It has been said that only two things drive the Vancouver Stock Exchange’s resource market: the price of gold and hot drill results. With the price of gold in the dumper, junior companies not only have to hit high-grade results to be noticed these days; they must also develop tonnage over minable widths. Simply put, investors want to see fire, not smoke, and not smoke and mirrors.
Mining analyst Glenn Brown of Haywood Securities views
Great Basin’s 15,000-metre drill program at Ivanhoe is aimed at finding “Ken Synder-type” deposits, bonanza-grade vein systems similar to those being mined by Franco- and Euro-Nevada. “The project has an excellent address in one of the world’s best locations for mining,” Brown notes in a recent research report. “The senior gold producers, in search of profitable mines in a weak gold market, will be watching.”
Accordingly, Brown views Great Basin as a “speculative buy for risk accounts.” The junior has 19.8 million shares outstanding (26.8 million fully diluted) and trades at about $1.50 in a 52-week range of 48 cents to $2. Major shareholders control 19.5% of the company, which is managed by the Vancouver-based Hunter-Dickinson group.
The Ivanhoe property has had a long and sometimes bumpy mining history. In the first half of this century, it was a mercury-producing district. In the late 1970s, a small gold resource was outlined by U.S. Steel. Robert Friedland’s Galactic Resources and Cornucopia Resources developed the Hollister deposit (76.2 million tonnes grading 1.16 grams gold per tonne) as an open-pit, heap-leach mine. However, it failed to live up to Carlin trend expectations, producing a mere 114,000 oz. between 1990 and 1992.
Newmont Exploration bought the project in 1992 for US$20 million in hopes of expanding the low-grade resource and discovering more resources. But the exploration effort was not as successful as hoped, and the major signed a deal allowing Great Basin to earn a 75% interest in the property. This spring, Great Basin increased its interest to 100%.
Ivanhoe has long been viewed as having potential for Carlin-style gold deposits. However, because of the great depth of the favourable host rocks and the region’s high geothermal gradient, this type of exploration is costly for a junior. “There is no value in deep Carlin-style targets at the present time,” Brown writes, “unless a joint venture is arranged for a senior company with deep pockets to undertake the risk.”
Instead, the focus will be on finding high-grade veins. A review of work on the property to date reportedly shows that “a Ken Snyder-type bonanza-grade feeder system lies within blind faults in the underlying Valmy Formation beneath the district.”
The vein targets at Ivanhoe are low-sulphidation deposits, similar to Ken Synder, and similar to Meridian Gold’s El Pe-on and Yamana Resources’ North Bacon deposits in Chile and Argentina, respectively. This year’s drilling is aimed at testing the extent and continuity of veins in the Valmy Formation.
The plan is to drill proximal stepouts from known intercepts, which will be followed by bolder, 50-ft. stepouts to determine the strike length.
“Great Basin’s model for the mineral potential at Ivanhoe is promising,” Brown notes. “Hydrothermal fluids have travelled through the relatively non-permeable Valmy quartzite along well-defined conduits and then dispersed into a disseminated mass in the overlying permeable Tertiary volcanic pile, producing the low-grade Hollister resource.”
Brown concludes his report with the caveat that Great Basin must deliver high-grade results over minable widths to sustain market attention. But nature rarely reveals her riches on the first drill hole, which means exploration efforts usually require some degree of patience.
“Any intercept of vein material along strike will effectively support the model and bode well for the stock,” Brown adds.
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