Dave Mathewson, vice president of exploration with U.S. Gold Corp. (USAU:NASDAQ), has spent 35 years in Nevada as a geologist. In senior positions with Newmont Mining Corp. (NEM:NYSE), he greatly expanded its portfolio of properties, discovering several deposits that became mines, pioneering novel geochemical and geophysical methods of exploration. With the data provided by these methods and an evolving understanding of the geologic controls on Nevada ore deposits, Mathewson was able to develop exploration models that paid dividends, discovering deposits that became mines that have produced millions of ounces of gold in the last two decades.
When setting out on his own, Mathewson combined his geologic and personal experiences in Nevada to identify locations that fit his geologic model yet were unappreciated. His first big success was with Gold Standard Ventures Corp. (GSV:TSX.V; GSV:NYSE) and the famous Railroad deposit. An exploration program guided by Mathewson's geologic models took Gold Standard Ventures from an initial market capitalization of CA$5 million ($5M); that company now is valued at approximately CA$495M.
Mathewson's latest venture is U.S. Gold Corp. The company holds a land package that has taken Mathewson 15 years to secure and is composed of claims formerly owned by Newmont, Placer Dome (Barrick Gold Corp. [ABX:TSX; ABX:NYSE]) and McEwen Mining Inc. (MUX:TSX; MUX:NYSE) (Tone Resources). Mathewson identified underappreciated, early-stage exploration properties that, for a variety of reasons, larger firms were not interesting in methodically exploring. The properties acquired fit the geologic model that Mathewson has developed over his entire career. Similarly, the acquisition of these properties has taken Mathewson more than a decade. However, the resulting district-scale land package, untested by modern exploration under the control of a single company, is unique in Nevada mining. The principal focus of U.S. Gold is to test Mathewson's model in Nevada (the "Keystone" property).
The Keystone property encompasses approximately 12 square miles (7,500 acres), located in central Nevada. Mathewson's goal in Nevada exploration was to find geologic evidence to support a model of an overlooked, district-sized, Carlin-style gold deposit.
Historical drilling at Keystone consisted of 183 reverse circulation (RC) boreholes generally between 200 and 300 feet deep. By modern standards, these shallow borings provided limited information to inform the geologic model of the site. Other historical work at the site includes geophysical surveys that were included and re-interpreted in the context of the Mathewson's models.
Recent site work has included five "scout" holes drilled by U.S. Gold, then a private company, late in the 2016 exploration season. Borehole locations were chosen based on U.S. Gold and historical geophysical (gravity and IP) surveys, as well as geochemical (gold pathfinder elements in soil) surveys. Locations for the scout holes were identified by the geophysical and geochemical surveys guided by the geologic experience of the exploration staff led by Mathewson. Five of the six holes were completed before a particularly severe Nevada winter ended the drilling season. The last of the scout holes will be drilled before the end of 2017.
Results from the complete scout drilling program have not been publicly released.
The company expects to spend a total of approximately $2.5M on exploration at Keystone in 2017. This will include the previously mentioned drilling, staking in the southeast (SE) part of the project, and additional geophysics in the SE corner of the property. Additional core and RC drilling located based on the updated model may take place as well. The results of the 2017 drilling program should be available in October and November.
In summary, the Keystone project is a district-size assembly of land in a highly prospective gold producing region of Nevada. The exploration team led by Dave Mathewson has found many deposits in Nevada and has developed a geologic model and an exploration methodology that they believe could be the next big Nevada gold deposit.
U.S. Gold Corp.'s second project is the Copper King deposit in Wyoming. Copper King is not a recent discovery. Like many historical mining areas in the Western United States, the property has had many owners over its history. For a variety of reasons, the Copper King deposit was somewhat of an orphan in the property portfolio of recent owners, which have been gold and uranium developers and producers. As such, the deposit was never given the attention it merited despite having a historical 1.5 Moz Au eq resource in a single open-pit design.
The U.S. Gold team is applying the same model-driven, modern and rigorous exploration techniques to the Copper King deposit as at Keystone. The initial results of the data review indicate there is a possibility of a second exploration target near the initial deposit. U.S. Gold is currently updating the mine model using modern 3-D mine planning tools that were unavailable to previous owners.
To a large, international mining company, development-stage deposits of 1.5 Moz Au equivalent-size at the grades and depths of Copper King are interesting, but not exciting. However, if exploration can prove up an additional resource of 1.5 Moz, the resulting 3 Moz deposit (ideally with a 100 Koz Au eq annual production) starts to look more like an acquisition target to a major mining company.
The Copper King deposit has had significant geologic and engineering assessments to evaluate potential mine economics. The preliminary mine plan forecasts a production of 58 Koz Au eq in a gravity/flotation concentrate. The ore appears to be simple to mill and there is no plan for cyanide heap leaching. Environmental risk due to acid mine rock appears low.
At first glance, Wyoming might seem like an unusual copper/gold mining jurisdiction. There are no current operating gold or copper mines in the state (as there are in the neighboring states of Colorado, Utah and Montana). Despite the lack of current gold or copper mines, mining plays an important part in the local economy. In both coal and uranium, Wyoming is a leader in production in the U.S. The local law is mining friendly.
In the last five years, owners of the Copper King have included Saratoga Gold, Strathmore Minerals and Energy Fuels. To date, the drill hole database included 91 holes over almost 35,000 feet with approximately 8,000 assays for gold and copper each. Preliminary metallurgical testing was done in 2009 by SGS.
The 2012 preliminary report prepared by Mine Development Associates is worth a closer look. It describes itself as the first NI-43-101-compliant resource estimate, as well as an analysis of recent economics of the deposit.
Copper King Summary
U.S. Gold plans to spend $1.5M on development at Copper King during 2017. The goal will be to apply model-driven exploration methods while refining the existing mine model to increase the appeal of the project to a joint venture with an operator looking for a development deposit with the potential of 3 Moz Au eq resource and 100 Koz Au eq annual production.
U.S. Gold Corporation
The corporate structure of U.S. Gold is unusual for a small gold company. In 2017, U.S. Gold (formerly a private company) merged with Dataram, an operating company in the computer memory business, to get a major market listing in the U.S. As part of the merger, there was a 1:4 reverse stock split to increase the share price to satisfy exchange listing requirements.
At present, the combined company has a total of 12.7 million shares. Of those, 1.2 million shares were issued to Dataram and 11.5 million shares allocated to the private owners of U.S. Gold. The market cap is approximately $27M. The end result: NASDAQ approved a new trading symbol, USAU, which the company is now trading under.
In spite of the unusual confusing corporate structure, there are benefits. The memory business of Dataram has approximately $20M in annual revenue. The company has a well-known industry brand name, and has been operating for several decades. The core business of Dataram appears unusual in combination with a gold company. However, the combination of a long-lived operating company with a credible upstart in the gold exploration sector make for an oddly synergistic coupling.
The new U.S. Gold has $7.7M in the bank as of Jan. 31, 2017. The 2017 exploration expenditures are planned to be $2.5M at Keystone and $1.5M at Copper King.
The new U.S. Gold Corp. has a comprehensible portfolio of a highly prospective gold exploration project in Nevada, a development asset with exploration potential in Wyoming and an established operating company that provides cash flow.
Complementing the technical team led by Dave Mathewson is the CEO, Edward Karr. Karr brings encyclopedic knowledge of deal-making in finance and the junior mining sector. He has an impressive ability to bring together the financial and the technical into a narrative that an investor can understand and support. For followers of U.S. Gold, the news releases with exploration results and more clarity on the corporate restructuring will make for an interesting summer.
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1) Alec Gimurtu compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He owns, or members of his immediate household or family own, shares of the following companies mentioned in this article: U.S. Gold Corp. He is, or members of his immediate household or family are, paid by the following companies mentioned in this article: None.
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( Companies Mentioned: GSV:TSX.V; GSV:NYSE, USAU:NASDAQ, )
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