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Thursday, April 13, 2017

SolGold Update

DISCLOSURE - I own shares in Sol Gold. I'll try to make this post unbiased, but I want everyone to buy lots of shares so that I can make some money!

Over the last couple of weeks we've received the results from holes 19, 20R and 22 (link and link).

Summary

TL:DR version: Inline with expectations
  • Economic (>1% CuEq) mineralization is deep (~600m depth)
  • Hole 19 - drop-off in grade, as you move away from the core of the deposit (hole 16)
  • Hole 20 - clipped the edge of the deposit, didn't get much.
  • Hole 22 - Inline with expectations - >1% zone is quite narrow (100m core length)
They are having drilling issues - several holes lost before reaching target depth, and have changed contractor to resolve them.

I'm concerned about grade-smearing. When you separate out the high-grade zones, you are often left with wide-zones of much lower grade (sub-economic?) mineralization.
e.g.
  • Hole 22 - 730m @ 0.52% Cu and 0.23 g/t Au becomes
    • 100m @ 1.1% Cu and 0.57 g/t Au
    • 630m @ 0.43% Cu and 0.176 g/t Au
  • Hole 19 - 1344m @ 0.44% Cu and 0.28 g/t Au becomes
    • 552m @ 0.68% Cu and 0.45 g/t Au
    • 792m @ 0.27% Cu and 0.16 g/t Au
This shows we have a high-grade (>1% CuEq) core surrounded by lower grade mineralization, which is normal for porphyry systems.

TAG Officially Bad (tm) resources

  • Au - increased to 4.74Moz (542Koz or 13% increase)
  • Cu - increased to 1.7Mt (198Kt or 28% increase)
looking good...
The key is going to be the cut-off grades that are used to calculate the resources.

Predictions

  • Hole 21 - 925m @ 0.5% Cu, including a 400m >0.6% Cu - hole only 100m from hole 16, whihc hit a lot of good stuff
  • Hole 23 - being drilled, target between holes 16 and 19, so I'll expect
    • 200m >1% Cu and 1 g/t Au (@ 1,000m depth), within a 1000m zone of 0.3-4% Cu and 0.2-0.4 g/t Au
  • Hole 24 - keep an eye on this one, 3 scenarios (2 good and 1 bad)
    • Gets not much as it is drilling the peripheral part of the Alpala porphyry (i.e. lots of pyrite and not much else)
    • Drills deeper and hits the continuation of the Alpala porphyry
    • Drilling the peripheral part of the mineralization mapped at Malte Creek
  • Hole 25 - being drilled ~100m south of hole 19, so I'm estimating
    • 600m @ 0.3% Cu and 0.2% Au
    • drilling below hole 003 that hit a couple of narrow zones @ ~0.3% Cu and 0.1 g/t Au

The Good

Hole 19 hit reasonable mineralization, inline with what you would expect when you are drilling away from the high-grade core in holes 12 and 16. 

left = split assay results; right = super duper PR assay results
Hole 24 is going to be key, from the description (lots of pyrite and trace chalcopyrite and bornite), it suggests that it has intersected edge of a porphyry, but is it:
  • Part of Alpala system - they've extended it by >1km, which is huge, this could move Alpala into a >10Moz Au deposit
  • If it is associated with Malte Creek target - a separate, smaller Cu-Au system. Good.
  • If it is the distal part of the Alpala system - nothing changes
Gut feel - the middle one, we'll have to wait for the results to see what grades they get.

The Bad

Hole 20 appears to have clipped the edge of the Alpala system. Even though the hole was lost, I doubt that it would have got much more, so it basically tells us that the exploration potential to the east is less than thought.

left = split assay results; right = super duper PR assay results

I did enjoy the lip-sticking (applying lipstick to tart up some average results), done by the IR department, but Hole 22 (designed to see if the Cu-Au zones goes to surface) was a classic Playtex (tm) hole - looks great from afar, but once you get it open, everything disappears.

geoporn is always crap
However, the results from both  are what I would expect from holes that are drilling the edge of the system. We are seeing a gradual decrease in Cu and Au grades away from the center of the system (around hole 16).

left = Copper; right = gold
you can download the 3D view from here (link)

The Ugly

Sol Gold are drilling 1500-2000m drill-holes. So each hole will take 2-3 months to be drilled (I'm assuming 800-1000m per rig each month). You can now see how important it is to use decent drilling contractors, as you don;t want to have invested >$100K and more importantly time into a hole that is lost before it hits the target!

