Tracker - February 26, 2020: Understanding NuLegacy's Rift Anticline Hypothesis and the Goldrush Analogue
NuLegacy Gold Corp reported results on February 18, 2020 for a winter drill program completed late 2019 on the Red Hill project in Nevada which did not signal a new discovery but which did bolster the case for a potential Goldrush scale discovery in Q4 of 2020 when a plan of operations allowing drilling of the Rift Anticline target gets approved. The program involved 5 core holes for 2,230 m, four on the eastern flank of the Rift Anticline target where expectations were not overly high, and one to the west on the 4Mile Look-a-Like target which failed to get through the overlying younger cover rocks. Of the 4 holes on the eastern flank #19-02 into the Western Slope target yielded 5.2 m of 9.6 g/t gold at a depth of 353 m hosted by the Wenban5 horizon of the Lower Plate. This hole is important because it supports the view that of the 8 distinct horizons that make up the Wenban formation, Wenban5, which is the key host in the Goldrush and Fourmile systems on Barrick's ground to the northwest, is also favourable 15 km to the southeast. The nearby hole 19-01C did not get beyond the Wenban4 horizon, while the 2 holes in the Serena Offset target yielded no significant values. The real importance of the news, however, lies in a more refined understanding of the Rift Anticline target provided by additional CSAMT (Controlled-source Audio-frequency Magnetotellurics) survey lines completed across the target. In October 2019 NuLegacy completed a private placement of 100 million units at $0.075 which came free trading on February 10, 2020. Fully diluted NuLegacy now has 507.3 million shares, giving the Red Hill project an implied value of $25 million at a $0.05 stock price, which allows for a 50-100 fold price increase if drilling confirms the Rift Anticline hypothesis that it represents another 10 million oz Goldrush equivalent deposit. NuLegacy deserves a Fair Speculative Value rating, but for now it has a Bottom-Fish Spec Value rating because permission to drill remains an important missing piece. That means we have time to accumulate the stock, but I expect the stock price to rise gradually as a broader audience understands the Rift Anticline target, and more so if gold sustains an uptrend during what will be a very turbulent 2020. This Tracker is intended to frame the Rift Anticline target.
Over the past 5 years NuLegacy has secured 3 "notice of intent" (NOI) permits for the Red Hill project, each of which allowed 5 acres of disturbance, a limit that has been exhausted by past drilling focused on the low grade Iceberg system which the new ex-Barrick management team characterizes as an "exhaust plume" from a much bigger system hidden under post-Carlin basalts and volcanics that obscure the western part of the property. Had NuLegacy poked a couple holes into the area now defined as the Rift Anticline target, drilling would have been possible last year and we would know today if the hypothesis is valid or a bust. But it was always assumed that the cover rocks, which are even less prospective than the Upper Plate rocks that sit on top of Barrick's deep high grade Fourmile discovery northwest of Goldrush, were very thick. So why waste money on a blind Hail Mary hole?
It wasn't until Ed Cope and Charles Weakly joined the company and in 2018 undertook a major rethink of the geology, drilled some scout holes into the Western Slope area which showed that Lower Plate rocks were much shallower than assumed, and deployed CSAMT surveys to "see" through the cover that the Rift Anticline hypothesis emerged. (See Tracker Sept 27, 2019 for more background.) NuLegacy is now spending up to USD $400,000 on what it takes to secure a "Plan of Operations" permit covering 8,500 acres that will allow 100 acres of disturbance. That may not sound like much, but once in place it will allow NuLegacy to delineate a discovery without any permitting holdups. Normally a POP takes 18 months but NuLegacy thinks it will have the permit in time to allow a 12-15 hole drill program on the Rift Anticline to begin in October 2020. In the meantime the junior will conduct additional CSAMT survey lines and further develop the target. In order to conserve cash NuLegacy will likely not attempt another shot at the 4Mile Look-a-Like target because it is a conceptual longshot extrapolated from CSAMT data that has been mapped to drill hole logged geology more than 5 km to the east.
