Discovery Watch is a weekly 15-30 minute audio show produced by HoweStreet.com where Jim Goddard interviews John Kaiser about resource juniors with projects that have caught John's attention. The projects will not be limited to companies he has covered through the Spec Value Rating System. Jim and John will periodically circle back to review the projects and if necessary close them out as no longer worth watching. Check out the catalog of KRO Free Stuff. We currently have a USD $275 Membership Special which grants full access to the end of 2020. Discovery Watch is available via YouTube or Podcast..
Zephyr Minerals Ltd has been a KRO Bottom-Fish Spec Value rated company since late 2017 based on the Dawson-Green Mountain gold project in Colorado where the junior has a small 111,300 oz resource for which a PEA supporting a small 300 tpd underground mine was published in early 2017. This resource in the Dawson segment has been outlined only to a depth of 275 m because it dips into a mountain and it is not practical to drill deeper. The idea is that if a small scale mine were developed a much bigger resource could be delineated by drilling from underground. The upside for the Dawson segment thus hinges on a gold bull market to bring in the required CapEx. In 2018 Zephyr acquired the Green Mtn segment to the west where it hopes to establish a similar system. Zephyr was introduced to DW in May 2019 on the basis of a Broken Hill type zinc-lead-silver target that emerged in 2018 within the El Plomo segment, a down-dropped block between the Green Mtn and Dawson segments. It features a high grade Zn-Pb-Ag horizon that was tested to a shallow depth decades ago but given up on because although it strikes for 3 km it is narrow. In the Broken Hill model metamorphism will have folded and remobilized such a system to create structural thickening and higher grades. Regional geochemistry suggests such a process could have taken place, so during the summer of 2019 Zephyr conducted an airborne Mag-EM survey over the property to see if there is a magnetic anomaly associated with the El Plomo trend that supports the hypothesis that a much thicker Broken Hill type deposit exists at depth. In September 2019 Zephyr revealed that there is such a magnetic anomaly worth drilling from 4-5 locations along the trend.An analog which fits the target's tonnage footprint is the Cannington deposit in Australia, a smaller but richer version of the original Broken Hill deposit. A KRO Cannington Clone Outcome Visualization indicated such a deposit would be worth more than CAD $7 billion at current metal prices, which, if Zephyr could avoid dilution beyond its current 74 million fully diluted, implied an ultimate price target of $100. Further support for the BHT model emerged when an electronprobe study revealed that silver occurs within a rare mineral uniquely associated with BHT deposit. Testing this target, however, was not simple because El Plomo is bighorn sheep habitat where drilling is restricted to July 1 to Oct 31. Zephyr's plans to drill during the 2020 summer were nearly disrupted when an anti mining NGO appealed the drill permit. The appeal was heard on July 22 and unanimously dismissed. Drilling started in August and progressed slowly due to difficult rock conditions and rig breakdowns, taking twice as long as expected. On August 28, 2020 Zephyr was halted to announce that the first hole at El Plomo had failed to intersect significant mineralization. Only 2.9 m of "sulphide mineralization" was intersected at the depth where the magnetic anomaly blossomed, with no obvious explanation for the anomaly. Although the news did not mention zinc or lead sulphides, it is implied by the observation that these BHT systems can pinch and swell. However, the geophysics suggested that the zinc-lead horizon encountered in 1971 by the shallow holes GC 8 & 9 underwent thickening as a result of folding, with the bunched up pyrrhotite creating the magnetic bulge. The 2020 drill hole showed that this was not the case, and although the mineralized zinc-lead-silver horizonappears to be present at depth, its tonnage footprint is too small to support an underground mine unless something special is going on closer to surface. No further drilling is planned for El Plomo in 2020. The BHT expert Paul Spry will review the assay data when it is available.The market reacted very negatively to the disappointment, dropping to $0.25. Zephyr did encounter disseminated sulphides within mafic bands occurring beneath the BHT horizon, and these will be assayed for gold. For now Zephyr is shifting its attention back to the gold potential, in particular the Green Mountain segment to the west optioned a couple eyars ago and which has potential for the mesothermal gold lode zones in the Dawson segment to the east where a high grade resource of 130,000 oz cannot be expanded because the zones dip into a mountain. If such gold zones are present at Green Mtn this problem may not be a limiting factor. There are no sheep habitat restrictions on the Dawson segment and only the northern end of the Green Mtn segment is affected, so drilling can be done year round on most of the land with gold potential. If the gold trend stays strong strong Zephyr may consider funding a decline at Dawson which would allow expanding the gold zones through underground drilling. (Aug 28, 2020)
