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Struther's Resource/Tech Report - - - - - V11 #2.0 - - - - - - - January 24, 2005
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In this issue:
new pick Gold Summit
Selection list
2004 review and performance
Model portfolio
I have been following Gold Summit for some time, watching results from their Monte Cristo project in Nevada. In mid November the stock caught my interest when they released the first core hole that intersected 116.8 gpt (3.41 opt) over 1.2 metres. They released another hole in early December that hit 36.5 gpt over 2.26 metres and then three more holes in early January, with one high grade intersect again and another with a pretty good intersect at 61.3 and 8.2 gpt respectively.
I was quite surprised they nailed this zone with the first few holes and I am now convinced they have made a high grade (Ken Snyder type) discovery in Nevada.
Going by the drill hole spacing on these first holes, it looks like they can easily outline about 400,000 ounces of 1 ounce per ton gold. There are good odds they will find from .5 to 1 million ounces and these types of deposits can easily run 2 or 3 million ounces.
They have an option to earn 100% on this property and should announce the next phase of drilling very soon.
The stock has seen a bit of a run already, but I expect it has lots of room to go yet. There were about 5 million warrants exercisable at $0.45 that expire January 24th and these have probably been holding the stock down. These are expiring today and I believe when they announce this next phase of drilling the stock is going to run higher.
Gold Summit Corporation ........ TSXV:GSM ................ Recent Price C$0.47
52 week trading range $0.12 to $0.51
Shares outstanding 19.2 million
Fully diluted 37.9 million
Gold Summit is a junior exploration company that began focusing on gold and silver projects in 2003/2004 located in Nevada. The company has developed a portfolio of very prospective grass roots and more advanced projects, that exhibit the potential to host highgrade gold-silver vein systems.
Management
GSM has a strong management team with considerable financing capability and a proven history of discovery world-wide that includes some very profitable mines.
Douglas R. Cook Chairman and Director is the former President of Freeport Exploration, Mr. Cook's extensive and successful exploration career spans over four decades, including senior exploration management positions with Exxon and Kennecott.
Dr. Anthony P. Taylor President, CEO brings over 38 years of international minerals exploration experience to the group. With hands-on experience and management in discovery of nickel, platinum, copper-zinc and gold deposits. He has managed projects in Australia, South Africa and the United States with Cominco, Selection Trust, BP Minerals, Kennecott and Gencor. He currently is a Director of Hecla Mining Company.
Douglas R. Bowden VP Exploration has over 25 years experience as a professional geologist. He previously worked for several major mining companies, including Noranda, Selection Trust, Gencor and BP Minerals America. He has extensive experience as a successful gold explorer in Nevada.
Ruth A. Carraher VP of project development has extensive industry experience with several major mining companies including Freeport, Selection Trust, BP Minerals and Barrick over an exploration career of 28 years. Ms. Carraher is a founding member of the Women's Mining Coalition, a grassroots group advocating a strong U.S. domestic mining industry.
Larry Kornze Director, recently retired from Barrick Gold as General Manager Exploration for Mexico and Central America and International Evaluations. His previous responsibilities included US Exploration Manager, Barrick Gold Exploration Inc., particularly for Goldstrike Mine area exploration with discoveries in Betze, Meikle, Deepstar, Screamer and Rodeo.
Properties
Gold Summit’s portfolio of high grade, bonanza-style, gold/silver properties are very similar to some notable discoveries in the past decade, including the very prolific Ken Snyder Mine at Midas.
Insert <<<<< Nevada property map
Several of Gold Summit's properties were explored for shallow, open-pit deposits but their underground, bonanza vein potential remains untested. The company plans extensive diamond drilling of the numerous high grade outcropping veins already identified, with many more such targets in the pipeline. The most prospective at this time and where Gold Summit has recently been focused is the Monte Cristo.
Monte Cristo, Nevada, 100% option
The property is located in the historic Gilbert mining district of Nevada approximately 40 kilometres west/northwest of Midway Gold’s high-grade Midway project. The property is known to host several epithermal vein systems that in the past have supported small-scale gold production.
The property includes the past-producing McLean pit, which produced about 25,000 ounces of gold from surface exposure of the Monte Cristo vein in the 1980s. The reported production was low grade, about 2.4 g/t gold because the stripping ratio was very high, but the vein itself exhibited bonanza (>1 ounce per ton) grades over narrow widths.
This was GSM's initial focus because they believed the McLean pit could represent the upper portion of a low sulphidation epithermal system capable of hosting bonanza gold grades. An interpretation that was not considered by previous operators as the focus in Nevada at that time was heap leaching open pits.
Initially GSM focused on shallow drilling right under the pit but this proved problematic but they got enough data to suggest the grade and thickness was improving at depth. Consequently they next tried a deeper core hole, MCC 12, that intersected bonanza-style gold and silver grades at a vertical depth of about 150 metres, over 50 metres vertically below any previous drilling. Visible gold mineralization with associated silver was intersected between 197.7 and 201 metres (downhole depth) grading 47.2 g/t over 3.3 metres that included 180.0 g/t over 1.2 metres in association with classic epithermal alteration mineralogy and textures
On Jan. 5th, GSM reported the third tranche of assay results from a drill program. Highlighted in this release were results for reverse circulation hole MC 13, which intersected 7.62 metres grading 15.4 g/t that included 1.5 metres grading 61.3 g/t at a downhole depth of about 170 metres. This was the third hole to intersect high gold grades over significant widths. Previous highgrade intersections were: MCC 12 (3.3 metres of 47.2 g/t including 1.2 metres of 180.0 g/t and MCC 16 (2.26 metres of 36.5g/t including 1.4 metres of 54.9 g/t).
