Alpha Flight Blog: Goldstrike Resources Nov 9 2012 Market Commentary
Installment (iii) 2012 Yukon Exploration Program Review & Path Forward For 2013.
Goldstrike Resources GSR.V Nov 12 2012 Market Commentary
Goldstrike shareholders know there’s an elephant in the room. I don’t know about the rest of you, but I’m a visual guy. So let’s look straight at it:
GSR.V May 14 2012 – Nov 8 2012 Bar Chart
The chart begins May 14, 2012, when Goldstrike announced plans for the 2012 Yukon exploration season and finishes November 8, 2012, roughly 5 months later. There are all sorts of ways technical analysts can look at this chart. But let’s skip the mumbo-jumbo for now and keep it simple (technical mumbo-jumbo to follow later).
From May to Mid-August of 2012, we see a period of rising prices and expectations on modestly increasing volumes, until August 20, 2012, when the company announced it had cut a channel with 14.25 g/t gold over 2.4 metres with visible gold, and the price spiked to the mid .50s and consolidated until September 18, 2012, when the company announced bonanza grade gold mineralization on its Plateau South property ranging up to 8.18 oz/t. This striking news was the impetus for a new and final leg up for the year, hitting a one-year high of .81 cents October 1, 2012 and settling into the mid .70s shortly after.
All this changed October 10, 2012 when Goldstrike announced the modest results of two small scout drilling programs comprised of 3 holes from the Goldrush Zone, located in Plateau North, and 2 holes in the Goldstack Zone, located in the distant, western edge of Plateau South. I’ll make reference to this work program later, but it should be noted immediately that these two discreet campaigns featured only a few hundred combined metres of scout drilling at two separate locations, both of which were respectively 15 and 18 kilometres distant, as the crow flies, from Goldstrike’s outstanding VG Zone, which as of the same day’s news produced a final bonanza-grade 15.45 oz/t gold rock grab sample taken from outcropping bedrock.
As stated in Goldstrike’s press releases of September 18, 2012 Outcrop and subcrop-based grab samples from the VG Zone range from detection level to 529.86 grams per tonne (15.45 oz/t) with over 23 samples running in excess of 1 g/t gold in a concentrated area of 2,000 by 140 metres, featuring 10 samples in excess of ½ oz/t gold. Certainly this outstanding area will be subject to a number of serious drill programs throughout 2013.
Despite the sensational bonanza-grade results from the VG Zone, the news of October 10, 2012 was met with quick and thorough selling, from an initial trade of .66 cents to a close of .38 cents, a decline of -42% for the day, and a drop of -50% from the previous day’s close of .76 cents. Since October 10, 2012, shares have settled and begun solid sideways consolidation around .25 cents, churning volume in the six-figure range, with firm support at .24 and modest resistance at .26. All-in, the market has applied a -35% discount to GSR for the period of time from May 14 to November 8, 2012, an unfair summary figure when measured against the outstanding results of the 2012 exploration season.
Since October 10, short-term Bollinger Bands have pinched down several times to convergence and are now running parallel, only a hair’s-width apart. Relative Strength Index ending one month has turned just up over 30 to 32, (bullish), Money Flow Index is moving out of oversold territory to rest at 37.22 November 8, 2012 (bullish) and the Ultimate Oscillator has moved up smartly from under 50 to now resting at 64 (bullish).
In other words, it is likely the bloodletting has ended, a bottom has formed, and the stock should now trade in a range with a more bullish orientation, as evidenced by the October 10, 2012 – November 8, 2012 bar chart below, with .25 cents precisely aligned with the 9-day simple moving average. Sensing a bottom in tax loss season, bargain hunters are moving in, a trend that will likely continue through the remainder of Q4.
GSR.V October 10 2012 – Nov 8 2012 Bar Chart
Based on the questions I’ve received from a number of my subscribers, it seems the selling from October 10 – 12, 2012 was driven by two key factors: Sophisticated investors profit taking at the end of Goldstrike’s exploration season, and a subsequent stampede of de-risking by those with little familiarity of the company’s fundamentals and business objectives. If the feedback I’ve received can be a guide, I opine that many sellers were unfamiliar with Goldstrike’s goals for the 2012 exploration season, described in the company’s May 14, 2012 press release. To be clear: Goldstrike did not drill and fail on the newly-discovered, extremely high grade discovery zones on the Plateau South. In fact, nothing could be further from the truth.
As stated in Goldstrike’s May 14, 2012 press release, Goldstrike’s 2012 scout drilling program intended to follow up on targets established by prospecting and geological work conducted in 2011, which focused on the Plateau North project, not the bonanza-grade zones found in Plateau South, which were only discovered in late 2012—long after scout drilling programs were initiated, tens of kilometres away, in Plateau North.
Considering Goldstrike’s outstanding VG Zone and Goldbank Zone remain entirely undrilled, the recent wave of selling was irrationally harsh and pushed the stock into oversold territory. As such, investors now have an unprecedented buying opportunity in the .25 cent range. I note large blocks of stock continue to be accumulated by savvy investors any time GSR cracks .25 to the downside. I continue to accumulate along support lines.
