Here's what U.S. Gold Corp. (USAU) just told markets about its Keystone Project
Wednesday, Sep 06, 2017
Written by Samuel Rae

U.S. Gold Corp. (USAU) is attracting a lot of attention in the Nevada Junior gold-mining space right now. The company, which formed out of a merger between then-private US Gold Corp. and New Jersey based technology firm Dataram earlier this year has been grabbing headlines both inside and out of the natural resource space, with the majority of the attention rooted in its lead development project, Keystone, and the involvement of big-name Nevada explorer, Dave Mathewson.

The latter was responsible for a number of very large resource discoveries during his time at mining behemoth Newmont Mining Corporation (NEM), where he was a Senior Exploration Geologist and a Manager of Exploration in both the Carlin Trend and the Great Basin (both well known, substantial deposits).

Subsequent to his time at Newmont, Mathewson served as the Vice President of Exploration at Gold Standard Ventures Corp (GSV), where he managed the successful exploration program on the Railroad project and helped to build the company from a $15 million junior to the half billion-dollar valuation it commands today.
Last week, US Gold Corp. published scout drilling results and an update as to the progress of exploration at its lead development project, the above-mentioned Keystone. The results have served to shed light on to what was previously a relatively underexplored property and, in doing so, have served to draw a lot of speculative attention towards the company.

For those not familiar with US Gold Corp., the company has two primary projects in its portfolio, one being the already mentioned Keystone, which is located along the Cortez Trend in Nevada, and the other being a gold and copper resource called Copper King, located in Southwest Wyoming.

Earlier this month, US Gold Corp. published an update as to the progress at the latter of these two resources, which is available here. As per the update, a base case summary of an historic Preliminary Economic Assessment (PEA) indicates that the resource will generate Net Cash Flow of $273.7 million and has a Net Present Value of $159.5 million, based on a $1,100 per ounce gold price and a $3.00 per pound of copper and a 5% discount rate.

Geophysical studies are underway at the project and drilling is expected to commence during late 2017 in an attempt to confirm these numbers and to build on the accuracy of currently available project data.

Copper King is secondary for now, however.

It's Keystone that is really driving valuation and that is drawing the high degree of attention referenced in the introduction to this piece.

So what did the latest report tell us?

The numbers derive from a six hole drilling program that was initially planned for completion during 2016. However, due to adverse weather conditions, the company was unable to drill two of the planned six holes. The most recent report details the remaining four, which completed this summer.

Importantly, and as a starting point (before looking at the individual holes) the drilled intercepts bear many similarities to world-class gold deposits located on the north Carlin Trend and neighboring Cortez Trend deposits. In natural resource mining, similarities between the geological profile of established deposits and exploration projects is what the company wants when it is conducting this sort of scout drilling. Similarity in geological profile suggests similarity in mineral makeup, so if the rock that makes up Keystone looks like (and contains the same stuff as) the rock that makes up the Cortez Hills mine, for example, an elephant-type deposit owned by Barrick Gold Corporation (ABX), it's a good sign.
That's the case here.

What about the drill holes?

There are four holes in focus: Hole Key17-1c, Hole Key17-01rc, Hole Key17-02rc and Hole Key17-03rc (the last three of these are follow ups to another hole, Key16-03c, which was terminated due to difficult drilling but which turned out some strong mineralization results, justifying further investigation).

The first of these, Key17-1c, was drilled to 1605 feet (489 meters) and was designed to provide an initial test at a location within the largely undrilled eastern flank of the Keystone project. To 359 feet, the hole showed gold anomalies up to 0.079ppm.

Before looking at Key17-01rc, Key17-02rc and Key17-03rc, it's worth noting that the hole that wasn’t completed, Key16-03c, was drilled to 753 feet and contained anomalous gold up to 0.217ppm, with moderately strong pathfinder metals in strongly oxidized and broken, silicified upper and lower-plate rock units.

So did the three follow up holes live up to expectations implied by the discontinued Key17-03rc?

In a word, yes.

Key17-01rc was drilled to 1810 feet and the numbers show that circa 75% of what's called the Horse Canyon siltstone unit (that the hole intersected) is anomalous (meaning >10ppb) in gold up to 0.181ppm. Key17-02rc was drilled to 1820 feet and multiple, thick zones of anomalous gold, up to 1.05ppm, were encountered within the underlying variably altered Wenban Formation limestone. Key17-03rc was drilled to 1940 feet and a 705-foot-thick zone of anomalous gold up to 0.731ppm was uncovered, as well as a 190-foot-thick zone of strongly anomalous gold, up 0.320ppm.

So it looks like there's gold there – what's next?

Now it's all about refining these numbers and getting a more accurate idea of how much gold there is and exactly where it is on the project. This is where having someone like Mathewson is so important – he's got the experience to compile the available data and use it to inform a refined drilling program, which the company expects will kick off before the end of this year.

All said, it's still early days for US Gold Corp., but this early stage exploration is a key component of establishing yourself as a successful mining entity and the data that it's returned so far for the company is strongly indicative of an economically viable resource. Near term catalysts come in the form of confirmation on the numbers already reported as well as continued discovery of mineral rich deposit zones.

Disclosure: The author holds no positions in any of the stocks mentioned.

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