Late last year, Andy Jackson (link to bio), one of Sprott Global's two in-house economic geologists, flew to Ghana, West Africa to visit an Australian-listed junior's emerging, near-surface gold deposit.
The Aussie junior's stock had climbed from AUD$0.15 in February, 2016 to AUD$0.65 at the time of Andy's visit, after reporting a succession of near-surface, thick gold intersections.
On his site visit, Andy met with the junior's in-country team of geologists, walked over the deposit, and spent a lot of time in the core shack looking at the rock that had been pulled up during 2016's drilling campaign.
Here are a few of the photos Andy took on his visit:
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Column 1Soon after Andy's visit, the Aussie junior announced a maiden resource of 4 million ounces at 1.2 g/t gold, more gold than most analysts had estimated.
Yet, over the next two days following the resource announcement, the company's stock dropped more than 60% (from AUD$0.70 to AUD$0.22) as investors reacted to the metallurgy report included in that maiden resource announcement.
The Aussie junior's report stated that the gold processing would require flotation and regrind steps to achieve acceptable recoveries of the gold, which can often significantly increase recovery costs.
Recall also that the price of gold was dropping hard at the time (late last year).
The sell-off was likely deepened by the selling of prominent North American junior resource-focused newsletter subscribers and fund managers.
Internally within Sprott Global, there were initially mixed opinions following the surprise news, with arguments for selling, holding, and buying more of the stock all being expressed by differing respected analysts.
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On his site visit, however, Andy had noticed a certain characteristic about the rocks he had seen in the core shack, which gave us some confidence that the market had not fully understood the deposit's metallurgy and the stock had likely been oversoldon the surprise news.
Andy's analysis and follow-up work has been valuable over the last two weeks, as the Aussie junior announced an updated metallurgy report plus further gold drill results, andthe company's stock has moved back up to about AUD$0.40.
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Column 1The above quote from Andy's report to the Sprott Global team after his site visit is key to understanding the metallurgy question of this gold deposit, and its ultimate value.
Andy's report included many other details, including an emphasis on:
the attractive geometry of the deposit (generally a wide block of fairly consistent gold mineralization)
the exploration upside along strike and dip to add ounces to the deposit, and
the sensitivity of the resource to gold price, given its relatively low grade in parts of the orebody
In hindsight, however, the most important part of the site visit report was the metallurgy section, in which Andy, after viewing core rock from across the deposit, wrote: "The gold is very fine, so I don't expect there to be much coming out from a gravity circuit. However, it is almost always associated with pyrite and there is a low % of pyrite, so flotation would likely produce a very high grade concentrate."
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Column 1The two photos above were taken by Andy during his review of the Aussie junior's core shack. Andy noticed the low percentage of pyrite across the core samples.
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February, 2017: Aussie Junior Releases Metallurgical Update to the Market, and Its Stock Sharply Rallies
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Column 1Just last week, the Aussie junior released the results of more comprehensive metallurgical tests on their gold deposit, highlighting that:
The gold deposit is a low sulfur system, which matched Andy's description of low pyrite percentage since pyrite is a sulfide mineral
Therefore, only a very small percent of the overall tonnage delivered to the mill should need to be reground to achieve the stated gold recoveries, likely resulting in lower initial capital cost and operating costs for a potential gold mining operation
On the day of this update to the market (plus a gold price rally), the Aussie junior's stock jumped in price from about AUD$0.25 to AUD$0.36. A week later, the junior reported additional gold drill results both along strike and dip (matching Andy's site visit report's bullishness on the project's exploration upside), moving the stock to its current AUD$0.405. The stock's rally was, very likely, aided by the concurrent increase in the gold price, and the company's valuation remains well below its 2016 peak. From here, the company's stock price direction will depend on a large number of factors, including more detailed metallurgy tests, the results of more drilling, capital market conditions, the gold price, and many others. Please remember that penny stocks and, particularly, junior resource company stocks are speculative and extremely volatile.
