I've been writing about Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX) and their Witwatersrand lookalike deposit for over five years. Well, Quinton Hennigh is associated with another Wits lookalike, this time in Brazil.
It wouldn't be the first time I wrote about a Wits deposit in Brazil, I was writing about Desert Sun in 2003 when they had a $7 million dollar market cap, well before they were taken over by Yamana for $500 million in 2006.
Yamana's Jacobina deposit is the same age as another similar type deposit in Brazil named Castelos de Sohnos owned by TriStar Gold Inc. (TSG:TSX.V). In both deposits free gold of unusually high purity is found in reefs of quartz cobbles. While the "experts" call these deposits "paleoplacer," they aren't placer. All "paleo" means is old so "paleoplacer" simply means old placer.
Since the discovery of gold in the Witwatersrand Basin in South Africa during 1886, experts have debated the origin of the gold there. In general there have been two camps. One camp holds that there were giant mountain ranges containing veins of rich gold and as the earth aged, rain and erosion caused the gold to be released from the rock and washed downstream. That's the "paleoplacer" group.
The other group believes that in a way similar to many gold deposits today, gold deep in the earth is taken into solution in the presence of hot, caustic solutions of sodium and chloride and brought to the surface through fissures in the ground. When either the chemistry or pressure or temperature of the water changes, the gold precipitates out forming gold deposits. These systems are named epithermal deposits.
You can go to any bar in Toronto during PDAC or Vancouver during Roundup and start a fight just by supporting one theory or the other. Everyone has a dog in the fight and wants to defend their position. Often to the death, it appears that nothing in life outweighs defending ones pet theories. Alas, there was a third theory of where the gold came from in the Wits Basin, long since forgotten.
In 1986 Ed Antrobus wrote a book called Witwatersrand gold—100 years: A review of the discovery and development of the Witwatersrand Goldfield as seen from the geological viewpoint. It was a limited edition of only 1000 copies and can be quite hard to find. I bought the book about ten years ago and was quite surprised to learn that there was indeed a third theory of where the gold came from.
It wasn't long after the discovery of the Wits that someone sat down and thought about how the gold got there. The author of the 3rd theory rejected both the paleoplacer concept and the epithermal theory because while elements of each existed, neither gave a really satisfactory and simple answer to the question.
This theory suggested that the gold was in solution in the water and as the chemistry of the water changed the gold came out of solution. We know that today the most gold in the world is found in salt water due to the presence of both sodium and chlorine. Working backwards, our expert determined that due to the chemical composition of salt water 2–3 billion years ago, it had the potential for containing a lot more gold than salt water does today. Between a thousand and ten thousand times as much.
That's the same theory that Quinton Hennigh has proven in Western Australia (WA) in the Pilbara Basin with Novo Resources. He has not only put a small test mine into production at a very low cost, he is hitting bonanza grades intersections in drilling and taking surface samples.
I'm not sure it makes a world of difference in a mining project as to just how gold got there. The Wits is a perfect example; it's produced over 40% of all the gold ever produced yet the source is still subject to a constant debate. But I think understanding the source of the gold would give a higher potential to finding a bigger deposit if you fully understood it.
What everyone seems to be missing in the paleoplacer theory is that placer deposits generally are found in rivers and streams where the heavier gold than the background gravels gets washed downstream and trapped in lower flow areas. No one mines basins for placer gold. It just isn't done. Rivers and creeks flow. In basins the water pretty much sits. If the gold was associated with the cobbles in these "paleoplacer" deposits why isn't there any gold within the cobbles? The experts have mistaken coincidence with causality. The gold is associated with the water, not the rocks.
In addition, the purity of the gold in WA with Novo Resources and in Brazil with both Jacobina and the Castelo de Sonhos deposit is nearly pure, measuring as high as 95–96 parts pure. Placer deposits in the Mother Lode Belt in California are typically 75–90 parts pure and purity above 85 parts is unusual in Alaska placer deposits. In placer deposits, the gold is always mixed with silver and copper as well.
TriStar Gold, headed by Nick Appleyard as President and CEO, was smart enough to ask Quinton Hennigh to come on board as an outside director. No matter how the gold got there, the similarities in the type of deposit and age of deposit between the two companies is striking.
TriStar was formed in 2010 and picked up on option from a private owner on the 72,067 ha Castelo dos Sonhos gold project in Brazil. The property is a plateau measuring 15km by 12km standing 300 meters above the surrounding terrain. Between the 1980s and the mid-90s the creeks and drainages from the plateau were mined by local artisanal miners who recovered an estimated 250,000 to 320,000 ounces of gold.
The option agreement called for TriStar to pay the owner $2.4 million over a three-year period for 100% ownership of the deposit. In addition, the company was required to incur exploration expenses of about $3.25 million over two years. The owner retained a 2% NSR and will receive an additional $1 per ounce of gold over 1 million ounces defined in a reserve.
Barrick worked on the project in 1995 and 1996. TriStar has their entire exploration data and drill core. The project had a 43-101 done on it in 2014 that showed 182,000 ounces of gold in the indicated category and an additional 98,000 ounces in inferred.
In January of 2016 after a reevaluation of the project and direction by management the project, TriStar issued a exploration target range at Castelo de Sonhos of between 2.1 million ounces of gold in 50 million tonnes at 1.3 g/t to 4.3 million ounces of gold in 84 million tonnes at 1.6 g/t. Those numbers are conceptual in nature and will require more drilling and surface sampling. There is no guarantee that any future resource will achieve those targets.
What is clear is that this is a Wits lookalike. The deposit has been barely explored so there is a high potential for the company meeting their target goals. Due to the price of gold, TSG has been fairly quiet for the last couple of years but with the renewed interest in gold and higher prices, the company has come back to life with a vengeance.
Two drill rigs have been mobilized to the project. Phase 1 drilling will begin shortly and continue through January. TriStar plans on issuing an updated 43-101 resource and preliminary economic assessment (PEA) by mid-2017. A phase 2 program is scheduled to begin in January/February and continue though May.
Given that Quinton Hennigh has spent 15 years thinking about how gold precipitated from salt water into conglomerate reefs in the Witwatersrand Basin and the Pilbara Basin, it was a good move of TSG to request his help. Quinton has developed a low cost way of mining the reefs in WA that is easily transferable to Brazil as well. Once you understand the limits and potential of Wits type system, exploration and exploitation become cheap and easy.
I really like the TriStar story. They have a resource now. They have the money to add to that resource. They have the technical and management bandwidth to keep things under control and, best of all, they have a financial tailwind from the higher price of gold that will make financing possible without terrible dilution.
Given all the positives, I'm a bit surprised the market hasn't given them a higher valuation. That will change as their story becomes better known. Brazil happens to be one of the more mining friendly jurisdictions in South America and that's a giant plus.
TriStar is an advertiser and I am biased naturally. Please do your own due diligence. I share in neither your profit nor your losses.
TriStar Gold Inc.
TSG-V $0.385 (Sep 27, 2016)
TSGZF-OTCBB 117.1 million shares
TriStar Gold website
Bob and Barb Moriarty brought 321gold.com to the Internet almost 14 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 820 missions in Vietnam. He holds 14 international aviation records.
Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.
Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. TriStar Gold Inc. is an advertiser of 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview/article until after it publishes.
