Contact Gold (C.V) is adding 7.8 square kilometers to its Pony Creek land package in Nevada as it has entered into an agreement to acquire the East Bailey project from private vendors. Contact Gold will issue 250,000 shares to the vendors, as well as granting a 2% NSR on the zones of the property which aren’t encumbered by existing royalty structures (generally structured as a 3% NSR, with an option to reduce it to 1%).
This means the surface area of the Pony Creek project now totals just over 107 square kilometers over 1325 unpatented claims. According to CEO Lennox-King, the East Bailey claims have the same ‘favourable structural and stratigraphic setting’ to host Carlin-type gold deposits which has been confirmed by low grade gold values encountered in a shallow drill program. East Bailey isn’t ‘virgin ground’ as the property has been subject to a geochemical sampling program and a total of in excess of 14,000 meters of drilling in almost 50 holes.
It’s interesting to see the majority of the holes didn’t drill deep enough to reach the Devonian Webb-Devil’s Gate contact zone which actually is ‘THE’ zone to find the gold as that’s the structure where the majority of the gold at the Rain & Emigrant mines and the Bald Mountain mines is hosted. Although Contact Gold hasn’t officially announced any exploration plans for East Bailey, we would imagine the company would like to drill deeper than the previous operators did, in an attempt to reach the ‘sweet spot’.
The company still has C$8M in cash, and we are flabbergasted to see it trade at a current enterprise value of C$29M. Although we acknowledge Contact Gold is still in the (relatively early) exploration phase, the existing historical resource and the quality of the management team warrant a higher valuation. Contact Gold is fully funded for its 16,000 meter drill program planned for 2018, and we’re looking forward to see the results of this year’s drill program confirming the value of Pony Creek.
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The author has a long position in Contact Gold. Please read the disclaimer