Follow-up results from diamond drill holes MCC 15, 16 and 19 and reverse circulation holes 13, 14 and 17 have all now been released. These results are what has convinced me that GSM's interpretation is correct and they have discovered the higher-grade portion of the Monte Cristo vein epithermal system or the boiling zone for the original McLean open pit.
These drill holes at this point are defining a vein that is slanting downward on an angle and is open down depth and along strike.
While GSM is currently focused on Monte Cristo where a significant discovery is taking place, they do have a number of other excellent properties and following is some info on just two of them.
Tip Top Property, 100% option, 250 hectares approx.
This property is located in Esmeralda County, Nevada, lies within the famous and prolific Walker Lane andesite belt that hosts the Comstock, Tonopah, and Goldfield mines. At the center of Tip Top’s 5 km by 2 km alteration zone is a massive outcropping quartz vein. The Tip Top mine is situated at the head of a gulch at about 8,500 feet elevation. The Tip Top vein system is exposed at the portal and has been described as a hangingwall vein, on the west side of the portal, and a hangingwall vein on the east side. Between 1915 and 1918, the Tip Top Mine extracted some 6,500 ounces of gold from the main vein.
Previous to Gold Summit, drilling indicated a high-grade resource of 10,000 ounces within 70 meters from surface. Gold Summit’s drill program concentrated on the down dip highgrade extensions. In total, 28 drill intersections exceed 8 gpt gold over a minimum width of 1.6 meters. Future drilling will focus on these high-grade targets. The company identified at least 6 other similar drill targets on the property.
Cold Springs, Nevada 100% option
The property covers epithermal vein outcrops over approximately 700 metres along a northwest trend. Classic vein textures, including fine chalcedonic banding, fault breccias and coarse calcite replaced by quartz, indicate multiphase hydrothermal activity. Sample results as high as 25 gpt gold and 451 gpt silver are reported. Shallow drilling by several explorers, mostly with vertical reverse circulation holes, intersected gold up to four gpt over three metres. No drilling for high-grade underground targets is evident.
Financial
GSM has no debt and just over $1 million cash on hand. I suspect most or all of the $0.45 warrants will be exercised that could add about another $2 million to the till.
Summary
There is little doubt that GSM is onto a high grade discovery at Monte Cristo, but it is still at an early stage. If one considers the location and the high grade nature of this discovery and the fact the general market sentiment toward junior exploration companies that have been making a discovery is robust, we should easily be able to a apply a multiple of $50/ounce for resources in the ground.
There are 19.2 million shares out, but we should assume that most or all of the $0.45 warrants will be exercised. For round numbers, lets say 24 million shares out a this time.
With drill results to date, I think we can safely assume 400,000 ounces with good odds of a lot more.
400,000 ounces at $50/oz works out to a value of US$20 million or Cdn$24.4 million. With 24 million shares out, that works out to a value of just over $1.00 a share.
Because of the high grade and location in Nevada, we could easily see a multiple of $100/ounce as the deposit is proven further and we could see a substantial increase in the size of the deposit to between 1 and 2 million ounces.
Once again it is still early days, but I expect the next phase of drilling will be announced shortly and speculation on this drilling will probably push the stock higher.
Longer term it will depend what the drills turn up, but we definitely have potential to make several 100% with this stock.
The chart reveals two up moves, each followed by consolidation and these moves were driven by positive drill results. There could be some mild resistance around current prices, but appears the stock could soon test the old high around $0.90
I think the recent consolidation between $0.43 and $0.50 was influenced by the $0.45 warrants that acted as a cap on the market. I did hear Friday that most of these warrants were exercised. This is important because it means GSM will not need any financing for some time and can carry out an aggressive exploration program.
Following is the list of near term warrants from the last financials. Assuming most of the $0.45 warrants are exercised it would add over $2 million to the treasury. There is another 5.4 million $0.75 warrants that expire in May, but I doubt these will inhibit the stocks move higher until we get into April and we will see plenty more drill results by that time. Drill results should have the main influence in the stock price in the near term.
WARRANTS
Expiry Date # of Warrants Exercise Price
January 24, 2005 4,405,001 0.45
January 24, 2005 400,000 0.45
January 24, 2005 308,350 0.45
March 1, 2005 928,331 0.45
April 19, 2005 372,000 0.45
April 19, 2005 28,000 0.50
May 17, 2005 5,430,000 0.75
Gold Summit Corporation 181 University Ave.
Suite 1414 Toronto, ON M5H 3M7 Canada
Pierre Angloss 1 250 336 2027
info@goldsummitcorp.com
https://www.goldsummitcorp.com/