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Malcolm Shaw
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Malcolm holds a MSc in Geology and has 13 years of experience spanning the resource and investment industries. He started his career as a geoscientist at PanCanadian Petroleum (now EnCana) before transitioning into the investment industry as an international energy research analyst at Wellington... More
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  • Nevada Sunrise Wakes Up To The Smell Of Big Gold At Kinsley Mountain

    Summary

    * Potential Carlin-style gold deposit in the making, with multi-million ounce potential

    * Initial drilling has yielded significant high-grade intervals (up to 38.7 metres of 15.6 g/t gold) and the geological model suggests additional potential along a 2 kilometre trend

    * 25,000 metre follow-up drill program planned to begin May 7, 2014

    * Generally under-followed by the market

    ==========================================

    Nevada Sunrise (OTCPK:NVSGF or NEV on the TSX Venture) caught my eye late last year when it released assay results that included 36.6 metres of 8.5 g/t Au (gold) from its JV with Pilot Gold (OTCPK:PLGTF of PLG on the TSX) at the Kinsley Mountain project in Nevada, USA.

    Based on what the companies were saying about Kinsley Mountain at the time, it was apparent to me that they might be on to something significant, particularly when the words "Carlin-style" were used in a comparative sense with respect to known mineralization in the area.

    For those who are not aware, Carlin-style deposits are sediment hosted gold deposits known for their grade and size potential. If you're looking for gold in Nevada, there's a good chance you are looking for a Carlin-style deposit. For those who want to know more about what Carlin-type deposits are, I highly suggest reading this paper (linked here) as a starting point. The first sentence of the abstract in the paper says it all, "Carlin-type Au deposits in Nevada have huge Au endowments that have made the state, and the United States, one of the leading Au producers in the world." Bottom line, the words Carlin-style or Carlin-type are often associated with the "big leagues" of gold exploration and production, so when a company starts pulling good holes out of something resembling Carlin-type geology, you best be paying attention, no matter what the current gold price is.

    As noted above, Nevada is one of the best and most prolific gold mining jurisdictions in the world. In this case, the Kinsley Mountain project is being explored by a 79/21 joint venture led by Pilot Gold alongside its partner Nevada Sunrise. What I really like here is the fact that the team from Pilot Gold, including Chairman Mark O'Dea, CEO Matt Lennox-King, and Chief Geologist Dr. Moira Smith, has a proven track record in Nevada. For those who remember, Pilot Gold is the reincarnation of the team from a Nevada-focused company called Fronteer Gold, which was bought by Newmont for $2.3 billion in 2011. Translation: This is a team that knows how to create value through the drill bit and monetize it. Without going into it in a lot of detail, the Fronteer Gold story can be best summarized as an example of a geological team that used new ideas in an old area to unlock a previously unrecognized gold resource. It appears that they may be at it again.

    In March of this year the JV partners announced that they had drilled 10.5 g/t Au over 42.7 metres (including 18.3 g/t Au over 22.9 metres) in one hole and 7.5 g/t Au over 53.3 metres (including 14.9 g/t Au over 22.9 metres) in another at Kinsley Mountain, one of which was a 100 meter blind step out and the other was a 25 meter step-out. That caught my attention. To step out 100 meters and encounter mineralization with that kind of grade and thickness on the first hole in that particular direction is no small feat, so either the geological team is very lucky, or they are onto something. Given the team's history at Fronteer, I felt that there was a reasonable chance that it wasn't all luck, so I bought an initial position in NEV the $0.80-0.90 range. I chose NEV because it is the pure play and, in my experience, the pure play always offers the best leverage. To put it another way, I want 100% of my money working for me in the project that I want exposure to... which in this case is Kinsley Mountain in Nevada.

