Best Drill Interceptions In The Metals Mining Sector For The Week Ended June 2, 2019

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Includes: FLMMF, OBNNF
by: Gold Panda
Summary

AuStar with good drill results near Morning Star.

Osisko Mining discovers new shallow gold-bearing zone at Windfall Lake.

Filo del Sol continues to grow with six out of seven new holes ending in mineralization.

(Source: Exploration Insights)

Introduction

If you're into investing in the mining sector, you should know the above chart very well. This series covers the three projects with the most significant drill interceptions over the past week as well as the prospects of the companies which own these projects. I will use data from the weekly bulletin of RSC Mining and Mineral Exploration, which can be found on its website. Note that the drill interceptions are converted into grades of gold equivalence using the following formula:

(Source: RSC Mining and Mineral Exploration)

RSC Mining and Mineral Exploration has chosen gold as the metal equivalent for all conversions, as it considers it the most widely used and best-understood benchmark to determine or appreciate the grade tenor of a drilling intercept.

(Source: RSC Mining and Mineral Exploration)

1) Rose of Denmark gold project in Australia

On May 28, AuStar Gold announced that it intersected 7.3m @ 153.57g/t Au from 21m in hole ROD055 at its Rose of Denmark Star project in the Australian state of Victoria. This is equal to 1,121(AuEq.)m and included an interval of 1m @ 1,110g/t Au.

(Source: AuStar)

The hole formed part of an initial first phase of resource definition drilling to identify the geometry of the controlling dyke and identify zones of mineralization within the dyke at the Rose of Denmark mine capable of near-term accessibility.

I've already covered AuStar in October 2018, when the company revealed that it intersected 9.75m @ 66.82g/t Au from 38m at its Morning Star gold mine.

The Rose of Denmark project is located near Morning Star:

(Source: AuStar)

AuStar expects to release a maiden resource for Rose of Denmark mine early this month.

In May, the company revealed plans to make a takeover offer for troubled gold company Centennial, which holds the nearby A1 gold mine. Centennial went into voluntary administration in March, after failing to complete an audit and recapitalization plan.

2) Windfall Lake gold project in Canada

On May 28, Osisko Mining (OTCPK:OTCPK:OBNNF) announced that it has intersected 2.2m @ 393g't Au from 100.2 in hole OSK-W-19-1883 at its Windfall Lake project. This is equal to 865(AuEq.)m and the company said that it has discovered a new shallow gold-bearing zone. The zone will be named Windfall North and mineralization occurs between 50 meters and 275 meters vertical depth from surface. The zone remains open at depth and along strike.

(Source: Osisko Mining)

Windfall Lake is situated between the Val-d'Or and Chibougamau projects in Québec and is one of the highest-grade gold projects in Canada:

(Source: Osisko Mining)

In November 2018, Osisko released a new resource estimate for the Lynx zone, which boosted the project's resource to 754,000 ounces of gold averaging 8.17 g/t in the indicated category and 2,366,000 ounces of gold averaging 7.11 g/t in the inferred category.

I continue to think that the recent exploration success of the company will improve the already compelling economics of Windfall. Here are the key figures from the July 2018 Preliminary Economic Assessment:

(Source: Osisko Mining)

Windfall remains open at depth, and a resource update and a feasibility study are expected in 2019.

3) Filo del Sol copper-gold-silver project in Argentina

On May 28, Filo Mining (OTCPK:OTCPK:FLMMF) announced that it has intersected 378m @ 0.44% Cu, 0.89g/t Au, and 42.5g/t Ag from 134m in hole FSDH030 at its Filo de Sol project. This is equal to 757(AuEq.)m and all but one of the newly released seven holes ended in mineralization:

(Source: Filo Mining)

Filo del Sol is located on the border between Argentina and Chile:

(Source: Filo Mining)

In January 2019, Filo Mining completed a pre-feasibility study, which was based on the leachable oxide cap of the project. The grades were low, but the metallurgy and strip ratio are excellent, and the economics of the project look very good:

(Source: Filo Mining)

One red flag for me is the high metal price assumptions - the copper and silver prices used in the study are higher than the current spot prices for these metals. Using copper prices of $2.40 per pound, the net present value of the project drops below $900 million.

The 2018/19 drilling campaign is targeting the porphyry target underneath the known ore body, and I think it has the potential to transform Filo del Sol into a much larger project.

I really like the management of Filo Mining, as it's a Lundin Group company, which has a very good track record of creating value for shareholders:

(Source: Filo Mining)

The company is led by Adam Lundin, and Lundin trusts hold a 30% stake at the moment:

(Source: Filo Mining)

Conclusion

AuStar released some good drills results from the Rose of Denmark just as it's ramping up gold production at its nearby Morning Star mine. I think that Rose of Denmark has the potential to act as a satellite deposit for the latter. AuStar is also looking at regional consolidation options with the potential acquisition of Centennial. Overall, I like AuStar, but I'm a concerned that there's little information on the economics of Morning Star, and the company's presentation hasn't been updated since August 2018. This is very unusual for a gold miner. If you still want to gain exposure to AuStar, the company is listed on the ASX.

I think that Osisko Mining could be the 2019 exploration star in the metals mining sector, thanks to several outstanding drill results at Windfall Lake. The newly discovered gold zone will also improve the economics of an already great project. There will be several catalysts for the company in 2019, such as drilling results, bulk sample results, a resource update for the whole project, as well as a feasibility study.

As I've mentioned before, Filo del Sol is a great example that grade isn't everything in mining. It has a very good metallurgy and an excellent strip ratio, and its economics look amazing. However, I think that the PFS uses very high metal prices and the NPV should be closer to a billion dollars. I like the company's management, as the Lundin Group has historically proven to care about shareholders, and sales of companies by the group have resulted in great returns. I continue to think that Filo del Sol is likely to see a significant increase in its resources in 2019 and that the company will eventually be sold at a significant premium to the share price.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am not a financial adviser. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading.