 meters of core drilling. This drilling included four core holes used for metallurgical sampling, four holes for geotechnical testing (SV12-611c to 614c), and eight water-monitoring wells (SV12-600w to 608w). Total drilling for the year through the third quarter is 11,834 meters of RC and 6,240 meters of core..."

The link below shows the locations of drill holes in relation to the current Spring Valley resource estimate:

Please see May 24th, 2011 Midway Gold Corp. NI 43-101 Technical Report for Spring Valley below:

Please see Midway Gold Presentation from the Denver Gold Forum contained in the video link below:

Midway Gold Weekly Chart 2012-12-27

Johnston-Sequoia Commentary:

"What you see depends on what you thought before you looked."
--- Eugene Taurman

I was recently sent a copy of a Bob Bishop interview with a very famous Nevada Geologist the late Dr. Ralph Roberts (who is credited with the discovery of the Carlin and Battle Mountain Gold Belts, the richest gold-mining region in United States) from September 1988.  (Dr. Roberts published a very famous report titled "Alignment of mining districts in north-central Nevada" which posed a theory that when tested by then Newmont Geologist John Livermore led to the discovery of the Carlin mine in 1961).  Dr. Roberts discusses with Bob Bishop his vision of the evolving nature of the Carlin trend (in 1988) & when cross referenced with what we now know today of the Carlin trend - his accuracy truly incredible.

Interestingly Dr. Roberts discussed the implementation of deeper drilling which ultimately led to the discovery of both the Betze-Post (now Barrick's Goldstrike mine);

Barrick's Goldstrike mine, Nevada

and Newmont's lowest cost producing mine - the Ken Snyder "Midas" mine:

Newmont's Ken Snyder "Midas" mine, Nevada
Gathering each piece of the puzzle is what makes the Discovery process so fascinating.  When I was first introduced to this evolving Humboldt district in May 2008 Midway Gold still controlled 100% of the project and Barrick was simply an equity investor in Midway with approximately 10% ownership in MDW.  At that time the NI 43-101 resource was  "just" 993,000 ounces of gold in the measured, indicated and inferred ("MI & I") categories.  Today Spring Valley sits at 4,100,000 ounces in the MI & I categories (which is based on a May 2nd, 2011 resource estimate).  The evolution of this district has been truly remarkable and we have now seen the single best intercept to date at Spring Valley {which lends itself to Dr. Roberts deeper drilling discussion as hole SV12-561c mineralized zone starts at 1,061 feet (323.4 m) and ends at 1,451 ft (442.3 m)}:

  • SV12-561c 18.6 meters of 6.79 gpt gold and 118.9 meters of 2.33 gpt gold, including 17.1 meters of 8.06 gpt gold

*** "Drilling at the northerly extent of the resource area indicates the potential for expansion of the resource to the north and at depth."

Terraco Gold Royalty Option on the Spring Valley Project***

"Terraco has royalty coverage on claims covering the Spring Valley Gold Project located in Pershing County, Nevada. Spring Valley is a joint venture between Barrick Gold Corp. and Midway Gold Corp., where Barrick has the right to earn 60% interest in the project by completing work expenditures totalling US $30 million before December 31, 2013.

Terraco's net smelter returns ("NSR") royalty coverage includes the option to acquire a 2.5% NSR royalty (by December 2016) on claims covering the majority of the Spring Valley deposit and an additional direct ownership and option for a 1% NSR royalty covering the remaining portion of the Spring Valley deposit."

Terraco Gold Royalty Option on Spring Valley, Nevada (Click to Enlarge)

Nano-cap Terraco Gold Corp. (TSX.V: TEN | US: TCEGF) has positioned itself very well in this evolving district with a 2.5% & 1.0% NSR royalty options on the Barrick Gold - Midway Gold Spring Valley Project and 100% ownership of the 35 sq km (Terraco's Moonlight Project) which adjoins the north side of this evolving Nevada discovery.

The History of the Evolving Humboldt District - Pershing County, Nevada

The Evolving Humboldt District looking south over Terraco`s Moonlight Project (Click to enlarge)

History of the Barrick Gold/Midway Gold Spring Valley Project:

"Placer gold was discovered in Spring Valley Canyon in the 1880’s and has been mined intermittently since that time. A gold dredge operated in the eastern portion of the project area in the 1910’s and 1920’s. The current Spring Valley resource lies in an alluvial-filled valley immediately west and upslope from the placer workings. Modern exploration at Spring Valley began with 4 holes drilled by Kennecott in 1996. Echo Bay acquired the property in 2000 and drilled the discovery hole in 2001. MGC gained control of the property in 2003, and immediately began a drill program that continued through 2008. MGC signed the Exploration Agreement with Barrick in 2009. During the earn-in period Barrick is conducting exploration pursuant to the terms of the agreement while MGC maintains 100% control of the property. Barrick has drilled 72 drill holes through the end of 2010 to better define the known mineralized area while continuing to test mineralized controls along strike to the north..."

