Delgratia resumes trading after assaying controversy

Las Vegas, Nev. — Shares of Delgratia Mining (delgf-q) have resumed trading after a 3-week halt related to controversy over assay results from the company’s Josh property, some 40 miles south of here.

In late February, the company released results from the first three holes drilled on the property. Results from a fourth hole (1,030 ft. grading 0.063 oz. gold per ton), released on March 19, pushed the price of Delgratia shares to a high of US$33.

At that point, however, concerns were raised when it was learned that Delgratia had its assaying done by a lab which the company refused to identify, with check assays performed at other labs, which the company also refused to identify. Delgratia shares soon fell to US$16, and, on March 21, regulators halted trading for three weeks.

In an effort to reassure investors and mining analysts, Delgratia Chairman Charles Ager led analysts on a tour of the Josh property The group, which included The Northern Miner, was shown a fenced-off compound containing the sample preparation facilities, crushing room and a locked container where rejects were stored.

Ager said he became aware of the property in 1991 and was convinced of its “economic potential” after interviewing self-taught assayers in the region. As geophysicist, he was hesitant to provide a geological interpretation of the property, preferring rather “to let the facts speak for themselves.”

Ager told analysts that he spent two years and US$5 million on metallurgical testing before establishing a process to extract the gold. He said the gold cannot be recovered using conventional panning and gravity methods, because “the gold particles are so small that they do not respond to the density contrast, but are more affected by their electrical charge.”

The samples are taken from the drill rig using a standard cyclone and splitter. Delgratia takes 20-ft. composite samples, a procedure which, Ager said, “evens out the histograms of the assay values.” The samples are brought to the on-site sample preparation lab and then sent for assaying to Energy International in Phoenix, Ariz., which works under an exclusive agreement with Delgratia and has no other client. Check assays were later performed on selected samples at two local laboratories.

Not long after Delgratia resumed trading, a news service reported that the owner of Energy International, Robert Harlan Gunnison, had been assaying without a licence and was under investigation by the Arizona Board of Registration (for assayers and geologists). Gunnison was also convicted of felony fraud relating to the sale of securities when he was president of Arizona Realty & Mortgage Trust in 1978.

This blow to the credibility of the lab and its results did not appear to faze investors. Over the next several days of trading, the share price of Delgratia rose US$9 to the US$17 level, though it has since slipped to about US$13.

Mining analysts are openly skeptical about Delgratia’s assay results and the potential of the property. One analyst who toured the property later told Bloomberg news service that “if there is gold there, I’d like to know how it got there. Geologically, it doesn’t make sense.”

Delgratia’s interest in the Josh is held through its 40% ownership position in Nevada Gold, a private company which holds title to the property. Delgratia is earning another 30% interest in Nevada Gold from Philgold Investments, a private company 50%-owned by Ager, in exchange for 3 million shares of Delgratia and a work commitment of US$15 million. Through Philgold, Ager owns another 51,000 acres of land surrounding the Josh.