Long gold hits for GoldQuest in DR

VANCOUVER — Every batch of drill results from the Romero gold discovery at GoldQuest Mining’s (TSXV: GQC) Las Tres Palmas project in the Dominican Republic adds to a growing list of impressive intercepts. The latest batch was no different: hole 140 hit 269 metres grading 2.35 grams gold per tonne and 0.56% copper.

Why, then, is GQC’s share price struggling along below 50¢, down more than 75% since September?

“It’s momentum,” says GoldQuest chairman William Fisher in an interview. “The share price went roaring through the roof because with the first few holes things got better and better and better. Then we put out 189 metres of 3.1 grams gold and 1.1% copper, and before long we had lost 30% of our market cap. That’s probably the best hole that’s been drilled anywhere in the world this year, and we lost almost $100 million in market cap. It’s a momentum thing.” 

Indeed, it is near impossible to maintain the kind of momentum that GoldQuest gathered on the Romero discovery. The first hole into the blind geophysical target returned 231 metres grading 2.4 grams gold and 0.44% copper, starting from 33 metres downhole. Within days of the announcement in May 2012, GoldQuest’s share price jumped from 7¢ to 61¢.

GQC shares settled slightly and inched up to the $1 level over the next two months, boosted by news that a second hole cut 24 metres of 7.5 grams gold and 0.86% copper, followed by 160 metres of 4.45 grams gold and 0.95% copper. 

July 2012 brought another big price spike when the third hole at Romero returned 258 metres averaging 4.47 grams gold and 1.27% copper. That day GQC closed at $1.37, up 1,860% in 10 weeks.

Management capitalized on the share price strength, raising more than $21 million through two private placements. When the second financing — a $15-million raise at $1.25 per share — closed on Aug. 21, 2012, GoldQuest was trading at $1.87.

Then the momentum stalled — though not for lack of impressive results.

Six days later GoldQuest announced results from four new Romero holes. The batch included that hot hole Fisher mentioned — 189 metres of 3.1 grams gold and 1.1% copper — as well as another hot 234-metre hit carrying 7.88 grams gold and 1.43% copper. 

That day GoldQuest closed down 9¢ at $1.71. Over the next three days shares lost another 29¢ to close at $1.42, down 21% on some of the best drill results to hit the market in months. 

A recovery to almost $2 only set the scene for the next collision between good results and bad markets. In late September the next set of Romero results came out, including 123 metres grading 2.64 grams gold and 0.33% copper. The market responded by pushing shares down 34% in two days to $1.23.

The perplexing pattern continued. In October Romero produced results including 232 metres of 2.04 grams gold and 0.3% copper. The company fell 27% in a day to 96¢. In late November, news of a drill core containing 52 metres of 1.31 grams gold and 1.24% copper pushed shares down 41% to 49¢.

Investors gave shares a little boost in January, but in the last six months the company’s share price has fallen as low as 25¢ and hasn’t risen above 57¢. In that time two drills probing the discovery have returned such results as 138 metres of 1 gram gold and 0.2% copper and 130 metres of 1.22 grams gold and 0.24% copper, including 17 metres of 6.2 grams gold. 

The market’s nonchalance continued with the most recent Romero results, even though Fisher says holes 140 and 143 are better than the discovery hole that generated such a positive reaction. 

“They’re longer and they’re higher grade than the discovery hole,” he says. “They’re 200-metre-plus intercepts with better than 2 grams gold — there’s nothing wrong with that.”

Hole 140 cut 269 metres grading 2.35 grams gold and 0.56% copper, starting 127 metres downhole and including 32 metres of 10 grams gold, while hole 143 returned 216 metres of 2.54 grams gold and 0.6% copper, starting 150 metres downhole and including 34 metres of 10.9 grams gold.

The news added 7¢ to GoldQuest’s share price, bringing it to 44¢ — not exactly the same reaction that the discovery hole sparked,  with its shorter intercept and lower grades. 

Regardless, GoldQuest is forging ahead. The company’s Romero model still evolves with every new drill result, but it has a core area of high-grade gold and copper surrounded by a body of lower-grade mineralization. The high-grade core has a strong vertical element, reaching 200 metres depth. It is also 200 metres wide and 200 metres long, while the lower-grade system reaches out along 800 metres of known strike. 

The company has two drills on-site: one chasing induced-polarization (IP) targets, and the other drilling infill holes to inform an initial resource estimate due out this quarter. Fisher says they had another rig on-site but cut back to two “because of the market, and because it’s the rainy season.”

IP has been the most effective tool for finding mineralization at Las Tres Palmas. GoldQuest initially drilled Romero, where mineralization is not apparent on surface, because the zone created such a clear chargeability anomaly. And GoldQuest’s latest IP survey outlined a new geophysical trend 2 km west of Romero that coincides with a series of high-grade copper grab samples. The anomaly has been dubbed Guama, and GoldQuest is keen to drill a few holes.

The Escandalosa deposit 1.6 km south also generates a strong IP response. Escandalosa was GoldQuest’s focus at Las Tres Palmas before the company discovered Romero, and while probing that anomaly GoldQuest defined an initial resource of 3.1 million inferred tonnes grading 3.14 grams gold, 2.56 grams silver per tonne and 0.18% copper.

Two zones of healthy mineralization sitting 1.6 km apart along strike begs the question of whether they are attached. In an initial attempt to answer that question, GoldQuest collared hole 135 halfway between Romero and Escandalosa. Poor drilling conditions forced drillers to abandon the hole at 450 metres depth, but the last 6.7 metres carried 4.62 grams gold.

“We rather hope Romero and Escandalosa are going to be linked up, but we just hit the top of it, so we don’t yet know what’s down there,” Fisher says. “It could just be a fault 7 metres wide, or it could be the top of something wonderful.”

It was the smaller of GoldQuest’s two drill rigs that got stuck drilling hole 135. The larger rig will soon be moved to the area to try the hole again. In the meantime there is a lot of ground left to explore at Romero, as well as the Guama anomaly to test; expansion potential at Escandalosa; and a resource estimate to calculate. Thankfully, GoldQuest has enough cash to do it all.

“The nice thing is that we raised over $21.5 million on the run-up, and we still have about $14 million in our pockets,” Fisher says. “Our burn rate is about half a million dollars a month, so we’ve got 28 months to go before we run out of money. Of course, if the market continues to be awful we can slow down. Or, if we find something wonderful, we have the ability and the cash to speed up.”