Pure Gold Mining (TSXV: PGM) has found a new zone at its Russet South target, 1.5 km northeast of the old Madsen mine on its wholly owned Madsen gold project in Ontario’s Red Lake district.
The near-surface zone lies on the eastern side of Russet South and 200 metres north and along strike of intercepts drilled in 2015 and 2016, prompting research analyst Michael Gray of Macquarie Securities to note that the junior continues to be one of his “top picks among exploration companies in Canada.”
Drilling in the new mineralized zone returned intercepts of 23.1 grams gold over 1.9 metres in hole 310; 8.3 grams gold over 1.7 metres in hole 316; 4.4 grams gold over 12 metres, including 14.3 grams over 2 metres in hole 335; and 21.4 grams gold over 1.9 metres in hole 341.
“Drilling has intersected gold mineralization across a 650- by 650-metre footprint to depths less than 250 metres, showing the near-term, near-surface potential for meaningful resources within a short distance of Madsen’s permitted mine infrastructure,” Mick Carew of Haywood Securities said in a research note, adding that the gold mineralization “is associated with the contacts between basalt and two distinct ultramafic units.”
Drill core at Pure Gold Mining’s Madsen gold project in Ontario’s prolific Red Lake gold district. Credit: Pure Gold Mining.
Darin Labrenz, Pure Gold’s president and CEO, notes that the latest drilling at Russet South builds on previous drilling in 2015 and 2016, which included intercepts of 12 metres averaging 4.4 grams gold; 2.9 metres of 12.3 grams gold; and 1 metre of 17.7 grams gold. Gold mineralization in all of the holes at Russet South, he says, are associated with deformed blue-grey quartz veins hosted in a 200-metre-thick wedge of basalt between two ultramafic units.
The near-surface setting at Russet South is structurally and stratigraphically analogous to the deep mineralization that forms the Madsen 8-zone deposit, he adds, which hosts an indicated resource of 0.34 million tonnes grading 12.21 grams gold for 132,000 oz. gold and inferred resources of 0.32 million tonnes grading 18.14 grams gold for 185,000 oz. gold.
“The 8-zone is an attractive target because it’s high grade and it’s an in-situ resource that remains untouched, and our initial thinking was that if it sits at depth, why couldn’t it come to surface?” Labrenz says. “The 8-zone is an elongated orebody with a short strike length and a very long down-plunge. We took the long axis and projected it to surface, and that takes you right into the area known as Russet South. That’s why we started targeting Russet South two years ago.”
Labrenz points out that expanding the footprint at Russet South to a 650- by 650-metre area “is quite a large footprint for an orogenic gold deposit in Red Lake.”
“It adds critical mass,” he says. “And Russet South is certainly becoming an important part of the development strategy.”
This year the company will drill 70,000 metres at Madsen that will focus on building resources close to mine infrastructure, and part of the budget will go towards developing satellite targets, including Russet South. Labrenz also said the company is moving to reopen the underground, and will access a pre-existing ramp into the footwall of the McVeigh zone and begin underground drilling in the second quarter of the year.
The Madsen project, including the 8-zone, has an indicated resource of 3.2 million tonnes grading 8.93 grams gold per tonne for 928,000 contained oz. gold and inferred resources of 0.8 million tonnes grading 11.74 grams gold for 297,000 contained oz. gold. The resource is based on 13,624 drill holes.
An aerial view of a drill site and infrastructure at the past-producing Madsen gold project in Ontario’s Red Lake district. Credit: Pure Gold Mining.
Pure Gold’s Madsen property hosts three past-producing mines, including the Madsen mine, which produced 2.4 million oz. gold over 36 years at an average grade of 9.9 grams gold. Existing infrastructure includes a permitted 550-tonne-per-day mill and tailings facility, and the project has access to roads and power.
A preliminary economic assessment completed in April 2016 outlined a $104-million, after-tax net present value and a 62% after-tax internal rate of return.
Tara Hassan, a research analyst at Raymond James, said she was encouraged by the latest drill results and in a brief note reiterated her view that “continued positive results from the 2017 program could have a meaningful impact on the resource and project economics.”
The analyst also noted that Pure Gold plans to update its resource estimate in the second half of 2017, and will include “substantial drilling completed since 2015.”
“If Pure Gold is able to continue to expand the mineralized zone at McVeigh and satellite targets like A3 and Russet South, we expect the update could be meaningful, as it could support expansion of throughput for a potential operation at Madsen and/or extension of the mine life.”
Both Hassan and Gray of Macquarie have a target price on the stock of $1 per share.
At press time, Pure Gold’s shares were trading at 55¢ within a 52-week range of 24¢ (April 2016) and 77¢ (August 2016).
The junior has 188 million shares outstanding and a $103-million market capitalization.
Iwas born and raised in Madsen 75 years ago. I hope that Madsen is brought back to life. It was a very goob place to grow up. My mum and dad lived in a tent the first year they were there untill a house became available.