Discovery has the ability to drive share prices higher regardless of where you are in the market cycle. However, when they are made in the bull market, share prices can move to irrationally high valuation levels very quickly, which is great for those who are able to stomach the high risk to high reward ratio that exploration companies bring to the investor.
Today, nearing mid-August of 2019, the gold price holding steadily above US$1500 per ounce and a slew of cash entering the junior sector over the last 3 to 4 weeks, mostly from Eric Sprott, new discoveries may be on the horizon.
With this major change in motion and a number of junior companies now having their coffers full, they can begin to mobilize their drill rigs, and should begin releasing assays over the coming weeks.
This influx of cash may lead to the next latest and greatest gold discovery for the sector, which, in my mind, will not only be good for current shareholders, but could bring much needed attention to the entire sector.
With this in mind, I'd like to introduce a new Junior Stock Review sponsor, Orestone Mining (ORS:TSXV). Orestone is cashed up and currently mobilizing drill rigs to its Captain Project, which is located in British Columbia in prime porphyry hunting grounds along the Quesnel Trough.
Not only this, but they have the Resguardo Project in Chile, which is drill ready and arguably even more prospective than Captain.
Orestone has the right management, a small $3 million MCAP, a good share structure, 2 projects located in good jurisdictions, and the necessary cash to drill them both by the end of 2019, giving investors 2 kicks at the proverbial discovery can.
Let’s take a closer look.
Orestone Mining Inc. (ORS:TSXV)
MCAP - $2.86 million (at the time of writing)
Shares – 28.0 million
FD – 45.7 million
Cash - $1.2 million
Cash FD - $3.8 million
NOTE: Last private placement was closed on April 29th, 2019. The PP was done for hard dollars at a share price of $0.11, with a full warrant at $0.15. These shares will become free trading soon and there's a chance that some buyers may sell their shares and hold the warrants going into drilling – FYI.
Orestone is led by CEO, David Hottman, who has over 30 years of experience within the mining industry in both corporate finance and executive roles. Most notably, Hottman was a founding member of Eldorado Gold and Nevada Pacific Gold, which was acquired by McEwen Mining in 2007.
Additionally, in the President’s role is Bruce Winfield. Winfield is a geologist by trade with over 40 years of mining industry experience in executive and consultant roles. Most notably, Winfield held roles in Texasgulf Inc. and Boliden Inc, and was also the VP of Exploration within Greenstone Resources and Eldorado Gold Corporation.
Winfields’ executive leadership experience, particularly in South America, will be an asset to Orestone as they proceed with development of their Resguardo Project in Chile.
Orestone’s Board of Directors includes Gary Nordin, Patrick Daniels, Julia Aspillaga, John Kanderka and James Anderson. Additionally, Marc Blythe and Robert Pease are advisors to the company.
In particular, I'm happy to see Pease as an advisor, as it not only speaks to the quality of Orestone as a company, but also to the potential of its projects. Pease was a founder and major driver of Terrane Metals, which developed the Mt. Milligan deposit toward becoming a mine.
This experience should prove to be highly advantageous for Orestone, especially if they are successful in discovering an economic copper-gold porphyry system at their Captain Project.
Jurisdiction - BC and Chile
Orestone owns 100% of its Captain Project which encompasses 72 square kilometres and is located in the Quesnel Trough, just 30 to 40 km south of the Mt Milligan Cu-Au open pit mine. Given that Mt Milligan is a producing mine, the infrastructure in this region of central BC is about as good as it gets.
Power, roads and forestry industry in and around Captain allow Orestone to easily access the property year-round and, in the future, if they are successful, would provide a workforce which has experience in the mining industry.
In terms of politics, I do see risk in investing in provinces that have the NDP in control. While I do see some risk in investing in BC given the current political leadership, I think it's mitigated given that Orestone is a quality company whose current value proposition outweighs the risks associated with BC’s current provincial leadership.
NOTE: The Fraser Institute ranks BC 18th in its mining investment attractiveness survey, with a score of 78.09. This ranking puts it ahead of other well-known jurisdictions, such as Ontario and Sweden.
Orestone owns 100% of its Resguardo Project, which encompasses 2,905 hectares and is located on the Middle Tertiary porphyry belt and, more specifically, 95 km northeast of Copiapo in northern Chile.
Resguardo is prime territory for porphyry exploration, as it's located along the north/south Domeyko Fault System and within 100 km of a number of large copper-gold mines and deposits. Most notable are the El Salvador Copper Mine, Candelaria Copper Mine and the now closed Potrerillos Copper Mine. Caspiche and Cerro Casale are gold porphyry’s and have not yet been developed and like Potrerillos are some of the largest gold deposits on the planet at +20 million ounces each.
Given this fact, infrastructure is very good and gives the company year-round access to the property.
Further, Chile is a great place for mining investment, with the Fraser Institute ranking it 6th in the world with a mining investment attractiveness score of 84.9. Chile follows only Nevada, Western Australia, Saskatchewan, Quebec and Alaska in the global rankings, putting it in very good company.
There is always political risk, but in this case it's minimal considering Chile's current political outlook.
In terms of geological potential, Captain is located in a great spot within the Quesnel Trough, a region which stretches from the southern part of BC to its northern most border with the Yukon. Along it you will find a number of Cu-Au porphyry deposits that have been developed into mines, making it prime exploration ground for other potential large porphyry systems.
The Captain Project property was glaciated and, therefore, doesn’t have outcropping of mineralization found in areas that haven’t been glaciated. Early exploration on the property had to be completed strategically, using geochemical and geophysical testing to identify potential targets.