Midas Gold Corp has been a regular Discovery Watch feature since January 2017, not because there was any new mineralization to be discovered at the Stibnite gold-antimony project in Idaho, but rather because we were curious to discover if CEO Stephen Quin with John Paulson's financial backing in early 2016 could overcome the market's glum view that Idaho would never permit an open pit mine in an area that was turned into an environmental disaster zone by mining for antimony to support the World War II effort, and later by gold miners who were no longer around when Nixon invented the EPA in the 1970's. And boy oh boy, has it ever been a journey of discovery with regard to regulatory incompetence led by the Forest Service as the timeline for a draft Environmental Impact Statement kept slipping into the future like that Steve Miller song. Midas as of the end of 2019 has spent USD $53 million on permitting out of $210 million overall, and CEO Stephen Quin has suggested to me the total will be $70 million when a mining permit is finally granted. The last economic study was a PFS in December 2014 which was lousier than the 2012 PEA because certain parts of the deposits lacked the drill density needed to support a PFS calibre ore schedule, so half the antimony output disappeared, as did a good part of the high grade front loading of the ore mining schedule. The outcome of the PFS was not impressive because it used a $1,350 gold price as a base case to support an after tax NPV of US $832 million and 23.4% IRR using a 5% discount rate. The IRR was fine, but the NPV not so good because CapEX was $970 million thanks to a pressure oxidation unit needed to deal with the refractory sulphide ore. But even worse, gold was below $1,300 most of the time until mid 2019 when it finally began to rise as the world became uncertain about America's leadership role in a world where China under emperor for life Xi Jinping had since 2012 embarked on a course that clearly dashed any hope that China's prosperity would eventually make it "just like us", even as the US under its own leadership was setting America on a path to become just like "them". One reason the timeline for a draft EIS kept being extended was that the Forest Service simply lacked the processing infrastructure to permit a mine that would produce 350,000 ounces gold annually and involved reclamation of a Superfund site, turning this into a learning how to properly approve a mine on the fly experience. The draft EIS, which includes 5 scenarios (the first was submitted by Midas in 2016, the second in 2019 by Midas after adapting to feedback to the first scenario, and 3 alternatives the USFS had to invent by law and are really straw men which illustrate the desirability of scenario 2) was finally filed by the USFS on August 14, 2024, kicking off a 60 day public comment period that ends October 13, 2020. Once the USFS has compiled the comments and provided responses to them, if there are no serious issues Midas hopes to publish a feasibility study before the end of 2020. The USFS will work on the Final EIS based on the chosen scenario which is expected to be filed in Q2 of 2021 along with a Draft Record of Decision, followed by a 30 day objection period open only to submitters in the draft EIS comment period who feel their concerns were not addressed by the USFS. This should lead to a Final Record of Decision in Q3 of 2021 which will allow the final permits to be secured by the end of 2021 so that construction could begin by 2022. At $1,900 plus gold Stibnite will be very much in the money, even if CapEx expands 30%, and if you dare to dream $3,000 gold, you are looking at a $10-$15 future price target. (Aug 28, 2020)
Tri Origin Exploration Ltd was inbtroduced to DW in October 2016 based on the South Abitibi project farmed out to Sumitomo. Tri Origin staked this area southeast of Cobalt when it came open after decades of being restricted from staking under the First Nations Bear Island caution. The area is covered by rocks of the Cobalt Embayment which overlies Archean rocks that are an extension of the Abitibi Greenstone belt which is prospective for VMS deposits. These cover rocks host the high grade silver-cobalt veins which launched the Cobalt mining district and which received newed attention from juniors during the cobalt boom of 2016-2018. Tri Origin's strategy was to fly Mag-EM surveys and drill blind targets in the underlying Archean rocks. Sumitomo optioned 50% in 2015 for $4.5 million exploration and spent $2.2 million before dropping at the end of 2018. The drilling confirmed the depth of the Archean basement but failed to deliver any discoveries. In 2019 Tri Origin gave De Beers permission to drill its own geophysical targets as potential kimberlites, with a commercial farmout to be negotiated if De Beers finds something. So far De Beers has drilled but not found any kimberlites. This area is south of the New Liskeard area where many kimberlites have been found, a few of which are barely diamondiferous. In 2019 Tri Origin reduced its property holdings to focus on the Sky Lake project near the Pickle Lake district in western Ontario, the North Abitibi project on the Ontario side of the Casa Berardi trend, and the South Abitibi. An attempt to finance below $0.05 in late 2019 failed, so in Q1 of 2020 CEO Bob Valliant got approval for a rollback up to 10:1 as a prelude to a $2 million financing which will allow Tri Origin to drill Sky Lake and North Abitibi, both of which host high grade gold systems that have strike and depth expansion potential. Valliant finally settled on a 5:1 rollback which was done on August 20, 2020. On Aug 24 Tri Origin announced to raise $2,125,000 through a private placement at $0.35 for common and $0.43 for flow-through that is also open to non-millionaires under the existing security holder exemption that allows individuals to buy up to $15,000 per company per 12 month period if they already own a share when the private placement is announcement. This requirement to already own shares is a mis-guided attempt by the regulators to protect retail investors from buying stock with a 4 month hold restriction because supposedly already owning shares makes you smart enough to buy more that are restricted for 4 months. The Tri Origin private placement does not include warrants, so there is no incentive for retail investors to by the common stock at $0.35 which allows them to buy only 42,000 shares which can be readily done in the open market. So under the logic of the Canadian regulators a non-millionaire who already owns 100,000 shares bought in the market can only buy 42,000 more shares by giving $15,000 directly to the company so that the money does something useful in the value creation department, but then reach into the market to buy as much as he or she wants. Or blow themselves up by buying as many lottery tickets from the government as they can. Are the Canadian regulators hypocritical, cynical, really fucking stupid, or all of the above? (Aug 28, 2020)
Disclosure: JK owns Tri Origin; Midas is a Good Spec Value rated Favorite, Zephyr is a Bottom-Fish Spec Value rated Favorite; Tri Origin is Bottom-Fish Spec Value rated.