Losing a couple due to poor ground conditions is expected, but the fact that Sol Gold tell us that they have changed contractors suggests something more - maybe they were using old equipment and inexperienced drillers?  

Conclusion

When you split out the high-grade intervals you see that the best mineralization is deep (starting at around 600m) with a high-grade core that grades outwards into lower grade mineralization. For me, the key is to keep your eye on the 0.7% CuEq contours that SolGold put on their various sections. Fe me, this is a reasonable proxy for the economic limits of mineralization. If you carefully check Figure 6, you can quickly see the disconnect between the long mineralized intercept reported in hole 22



So essentially SolGold have given you a quick way to check their results and ignore the PR headlines and look at what the data is telling you.

What I would like to see

Some work on the other targets, it would be nice to know when they will be thinking about drilling the other targets. Alpala is now a mature exploration project and the new results aren't as flashy as earlier ones and people will start to get Alpala fatigue. It will be nice to have a rig exploring adjacent targets, as Sol Gold could find higher grade zones at surface where there will be amenable to open-pit mining.





9 comments:

  1. any thoughts on the latest drill results - Hole 24 results have been released. thanks

    http://www.iii.co.uk/research/LSE:SOLG/news/item/2336961/cascabel-exploration-update?context=LSE:SOLG

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  2. Hello Nicolas,

    So they have released a visual description of the drill-core from a few holes. I'll make an updated LF view and quick-post with this data. Hole 23R will be very good, as it is going through the guts of the system.

    Hole 24 - they have hit 194m @ >1.6% Chalcopyrite which is around ~0.56% Cu and hopefully they'll get more!

    Hole 25 - visual logging - >2.8% Cpy and 0.6% Bornite over 166.3m - this should equate to ~1.4% Cu, and again the hole is still in mineralization.

    This looks very positive and suggests that the Alpala Central deposit may extend as far as hole 24 to the SE, or that there is a separate Hematite Hill porphyry that has been hit by hole 24 and 25.

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  3. Why are they drilling less than 25 metres a day?

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  4. You would expect that each drill will be drilling between 25-30/12 hours, so the slow rate could be due to:
    1. Poor ground – the rock is highly fractured and broken up, so they are going slow to make sure they pass through the bad ground (one of the main reasons that holes are lost is that the drillers were going too quick, hit a fault zone and got the hole stuck)
    2. Not drilling at night – for safety
    3. Deep holes – smaller machinery don’t have the power and torque to drill-quickly at very great depths
    4. Drill-bit changes – a drill bit gets worn and they need to pull up all the drill rods to replace it
    5. They may be surveying continuously downhole to make sure that they are going in the correct direction and not deviating, so they maybe surveying weekly to make sure the hole is on track
    6. Inexperienced drillers

    The most likely is the first option, going slow and playing it safe, so that they don’t lose the holes

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  5. This comment has been removed by the author.

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  6. Hi AG, H21 looked a bit better than expected? Bring on H24 and H25 eh! That should give you some nice data to model this ever growing beast :) sav

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  7. Hi AG. May I say firstly a big thank you for the work undertaken here. I'm sure I'm not alone in struggling to pull together all the geo data in a meaningful way to get a true picture of the results in context & also seeing through pr "fluff" v hard factual data..... Latest results have been published for hole 21 which to this amateurs eye's look pretty decent......Will be really interesting to see what hole 25 & 24 show @ HH & AlpSE.....Look forward to reading your updates in due course & once again thanks for this work - greatly appreciated! S

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  8. News out this morning regarding Hole 24 and 25: https://www.rns-pdf.londonstockexchange.com/rns/8490D_-2017-5-2.pdf

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