Stocks Investment

Best Drill Interceptions In The Metals Mining Sector For The Week Ended August 16, 2020

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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)

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) Windfall Lake gold project in Canada

On August 10, Osisko Mining (OTCPK:OTCPK:OBNNF) released a new batch of results from the ongoing definition and expansion drill program at its Windfall Lake project, and the best interception was 28m @ 202g/t Au from 1,037.5m in hole OSK-W-20-2059-W4. This is equal to 5,656(AuEq.)m and the estimated true width is 9m.

(Source: Osisko Mining)

Windfall Lake is located near the Val-d’Or and Chibougamau projects in Québec and is among the highest-grade gold projects in Canada:

(Source: Osisko Mining)

After a million meters of drilling, the project is still open up and down plunge and has a mineral resource of more than five million ounces of gold across the indicated and inferred categories at a 3.5g/t cut-off grade.

(Source: Osisko Mining)

I’m truly impressed at how fast Windfall has been growing over the past few years.

(Source: Osisko Mining)

The new resource estimate should significantly improve the key financial figures from the Preliminary Economic Assessment for Windfall, which was released in 2018.

(Source: Osisko Mining)

The next step for Osisko Mining is a feasibility study and I think Windfall could enter the construction phase in around two years.

2) Las Chispas silver-gold project in Mexico

On August 13, SilverCrest Metals (OTCQX:OTCQX:SVCMF) reported drill results from the Babi Vista Vein at its Las Chispas project and the best interception was 1.7m @ 634.56g/t Au, and 26,000.6g/t Ag from 247.2m in hole BV20-60. This is equal to 1,705(AuEq.)m and the estimated true width is 1.3m.

(Source: SilverCrest Metals)

The drill program at Babi Vista aims to expand and in-fill high-grade precious metal mineralization to be included in the updated resource for the upcoming feasibility study for Las Chispas. The latter should be released in the last quarter of 2020.

Las Chispas is located in the state of Sonora, close to the Santa Elena and Mercedes mines:

(Source: SilverCrest Metals)

In 2019, SilverCrest delivered a compelling Preliminary Economic Assessment (PEA), which showed robust internal rate of return and net present value even at low gold and silver prices.

(Source: SilverCrest Metals)

The initial capex is just $110.5 million and the all-in sustaining costs for the first four years of operation are estimated at just $4.89 per ounce of silver equivalent.

With 88.7 million ounces of silver equivalent, I don’t think Las Chispas is a large project. However, the PEA suggests that it can be very profitable as the payback period at $19 per ounce of silver and $1,450 per ounce of gold is just seven months.

(Source: SilverCrest Metals)

3) Hera polymetallic mine in Australia

On August 13, Aurelia Metals (OTCPK:OTCPK:AUMTF) released an exploration update for the Federation deposit near its Hera mine and the best drill result was 21.6m @ 18% Pb, 26.8% Zn, 31.9g/t Au, 23g/t Ag, and 1.6% Cu from 372.4m in hole FDD086. This is equal to 1,059(AuEq.)m and the estimated true width is 13m.

(Source: Aurelia Metals)

The gold found through the latest drill results is very coarse grained and it occurs in patches in up to four millimeters as can be seen on this photo:

(Source: Aurelia Metals)

Hera is a gold-lead-zinc mine located in the Cobar region in New South Wales and the Federation deposit is situated around 10km south-southwest of it.

(Source: Aurelia Metals)

At the moment, the mine is producing just over 10koz of gold per quarter and it has just a few years left until depletion.

(Source: Aurelia Metals)

The Federation deposit is key for extending the mine life of Hera and in June 2020, Aurelia released a maiden resource estimate for it.

(Source: Aurelia Metals)

I think this deposit has the potential to more than double Hera’s mine life.

Conclusion

Osisko Mining is among my favorite exploration-stage gold mining companies and I think Windfall is fast developing into a Tier 1 asset. It’s one of the most compelling gold projects in Canada and it could be in production in about three years. Osisko Mining looks like one of the best takeover targets in the gold sector.

SilverCrest announced amazing grades from Las Chispas and is very well funded at the moment with $161 million in the bank. It’s an exciting exploration story in the silver space but I remain concerned that the veins are narrow, which means that dilution will be an issue.

Aurelia has drilled more than 20,000m at the Federation deposit since its discovery in 2019 and the latter is shaping as the next step in the evolution of the Hera mine. However, I think that Aurelia looks overvalued at the moment as the mine life of its two key operations is short.

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.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

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