Pure Gold to update Madsen PEA in Q3

Pure Gold Mining (TSXV: PGM) has reached several milestones this year at its Madsen project in northwestern Ontario’s Red Lake district, and is on track to reach several more before the year comes to an end.

Madsen, which the firm says is one of the highest-grade, undeveloped gold deposits in the world, contains three historic mines, among them the Madsen mine, which produced 2.4 million oz. gold at an average grade of 9.9 grams gold per tonne. Infrastructure includes a permitted, 550-tonne-per-day mill and tailings facility.

In August, the junior announced that it had expanded the project’s indicated resource 48% to 5.8 million tonnes grading 8.9 grams gold per tonne for 1.65 million contained oz. gold. (Inferred resources add 587,000 tonnes at an average grade of 9.4 grams gold for 178,000 oz. gold.) The resource estimate used a cut-off grade of 4 grams gold per tonne.

Pure Gold Mining’s Madsen gold project in Ontario’s Red Lake gold camp. Credit: Pure Gold Mining.

The resource, which encompasses the Austin, South Austin, 8 Zone, McVeigh and A3 domains, will be updated in the fourth quarter, with mineralization from near-surface satellite targets, including Russet South (which it found in March, 1.5 km northeast of the old Madsen mine) and the Fork Zone. The resource will incorporate mineralization from the satellite targets for the first time.

A revised preliminary economic assessment (PEA) is due out in the third quarter. The previous PEA dates to April 2016.

The company has also reopened the Madsen portal and ramp. The portal, established in 1997, is 1 km from the mill and provides ramp access to the upper 150 vertical metres of mine workings.

The ramp declines in the footwall of the Madsen resource — extending for 1,080 linear metres from surface to just above three level — and provides access to the McVeigh, South Austin, Austin and A3 deposits. Drilling from underground began in July and will confirm grade and continuity in the four deposits, as well as target resource growth potential.

Underground access will also allow the company to undertake detailed underground geological mapping and sampling to refine the structural mineralization setting that has been defined by surface drilling.

On Sept. 5, Pure Gold released more results from its 70,000-metre surface and underground drill program.

Drill core at Pure Gold Mining’s Madsen gold project in Ontario’s prolific Red Lake gold district. Credit: Pure Gold Mining.

The company reported that multiple drill holes collared underground from the Madsen ramp intersected gold within the McVeigh deposit and outside the current resource. Drill hole 12 returned 48.4 grams gold over 6 metres and hole 4 cut 12.5 grams gold over 8.2 metres. Drill hole 5 returned 4.8 grams gold over 10.8 metres, extending known mineralization outside the current resource by more than 10 metres.

Drilling south of the Fork Zone intersected 7.5 grams gold over 1.1 metres in a 260-metre step out from hole 17-359, which returned 13.9 grams gold over 1.5 metres. Other step-out drilling included hole 17-427, which cut 13.9 grams gold over 2 metres, and hole 17-444, which intersected 5.4 grams gold over 7.3 metres, including 10.6 grams gold over 3.1 metres. The drilling expanded mineralization in the shallow-plunging Fork Zone to more than a 700-metre strike length.

In the Austin zone, drill hole 17-454 targeted shallow gold mineralization outside the current resource. The hole intersected 32.5 grams gold over 2 metres at a vertical depth of 135 metres, about 180 metres up dip of the resource model. Drill hole 17-429, which also targeted up-dip extensions to the Austin resource, returned 8.5 grams gold over 1 metre.

Tara Hassan of Haywood Securities said in a research note that the latest drill results “continue to support the potential for resource growth and a larger operation at Madsen.

“With a recent resource update [issued on August 2017], Pure Gold has outlined a larger resource at Madsen, but the results highlight potential to expand [the McVeigh and Austin zones] that are included in the PEA, as well as show upside at satellite targets like Fork, which were not included in the resource update.”

Michael Gray of Macquarie commented in a research note that underground ramp access is “paying off as a drill platform,” as “bonanza grades expand the McVeigh deposit resource margins.” He added that “there were six intersections with +8 grams gold at +1.5 metres that should lead to resource expansion.”

Gray sees PGM as the next Integra Gold. Its similarities include having an asset in a producing Canadian gold district, owning a permitted site with a mill, having a resource of more than 1 million oz. gold and a strategic investment from Goldcorp (TSX: G; NYSE: GG).

As of Aug. 2, strategic shareholders own 27.3% of Pure Gold’s basic shares outstanding. AngloGold Ashanti (NYSE: AU) owns 10.8%; Robert McEwen’s Evanachan Ltd. owns 9.4%; and Goldcorp, 7.2%. Institutional shareholders hold another 14.4% and management and insiders, 4.9%.

Over the last year Pure Gold’s shares have traded between 40¢ and 76¢. At press time they traded at 62¢ per share.

Gray has an “outperform” recommendation and a $1.10-per-share target price.