    Fast forward to today, and NEV/PLG released the final assay results from the winter drill program, which included:

    -- 10.6 grams per tonne gold over 30.0 metres in PK133C (step-out), including 16.1 grams per tonne gold over 16.5 metres;

    -- 15.6 grams per tonne gold over 38.7 metres in PK137CA (infill), including 26.2 grams per tonne gold over 21.9 metres

    When combined with other highlight intercepts from recent drilling, things start to look interesting:

    -- 8.53 grams per tonne (g/t) Au over 36.6 metres in PK091CA, including 29.43 g/t Au over 7.6 metres;

    -- 6.85 g/t Au over 41.7 metres in PK127C, including 16.6 g/t Au over 8.5 metres;

    -- 10.5 g/t Au over 42.7 metres in PK131C, including 18.3 g/t Au over 22.9 metres; and

    -- 7.53 g/t Au over 53.3 metres in PK132C, including 14.9 g/t Au over 22.9 metres.

    A map showing the high-grade section of the deposit, including the above noted intercepts, is shown below.

    Figure 1: Kinsley Mountain Western Flank Zone Schematic (note that the high grade zone is open to expansion in multiple directions)

    (click to enlarge)

    (Source: company reports)

    The map above refers to the "Western Flank" target area, but the bigger picture can be seen below in Figures 2 and 3 below. Not only is the Western Flank part of a much longer corridor of prospective ground (Figure 2), but it also represents a new horizon of deeper mineralization which was unrecognized by prior drilling and mining. The current theory is that the historic Upper Main and Ridge Pits on the Kinsley Mountain property may have just been the "smoke" of a deeper and potentially larger and/or higher grade mineralizing system. That's where things get interesting. If that interpretation is correct, it's possible that the high grades at the Western Flank zone may be part of the same "plumbing system" that fed the Upper Main and Ridge Pits... which would mean that significant untested potential may remain at depth in the area.

    Figure 2: A Zoom-Out from the Western Flank Zone Showing Its Relationship to the Historic Upper Main Pit and Ridge Pit

    (Source: company reports)

    To illustrate the nature of the previously unrecognized mineralization at Kinsley Mountain, the cross-section included below is key. Figure 3 shows that the mineralization being encountered by the PLG/NEV JV is in a deeper "look-alike" horizon, as opposed to the shallower zone that was the focus of prior operators. In brief, those who worked the property before never/seldom drilled as deep as where the PLG/NEV JV is finding this high grade gold which is why this deeper system was previously unrecognized. Prior drilling focused on the Candland Shale and Lower Hamburg/Clark Spring Limestone, while this new mineralization is being found in the deeper Secret Canyon Shale, which sits on top of the Geddes (?) Limestone (see below).

    Figure 3: Schematic Cross-Section Through the Kinsley Mountain Project Showing Shallow Nature of Historic Drilling (gold mineralization denoted in red along drill traces)

    (click to enlarge)

    (Source: company reports)

    Some selected quotes today from Pilot Gold add some additional color (full press release here):

    "Kinsley Mountain is quickly emerging as Nevada's leading exploration project due to its high-grade drill results and district potential," stated Matt Lennox-King, president and chief executive officer of Pilot Gold. "The newly discovered high-grade Western Flank zone continues to grow and remains open in all directions..."

    "...The strong results along this trend suggest that the mineralization may be an extension of the 2.2-kilometre-long northwest-southeast Kinsley trend structural zone, along which the historic pits are aligned. Shallow historic drilling in the pits stopped short of testing the stratigraphic horizon hosting high-grade mineralization in the Western Flank target, and thus the potential for mineralization below the limits of the pits may be extensive."

    "PK133C (10.6 grams per tonne gold over 30.0 metres) and PK134C (2.84 grams per tonne gold over 18.9 metres) are step-out holes located 43 metres northeast and 43 metres south, respectively, of PK131C. These holes delineate the potential width of the zone of high-grade mineralization, which is open in all directions. Geological data suggest the presence of a gently northeast-dipping, tabular, partially stratabound zone of mineralization."

    "Current activities on the property include construction of drill roads to access areas between the Western Flank and the Right Spot and Secret Spot target areas, located up to two kilometres to the southwest, as well as areas between the Western Flank and the historic Upper pit, located 550 metres to the southeast. Areas to the south of the Right Spot are undergoing detailed surface mapping, sampling and target generation. Drilling is set to resume in early May with one core drill and two reverse circulation drills."

    To be clear, no one knows what will ultimately be found at Kinsley Mountain. The data suggests that PLG/NEV have drilled into a previously unknown mineralized system that exhibits high grades over good thicknesses which may indicate district-scale Carlin-type potential.

