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New Portage Zone Drilling Supports 5 Million Ounce Gold Potential
Event
·The company announced the first results from its winter drill program at its Springpole Gold Project located northeast of the Red Lake Mining District, Ontario. Of note, this is the first time the company has encountered bonanza grades within the Portage Zone as seen in hole SP11-033.
·Highlights from the drill program include:
oHole SP11-033: 53.88 g/tonne gold over 3metres within 302 metres at 1.39 g/tonne gold.
oHole SP11-034: 1.18 g/tonne gold over 73.5 metres, 1.08 g/tonne gold over 169 metres, including 2.20 g/tonne gold over 51 metres.
oHole SP11-030: 2.51 g/tonne gold over 59.0 metres.
oHole SP11-031: 1.09 g/tonne gold over 85.6 metres.
·The company has also said it is now unlikely to complete all 9,000 metres of the current phase of drilling from off the ice (ie before April 1st) as originally hoped. The company now expects to complete 6,000 metres. The company has planned to deliver two barges to Springpole to ensure that drilling can continue through spring/summer for it to complete critical holes and an updated resource estimate in 2011.
Discussion
·The drill results were very positive as it confirms the continuity of the Portage zone through the mid-sections where previously historic drilling had been spotty. It also confirms that the zone extends to within 15 metres of surface. Lastly it confirms that the gap between Portage and Main is well mineralized. All off these serve to derisk our estimate of 5 million ounce gold potential along the 1,300 metres of strike that have been drill indicated to-date.
·Encountering bonanza grades, while encouraging, does not alter our view of the project as a bulk-tonnage, 1.3 to 1.5 g/tonne gold deposit and therefore does not reflect in our valuation at this time.
·Slightly disappointing is the slow progress of drilling. As a reminder the company is currently drilling off of the ice at Springpole lake for the current phase of drilling. We are confident that work currently underway will be finished from barges in the spring and summer months but as a result will delay a resource estimate to (likely) September.
·Over-all the news is very positive. It also indicates exceptional assay turn-around time and we therefore look for step-out holes from the south-east in the weeks to follow.
·Continued successful step-out drilling to the southeast of Portage will merit yet another re-rating based on increasing the probability weights for additional ounces in that direction. If we were to bring these probability weights to 100% (based on successful step-outs), this would add an additional 900,000 ounces and would raise our estimate of the potential from 5 million ounces gold to 5.8 million ounces gold and imply a potential target of $4.95 per fully diluted share using the same $100/potential ounce in the ground value.
·We maintain our Strong Buy recommendation and reiterate our 12 month price target of $4.25 per fully diluted share.
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