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Friday, October 21, 2016

SolGold - Has Eldorado been found in Ecuador?

DISCLOSURE - I am a shareholder of SolGold. I bought a few shares (not enough unfortunately) after my original post as I though this project was very interesting, and that there was a lot of potential to find more deposits. 

In my original post I asked why no major companies had got involved in the Cascabel project. Fast forward a few months later and there have been press release after press release about:
  1. BHP wanting to invest in the company (link)
  2. Newcrest.Maxit mining investing in $44M in Sol Gold (link)
    • we got an update PR today announcing funding for Cascabel
I've also brought in all of the newly released drill-hole data so that I could see what had changed. For selfish reasons (I want to make money), I wanted to know why suddenly SolGold and Cascabel had become the flavour of the month for large Australia-based mining companies?

Summary

  • New results are more of the same, good grades, but deep - Alpala won't be a surface mine.
  • Newcrest involvement - miner with experience of operating large, low grade underground copper-gold mines - is a good sign
  • Indirect investment opportunity through Cornerstone (CGP.V)
The new data is just expanding what we already know, at Alpala they have a decent porphyry system with good grades, but it is deep. Not quite Resolution deep (link) but well beyond the limits of an open pit mine. This deposit if it gets mined, will be mined from underground via a block cave. 

Fortunately, their new partner, Newcrest has a lot of experience in operating large, low-grade underground mine (Cadia, NSW, Australia - reserves 1.5BT @ 0.47 g/t Au and 0.27% Cu - link), so Alpala should be a doddle for them.

In their presentations they give us a teaser on what they think the Alpala depoist will contain:
2.56Mt Cu and 7.4M oz AU
This is just using Leapfrog to give you an idea of what a deposit may contain. This is what I have done with other projects, so I tried to replicate these numbers, to see how close I can get! This is what I came up with:

  • 451 Mt @ 0.54% Cu and 0.56 g/t Au
  • Contained metal
    • Copper: 2.4Mt
    • Gold: 7.5Moz Au
For the geologists out there, I used a 300m search radius to create the grade shells, which appears to be very similar to what SolGold are doing. However, if I reduce the search ellipse to:

200m: the >0.3% Cu grade shell contains:
  • 331 Mt @ 0.53% Cu and 0.55 g/t Au
  • Contained metal
    • Copper: 1.7Mt
    • Gold: 5.4Moz Au
100m, the >0.3% Cu grade shell contains:
  • 123.8 Mt @ 0.49% Cu and 0.55 g/t Au
  • Contained metal
    • Copper: 0.6Mt
    • Gold: 5.4Moz Au
This is what it looks like, and you can these in a Leapfrog Viewer file from here (link).

Copper

looks fairly close to the SolGold model in their Sept 2016 Presentation

Gold

They have a little bit of gold close to surface, with more drilling could this be better defined?


You can quickly see that the size of the 'resources' quickly diminish the smaller the search ellipse we use. I feel that the 450Mt number will be close to the inferred resources for Alpala, and maybe they will have ~200Mt of Indicated resources.



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