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An Exploration Company Where the Geologist Is the Largest Shareholder and Banking on His Own Success

Streetwise Reports, Streetwise Reports
0 Comments| January 28, 2020

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The chief geologist believes the deposits are part of a large, emerging trend.

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Megastar Development Corp. (MDV:TSX.V; MSTXF:OTC; M5QN:FSE), a small-cap exploration company focused on the emerging Oaxaca Gold-Silver Belt in Mexico, has conducted fieldwork over two months that has revealed multiple targets for further exploration.

The fieldwork is being overseen by David Jones, chief geologist and a director of Megastar, who over his 40-year career has had a number of high-profile discoveries and expansions under his belt. Those in Mexico include the 1995 discovery of the Los Filos deposit in what is now known as the Guerrero Gold Belt (GGB), leading the successful Teck bid for the Morelos Reserve in the GGB (now Torex Gold), principal geological consultant in the fundraising and start-up of Torex Gold, the targeting of Gold Resource Corporation's recent Switchback mine discovery, and participation as a director in the successful sale of Cayden Resources to Agnico Eagle. Jones was one of the early geologists to recognize the larger potential of the Guerrero Gold Belt, which over the past 25 years of his involvement has grown from less than 2 million ounces of gold to more than 30 million ounces.

"The reason I tend to have more success than failure is that I focus on thinking about why mineralization is where it is and where I might find more, especially if there are no obvious indicators in the area. Los Filos was a blind discovery; there was nothing at the surface, and it was based on a geologic idea that paid off," Jones told Streetwise Reports. He says that similar thinking may be applied to the state of Oaxaca, Mexico.

Jones has become interested in the regional structures that cross through southern Mexico. "In Oaxaca, there are super volcanoes—calderas—and every mineralized district that I know of along the central volcanic belt in the state, including Fortuna Silver's San Jose Mine and Gold Resource Corp.'s Arista-Switchback and Alta Gracia mines, is associated with Tertiary calderas and their related structures. The liquid magma that comes up fills the cracks and associated hydrothermal fluids make the ore body," Jones explained.

Epithermal gold-silver deposits are known for their bonanza grades, "fabulous high grades, gold, silver, copper, lead, zinc, with gold upwards of 5 grams per tonne, silver in the kilo range and base metals in the multi-percentage range, all in the same vein," Jones said.

Jones views the emerging Oaxaca Gold-Silver Belt as an "opportunity parallel to that of the early Guerrero Gold Belt" with the potential for significant discoveries. Fortuna Silver's San Jose Mine has produced 767,000 gold-equivalent ounces (gold and silver) since 2013; Gold Resource's Arista-Switchback and Alta Gracia mines have produced 465,000 ounces of gold since 2011.

Acting on his working theory is what allowed him to target what became the Switchback mine discovery. Applying his knowledge on a more regional scale led Jones to secure three highly prospective properties in Oaxaca, "the perfect number for a junior company," and joined with Brian Ostroff of Windermere Capital to get Megastar going. Today, David Jones is the largest shareholder, believing strongly in the opportunity.

Megastar's three Oaxaca projects—Yautepec, Magdalena and Rama de Oro—have no history of systematic exploration work, and thus the opportunity to find something of significance is considered wide open, Jones stressed.

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At Yautepec and Magdalena, "we are seeing things that are textbook examples of mineralized epithermal systems even before we get to the first stage of drill testing. We have identified multiple centers of strong quartz veining, fossil hot springs, rhyolite domes and dikes, all with associated abundant sulfides, which is nothing short of remarkable for the small amount of work completed to date. We have an abundance of mineralized samples from Yautepec from a quartz vein system of over 500 meters strike length with estimated widths of 2 to 9 meters; this flanks a 700-meter-long mineralized fossil hot springs (sinter) deposit that demonstrates we are at the very top of the epithermal system, with the full potential preserved at depth," Jones explained. "Another target consists of multiple dikes we have identified along a canyon bottom that are similar to those associated with the nearby producing mines of Gold Resource Corp. In total, we have identified four principal targets so far at Yautepec over a 3-kilometer trend, and that's just a small part of the 20-kilometer caldera-related structural trend that defines the larger project."

