Mackie Research – A Discrete Higher Grade Zone Takes Shape
EVENT – Release of 25 Drill Holes; 10 From High-Grade Zone
Aggressively drilling to establish a resource: Probe released results from a total of 25 drill holes completed on the Borden Gold project which looked to further define a higher grade extension to the southeast, as well as increase confidence in the existing deposit with infill holes to the northwest. Four drill rigs are currently active, with an overall goal of updating the resource by year-end and completing a PEA early in 2014.
Nature of resource and potential mine will change: Borden Gold project started off as a bulk tonnage, open-pit resource grading 1.03 g/t. But successful drilling of a higher grade zone to the southeast has completely changed the kind of resource and potential mine that Probe has. In-fill drilling from 1200 SE to 1900 SE is defining a high-grade underground component of the resource. Based on the drilling to date, this new zone looks to be ~1,000 metres long, averaging ~100 metres in height and ~25 metres in width (an overall shape like a flatten tube plunging SE – figure 1). The grade of the material consists of a wide zone of ~25 metres grading ~6 g/t, but within this is a higher grade core of ~5-6 metres grading better than 15 g/t. So far the zone is indicated to be ~1.3 Moz, but substantial in-fill drilling will be required to confirm this. It is entirely probable that the Borden Gold project starts life as a smaller-scale, high-grade underground mine. The advantage of such a start is a considerably smaller footprint, and lower initial upfront capital.
IMPACT – Positive. Higher Quality Ounces
Infill drilling continues to prove up continuity of a high-grade, underground zone: The latest batch of drilling results further increases confidence in the existing resource, as well as continues to show increased potential for establishing a high-grade underground component (see Figure 1). More drilling in the area is required, with additional results expected in September. An updated resource is expected to be published in 4Q/13 which we expect will incorporate much of the higher grade underground potential.
ACTION – Maintain BUY Rating
We have adjusted our target price for the potential of a high-grade component to the resource, but we have also lowered our long-term gold price to $1,250 and have incorporated dilution of the recent equity issue. As a result, our new target is $2.60. We continue to believe Probe has successfully defined a resource which will become a mine, and are on to something new. We maintain our BUY recommendation.
