Brad Aelicks: Follow up Coverage 2020.09.14
Background: After an excruciatingly long wait, Freegold Ventures Ltd (FVL) released results Sept 11 for Hole #2, GSDL2002 collared 150 metres due east of the spectacular 1st hole GSDL2001, which reported 257 m of 2.94 grams including 188m of 3.69 grams per tonne gold and bottoming with the last 20 meters grading 9.87 grams gold.
Hole #2 was a bold test of Freegold’s new interpretation for the potential to add higher grade tonnage from the vein swarm within the mineralized sedimentary host rocks sitting just north of the Dolphin Intrusive Stock where Freegold published an August 2013 non pit constrained resource of 6,524,000 ounces of gold as categorized below.
The Dolphin Stock resource is still open for expansion but Hole #1 collared just north of the resource proved there may be a much higher-grade bigger prize potential in the sediments to add to that 6.524 million ounces of gold.
Details of Hole 2: Hole GSDL2002 collared 150m east of Hole 1 and just outside the eastern side of the Dolphin Resource returned a significant 249m of mineralization with three important intervals. The uppermost interval of 12.0m graded 2.3 grams gold from 156m down hole, that was followed by a huge intercept of 237m of 0.87 grams gold within which were two distinct higher-grade intervals of 49.7m of 0.93g from 270m down hole and even better 136.4 m of 1.02 grams gold starting at 370.6m.
The section below provided by Freegold with their news release shows the intercept expanding a zone from a previous hole, (GSDL1201) drilled within the projected vein zone averaging 1.3 g/t Au over the last 113 metres (from 209m) and bottoming in mineralization.
Significant results of Hole 2 are reported in the table.
Ramifications: Although Hole #2 was not as strong as Hole #1 the magnitude of the step out at 150m and the continued strength of the zone with 249m of collective mineralization will build ounces fast and continue to improve economics in an already impressive body. Freegold Ventures will continue to expand the new discovery in all directions. Hole 2 seemed like a very risky giant step out, but we have to keep in mind that the technical staff had planned the Holes to test this stratigraphic package before they could have any inclination that Hole 1 would produce the blockbuster grades it did. But now that Hole 2 has also delivered such impactful results its critical to review the overall data from an investment perspective. Below is a list of my interpretations from the data now available.
Dolphin Zone Indicated Resource within Conceptual Pit
Dolphin Zone Inferred Resource within Conceptual Pit
This small part of the deposit would produce 98,000 ounces gold per year for 24 years with peak production of 150,000 ounces at a cash cost of $842 using only a $1300 gold price. A key parameter disclosed was the operating cost per tonne of just $18.11 per tonne for the sulphide ore and only $14.90 per tonne for the oxide ore.
The PEA also indicates that the first phase of production postulates a heap leach operation for the oxide ore (as did the Fort Knox comparative which sits only 5km south east) with estimated capital cost of only $88 million that would last for 8 years. There are 528,000 ounces in the first phase of oxide production at an average grade of 0.63 grams gold. At current gold prices of US$1950 that is $39.40 per tonne as compared to the $14.90 it would cost to mine and leach it.
The reason I have brought this discussion into point #3 is that the collars for hole 1 and 2 both sit virtually right on the northern pit wall of the PEA resource. None of this data was shown on the cross section or mentioned in the press release Sept 11, but I am sure that management will include it in future graphics particularly as results stream in for additional holes on the Section line for Hole GSDL 2001. I think the market will be blown away when they show 6.5 million ounces sitting right behind Hole 1’s 257m of 2.94 grams dipping right towards and under the existing resource.
Additional Gems in the Release: The company also released this second graphic.
There are a number of things that really caught my attention here. Firstly, the hashed lines illustrating the vague projection of the Cleary vein system at depth. We now know this is just cartoon for a portion of the overall vein swarm importance. The Cleary vein which produced 281,000 ounces at an average grade of 1.3 ounces per tonne gold is represented at surface by the red line at the top of the graphic above the squiggly black lines which are the underground levels of the mine. Moving down there are 3 more sets of known high grade veins too small read on my pirated graphic but they are the Colorado Vein the Wackwitz Vein and the Wyoming Vein. On the far-left side of the graphic we see the black squiggly lines representing the Tolovana vein and underground workings.
We can see that managements interpretation is that the Cleary Vein is bending like a boomerang shape from East to West and turning to Southwest and all the other veins are projecting directly into this bend. Now we now that the position of this as more information arrives is going to change so I’m looking beyond the current graphic expression. What was important to me is that Hole 1 never got through the mineralized system even though it was 257m thick of 2.94 grams at this point. The next hole on section to the North is Hole 5. The news release stated that Hole 5 is collared 100m north of Hole 1 and drilled to a depth of 645m to test the up-dip extension of the discovery. However not only would they have tested the up-dip extension but the hole continued to 645m which is 97m deeper than Hole 1 and 100m north. This is a very exciting development as no geologist would allow a hole to run to this depth without serious encouragement from the mineral system. In addition, there is now a proposed Hole F which sits a further 75m estimated north of Hole 5. All of these Holes 1,5 and F sit in the apex of the Cleary vein bend and the other 4 veins are all projecting into this area.
The vein swarm will not be a simple blob of mineralization like the Dolphin stock and is likely to have numerous legs and tails as each distinct vein enters and leaves that Apex of the bend. What we now know is that the discovery is real and we can expect it to grow in multiple fashions as Freegold ramps up drilling.
Summary: Hole 2 although not the blockbuster of Hole 1 has nearly as much positive impact to the quality of the discovery at Golden Summit. We now know there is an East West strike component to the system at least at this area and it dips at 50deg+/- south into or directly below the Dolphin Stock. Hole 1 with 257m of 2.94g gold is very close to true width as is the 237m intercept in Hole 2. The sediments have been cross cut by at least 5 different high-grade veins all trending into a major structural bend in the prolific Cleary vein down dip extension. The East West trend between Hole 1 and 2 keeps the new mineralization close enough to the Dolphin Stock to potentially be mined in the same massive pit. The grade of the new discovery is now significantly better than the historical 6.524 million ounces.
The company expects a second drill rig to arrive the week of Sept 14th and the camp is fully winterized to drill through all seasons.
Freegold has the sponsorship of Eric Sprott who will beneficially own and control 78,948,504 shares and 37,162,502 share purchase warrants, representing approximately 26.0 per cent of the outstanding shares and approximately 34.0 per cent of the outstanding shares on a partially diluted basis assuming exercise of such warrants.
The Golden Summit property overlies the creeks that boast the title of the most prolific placer gold district on the continent producing over 6.9 million ounces of gold from the creek beds. As such, Golden Summit has seen over a hundred years of exploration and production both from the creeks and bedrock mineral claims. The PEA that used $1300 gold to pit constrain 2,947,000 million ounces gold (1,363,000 ozs indicated and 1,584,000 ozs inferred) will now be wide open for revaluation. Firstly, the rising gold price now north of $1900 will in itself significantly enhance the economics of those ounces.
All of the material I have referenced here is available in the news releases and technical reports available on the company’s website http://www.freegoldventures.com/
I am not a paid consultant to the company or a paid letter writer. I am a career geologist that has worked in building public companies and wealth creation for shareholders for over 35 years. I currently do not sit on the Board of any publicly traded mining companies and invest in junior exploration companies for my own account. Free Gold Ventures is now my largest investment holding.
I am obviously now biased because of my shareholdings so do your own due diligence and consult your investment advisor. This is not a solicitation to buy shares.
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