Terraco Gold's Moonlight Project History & Production

"John Livermore (discoverer of the original Carlin Deposit) of Cordilleran Exploration (CORDEX) became interested in the Moonlight Mine and visited the area several times during the period between 1981 and 2003.... The samples range in value from (one sample) below detection limits up to 415 opt silver (non-NI 43-101 compliant). All samples returned only trace amounts of gold. John Livermore and CORDEX returned to the Moonlight in 1999, staking an unknown number of claims around the original Grant Patent and leasing the patented claim from John Heizer. A series of thirty samples were collected from the Moonlight Mine (the original Grant Patent) by geologists for CORDEX. Of those samples, the assay certificate from Legend, Inc., of Reno, Nevada, indicates that several samples were anomalous in silver and gold, with values up to 1,329 ppm (gpT) or 38.76 opt silver and 4.801 ppm (gpT) or 0.140 opt gold (non-NI 43-101 compliant)....

Recent History of Nearby Properties or Projects in the Humboldt District

...Nearby in the Humboldt Range, recent history includes developments at Coeur d’Alene Mining’s Coeur Rochester Mine and the Midway-Barrick Spring Valley Joint Venture. Coeur's 100% owned Rochester mine has produced more than 127 million ounces of silver and 1.5 million ounces of gold since production began in 1986 (Coeur website, Nov 2010)...  Proven and Probable reserves at Rochester, according to the Coeur website at year-end 2009, totaled 42.4 million tons containing 25.9 million ounces silver and 233,000 ounces gold..."

Please see Terraco Gold Corporate video below:

Will the evolving Humboldt District one day be recognized as a major Nevada Gold Trend? - only time will tell. What we do know is that Midway Gold and now Barrick have done (and are currently doing) a tremendous job of defining this new Nevada discovery.  

I am an advisor of Terraco Gold Corp. & own shares in the company. As always, please do your own due diligence.  To all of our readers - I hope you and your families have a safe and wonderful holiday season.

Your Editor standing along the Blackridge Fault on Terraco Gold's 100% owned Moonlight Project, Nevada

Sunday, December 9, 2012

Talison Lithium backs $848,000,000 Chinese Takeover Bid

Talison Lithium backs $848,000,000 Chinese Takeover Bid

“Talison Lithium Limited ("Talison" or the "Company") (TSX:TLH) announced that it has today concluded its discussions with Windfield Holdings Pty Ltd, an Australian incorporated wholly-owned subsidiary of Chengdu Tianqi Industry (Group) Co., Ltd (together "Tianqi") and reached agreement under which it is proposed that Tianqi will acquire the balance of the ordinary shares that it does not already own and options in Talison by way of schemes of arrangement for a cash consideration of C$7.50(1) ("Tianqi Schemes").


The Tianqi Schemes constitute a superior proposal(2);
  • C$7.50 cash offer for each Share
  • US$25 million cash deposit paid by Tianqi in an Australian bank as a reverse break fee
  • Minimal conditions
  • Talison Directors unanimously recommend Tianqi Schemes, in the absence of a superior proposal
  • Talison and Tianqi have entered into a Scheme Implementation Agreement ("Tianqi SIA") with minimal conditions, subject to Rockwood's 5 business day matching right
  • Rockwood has a 5 business day right to match, although Talison notes that on November 20, 2012, Rockwood made a "best and final offer" statement which, under Australian policy, is expected to limit Rockwood's ability to increase its offer
  • If the Rockwood SIA terminates, Talison expects to pay Rockwood a C$7 million break fee

Tianqi Proposal


On November 19, 2012, Talison received a non-binding, conditional proposal from Tianqi to acquire all of the Shares of Talison which it did not already own for C$7.15 per Share via a scheme of arrangement.

On November 21, 2012, the Talison Directors determined that to meet their fiduciary duties Talison would engage with Tianqi and its advisers to determine if the Tianqi proposal represented a superior proposal (as defined in the Rockwood Proposal).

On November 23, 2012, Tianqi received notification from the Australian Foreign Investment Board (FIRB) that it has no objections to Tianqi's proposed acquisition of Talison. Following receipt of this notification Tianqi would own 19.99% of Talison's issued share capital.

At the conclusion of negotiations between Talison and Tianqi an offer price of C$7.50 per Share was agreed. This values the equity of Talison at approximately C$848 million on a fully diluted basis.


The Talison Directors have now considered the Tianqi Scheme and determined that it represents a superior proposal (as defined in the Rockwood Proposal). The Talison Directors therefore unanimously recommend that Securityholders vote in favour of the Tianqi Schemes, in the absence of a Superior Proposal (as defined in the Tianqi SIA) and subject to an Independent Expert concluding that the Tianqi Schemes are in the best interests of Securityholders. Each of the Talison Directors intends to vote the Shares and Options held or controlled by them as at the registered holder record date in favour of the Tianqi Schemes.

