We have been reporting on Columbus Gold (CGT.V) for almost five years now as the company’s decision to acquire the Paul Isnard gold project in French Guiana was a true game changer. In this report we will however spend some more time at the Eastside gold project in Nevada, where Columbus has released a fresh batch of drill results, highlighting the massive exploration potential at Eastside.
The recent drill results in Nevada are an eye-opener
Until recently, we were considering Paul Isnard to be Columbus’ only really good project, but the recent exploration results at the Eastside project in Nevada are now almost putting this project at the same level as Paul Isnard, despite the earlier stage the project is on the development curve.
No less than 38 of the 46 holes that have hit the intended targets have encountered ‘significant mineralization’ and almost half of those holes has even ended in mineralization, pointing in the direction of the Eastside gold zone being deeper than originally anticipated.
So is ‘significant mineralization’ just another desperate attempt from a desperate mining company to draw attention to something relatively normal? No, not at all. It’s quite exceptional to see long and broad mineralized zones like the ones encountered at Eastside. In excess of 150 meters at 0.71 g/t and almost 25 meters of 2.7 g/t are quite exceptional.
Keep in mind the entire mineralized system has shown high recovery rates in preliminary metallurgical test results and not only the oxide zones but also the sulphide bearing zones had an average recovery rate of approximately 95%. More test work will be needed but these first results are extremely encouraging because for instance the intercept of 152 meters of 0.71 g/t gold would have a rock value of $25/t based on the total amount of gold that could be recovered.
Add the fact Eastside is located within walking distance from the US95 highway and a slightly longer hike (30km) from Tonopah and keep in mind there’s a power line running right through the property and you’ll understand why Eastside is suddenly showing all characteristics of a sizeable low-cost mine. This video provided by the company is very useful to really understand how close all infrastructure is: https://youtu.be/1MaIHDnT1l4
How sizeable? With the recent exploration results, all bets are off. Based on the current footprint of the mineralization we are currently anticipating Eastside to already contain at least 4 million ounces and whereas we would have been happy with 4 million ounces as total exploration target, it’s now pretty obvious we can aim higher. Columbus has been drilling on just one of the 7 ‘hot’ zones, and this leads us to go on record and state there’s 10 million ounces here on this property.
What will the next exploration phase consist of?
As several of the mineralized holes ended in mineralization, the mineralized system could actually be much larger than originally expected, especially at depth. Even though the deepest hole in the summer drill program has reached a vertical depth of approximately 300 meters, it now looks like the mineralization is running deeper.
This means Columbus Gold will be very keen to test the mineralization at depth, and the best way to find out what’s underneath the current mineralized zone is by drilling some deep vertical holes. It will be extremely interesting to see what’s 500 or even 600 meters underneath the surface. This doesn’t mean Columbus Gold will have to spend a lot of money to prove the mineralized zone is extending at depth, just a few deep holes will be sufficient to confirm a new geological model but then the focus should once again revert to expand the mineralization closer to surface.
So if the mineralization could be confirmed at a depth of 500-600 meters, does that mean Columbus Gold won’t be able to recover those ounces through an open pit? Not at all. Have a look at the image on the previous page, and you can clearly see the mineralization starts close to the top of a hill. This means Columbus should be able to just slice off the top of the hill and either discard it as waste or process the ore, and then start digging once the top has been leveled off. Using the new starting point to calculate the depth of the mineralization, the deepest hole is now just 180 meters below the ‘new’ surface level so an open pit could easily reach even deeper zones so this shouldn’t be a problem at all.
Drilling has been suspended now as Andy Wallace and his Cordex Exploration team are currently re-interpreting the drill results which will very likely lead to an updated drill program. Additionally, Columbus’ cash position has decreased to less than C$2M and that’s the lower limit CEO Giustra wants to keep as a cash buffer, so we would expect the company to raise some more cash soon in order to be able to drill a few dozen more holes and advance its metallurgical test programs. In an ideal scenario, Columbus Gold would be able to find a strategic partner who’s willing to take a stake in Columbus Gold so the company can advance this new discovery. Nordgold can be ruled out (a Russian company in the USA wouldn’t exactly help), but other companies like an OceanaGold (OGC.TO), Kinross Gold (KGC, K.TO) and even a larger company like Newmont Mining (NEM) should be interested in the Eastside project.
There might also be some excellent news from French Guiana
On a recent site visit in French Guiana, the French minister of economy has expressed his support for the project and even the mainstream media (see https://youtu.be/gV73HUg_cJg) in France were emphasizing this, reporting the minister ‘soutient fermement le projet’ and that will obviously be very helpful to convince the public opinion in France about why this project should go ahead. Fortunately the people who really decide on this matter can see the advantages of having a gold mine in France and it really is a big deal to see a minister openly supporting a gold mine, which could potentially lead to the French government stepping in and helping out with for instance extending the existing power grid.
Meanwhile, drilling is ongoing at the project but unfortunately there won’t be any more step-out drilling due to time constraints. As Nordgold needs to complete a feasibility study by March 2017, it needs to focus on increasing the confidence in the existing resource estimate by moving inferred and indicated ounces to the measured category to improve the quality and credibility of the mine plan. So even though we still see much more gold than the current 5Moz resource estimate, it will take longer than we expected before seeing our exploration target of 8 million ounces (which won’t be reached before the project goes into production).
Conclusion
Columbus Gold is firing on all cylinders and now it’s not just Paul Isnard representing the future of the company, but the (still 100%-owned) Eastside project in Nevada is impressing us more with every hole being drilled. The mineralization seems to be wider, extending for a longer strike length and deeper than we originally anticipated and we can now see a total exploration potential of at least 10 million ounces throughout the entire Eastside land package. And we have to admit there’s some gold fever now at the Caesars Report headquarters.
It’s too bad the broader market isn’t performing better as this company is worth so much more than the C$55M it’s currently trading at. Columbus is now trading at less than the fair value of its stake in Paul Isnard (and even below the fair value based on the NPV if Columbus Gold would elect to be diluted down), and you are still getting Eastside for free. We already own a stake in Columbus Gold but will add on the back of the Eastside news as that project could be huge.
Disclosure: Columbus Gold is a sponsor of the website. We also hold a long position. Please see our disclaimer for current positions.
