By: Brian Leni P.Eng, Junior Stock Review
The last few weeks have been busy from an investing standpoint; I spent a week in the Yukon visiting some of the Territory’s most exciting projects, and then headed to Vancouver for the Sprott Natural Resource Symposium.
Over the course of the week in Vancouver, I had some great conversations with fellow investors, but I also came to a realization for how a segment of the retail market conducts their due diligence. I was surprised and disappointed by the number of investors who rely solely on quick rules of thumb to evaluate companies.
In my opinion, using rules of thumb in some portions of the due diligence process can have major consequences for the odds of success of your junior resource sector portfolio.
Each company is unique and should be analyzed on its own merits. Instead of approaching the evaluation of a company based on a few loose rules, I believe it’s pertinent to enter into the evaluation process with an open mind and to know that it all depends on circumstance.
It depends on the management team, the infrastructure, the topography, the depth of the mineralization, the grade, the type of metal, where you are in the market cycle, and many other variables.
In my experience, correctly piecing these variables together and forming an opinion with regards to valuation is how you can truly be successful in the junior resource sector. Only then can you take advantage of bear markets and buy the best quality stocks while they’re discounted.
Rules of thumb or personal preference criteria are best left at the periphery of due diligence, such as the narrowing down of your list of gold companies by jurisdiction. Many of these high level items are linked to risk and, in my opinion, are great ways to narrow your search for companies that fit your individual investment criteria.
Today, I’m going to give you an update on Klondike Gold, a company whose latest drill results may not be flashy headline-grabbing, high-grade gold hits, but from an analytical standpoint, show great promise for what may be an economic gold deposit.
Let’s take a look!
Klondike Gold Corp. (KG:TSXV)
MCap – $30 million (at the time of writing)
Shares – 95 million
Fully Diluted – 120 million
2018 Exploration Program
Klondike Gold has hit the summer exploration season running, completing 5,000m of drilling, soil sampling and air borne surveys of the property. Through prospecting, they have also discovered 2 new areas with outcropping quartz veining with visible gold. This is a great body of work that they have completed since May, and it will enable them to expand upon their drill program this summer.
In my opinion, one of the most appealing features of the Klondike Gold story is the potential to find the source of the Klondike Goldfields’ placer gold. For many, a feeder system for the Klondike’s placer gold was likely to be found in a high grade quartz vein system. However, this doesn’t appear to be the case, as Klondike Gold’s CEO, Peter Tallman, has developed a geological model, which incorporates disseminated gold along with gold bearing quartz veins to explain the source of the placer gold.
What does disseminated mean? Disseminated mineralization is characterized by small particles of a given mineral that is spread quite uniformly throughout the host rock. While assay results may not be as flashy as gold bearing quartz veins, a disseminated model enables companies to develop bulk tonnage deposits much faster.
Given Tallman’s success in proving his theory, thus far, I’m excited to see how he and his team continue to explore the property. Let’s take a look at some of the results from the 2018 exploration program; first with the Nugget Zone core re-sampling, the first 7 assay results from the 44 holes which have been drilled, thus far, in 2018, and finally, a note on the wildcat exploration target, the Gold Run Zone.
Nugget Zone Update
On July 10th 2018, Klondike released news on the assays from core re-sampling they performed on five holes as part of the re-evaluation of the Nugget Zone and Nugget Fault area. In 2015, when the core was originally evaluated, it was gold bearing quartz veins which were the focus. With the change in the geological model, which now incorporates disseminated gold, the core needed to be re-evaluated using a different method.
The results are positive with all of the holes exhibiting broad intersections of near-surface gold mineralization and the following results: Hole EC15-15 – 58.10m of 1.03 g/t gold, Hole EC15-16 – 44.50m of 0.76 g/t gold, Hole Ec15-17 – 41.78m of 0.27 g/t gold, Hole EC17-140 – 24.94m of 2.20 g/t gold and EC17-142 – 21.00m of 0.73 g/t gold.
Klondike is off to a good start with these initial re-evaluations, and with further drill results from the Nugget Zone pending, we should receive an even better understanding of the Nugget Zone’s potential.
Lone Star Zone Update
In 2017, roughly half of the interpreted strike length (approximately 2400m) of the Lone Star Zone was drilled and intercepted gold mineralization in each hole. The plan for 2018 is to expand on the 2017 drill program and to drill across another 550m along strike, by 250m down dip on 50m spacing.
On July 18th 2018, Klondike released news on the assays from 7 drill holes at the Lone Star Zone. Two of the highlights were holes LS18-155 and LS18-156. Interestingly, both holes were drilled from the same collar, except they were drilled in opposite directions. The result? LS18-155, which was drilled in the southerly direction, intersected 1.33 g/t gold over 26.20 meters, and LS18-156, which was drilled in the northerly direction, intersected 1.4 g/t gold over 65.05 meters.
These are great results as the intersections start at surface and are entirely within 45 meters of surface. Dimensionally, they suggest that it could be a large body of disseminated gold. More results like this should be a great lead into a potential maiden resource on the property, possibly by the end of 2019 or in 2020.
LS18-155 and LS18-156 Cross-Section
Other highlights include holes LS18-152 – 0.56 g/t gold over 21.00m and LS18-153 – 1.01 g/t gold over 24.00m. Please see the news release for further details.
Gold Run is located on what Tallman believes is the same structure which controls the mineralization found in the Lone Star Zone, but as you can see in the image above, it sits about 55km away. For this year’s program, Tallman decided to drill 4 holes on Gold Run to get a better idea of what it looks like. Although assays are still pending, when he aligns the area with the new airborne surveys, it looks a lot like Lone Star.
In my opinion, there are 2 conclusions to make from this; First, and arguably most importantly, the geological model Tallman created works. Secondly, following all of the work completed on Lone Star, the Gold Run Zone has a ton of potential in terms of gold mineralization.
Stay tuned for assays!
Mineral exploration is a high stakes game and often ends poorly. In the case of Klondike Gold, however, the first portion of assays are very encouraging and have set the stage for what are, hopefully, more positive results in the coming weeks.
For those who may have missed my introductory article on the Klondike Gold story, here is a recap of the reasons I believe the Klondike team has high odds of success:
- Experienced management team which is supported by smart money via billionaire investors, Frank Giustra and Eric Sprott.
- District scale land package of 557 square kilometers with the premier mining jurisdiction that is the Yukon. NOTE: The Yukon ranks 13th in the world in mining investment attractiveness as per the Fraser Institute’s 2018 Survey.
- The Klondike Goldfields have produced 20 million ounces of placer gold over the course of their history.
- Extensive 2018 exploration program, which includes airborne mapping, soil samplings and a 5000m drill program. High news flow throughout the summer.
- Exploration program is supported by a robust plan which is rooted in the geological similarities between Klondike’s target geology and Goldcorp’s 4 Moz Coffee Gold Project, which is just south of Dawson City.
- CASH – Funded through 2019
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Until next time,
Brian Leni P.Eng
Founder – Junior Stock Review
Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria. I do own shares in Klondike Gold Corp. All Klondike Gold Corp. analytics were taken from their website and press release. Klondike Gold Corp. is a Sponsor of Junior Stock Review.