Sunday, June 16, 2013

Barrick Hits 361 Meters of 1.47 gpt Gold at Spring Valley, Nevada

The Humboldt Range West-Central Nevada
Barrick Hits 361 Meters of 1.47 gpt Gold at Spring Valley, 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.

The Barrick budget for Spring Valley in 2013 includes $8.0 million for exploration, primarily drilling, and $2 million for development work. Development work includes completing the scoping study and initiating a prefeasibility study if supported by the scoping study results. Midway anticipates by the end of 2013 Barrick will complete cumulative expenditures of $38 million to earn a 70% interest in the project, which would be a full year ahead of the contractual requirements."

Significant Drill Results at Midway Gold’s Spring Valley JV with Barrick Gold Confirm Potential for Terraco’s Royalty Interest
--- Chris Berry – Morning Notes 2013-07-05

Terraco Gold Update (TEN :TSXV, TCEGF :OTCBB)

"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, MBA – Morning Notes 2013-07-05

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.

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.

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.

Your editor standing on the Blackridge Fault approximately 3,200 ft north the Barrick discovery (Click on Image to Enlarge)