I see something of a gold rush going on in Nevada these days and Blackrock Gold (TSXV:BRC) is part of it. They have an option for the Silver Cloud property, which is “located near the confluence of the Carlin Trend and the Northern Nevada Rift within north-central Nevada, the richest gold mining area in North America” and are currently working on their first financing to get this show on the road. The current round is small, but it’s enough to get started. Some recent discussion on the company on CEO.CA from Andrew Pollard has grabbed my attention.
Mining at the project goes back to 1915 when the Silver Cloud Mine was the “largest mercury producer” in the Ivanhoe Mining district. Fast forward to 1998, when Carl Pescio staked the current property and then leased it to Teck-Cominco Resources who themselves did a joint-venture with Placer-Dome several years later.
It’s always fun to look for crumbs that majors dropped in bear markets – especially when vetted by experienced people like Mr. Pescio.
The majors produced some nice drilling results at Silver Cloud, but it was a tough market and Geologix Explorations, Inc. assumed the Placer Dome-Teck-Cominco JV in late 2003. They produced a technical report in 2006 that is very well done before returning the project to Pescio Exploration LLC. I wonder how many people have looked at it since and how quickly the Blackrock team acted on the opportunity when it presented itself?
Blackrock optioned Silver Cloud from Pescio Exploration LLC in October 2017 and the option terms are flexible on the front end, with requirements to drill a minimum of 15,000 feet during the first 3 years and some small initial payments. The back end looks better for the optionor, with US$3.65M additional payment over 8 years after the first 3 years, a royalty of 3.5% of the gross value of production, and additional drilling requirements. The Gross Royalty can be bought-down, but it may be a sticking point for some who review the project.
The company conducted a special transaction in mid-January 2018 where Directors Hendrik van Alphen, Deepak Malhotra, and Alistair Waddell provided a loan of approximately $101,350 to the company. That amount is similar to the initial option payments due to Pescio Exploration LLC in fall 2017, which makes sense. Blackrock Gold is now following on quickly with the current financing.
I spent several hours going through the technical report (not a resource estimate!) for the Silver Cloud project completed by Geologix in 2006 and other documents, including a resource estimate and PFS on the nearby Hollister Mine published by Klondex in 2017 and a very helpful report by the Exploration Alliance for the Association of Mining Analysts on Low Sulphidation Epithermal deposits.
After reading through all this stuff for several hours and trying to put it all together, do I have sense for Silver Cloud?
One thing I do feel good about is the fact that there is some difference between geology at Silver Cloud and Hollister. I'm not a geologist and can't quite articulate the difference, but I will try anyway. The feature I’m referring has to do with the vertical extent of mineralized system. Hollister is a good deposit (110% IRR from 3 years production at the Gloria and Main Deposits?!), but it’s possible that Silver Cloud is better.
The Vinni Formation is the main host for gold at the Hollister Mine and the teriary volcanics above it are actually excluded from the resource estimate. As in the Klondex report, “the mineralized epithermal system cuts both units. The style of mineralization however does change across this contact. The Hollister Mine underground resource is calculated only for mineralization below the unconformity in epithermal veins hosted by the Ordovician sequences. Previous operators mined some resources above the unconformity.” Previous operators of the Hollister include Galactic Resources in the late 1980s.
The good news is that gold at Silver Cloud isn’t just in the Vinni. The Geologix report notes, “In discussions with Great Basin Gold geologists it is their belief that the veins were not able to follow fractures or to propagate beyond the brittle Vinini because the tuffaceous sediments overlying the Vinini are intensely argillized and fractures could not be maintained.” That is an encouraging fact, but it’s just one piece of the puzzle.
An apparent negative at Silver Cloud is that everything appears to be deeper. The boiling point is still 150-200 meters below surface, as expected, but some past holes go down +2,000 feet and are still hitting antimony, which is surprising to me as the presentation I mentioned on low sulphidation systems led me to believe that you typically see that element close to surface. The resource estimate for Silver Cloud mentions that differences in topography at Silver Cloud versus Hollister could have played a part in all this, but I’m out of my depth with the vertical zonation of these deposits. I look forward to hearing more from Blackrock on the geology at Silver Cloud – particularly around the presence of antimony at depth.
