Best Drill Interceptions In The Metals Mining Sector For The Week Ended February 23, 2020

Summary

• Wesdome with bonanza gold grades at Kiena.
• Filo del Sol on path to prove one of the best undeveloped copper-gold-silver deposits in the world.
• K92 releases another batch of high-grade drill results from below the Kora North deposit at Kainantu.

(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 Opaxe, which can be found on its website. Note that the drill interceptions are converted into grades of gold equivalents using the following formula:

(Source: Opaxe)

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

(Source: Opaxe)

1) Kiena gold mine complex in Canada

On February 19, Wesdome Gold Mines (OTCPK: OTCQX:WDOFF) released a new batch of results from the ongoing underground definition and exploration drilling campaign at the Kiena Deep A Zone of its Kiena mine complex in Val d'Or. The best interception was 10m @ 114.84g/t Au from 725m in hole 6580, which is equal to 1,148(AuEq.)m.

(Source: Wesdome)

The new results extended the gold mineralization of the A Zone by another 100m down plunge and it now extends for more than 830m. A new resource estimate should be released later this year, which will serve as the basis for a preliminary economic assessment. The company has drilled 40,850m in 136 holes since the last one.

Kiena is a high-grade past-producing mine which was put under care and maintenance in 2013. It has a 2,000 TPD permitted mill as well as a 900-meter production shaft:

(Source: Wesdome)

In December 2018, Wesdome put out a resource estimate for the complex, which showed that it contains more than 1.5 million ounces of gold across all categories:

(Source: Wesdome)

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

On February 20, Filo Mining (OTCPK: OTCQX:FLMMF) released additional partial results from two drill holes which formed part of its 2019/2020 drill program at the Filo del Sol project. The best interception was 786m @ 0.57% Cu, 0.40g/t Au, 13.6g/t Ag from 192m in hole FSDH032. This is equal to 937(AuEq.)m and the result proves the existence of a large porphyry system which underlies and extends to the north of the current resource.

(Source: Filo Mining)

In January, Filo released a partial result of 358m @ 0.42% Cu, 0.35g/t Au, 16.6g/t Ag from 192m for this drill hole.

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 project has great metallurgy and the strip ration is excellent. However, note that the study assumes a very high price for copper.

(Source: Filo Mining)

3) Kainantu gold mine in Papua New Guinea

On February 20, K92 Mining (OTCQX:OTCQX:KNTNF) released drill results from another 25 holes from the Kora North Extension of its Kainantu gold mine. The best interception was 30.1m @ 22.7g/t Au, 5g/t Ag and 0.54% Cu in hole KMDD0167, which is equal to 703(AuEq.)m.

(Source: K92 Mining)

The mineralization in this drill hole was intercepted in the area where the Kora Link vein connects the K1 and K2 veins and step-out drilling to the south has extended the known Kora North mineralization by more than 200m below the known Kora resource.

Kainantu is located close to the Wafi-Golpu and Ramu projects in PNG:

(Source: K92 Mining)

In 2015, K92 acquired the project from Barrick (GOLD) for just $2 million plus $60 million in future payments if certain milestones are reached, such as producing more than a million ounces of gold over the next nine years. Barrick itself bought Kainantu for $141.5 million in cash in 2007 and spent around $100 million upgrading infrastructure and on other expenses, and an additional $41.3 million on exploration and expansion activities, including drilling 78,935 meters of core. The owner before Barrick spent another $80 million on development.

K92 was listed in 2016 and I was considering investing in the company back then as it had a large high-grade gold resource of more than two million ounces at an average grade of more than 11g/t AuEq. At the moment, Kainantu has a resource of just over three million ounces of gold equivalent:

(Source: K92 Mining)

In 2019, K92 produced 82,256 ounces of gold equivalent and is currently in the middle of doubling the capacity of its processing plant to 400,000 tpa. The economics of the planned expansion is amazing:

(Source: K92 Mining)

Conclusion

Wesdome has been having a great drilling campaign at both its Kiena and Eagle River projects and their reserves and resources are set to increase significantly in the near future. At Kiena, the new batch of results has extended gold mineralization of the A Zone by another 100m down plunge. However, Wesdome is already valued at more than $1 billion, which is a ludicrous price tag for a company producing of less than 100,000 ounces of gold per year.

Filo del Sol’s 2018/19 drilling campaign was targeting the porphyry target underneath the known ore body and I think the recent results show this might be one of the largest undeveloped copper-gold-silver deposits in the world.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 think that Filo Mining will eventually be sold at a significant premium to the share price.

K92 delivered another batch of high-grade results from Kainantu and the economics of the planned expansion look great. However, I remain unconvinced about the prospects of Kainantu. The measured and indicated resources are just over 0.6 million ounces of AuEq and the previous owners spent over $200 million before dumping it for almost nothing.

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