I was thinking I was the only one that liked this for the gold. They have some of the best visible gold I have ever seen. A couple of samples don't make a mine but there is plenty of evidence they will have a gold mine.
21 nov 2013; “Extremely coarse gold: 86% Au recoveries from un-optimised gravity circuit Exploration decline planned for grade estimation. Licence to remove and process up to 50,000t of ROM due 3rd Qtr 2013. 1 tonne bulk sample grading 22.3 g/t Au.” “The bulk sample was collected from the deepest point of two historic winzes approximately 400 metres along strike from each other (Figure 1). Two 500kg samples were collected; one from the Mestre winze at a vertical depth of 55m (~10m down plunge) and another 400m to the northwest from the Cuca winze at a vertical depth of 25m (~50m down plunge). The entire ‘mining’ face at the end of each winze (1.5m x 3m and 2m x 2m respectively) was systematically collapsed and collected. Each sample was non selective. Together the samples are considered to be representative of the mineralisation displayed in the winzes and are visually and mineralogically consistent with the much wider intersections of the mineralised zones (up to 15m) evidenced in drilling to date. The samples were homogenised and the head grade determined prior to a range of metallurgy tests being undertaken. The Mestre winze appears to be located just below the centre of the First mineralised zone, while the Cuca winze is located at the top of the second mineralised zone (Figure 2). Additionally, as previously reported, drilling has revealed that the level of alteration and sulphides in the system appears to be increasing at depth. Consistent with these observations the 500kg sample collected at the Mestre winze (~130m down plunge) contained a greater degree of alteration and returned an average head grade of 39.9 g/t Au, while the 500kg sample from the Cuca winze (~50m down plunge) contained noticeably less alteration and had an average head grade of 4.34 g/t Au. The combination of these two samples is believed to represent mineralisation both in the core and also at the margin of the mineralised zones.” “Drilling has continued to intersect the structure that hosts the mineralised zones from which the bulk sample was collected, with all holes hitting the targeted structure over 420m of strike and 620 down plunge.” This has since grown with “6,000m of diamond drilling has defined precious metal bearing, geologically continuous structures over 1600m strike x 620m plunge.”
The Mestre winze sample which returned 39.9g/t from its 500kg bulk sample lies in the first mineralised zone just above the silver zone. At the actual average grade of 22.3g/t from both zones, it would be a very high grade underground mine. Assuming even just half the average grade of both bulk samples (which averaged 22.3g/t) of 11g/t and considering low labour costs in Brazil, the grade should easily provide for a high profit margin underground mine from the first mineralised zone of gold. This should be overly conservative though considering that historic small scale mining reportedly produced ore with a head grade above 20g/t. Regardless of what comes out of the silver exploration potential, it does appear very likely that underground mining of at least the first (upper) mineralised gold zone should be a very profitable and long life operation with very low capex (minimal dilution of existing share structure) thanks to high gravity recoveries (86% and yet to be optimised- even 86% would be an excellent recovery rate at these grades. There is also some very promising regional exploration upside. Very early days and the mc at below $20mill does not do justice to the current work from just the first gold zone (three identified to date). With 1.6kms of strike by 600ms (and open) and from the above bulk samples from existing winzes assuming a 2m depth (even though from the above quotes mineralised zones range up to 15m from drilling), there is 1.9Mill cubic metres or around 5mill tonne potential from ONLY THE FIRST mineralised zone. At the average grade of both zones of 23g/t (and keep in mind the first mineralised zone bulk sample result was 39g/t), that has potential for 3.7mill ounces. If they only recover 20% of that potential from mining (740,000oz) and 86% of that 740koz through gravity processing, that would be 635,000oz of recovered gold. At those grades in Brazil, total all in costs should be well below $800/oz. If that proves correct, margin would be above $600/oz at $1400 gold resulting in profit before tax of more than $380mill (current mc below $20mill). A gravity plant can cost less than $10mill. Both of the first two mineralised zones are accessible from the existing winzes so there is no upfront mining cost before reaching the ore. Capex should be very low. There is plenty of potential here for a ten bagger with and without the silver. Usual case of higher risk until further work better defines the potential but very high upside potential.
OGX Price at posting:
18.8¢ Sentiment: Buy Disclosure: Held
