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Thursday, April 13, 2017

SolGold Update

DISCLOSURE - I own shares in Sol Gold. I'll try to make this post unbiased, but I want everyone to buy lots of shares so that I can make some money!

Over the last couple of weeks we've received the results from holes 19, 20R and 22 (link and link).

Summary

TL:DR version: Inline with expectations
  • Economic (>1% CuEq) mineralization is deep (~600m depth)
  • Hole 19 - drop-off in grade, as you move away from the core of the deposit (hole 16)
  • Hole 20 - clipped the edge of the deposit, didn't get much.
  • Hole 22 - Inline with expectations - >1% zone is quite narrow (100m core length)
They are having drilling issues - several holes lost before reaching target depth, and have changed contractor to resolve them.

I'm concerned about grade-smearing. When you separate out the high-grade zones, you are often left with wide-zones of much lower grade (sub-economic?) mineralization.
e.g.
  • Hole 22 - 730m @ 0.52% Cu and 0.23 g/t Au becomes
    • 100m @ 1.1% Cu and 0.57 g/t Au
    • 630m @ 0.43% Cu and 0.176 g/t Au
  • Hole 19 - 1344m @ 0.44% Cu and 0.28 g/t Au becomes
    • 552m @ 0.68% Cu and 0.45 g/t Au
    • 792m @ 0.27% Cu and 0.16 g/t Au
This shows we have a high-grade (>1% CuEq) core surrounded by lower grade mineralization, which is normal for porphyry systems.

TAG Officially Bad (tm) resources

  • Au - increased to 4.74Moz (542Koz or 13% increase)
  • Cu - increased to 1.7Mt (198Kt or 28% increase)
looking good...
The key is going to be the cut-off grades that are used to calculate the resources.

Predictions

  • Hole 21 - 925m @ 0.5% Cu, including a 400m >0.6% Cu - hole only 100m from hole 16, whihc hit a lot of good stuff
  • Hole 23 - being drilled, target between holes 16 and 19, so I'll expect
    • 200m >1% Cu and 1 g/t Au (@ 1,000m depth), within a 1000m zone of 0.3-4% Cu and 0.2-0.4 g/t Au
  • Hole 24 - keep an eye on this one, 3 scenarios (2 good and 1 bad)
    • Gets not much as it is drilling the peripheral part of the Alpala porphyry (i.e. lots of pyrite and not much else)
    • Drills deeper and hits the continuation of the Alpala porphyry
    • Drilling the peripheral part of the mineralization mapped at Malte Creek
  • Hole 25 - being drilled ~100m south of hole 19, so I'm estimating
    • 600m @ 0.3% Cu and 0.2% Au
    • drilling below hole 003 that hit a couple of narrow zones @ ~0.3% Cu and 0.1 g/t Au

The Good

Hole 19 hit reasonable mineralization, inline with what you would expect when you are drilling away from the high-grade core in holes 12 and 16. 

left = split assay results; right = super duper PR assay results
Hole 24 is going to be key, from the description (lots of pyrite and trace chalcopyrite and bornite), it suggests that it has intersected edge of a porphyry, but is it:
  • Part of Alpala system - they've extended it by >1km, which is huge, this could move Alpala into a >10Moz Au deposit
  • If it is associated with Malte Creek target - a separate, smaller Cu-Au system. Good.
  • If it is the distal part of the Alpala system - nothing changes
Gut feel - the middle one, we'll have to wait for the results to see what grades they get.

The Bad

Hole 20 appears to have clipped the edge of the Alpala system. Even though the hole was lost, I doubt that it would have got much more, so it basically tells us that the exploration potential to the east is less than thought.

left = split assay results; right = super duper PR assay results

I did enjoy the lip-sticking (applying lipstick to tart up some average results), done by the IR department, but Hole 22 (designed to see if the Cu-Au zones goes to surface) was a classic Playtex (tm) hole - looks great from afar, but once you get it open, everything disappears.

geoporn is always crap
However, the results from both  are what I would expect from holes that are drilling the edge of the system. We are seeing a gradual decrease in Cu and Au grades away from the center of the system (around hole 16).

left = Copper; right = gold
you can download the 3D view from here (link)

The Ugly

Sol Gold are drilling 1500-2000m drill-holes. So each hole will take 2-3 months to be drilled (I'm assuming 800-1000m per rig each month). You can now see how important it is to use decent drilling contractors, as you don;t want to have invested >$100K and more importantly time into a hole that is lost before it hits the target!

Losing a couple due to poor ground conditions is expected, but the fact that Sol Gold tell us that they have changed contractors suggests something more - maybe they were using old equipment and inexperienced drillers?  

Conclusion

When you split out the high-grade intervals you see that the best mineralization is deep (starting at around 600m) with a high-grade core that grades outwards into lower grade mineralization. For me, the key is to keep your eye on the 0.7% CuEq contours that SolGold put on their various sections. Fe me, this is a reasonable proxy for the economic limits of mineralization. If you carefully check Figure 6, you can quickly see the disconnect between the long mineralized intercept reported in hole 22



So essentially SolGold have given you a quick way to check their results and ignore the PR headlines and look at what the data is telling you.

What I would like to see

Some work on the other targets, it would be nice to know when they will be thinking about drilling the other targets. Alpala is now a mature exploration project and the new results aren't as flashy as earlier ones and people will start to get Alpala fatigue. It will be nice to have a rig exploring adjacent targets, as Sol Gold could find higher grade zones at surface where there will be amenable to open-pit mining.