    Valuation

    As the pure play, NEV provides a direct way to see how the market is valuing Kinsley Mountain. NEV has 18.9 million shares out and about 7 million warrants for a fully diluted share count of 26 million shares. At today's closing price of C$0.99, the implied enterprise value is about $25 million, give or take. That's for 21% of the project. Grossing that up to 100% yields ~$120 million for the full project value. Given that the end result for Fronteer gold was a buyout at a value of $2.3 billion, it's easy to see why speculators like myself are attracted to this story. There's a long way to go and a lot of drilling to be done at Kinsley Mountain to prove up anything comparable to what Fronteer found at Long Canyon, but when I'm comfortable that the geology has the potential to deliver a real Carlin-style deposit, I tend to keep one eye on the horizon. That way I know how much runway I have, which appears to be quite a bit if my hopes are realized through further drilling.

    There's a saying in the gold business that goes something like, "The best place to find gold is where it has been found before." In the case of Kinsley Mountain, that appears to be holding true. The drilling program that's set to get underway in a couple of weeks should be telling... and I'll be watching. If Kinsley Mountain yields what I hope it will, NEV and PLG should attact a lot of attention, no matter what sentiment in the broader gold market is at the time.

    Additional disclaimers: This is not investment advice, nor is it a recommendation to buy or sell shares in the company/companies mentioned. The information contained herein is accurate to the best of the author's knowledge, but the presented information should be verified by any party using this information as part of any decision making process. This view represents the author's opinion only, and as such readers should come to their own conclusions if they are using the opinions contained herein as part of any larger due diligence process. Geological inferences are, by their nature, subjective and interpretation dependent.

    Disclosure: I am long NVSGF.

    Apr 23 7:12 PM | Link | 9 Comments
  • UNO - Looking For Uranium Away From The Crowd

    MPVC Inc. (UNO on the TSX Venture; there is no U.S. listing that I am aware of) is possibly the smallest and riskiest uranium exploration venture in which I have ever invested, which should be self-evident as soon as you notice the C$3.5 million market cap. It is a grass-roots exploration project that has been matured to drill-ready status over a multi-year period and the drills should be turning in the near future.

    In a nutshell, UNO is about to drill at its NW Manitoba project for the first time since a multi-year, multi-million dollar, major data acquisition program by its partner, CanAlaska Uranium (MPVC has the option to earn 80% of the project from CanAlaska through a series of capital expenditures and share issuances to CanAlaska at certain milestones).

    The story is fairly simple from a geological standpoint and is actually a textbook example of what you might look for if you were trying to discover a new uranium deposit in an area where few companies have looked before. The target area is within a corridor that is the interpreted extension of the Mudjatik-Wollaston Tectonic Zone, which is a major, regional-scale geological boundary that also hosts some of the largest uranium deposits in the world (Cigar Lake, McArthur River, etc). The same basement rocks which are associated with deeper deposits to the southwest are found at surface in the area where UNO is about to drill. There is high grade uranium vein mineralization in outcrop grading 9.5% U3O8 (i.e., high grade uranium in bedrock exposed at surface) within the target area and a number of uranium-mineralized pebbles and boulders have been found on the property, with one sample returning a value of >60% U3O8. That information got my attention... it's hard to ignore uranium at surface that can be sampled with a hammer and those uranium-mineralized boulders and pebbles must be coming from somewhere.

    It takes about 4 pictures to tell the story, which are included below with brief descriptions of the information being portrayed...

    Figure 1: A map of the Madjatik-Wollaston corridor shows the general trend of the major eastern Athabasca uranium deposits and gives a sense of the regional lineament.

    (click to enlarge)

    (source: company reports)

    Figure 2: A regional magnetic map of the eastern Athabasca Basin showing the magnetic signature of the Mudjatik-Wollaston Tectonic Zone and locations of key known deposits. The project area is outlined in yellow on the map (yellow star). Note how the low (blue) magnetic susceptibility trend becomes clearer as you move from the southwest to the northeast... that appears to be the geophysical signature of the basement rocks coming closer to surface as you move to the northeast (this interpretation has been ground-truthed by field work). So, to sum it up, the same basement rocks associated with the deposits to the southwest are at surface in the NW Manitoba project area and presumably may have similar potential for uranium mineralization. The surface sampling in the project area appears to support that theory.