Investment Case: Geological Prospectivity – Plateau South Project / Yellow Giant Trend
The strike length of the Plateau South’s Yellow Giant trend is approximately 25 kilometres long, with two key areas featuring multiple bonanza-grade, outcropping bedrock and subcrop samples with evident visible gold: The Goldbank Zone and the VG Zone. These zones and intervening gold mineralization are associated with a regional deformation system that has been traced for at least 13 kilometres and remains open, which provides for multiple strong drill targets.
Yellow Giant Trend - VG Zone
High grade gold mineralization has been found over an area of at least 2,000 by 140 metres that remains open and is drill ready. Within this area, 23 rock grab samples to date assayed over 1 g/t, including four samples that assayed 525.86, 280.60, 210.26 and 159.48 g/t. The high grade samples are found in silicified felsic volcanic rock, which gives another strong indication of district-scale potential, as felsic volcanics host over 60% of Canada’s gold production, the most notable examples being Timmins, Kirkland Lake, and Val-d’Or.
Of specific interest in the VG Zone picture seen below are two grab samples running 8.18 oz/t and 15.45 oz/t respectively. Most significantly, the 8.18 oz/t sample containing visible Wire Gold is probably quite close to the source of gold mineralization, as gold is so malleable it would likely have ground down if the sample had travelled any distance. In addition, the 15.45 oz/t sample, while not featuring visible gold, was taken only a few metres away from the visible Wire Gold sample, and samples with no visible gold are running consistently bonanza & high-grade g/t gold numbers in this localized area and along strike.
As seen in the photo, these bonanza-grade samples are exposed across a low-rolling hilltop. They are no doubt proximate to the gold source as high grade gold simply does not travel uphill and concentrate over time. Most importantly, all of the high grade samples have been taken from outcropping bedrock and adjacent subcrop, not float.
With these unique geographic and geological factors in mind, it can be said with confidence that the underlying bedrock in this area is locally gold mineralized. High resolution ground geophysics has confirmed a large structure directly below the bonanza grade gold mineralization found on surface. This structure is believed to be the source of gold mineralization, and Goldstrike is planning an extensive program of systematic drilling to outline its extent to depth and along strike.
Yellow Giant Trend - Goldbank Zone
As for the Goldbank Zone, high grade gold mineralization has been found in outcropping bedrock over an area of more than 11 kilometres by 500 metres that remains open and is drill ready. Within this area, 33 rock grab samples to date assayed over 1 g/t, including five samples that assayed 34.25, 26.99, 24.70, 14.54 and 11.10 g/t. The high grade gold mineralization is associated with strongly silicified felsic volcanic layers that are continuous over long distances and are recognizable even on satellite imagery.
Precision Geosurveys Inc. has just completed a low level high resolution helicopter geophysical survey that confirms the geometry of the new Yellow Giant system. As with the VG Zone, Goldstrike is planning a series of drill holes targeting the high grade gold mineralized outcrops along the 11-kilometre Goldbank trend.
Yellow Giant Trend - VG Zone & Goldbank Zone Summary
Both the VG and Goldbank Zones are entirely new, with no significant geological work completed before the 2012 exploration season. As reported in Goldstrike’s October 10, 2012 news, Precision Geosurveys Inc. has just completed a low level, high resolution helicopter geophysical survey along the entire Yellow Giant Trend on the Plateau South property. This survey was designed to assist in outlining the key structures and geometry of the extensive new Yellow Giant gold system. Since these discoveries came to light late in the 2012 exploration season, Goldstrike is still in the process of compiling and interpreting of geochemical, geological, ground and airborne geophysics in preparation for drilling in the VG, Goldbank and Goldstack zones. The VG and Goldbank zones will be the first areas within that deformation zone to be drill tested, and will certainly be Goldstrike’s priority targets for 2013.
Investment Case: Geological Prospectivity - Lucky Strike
The Lucky Strike property is located in the heart of the White Gold District, and is contiguous with the Kinross Golden Saddle property, 12 kilometres south-southeast of Comstock’s QV property, and 30 kilometres north-northeast of Kaminak’s Coffee Creek property. As noted in Goldstrike’s news release of Oct 1, 2012, the Lucky Strike claims now boast the highest grade gold in bedrock sample in the entire White Gold District at 1.216 oz/t (41.69 g/t). This sample consists of sheared, brecciated felsic schist, with strong silica, sericite, and pyrite alteration and contains finely disseminated dark grey sulphides. The assay record shows elevated values of silver, molybdenum, antimony, lead, and arsenic, all of which are quite similarly anomalous to what was found on the Underworld / Kinross Golden Saddle property.
This high grade sample was taken along a newly-discovered gold-mineralized structure that trends east-northeast for 410 metres and remains open, now named “Lucky Shot”.
