Red LakeIt is worth noting that the Red Lake camp is relatively under-explored, despite the fact that literaly dozens of juniors are active in the area, yet some of the best drill core intervals in Canadian history have come from there. Gold emplacement in the region is hosted in structuraly controlled vein structures, meaning that you need to understand the geology and accurately map the fault structures, and where they intersect, to find the richest zones. This makes exploration complex, and the fact that most of the area is only suited to winter drill programs adds another layer of challenge.
So what has been accomplished over the years at Springpole is pretty significant. There are several results on the record where drilling encountered greater than an OUNCE of gold per tonne over more than a meter. In fact, one interval from 2004 hit 8.6 OUNCES per tonne over the width of nearly 2m, and another hit 3.3 ounces per tonne across more than 2m of vein. And there has still been less than 10% of Springpole tested by exploration, and many new targets have been identified with the potential for more impressive results since Gary Smith came on board. Work will be done later this year to follow up on the success of the drilling last winter, when several entirely new mineralized zones were hit.
So now given that there is high grade data already on hand, and a compliant resource outlined of nearly a quarter million ounces of gold for Springpole, the company has gone ahead and acquired the nearby Horseshoe Project, and then subsequently staked an additional package of land connecting all of the holdings in the area into a contiguous property holding. So they are now controlling one of the larger property packages, and they paid peanuts for this advanced stage exploration prospect.
The current market cap for GCU is somewhere in the range of $50 million, and that is still cheap considering all of the projects controlled, and the upside potential at Cordero. If metallurgy results come in positive for the gallium at Cordero, I think that property alone could represent an asset value of more than $100 million, and I expect it will be rapidly advanced to production. However, even ignoring the other projects, the Red Lake camp holdings could also amount to a significant asset if the upcoming exploration program is successful. Just going with a rule-of-thumb estimate of $60 per ounce of resources in the ground, Springpole alone is worth about $15 million. I think they can establish probably a million or more ounces in this project as they have now identified the structure and proven this with the last successful drill program. And we can also look forward to polymetallic potential with base metals and PGM metals as well that adds an interesting dimension.
I think a $3 price objective for GCU is reasonable within a one-year time frame if the company is able to demonstrate a larger resource area at Cordero and positive metallurgical work, as well as delivering some new high grade intercepts in the Red Lake area this winter.
The junior mining sector has been through a tough year and we could be approaching the next upleg of this bull market, when speculative money comes back into the juniors. If so, I expect that GCU will be one of the leaders this time around.
cheers!
COACH247
PS: I will be posting my article on my forum next week.
Voluntary disclosure: I own shares of GCU and the company has paid for an advertisement on my website.