    (click to enlarge)

    (source: company reports)

    Figure 3: A map focused on a smaller region of the project area outlined above. The map shows the same SW-NE trending magnetic low (blue) as well as the interpreted Maguire Conductor trend. There are some notes to the right of the image that shed a little more detail in terms of data/observations in the area. Note the scale bar... this is still a large area, but the right ingredients seem to be there.

    (click to enlarge)

    (source: company reports)

    Figure 4: This image is now zoomed to "target" resolution. Outlines of the survey areas in this image can be seen in figure 3 in black (Grid 2, Grid 2b, and Grid 2c). The Maguire conductor (marked as "VTEM anomaly") is annotated on the map and may be interpreted as a graphitic horizon that could be important for uranium deposition in the area. The map on the left is gravity data, which reflects the density of the rock in the area, while the map on the right is resistivity data, which measures the resistivity of the rock in the area. The hydrothermal alteration that is commonly associated with uranium deposits has a fairly specific geological signature... it often makes rocks both less dense and less resistive.

    (click to enlarge)

    (source: company reports)

    The 4 arrows in the image above are showing regions where gravity and resistivity are both low, which is exactly the signature you might want to see when looking for uranium. Combine that geophysical data with the regional trend, the uranium in outcrop at surface, the mineralized pebbles/boulders, all of which are adjacent to a large-scale conductor and the target becomes quite compelling, which is why I invested.

    UNO is also in the process of completing a radon survey (press release linked here) which has yielded promising early results. Recall that the only way to produce radon is via the natural decay of uranium, so the presence of radon suggests a nearby uranium source.

    Put it all together and these are the kind of targets that you want to see drilled. I cannot overstate how speculative a venture like this is, but the rewards are commensurate with the risks. If successful, the upside from a C$3.5 million market cap could be tremendous. The company has recently raised the money it needs to carry out an initial drill program, but it will mostly likely need to come back to market if there is to be a "phase 2" drill program. If the initial drilling yields encouraging results, the access to capital will likely be less of a factor... such is the exploration business.

    I am not recommending this as an investment, because it is strictly speculative, but this brief note does outline my thoughts on the opportunity from a technical standpoint. Those who followed my writing from the early days of Patterson Lake South will know that I am not shy about taking a stab at an early stage project, which this one most definitely is...

    A bet on UNO is like a bet at the roulette wheel in Vegas... once in a while you can get lucky, but at least if it doesn't work out, you know you can feel good about being at the table in the first place in light of the available data.

    Additional disclaimers: This is not investment advice, nor is it a recommendation to buy or sell shares in the company/companies mentioned. The information contained herein is accurate to the best of the author's knowledge, but the presented information should be verified by any party using this information as part of any decision making process. This view represents the author's opinion only, and as such readers should come to their own conclusions if they are using the opinions contained herein as part of any larger due diligence process. Geological inferences are, by their nature, subjective and interpretation dependent.

    Apr 13 9:25 PM | Link | 23 Comments
  • Mackie Research Launches Coverage On Crown Point Energy With A C$1.55 Target Price And A Buy Rating

    Just a note to those following this story. Today, Toronto-based Mackie Research Capital (https://secure.mackieresearch.com) launched research coverage on Crown Point Energy (OTCPK:CWVLF or CWV on the TSX Venture) with a buy rating and a 12-month target price of C$1.55.

    The same firm also covers Madalena Energy (OTCPK:MDLNF or MVN on the TSX Venture).

    Crown Point is expected to begin its 10-well Tierra del Feugo development and exploration drilling program next month. Investors are also waiting for testing to get underway at the Hoyada-1 exploration well, which encountered 36 meters of naturally fractured volcanics with persistent live oil shows within Argentina's Vaca Muerta shale play in February of this year.

    The stock is trading at $0.75 at the time of writing.

    Disclosure: I am long CWVLF.

    Tags: CWVLF
    Mar 27 2:21 PM | Link | 1 Comment
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