Again, I don't understand the details, but the takeaway is that there seems to be a much broader vertical extent of mineralization at Silver Cloud is encouraging.
I think the main comparison for Silver Cloud will be the Hollister Mine simply because they are so close to each other, even if there are major geological differences. With all the history at the Hollister, the Blackrock team may be able to pick and choose how they identify similarities and differences between it and the Silver Cloud. The Hollister itself is not a bad deposit, but it may not be the best one in the local area. The several other large mines in the area really give Blackrock a great opportunity to tell a rich story for the exploration junkies out there.
One final quote from Geologix report on this topic:
“The presence of mineralization at Silver Cloud in the Tertiary volcanics would tend to suggest that a greater vertical extent to the mineralization is possible than at Hollister. Hollister has a known vertical extent of 300 m (open-ended) whereas Midas has a vertical extent of 500+ m. The vertical extent of mineralization at Silver Cloud could more closely approach that of Midas as it may extend from the overlying volcanics through the underlying Vinini whereas Hollister occurs from the Vinini contact down.”
We're far from getting any new evidence to explain what is happening at Silver Cloud, but the holes that were drilled seem to provide some grades that were in the ballpark of what was seen at the Midas Mine or Hollister Mine and that is encouraging. I’d say that it was just screaming for follow-up work!
I have to wonder why Carl Pescio sat on Silver Cloud for so long. The answer may be simply that he had lots of projects in inventory and was waiting for the right partner to come along to treat Silver Cloud right. Whatever the reason, it’s ancient history now.
I will point out that there are several good data sets on the Silver Cloud, with several rounds of drilling all the way through soil samples and onto biogeochemistry! They've actually sampled the sage brush and had some encouraging results, finding gold in the plants if I read that correctly.
The first steps for Blackrock Gold at Silver Cloud may be to reinterpret the geological model. Bringing a new set of eyes to a bunch of old data like this can really help change the script. I don’t think there’s enough for a resource estimate from past work, but the Geologix technical report was done in 2006 when the Hollister Mine was less understood. Maybe the Blackrock team can learn some things from recent developments there or elsewhere in the area and bring new life to the rich old datasets they have at the Silver Cloud.
If Blackrock can do some meaningful work at Silver Cloud before drilling any new holes, then I think they will get some well-deserved attention from majors in the area. With some good desktop analysis and fieldwork, they could come storming out of the gates with lots to talk about.
A possible comparable for this is Cabral Gold (TSXV:CBR), who was able to start work on a revised resource estimate right after going public. The prior owners had assayed some drill core, but not included it in a resource estimate and that allowed Cabral to hit the ground running. It’s interesting to note that Alan Carter, CEO of Cabral, is also a Director of Blackrock Gold.
There are some serious geological minds behind the scenes at Blackrock who will be able to guide the company forward. To see the shell company trading at a $2 million valuation prior to this latest financing is encouraging as a speculative value play – the risks would seem to be skewed to the upside at that valuation.
I had a look at the area around the Silver Cloud on Google Maps and it is stunning to see how many large mines are nearby. Some are in production today by the likes of Newmont, Barrick, SSR Mining. Others are long since exhausted.
This may prove to be a case of new things in old places, and quickly! Many of the new things have already been done at Silver Cloud, at least on part of project area with biogeochemistry and high-tech soil sampling. Watch out for more from the past geophysics surveys, too.
I’ve still got some things to learn about the geological model at Silver Cloud, but the basics are simple enough. In particular, I like the fact that this area was a prolific source of mercury since that fits with the classic model for the vertical zonation of these low sulphidation epithermal deposits.
There's good reason to expect some flashy gold numbers from the next work programs at Silver Cloud. Even though those flashy numbers might be expected by geologists who understand the deposit type, I think there's still good potential to surprise those skeptical geologists who may have written Silver Cloud off.
What's more, there seems to be some resurgence in exploration in Nevada that lines up with a macro trend supporting all kinds of economic activity within the domestic USA regardless of problems with the national debt. The team at the top of Blackrock Gold are high-calibre and capable of leading an effective exploration company in the USA. I look forward to learning more about what they plan to do at the project and publishing an interview or two with management to share their insights into the project and professional backgrounds, which are outstanding.
You may have to squint to see it at this point, but there’s something coming our way with Blackrock Gold.