The cash consideration of C$7.50 per Share offered under the Tianqi Scheme represents:
  • A 15% premium to the consideration under the Rockwood Proposal of C$6.50; and
  • A 77% premium to Talison's last closing price of C$4.24 on August 22, 2012, the day prior to the announcement of the Rockwood Proposal.
Resource Capital Fund IV L.P. and Resource Capital Fund V L.P. (collectively, the "RCF Funds") have each confirmed to Talison that, in the absence of an offer which the RCF Funds determine is superior, each of the RCF Funds intend to vote in favour of the Tianqi Share Scheme in respect of the Talison Shares held by them at the relevant time."

Talison Lithium Ltd. (TLH - TSX, $7.15)
Target Price: $7.50 ↑
Higher Bid from the Chinese Is Deemed "Superior"

Jonathan Lee, MBA
Battery Technologies and Materials Analyst: Byron Capital Markets

  • "Higher and Binding Bid from $7.15 to $7.50: Winfield Holdings Ptd Ltd (Winfield), which previously had a non-binding $7.15/sh all-cash bid for Talison Lithium Ltd. (Talison) increased the bid to a "superior proposal" of $7.50/sh in cash. Talison's board of directors and the largest shareholder, Resource Capital Funds, recommended the bid and stated they would vote in favour of the new offer in the absence of a higher bid. We find this as positive news, and it gives comfort in the acquisition being completed. Additionally, as previously stated, Winfield received all Chinese approvals for the acquisition and also received Australian Foreign Investment Review Board (FIRB) approval. The expected timeline to finalize the deal is the end of February 2013, or three months from now. We maintain our TENDER rating and raise our target price to $7.50 as the new binding offer price is released. 
  • Bidder Showing Commitment: As a sign of Winfield's commitment to completing the deal, the company will put US$25 million in a trust fund in an Australian bank. The capital is paid to Talison if Winfield is unable to reach an agreement. We believe this additional US$25 million added to the already 19.99% ownership stake in Talison shows a significant commitment of over $150 million in the company. This gives us comfort that Winfield is serious about the strategic asset to build its existing lithium processing business. We believe that the company may vertically integrate Talison's operation with its downstream lithium processing company, Tianqi Lithium Industries (SZE:002466, Tianqi).
  • A Higher Bid Is Doubtful: Strategically, this acquisition for Winfield makes sense. Its related company, Tianqi, is currently dependent on Talison for its raw material and is also a marketer of Talison's material in China. With a market cap of US$575 million, $30 million in cash and US$7 million in income, the acquisition will be significantly accretive to Tianqi's Chinese lithium operations. This is why we believe Winfield is willing to bid $7.50/sh. Additionally, with Rockwood's final and best offer of $6.50/sh, we believe there is limited room to submit a higher bid.”
---Jonathan Lee, MBA
Battery Technologies and Materials Analyst: Byron Capital Markets

Johnston-Sequoia Commentary:

"Patience and perseverance have a magical effect by which difficulties disappear & obstacles vanish"
--- John Quincey Adams

As a student of the market I have to say that I am extremely impressed with the chess game that Sichuan Tianqi Lithium Industries Inc. (CH: 002466) ("Tianqi") has played in its pursuit of Talison Lithium Ltd (TSX: TLH).  Going head to head with NYSE specialty chemical giant Rockwood Holdings Inc. (NYSE: ROC) (which announced its own unsolicited $724,000,000 all cash bid for TLH back in August) -  Tianqi (Talison's largest buyer of Lithium concentrate) quietly acquired 15% of TLH for approximately $6.50 per share.  Following this announcement Talison received a non-binding, conditional proposal from Tianqi to acquire all of the Shares of Talison for $7.15 per share on November 19, 2012.  Negotiations between Talison and Tianqi resulted in an offer price of C$7.50 per Share. This values TLH at approximately C$848 million on a fully diluted basis.

Tianqi's bid of C$7.50 per Share represents:
  • A 15% premium to the Rockwood bid of C$6.50; and
  • A 77% premium to Talison's last closing price of C$4.24 on August 22, 2012, the day prior to the announcement of the Rockwood bid.
To all of our Salares Lithium Inc. (TSX.V: LIT) and Talsion Lithium Ltd. (TSX: TLH) readers and shareholders who stuck with this story - congratulations.  This is again, Discovery Investing 101.  The Tianqi bid represents approximately a 1,671% ROI (557% per year ROI) in the past three years for Salares Lithium Inc. shareholders who held there shares since December 9th, 2009.

I am an advisor of Talison Lithium Ltd. (and formerly of Salares Lithium Inc.) and own shares in the company.  As always please do your own due diligence.