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TICKERS: VGLD

Junior Explorer Advances Project at Historical Mexican Mine
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Peter Epstein Peter Epstein of Epstein Research explores the latest from VanGold Mining, including a report on 55 meters of channel sampling averaging 537 g/t silver equivalent, or 6.7 g/t gold equivalent, and plans to continue drilling in November.

VanGold Mining Corp. (VGLD:TSX.V) reported assays from channel sampling of an underground vein exposure within an ore shoot of the El Pinguico vein system at its El Pinguico silver and gold project in central Mexico. The market liked the news.

This is the latest good news in a string of well prepared and articulated press releases. CEO James Anderson is advancing this project at a rapid yet prudent pace, and the company has >$4.5 million ($4.5M) in cash.

Readers may recall that VanGold hosts a high-grade, past-producing silver (Ag) and gold (Au) mine (400 tonnes/day). The mine operated from the late 1880s until 1913, mining the El Pinguico and El Carmen veins, thought to be splays of the Veta Madre, the "Mother Vein."

The Mother Vein (MV) outcrops for 25 kilometers (25 km) and remains the most important and prolific source of mineralization in the entire region. The MV has been mined to within 250 meters (250m) of VanGold's property.

Management believes the MV crosses its property underneath the high-grade El Pinguico and El Carmen veins, at a depth of ~400600 meters. Minimal drilling has been done to date on the company's concessions, and none has sought to intercept the MV. To be clear, even though it probably crosses the property, it might not carry attractive grades or mineable widths.

Samples were obtained from pillars and stope walls ~130185m below surface. The section sampled was ~55m high by ~60m wide, where the stoped-out area, plus remaining vein material, ranged from 1.55.5m wide.

The weighted-average grade of the samples was 537 g/t Ag equivalent (Ag eq), or 6.7 g/t Au eq. The best was 833 g/t Ag eq, or 10.4 g/t Au eq. In the average of the samples, silver represents 65% of the economic value (at spot prices), and gold accounts for 35%.

The samples are from a section immediately adjacent to the El Pinguico shaft, where crews are getting closer to regaining access to the #7 adit level. Presumably, the sampled vein material in the pillars was not mined because it was below the mine's reported cut-off grade of ~15 g/t gold equivalent.

These strong results give VanGold Mining added confidence that significant amounts of high-grade ore, left behind when mining ceased over a century ago, remains to be identified and potentially exploited within in and surrounding historic workings.

VanGold director William Gehlen, a geologist and epithermal system expert, commented, "There are a lot of things to like about these results, chief among them is the uniformity of good grades from what was historically considered waste rock. Historical geologic reports that discuss the El Pinguico vein system comment on the consistency of high-grade distribution within the veins.

"If VanGold continues to find these sorts of grades in the wall rocks left behind by previous mining, the surrounding material could represent a significant resource and the potential to find additional and wider vein zones of potentially economic grades in unexplored parts of the system seems possible."

Country manager Gerardo Dorado Cantu added, "We have always known that El Pinguico was a silver mine accompanied by high gold values, however in this particular portion of the vein system, the silver to gold ratio is approximately 145:1, easily making silver the most important potentially economic component.

"When drilling commences in late November, we will be able to develop a better understanding of the grade distribution of both gold and silver within different parts of the El Pinguico vein, and within different vein systems that are present on the property."

VanGold's recently purchased underground drill rig will be used in a 14-hole, 2,230m drill program starting in late November. Drilling will initially focus on the Don Ricardo target area, shown on page 9 of this presentation, south of the area reported on in the press release.

Surface drilling will commence in January, consisting of ~4,000m and 13 holes, including three holes to test for the extension of the MV fault structure.

Also in November, management plans to sample the bottom of its underground stockpile, containing material that, in 2012, the Mexican Geological Survey Agency determined to be 148,966 tonnes in size.

There's a chance this stockpile extends below level 7 (see slide #6; the light blue-shaded area is the [known] underground stockpile). If true, subject to further study, some believe the volume could be closer to 200,000 tonnes.

In 2017, VanGold conducted a trenching program on top of the underground stockpile that resulted in a weighted average trench sample grade of 1.75 g/t gold + 183 g/t silver (~4.0 g/t gold eq at spot prices). That's ~$325/tonne rock.

As exciting as these opportunistic channel sample results were, bigger news is coming, and fairly soon. Underground drilling is expected to start in six or seven weeks.

I mentioned the historical cut-off grade of nearly half a troy ounce/tonne. That means production grades were well above that. With a portion of the mine possibly grading >15 g/t Au eq, it would not take that large an operation to mine the ore needed to produce (after recoveries) 20,000 Au eq ounces per year. Having said that, it remains to be seen what the drill bit will reveal.

The de-risking of the VanGold Mining story continues. In prior articles I focused a lot on the near-term cash flow opportunity from toll-milling two stockpiles (one underground + one at surface). That scenario was nicely de-risked in June by a 1,039-tonne bulk sample of surface material that was run through a nearby mill.

With the story developing to include newly mined ore in H2/2021, the vital importance of toll-milling the stockpiles has diminished somewhat. It's still an approximate $25M (undiscounted; total over three years; at spot prices) free cash flow undertaking, but other opportunities appear increasingly promising.

If 250 tonnes per day (tpd) from each stockpile could be added to 250 tpd of newly mined, higher-grade ore, the combined 750 tpd of blended medium-grade material would generate very significant cash flow for a company with an enterprise value (market cap + debt cash) of just $26M.

Add to that the blue-sky potential of hitting pay dirt at the Mother Vein, and all bets are off. I don't know how probable a high-grade intercept is, but management continues to be optimistic about its prospectivity. An intersection of one or more veins in the El Pinguico vein system with the MV at depth would be a big deal.

Finally, saving one of the best things for last, VanGold has >$4.5M in cash, plus another $4.3M of in-the-money options and warrants (strike prices between $0.0750.25/share versus current price of $0.295/share). This really takes some pressure off, allowing management to make only optimal exploration/development decisions.

Conclusion

The next three to six months are critical for VanGold Mining. To reiterate, investment catalysts include 1) hundreds of underground channel sample assay results expected in the next two to three weeks; 2) sampling the bottom of the underground stockpile; 3) a 14-hole, 2,230m, underground drill program starting in late-November; and 4) a 4,000m drill program (from surface) in January.

If management can continue to execute well and communicate its successes to the market, there could be substantial share price appreciation. Make no mistake, there's still plenty of risk, but I feel better now about the prospects for VanGold Mining than ever before.

Late breaking news

Country manager Gerardo Dorado Cantu has been appointed president of the Guanajuato chapter of the College of Mining Engineers, Metallurgists and Geologists of Mexico. Mr. Dorado Cantu is a mining engineer with >40 years' experience on numerous projects across Mexico.

Gerardo's hard work, dedication, experience and business contacts are responsible, in large part, for VanGold's rapid, but prudent, advancement of the El Pinguico project.

In addition, CEO Anderson announced the hiring of Gabriela Ponce as project geologist for El Pinguico. After graduating from the University of Guanajuato, Ms. Ponce established a successful career in the area. From 20092019 she worked at Endeavour Silver Corp.'s (EDR:TSX; EXK:NYSE; EJD:FSE) El Cubo mine complex, located 5 km from El Pinguico. Gabriela worked in El Cubo's underground mine exploration and exploitation departments, managing a team of up to 20.

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University's Stern School of Business.

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Disclosures/disclaimers: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about VanGold Mining, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of VanGold Mining are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Peter Epstein owned stock and warrants in VanGold Mining, and the company was an advertiser on [ER].

While the author believes he's diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts and financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover any specific events or news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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