|
007 East results averaging 17.7 g/t over 6.0m
San Gold released the results of an additional 24 drill holes from its ongoing 007 Zone
exploration program at its 100%-owned Rice Lake property. The most recent assays can only
be described as impressive and included individual intersections of 51.0 g/t over 6.3m,
15.4 g/t over 13.7m, and 43.5 g/t over 4.8m (uncut assays over core widths). We calculate a
weight-averaged (by core width) uncut grade of 17.7 g/t over 6.0m from the 25 reported
intersections (Table 1). The average grade drops only slightly to 16.7 g/t when high grade
intersections are cut to 50 g/t, a testament to the consistent high-grade nature of the results.
We continue to view San Gold as one of the more prospective exploration stories in the past
couple of years, and expect the company to rapidly add to its reserve/resource base going
forward. The market, however, has become fixated on the company's current production ramp
up (which has been slower-than-expected), and has apparently lost sight of the low-cost,
high-margin potential of the property. We believe the recent under performance of the stock
provides an excellent opportunity for investors, and we are maintaining our
BUY rating
(Top Pick) and 12-month price target of C$5.30/share
.
Identified along a 500m strike length
The most recent drilling on the 007 East area has now extended the 007 mineralization over a
strike length of 500m, 350m of which have been developed on the 260m underground level. The
mineralization is demonstrating the two most important aspects needed for a successful
underground operation - grade and continuity (as an aside, we consider concerns over dilution
from the recent underground development to be overblown - the drift accessing the
mineralization was designed to accommodate large underground equipment and was more a
haulage way than a mining stope - we expect future mining will break less waste material with
commensurate higher grades to the mill).
The 007 Zone is rapidly approaching the Emperor Zone at its eastern end - we believe it likely
that the two zones will be shown to be one, extending the mineralization to over 600m along
strike. Both zones remain open in all directions (Figure 1).
The recent results from the 007 East area are contained in a 220m long by 220m deep
envelope. Given the average grade and width, we think it reasonable to suggest that this
relatively small volume has the potential to host over 300,000 oz of gold. With current known
dimensions of up to 600m long and over 450m deep, we consider the potential of the
007/Emperor zones to be far greater than the market's estimate.
|