The Lucky Shot structure was traced in an area of little outcrop using high resolution ground geophysics that confirms it passes through the mineralized outcrop and beyond. The new high grade gold discovery is contiguous with Kinross’s claims that contain the Golden Saddle, and is the closest new gold in bedrock discovery to that deposit. Lastly, the Lucky Shot structure has the same orientation as the Golden Saddle deposit, Kaminak’s Coffee Creek & Comstock’s new gold discovery and is drill ready.
Investment Case: Geological Prospectivity – Solomon’s Summit
The Summit property contains a new Carlin-like discovery that closely resembles ATAC’s Conrad Zone. Five rock grab samples that assayed 9.92, 8.7, 5.3, 2.78, and 5.3 grams per tonne gold were taken along a north-south mineralized structure that has been traced on the ground for 400 metres and remains open. The gold shows a close spatial association with pathfinder elements arsenic, antimony, mercury, and thallium. The structure cuts across a strong multi-element geochemical anomaly, including calcareous sandstone, limestone, limestone breccia, and siltstone, anomaly 2,000 metres long, and up to 800 metres wide that extends northwest along Solomon’s Summit and remains open. Targets are drill ready.
Investment Case: Geological Prospectivity – Summary
Including the VG, Goldstack, Goldbank, Goldrush, Solomon’s Summit and Lucky Shot prospects, Goldstrike has six original discoveries in Yukon that are drill-ready. The grade, consistency, and scale of showings discovered so far along the Yellow Giant Trend suggest that the results of 2012’s exploration programs are just the tip of the iceberg. We may be seeing the earliest indications of a new gold district.
At the newly discovered VG Zone, ground geophysics has confirmed a large structure below bonanza grade mineralization taken from outcrop & subcrop at surface. At this location, high grade mineralization has been found over an area of at least 2,000 by 140 metres, and the zone remains open in all directions. Several other high grade mineralized zones have also been defined along the gold-mineralized Yellow Giant trend, including the Goldbank Zone. These zones and intervening gold mineralization are associated with a regional deformation system that has been traced for at least 13 kilometres and remains open, which provides for multiple strong drill targets. Numerous Yellow Giant targets are drill ready and multiple drill programs are planned for key, bonanza-grade target areas.
Lastly, drilling has also been recommended on the Lucky Strike and Solomon’s Summit properties, which have both produced outstanding high-grade high grade gold assays from bedrock during the 2012 exploration season.
Market & Investment Case Summary
Goldstrike Resources is a pure Yukon gold explorer, with 6 original drill-ready discoveries key among their 2,787 claims covering approximately 58,260 hectares. Based on the results of reconnaissance exploration and initial follow-up, the company is now focusing on six high grade gold prospects which are all-new discoveries and appear to have very large upside potential.
Goldstrike’s 2012 exploration program has, in my mind, been a season of massive achievement. The consistent bonanza-grade anomalous gold in rock results found in key areas along the Yellow Giant Trend, are unprecedented in Yukon exploration and show strong, early indication of true district-scale potential. I look forward to the company’s 2013 diamond drill campaigns on the untested VG and Goldbank zones, as well as further testing of the Goldstack zone, and initial drill campaigns on the outstanding Lucky Strike and Solomon’s Summit properties.
Goldstrike’s management, exploration and technical teams have over 100 years of combined experience with a proven track record of success in the Yukon. In fact, one of the Yukon’s most notable recent discoveries, Coffee Creek can trace its origin back to the Prime Properties Syndicate, under the leadership of Goldstrike’s Chief Operating Officer, Bill Chornobay.
GSR’s technical staff is first rate: Trevor Bremner served as the Yukon’s Chief Government Geologist and Yukon’s Acting Director of Mineral Resources for nearly a decade, and three years as Head of Mining Legislation in Ottawa. Prior to that, he spent about eight seasons in the Yukon on a wide variety of mineral exploration projects with Archer Cathro and Associates (founders of ATAC Resources). The team behind Goldstrike is responsible for several major mineral discoveries, including the CanCan gold-silver deposit in Chile, and the Golden Bear gold deposit in British Columbia discovered by Goldstrike Director Dr. Lawrence D ick.
With all this in mind, it comes as no surprise that Trevor Bremner has been invited to speak to a group of his colleagues, peers, and members of the scientific community regarding Goldstrike’s Selwyn Basin prospects at the Yukon Geoscience Forum, to be held in Whitehorse November 18 to November 21.
Value priced at .25 cents, and with true district scale potential (and of course significant stock price multiplication potential), Goldstrike Resources is my number one pick of all Yukon gold explorers for 2013. I continue to take full advantage of the current oversold conditions through accumulation along support lines.
Your money and your risks are your own, and I urge you to conduct serious and thorough due diligence. But if you do, I expect in the end you will agree with me: Now that Goldstrike’s story is fully told – the stock is grossly oversold. If you want join me in capturing the coming upside, the rest is up to you.
To learn more about AlphaPortfolios Advisory Inc. please visit my Stockhouse profile, see my images and graphics on Flickr, or connect with me on Facebook and Twitter to find out more.
James Hudson, AlphaPortfolios Advisory Inc.