As you can see in the image below, historical exploration on the Captain Project was able to identify Cu-Au stream sediment anomalies within the old claim boundaries and then move their attention up ice to complete more localized geophysical studies in hopes of identifying the Cu-Au source.
As you can see, the bottom portion of the old claim boundaries appear to be the most prospective and thus, today, is the focus of Orestone.
Over the last few years, Orestone has completed 44 line kilometres of IP, 138 line kilometres of detailed ground magnetometer and drilled close to 3,000 m of diamond core drilling in 11 holes.
In all, they have spent roughly $4 million in exploration and have narrowed their focus down to 2 main prospective targets – Admiral and Max Extension.
In 2013, Orestone made an important discovery when they intersected a 3 m xenolith fragment of highly potassic-sercite altered monzonite porphyry grading 1.90 g/t gold and 0.226% copper, within an otherwise barren – post mineral dyke.
You may be asking yourself, why hitting a xenolith fragment of highly potassic-sercite altered monzonite porphyry within a barren-post mineral dyke matters? That is the ultimate question, in my opinion, when it comes to understanding the potential of the Admiral target.
The significance of the intersection is that the fragment has been transported away from its origin and has become a part of the dyke, which formed after the mineralizing event that created the xenolith fragment.
This means that if you can find the origin of the xenoliths fragment, you have most likely found your gold porphyry deposit, which is potentially a big deal! The Cu-Au mineralization in this fragment is of a very good grade, especially the gold at 1.90 g/t.
This factoid alone makes the upcoming drill program that much more exciting and, in my opinion, has slightly tilted the odds of success in Orestone’s favour. However, the fact remains that vectoring in on the porphyry is a challenge, but one that I believe presents a great risk to reward ratio!
With the use of localized IP and detailed magnetic surveys, the company has been able to refine the size and shape of the 2000 m x 1000 m target and have the proposed drill holes located; see the image below.
Max Extension Target
The claims surrounding the Max Extension target were staked earlier this year and sit approximately 7 km northwest of the Admiral target. In total, the Max Extension claims cover 2834 ha and cover a phyllic altered felsic intrusive with disseminated chalcopyrite exposed along a forestry logging access road.
The target is much like Admiral; it's lying at the junction of a NW and NE fault and is associated with a MMI Cu-Au geochemical anomaly and quartz sericite alteration characteristic of the outer zone of a Cu-Au porphyry.
More work soil and rock geochemical sampling need to be completed this year before the company can define drill targets.
Orestone optioned to purchase a 100% interest in the Resguardo Project from Sociedad Contractual Minera Resguardo in August 2018. Details of the option agreement can be found by following the link.
Resguardo has historical workings, a shallow open pit which was focused on an oxide copper-gold deposit. The pit measures 150 x 60 metres and produced copper and gold ore grading 1 to 7% Cu and up to 0.6 g/t Au.
The mined oxide deposit is surrounded by a large, 1 square kilometre, hydrothermally altered zone of clay and silica. This, combined with the fact that the area is also underlain by a large IP chargeability anomaly, suggests that there could be a sulphide copper porphyry at depth.
In terms of historical exploration work, Resguardo has seen structural/alteration mapping, geochemical sampling, geophysics – 3 line 5.6 km IP and resistivity survey + 105 line km ground magnetometer survey, and a total of 514 metres of RC drilling in 2 holes.
The 2019 exploration program is expected to cost CDN$200,000 and include the following:
• Minor road building and maintenance
• Limited prospecting, mapping and sampling of the porphyry extension and the gold target
NOTE: Mineralization consists of fracture-controlled chimney and manto style oxide and sulphide copper along 1000 metres of strike. FYI – Manto refers to mineralization which has formed along the bedding plane of the rock, while chimney refers to mineralization which has perpendicularly cut across it.
• IP and resistivity survey of approximately 8 line kilometres to refine the drill location – current and proposed IP lines are shown in the image above.
• 3 RC drill holes, which should each range between 300 and 350 metres deep
Proposed Drill Hole #1 – Located along L1 IP Line
Proposed Drill Hole #2 – Located along L2 IP Line
Exploration is a risky investment given the odds of finding economic mineralization, however, the reward for finding something of value can be tremendous, especially in a bull market.
In Orestone’s case, I believe the investor has the odds in their favour, as they get two chances to be right, on targets that could be very valuable in future.
The investment case for Orestone can be summarized by the following points:
• Competent management team which has a history of developing and selling junior resource companies.
• Small $3 million MCAP – There are shell companies that have higher MCAPS!
• A good share structure with under 50 million shares out after the closing of their latest financing. The share price has the potential to really move if drilling is successful.
• Low executive wages + high insider ownership of 12% (21% FD) - Management and shareholders' interests are aligned, as management’s financial success is linked to the company success.
• 2 high potential Projects in Captain and Resguardo, located in mining jurisdictions that rank within the Fraser Institute's top 20 jurisdictions for mining investment attractiveness.
• They have the cash required to execute the drill programs and should have enough cash after the drilling to keep the exploration process going, regardless of the outcome.
In my opinion, Orestone Mining (ORS:TSXV) presents a compelling case for investment given the risk to reward profile. Currently, I'm a shareholder and will be looking for any weakness in the share price to add to my position in the coming weeks.
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Until next time,
Brian Leni P.Eng
Founder – Junior Stock Review
Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria. Orestone Mining is a Sponsor of Junior Stock Review and I am a shareholder of Orestone Mining shares.