With positive results coming out of the initial work, Megastar in October announced the signing of an option agreement to acquire the mineral rights to Cerro Minas, an extension of the trend at Yautepec. "Completely surrounded by our current land holdings, Cerro Minas displays similar epithermal characteristics to targets that we had already identified and, given our early-stage success, adding this land is a natural as we look to enlarge our footprint in, what we believe, is a very prospective area," Jones stated.

The Cerro Minas property covers "5 kilometers strike length of highly prospective ground containing polymetallic (Ag-Au-Cu-Pb-Zn) skarn-style mineralization along a northwest trending caldera structural margin," the company stated. "With this agreement, Megastar has consolidated over 7 kilometers strike length of high potential epithermal and skarn mineralization targets for drill testing proposed in 2020."

At another Megastar property, the Magdalena project, fieldwork has recently identified a 1.7-km structural trend "within a well-defined volcanic caldera." In December Megastar announced that its preliminary work identified "characteristics of a significant epithermal system including gold mineralization locally exceeding 3.00 grams per tonne." Jones stated, "We have mapped a principal 300 by 285 meter area of surface gold mineralization defined by 58 samples, including a couple of samples of over 3.00 g/t gold. This main zone, along with other prominent outliers, constitute easy-to-access and drill-ready targets."

"The first-round Magdalena results are remarkable sampling numbers for anyone, anywhere," Jones stressed, "58 samples above 0.20 grams with two over 3 grams, a dozen over a gram."

Megastar geologists have been finding fossilized stromatolite mounds at Magdalena. "They form at the margins of previously active surface hot springs, which means that they are at the very top of the epithermal system," Jones explained. "That's important because it means that the entire vertical potential of that bonanza system is conserved; if it is there at all, you've got the full down dip extent of potential bonanza grade mineralization."

"Megastar has a busy exploration program planned as it looks to follow up on its early success," Jones said. As well, the company is currently in the process of applying for drill permits and expects to begin drilling this year. "This work should create a steady news flow for the company in coming months."

Megastar boasts a tight share structure, with 44 million shares outstanding and 14 million warrants and options, which when exercised would generate just under $1.4 million. Management and insiders control approximately 16% of the company and other significant shareholders control an additional 23%.

Megastar closed a non-brokered private placement last spring that raised $672,600, which is being used to advance exploration on the properties and, to date, has generated results that have confirmed and heightened Jones' early and persistent optimism.

Industry veteran Robert Archer, cofounder of Great Panther Mining and CEO of Newrange Gold, sits on Megastar's board of directors. He told Streetwise Reports, "The Megastar projects in Mexico represent the best in fundamental gold exploration. We have the prolific Sierra Madre trend, the Oaxaca gold belt with producing mines, a highly respected and knowledgeable geologist responsible for some of those discoveries, and early stage prospects that are demonstrating all the right characteristics of epithermal gold deposits. We are excited about the potential for new discoveries and 2020 should be a pivotal year for the advancement of the projects."

"People ask me why I've invested in Megastar," Jones stated, "and I tell them that when you understand what you are looking at, it's easy to become excited because I can clearly see the unrealized opportunity."

Technical analyst Clive Maund wrote on on January 18, that the company is nearing an upside breakout. "Megaster is an explorer/developer that in addition to gold and silver properties has a copper-zinc project. . .we stay long and Megastar continues to be rated a buy here."

Maund's technical chart on Megastar:

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1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Megastar Development. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Megastar Development Corp., a company mentioned in this article.

Additional disclosures
Clive Maund does not own shares of Megastar Development and neither he nor his company has a financial relationship with the company.

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