We don't know much about the Fourmile discovery of Barrick other than that it is very deep, was considered way too gutsy by some of the ex-Barrick people now on NuLegacy's team, took 11 holes to discover, is very high grade in a manner reminiscent of the deposits in the North Carlin district, and that Barrick's CEO Mark Bristow thinks it is worth crowing about, especially since it was not contributed to the Barrick-Newmont Nevada JV formed in 2019. But we do know a fair bit about the Goldrush deposit, and the ex-Barrick people who now head NuLegacy's exploration team know an awful lot about it. Goldrush was intersected decades ago by another major, but not rediscovered until an RC hole was drilled in a gravel covered area as a condemnation step ahead of developing a new water supply for the Cortez Hills operation. Unlike Cortez Hills, Goldrush is all refractory sulphides and has an elongated shape with a 5 km strike which at one time was described as a "breccia body" but which is now described as a "ribbon like structure of highly fractured favourable Weban5 horizon averaging 10 g/t gold with the axial crest (dome) of the anticline varying from 150-450 in width and 50-75 m in thickness over the 5 km strike length". It is expected to produce 450,000 ounces annually in 2021 at an all-in-sustaining cost of USD $620 per oz. The graphic above shows the exploration timeline with ounces growing very rapidly from 2010 onwards once Barrick got serious about the Goldrush discovery. If NuLegacy confirms the Rift Anticline hypothesis, there will be no hesitation delineating a new discovery.
The graphic above shows the location of the Rift Anticline target relative to the Avocado, Serena Offset and Iceberg zones into which NuLegacy has invested more than $24 million since 2012. The graphic below shows the historic drill hole locations, including the 5 drilled in late 2019 (the 4 green stars and the yellow star tagged as #19-02). The area to the west is virgin territory because it is covered by flood basalts and volcanics.
The graphic below is an east-west section which shows what Ed Cope's team thinks lurks beneath the veneer of basalts (red - Tb) and volcanics (salmon - Tv). Take note that none of this geology is supported by drill hole geology logging except in the area of hole WS18-01, the westernmost hole drilled. The historic holes in the western end of the property are west of the Vio target which is interpreted as a younger potential epithermal gold-silver system. The target host rock is the Wenban5 horizon (grey - Dw5).
The stratigraphic interpretation of the Rift Anticline is based on a combination of a CSAMT survey (the green east-west lines) and detailed logging of all the holes drilled to the east of the Rift Anticline. Once I realized that this graphic below is a combination plan view with vertical slices of the CSAMT lines depicted as slightly shaded, I finally understood the Goldrush analogue and why the Rift Anticline has the potential to yield a world class Carlin discovery when it finally gets drilled in late 2020.
The cross section of one of the CSAMT lines below gives a glimpse of the survey data NuLegacy has processed to come up with its stratigraphic interpretation.
The key to the gold mineralization at Fourmile and Goldrush is the intersection of low angle faults, along which the Carlin fluids traveled, with high angle faults that channeled the fluids upward. Where this intersection occurs within the Wenban5 horizon, a dirty limestone whose "dirtiness" is the source of iron that combines with the sulfur in the fluid to create the pyrite which encapsulates gold as micron sized grains as it precipitates in this horizon, that is where high grade Carlin type mineralization forms. The striped white bowed line shows the folding of the stratigraphy, forming an anticline with a northwest-southeast axis, the same as the Goldrush system. The folding, which would have occurred long before the Carlin deposition window, would have fractured the Wenban5 rocks, particularly along the top of the fold. This gives Goldrush its elongated shape.
The conceptualized cartoon above pulls the Rift Anticline Hypothesis together. The key is the idea that massive Carlin fluid flow came along the low angle faults from the west, some of which blew through and ended up in the low grade Iceberg zones to the east, but most of which ended up within the fractured Wenban5 rocks near and within the anticline's fold axis. It is the same explanation as to how the 10 million ounce Goldrush deposit formed. We have the general location that already hosts 3 world class Carlin type deposits with a fourth emerging discovery, a well articulated structural and geological context called the "Rift Anticline" suitable for trapping Carlin type gold mineralization, and evidence to the east that gold laden Carlin type fluids blew through the Lower Plate carbonates hidden under a veneer of barren younger basalt and volcanics. Drilling will first need to confirm the Rift Anticline hypothesis, and then encounter the gold confirming the Goldrush analogue. NuLegacy has done an excellent job making this story comprehensible!