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(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:

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(Source: opaxe)

Where AuEq (g/t) is the gold-equivalent grade, z is the number of listed components (e.g. Au, Ag, Pb, Cu, Zn, Li2O, Sn, Co etc), ρn and Vn are the mass concentration and market value of the n th component in the list, respectively, and V Au is the market value of gold.

Gold has been chosen as the metal equivalent for all conversions as it is the most widely-used and best-understood benchmark to determine or appreciate the grade tenor of a drilling intercept.” – Opaxe

(Source: opaxe)

1) Eskay Creek gold-silver project in Canada

On August 25, Skeena Resources (OTCQX:SKREF) released a new batch of results from the 2020 Phase I surface drilling program at its Eskay Creek project and the best interception was 35.42m @ 21.9g/t Au, and 235g/t Ag from 79.55m in hole SK-20-290. This is equal to 890 (AuEq.) m and what’s even more encouraging is that the hole was drilled into a previously unexplored area.

(Source: Skeena Resources)

Eskay Creek is situated near the Brucejack and KSM gold projects in the famous Golden Triangle of northwest British Columbia and was once the highest-grade gold mine in the world. The mine churned out some 3.3 million ounces of gold and 160 million ounces of silver at average grades of 45 g/t gold and 2,224 g/t silver before it was closed due to depletion in 2008.

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(Source: Skeena Resources)

At the moment, Eskay Creek holds just over three million ounces of gold and 60 million ounces of silver in the indicated and inferred categories.

(Source: Skeena Resources)

The objective of the 2020 Phase I surface drilling program is to upgrade areas of inferred resources to the indicated category.

In November 2019, Skeena put out a preliminary economic assessment for the project and the latter showed compelling financial figures. At $1,325 per ounce of gold and using a discount rate of 5%, the project has a net present value of C$638 million ($487 million) and the after-tax internal rate of return stands at 51%. Using higher gold prices, the numbers look much more robust.

(Source: Skeena Resources)

The initial capex is estimated at a relatively modest $233 million and all-in-sustaining costs (AISC) are expected to come in at just $615 per ounce.

2) Mallina gold project in Australia

On August 27, De Grey Mining released an exploration update on its Mallina project and the best drill result was 64m @ 13.4g/t Au from 141m in hole HERC238. This is equal to 858 (AuEq.) m and there was visible gold.

(Source: De Grey Mining)

Mallina is located in the iron ore-rich Pilbara region of Australia and it currently has a minerals resource of almost 2.2 million ounces of gold at an average grade of 1.8g/t:

(Source: De Grey Mining)

However, this estimate does not include the Hemi discovery, which was made in December 2019. The latter is a game-changer as De Grey believes it has struck the potentially largest gold discovery ever in Pilbara and has a corporate goal for a resource of over five million ounces at this discovery alone.

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De Grey is also on the hunt for other deposits like Hemi and has so far identified four similar mineralized intrusions within 10 km.

(Source: De Grey Mining)

On September 2, the company announced the discovery of a new altered intrusion, which is 1.8 km long and up to 80 m thick. It’s likely you’ll see Mallina in next week’s edition of this series too.

3) San Francisco gold-silver-copper project in Argentina

On August 28, Turmalina Metals (OTCQX:TBXXF) announced assays for the first three holes of its 5,000-meter drilling program at its San Francisco project and the best interception was 109m @ 4.94g/t Au, 109g/t Ag, and 1.1% Cu from 12m in hole SFDH-012. This is equal to 829 (AuEq.) m.

(Source: Turmalina Metals)

So far, Turmalina has completed 14 holes for a total of 3,890 m.

The company has a portfolio of high-grade gold-silver-copper breccia projects in Latin America and San Francisco is located in the province of San Juan. Argentina doesn’t have a reputation as a mining-friendly jurisdiction, but I doubt Turmalina will have any problems as this province has defined mining development as a key state policy.

(Source: Turmalina Metals)

Tourmaline breccia pipes are usually barren but the pipes at San Francisco seem to have exceptional gold content and the project reminds me of the Soledad deposit in central Peru.

The grades for copper are also good and there was a mine at the San Francisco property, which produced 2,420 tons at 6-7% copper and 1.43% bismuth between 1941 and 1980.

Regarding future exploration, the model has these high-grade intersections improving at depth.

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Conclusion

Skeena released another group of good drill results from Eskay Creek, which should allow it to transfer a significant amount of gold resources into the indicated category. I really like projects which involve the restart of old mines as they usually come with very good infrastructure and are generally less risky to develop. I think Skeena looks undervalued at the moment.

I think De Grey might have one of the best undeveloped gold projects in the world and it’s possible that Mallina grows beyond 10 million ounces in the future. Initial capex should be relatively low, as infrastructure in the area is well-developed. If you like this company, you’ll have to go to the ASX as this one isn’t listed in the USA.

Regarding Turmalina’s San Francisco project, I don’t really like breccia systems as they are deep and complex. However, grades are likely to improve with depth, so it’s possible for future drill results to be bonanza-grade and generate a lot of buzz. With this in mind, Turmalina can be viewed as a speculative buy, but I’ll pass.

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.



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