Progress at North Bullfrog keeps Corvus shares climbing

VANCOUVER — It has been a good year so far for Corvus Gold (TSX: KOR). The company started out 2014 with almost $12 million in the bank, and has since released a raft of good drill results from its flagship North Bullfrog gold project in Nevada, kicked off this year’s planned 19,000 metres of drilling, tabulated an initial resource for the high-grade Yellowjacket zone and took some strides on the infrastructure front.

The market has rewarded Corvus for its efforts, boosting the company’s share price from $1.15 in early 2014 to almost $2 at press time.

Corvus is focused on North Bullfrog, a 68 sq. km property in southern Nevada just north of Barrick Gold’s (TSX: ABX; NYSE: ABX) historic Bullfrog gold mine. Five oxide gold deposits at North Bullfrog collectively contain 36.7 million indicated tonnes grading 0.26 gram gold per tonne and 242 million inferred tonnes averaging 0.18 gram gold. 

Corvus has shown through a twice-updated preliminary economic assessment (PEA) that the oxide resource could be developed into a low capital expenditure heap-leach mine. However, the economics of the proposed operation are a bit tight: the internal rate of return (IRR) at US$1,300 per oz. gold and a 5% discount rate is 17%.

A new gold zone with much higher grades could change that.

The first estimate for the Yellowjacket deposit pegged resources at 4 million indicated tonnes grading 0.97 gram gold and 5.15 grams silver per tonne plus 35.6 million inferred tonnes averaging 0.7 gram gold and 3.86 grams silver, for a total contained metal count of 925,000 oz. gold and 5.1 million oz. silver based on a 0.3-gram-gold cut-off grade.

Boosting the cut-off grade to 0.5 gram gold tightens the resource to 1.8 million indicated tonnes grading 1.73 grams gold and 9.72 grams silver, plus 12.9 million inferred tonnes averaging 1.28 grams gold and 7.94 grams silver. 

Yellowjacket sits in a corridor between two major faults: the Josh vein and the Liberator fault. Corvus has drilled Yellowjacket from the Josh vein side for 600 metres along strike and to an average depth of 120 metres. 

Yellowjacket remains open along strike in both directions and at depth — and Corvus has hit into promising drill results in each direction. In particular, hole 370 highlighted the depth potential at Yellowjacket when it returned 4.9 metres grading 21.2 grams gold and 117 grams silver from 170 metres vertical depth. Corvus notes that grade improved with depth at the historic Bullfrog mine 10 km north. 

Corvus believes the structural zone around Yellowjacket could host more vein systems similar to Josh to the east and west. Mineralization at Yellowjacket occurs as native gold and silver sulphides in quartz veins. Corvus says initial metallurgical test work shows the metals are “readily cyanide soluble.”

The rest of the resource at North Bullfrog is quite different, comprising broad tabular bodies of near-surface disseminated oxide mineralization. Corvus has also drill tested some of the fresh mineralization below each oxide body, generating an inferred sulphide resource of 213 million tonnes grading 0.16 gram gold and 0.62 gram silver.

Corvus plans to complete another 19,000 metres of drilling at North Bullfrog in 2014. A first phase of drilling is already underway, targeting new mineralization at Yellowjacket. A second, larger drill program will get underway in May, also looking for more mineralization at Yellowjacket while testing some of the best exploration targets at the property. One of those targets is the Jolly Jane–Road fault area, where Corvus has identified a large, high-level alteration system similar to the upper levels of Yellowjacket.

Finding mineralization is one part of planning a mine. Ensuring that infrastructure requirements line up is another part. At the end of 2013 Corvus took a big step forward on that front when it bought a US$1-million, 440-acre land parcel 48 km north of North Bullfrog that includes 1,600 acre-feet of irrigation water rights. 

That would provide all the water needed under the current North Bullfrog mine plan. Corvus is working to permit using that water for the mine, while working with regulators to develop a mining plan of operations.

The project is well situated in terms of other infrastructure needs. A power line runs past the property and was just upgraded to carry more capacity than the mine would require. Nevada Highway 95, which connects Las Vegas and Reno, also passes within a mile of North Bullfrog. 

Corvus is pushing foward with metallurgical test work. Composite samples are being prepared for both cyanide bottle-roll and column-leach tests. Milling test work is also continuing on material from Yellowjacket. 

The North Bullfrog PEA outlines a heap-leach mine producing 76,500 oz. gold annually over 11 years. Operating cash costs are forecast at US$778 per oz., aided by a strip ratio that averages 0.53 tonne of waste for each tonne of ore over the project’s mine life. Building the mine could cost US$101 million.

Corvus topped up its treasury in November when it raised $5.2 million by selling 5.2 million shares for $1 a piece. AngloGold Ashanti (NYSE: AU) bought 3 million shares in the offering, boosting its stake in Corvus to 16.6%. The company has a 52-week trading range of 51¢ to $2.13, and 70 million shares outstanding.