One Company, Two World Class Mining Districts?: Comstock Metals (CSL:TSXV).
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The leader of our new Featured Company has come to find success in a different way than your typical mining CEO. He is not a wheeler and dealer. He is not one to be at the restaurant or conference promoting his company to every ear that will listen.
This man is a problem solver and one who lives for the discovery and the understanding of geological formations. He is a geological engineer by education and trade and lets his results speak for themselves. His passion lies in the hunt.
We will get to this CEO’s collective accomplishments, but first, you have to understand the story which brought us to the selection of our new Featured Gold Company – Comstock Metals (CSL:TSXV).
The CEO of our new Featured Company (Comstock Metals) is also leading another junior explorer which has been around for a couple years. He has already delivered drill hole results, with this other company, that the vast majority of geologists never find.
What kind of results? Less than 3 months ago this CEO delivered a drill hole which intersected 213.9 metres (m) of 1.63 g/t gold (g/t Au), starting at 11.70 metres depth. To say he has proven himself in the mining industry is an understatement.
The best way to learn about Comstock Metals, our new Featured Company that went public last summer, is to know how the discovery of its flagship gold asset unfolded.
It begins in 2006, with our main character Rasool Mohammad, the CEO of Comstock Metals. Rasool has travelled the world, working for mining companies as large as BHP and HDI Mining. He speaks 5 languages (and that doesn’t include the ‘language of geology’ only rock fanatics can understand).
Back in 2006, Rasool was hired by a company many of you may have heard of – Golden Goliath. He was brought on as an independent consultant to the company and its CEO. The area Rasool was asked to come down and map (at the request of Golden Goliath) was the western part of the Chihuahua District, of the Sierra Madre Trend in Mexico.
At the time, this area was not well understood from a geological standpoint. He spent months at a time in the field, learning the geology and reviewing countless scientific papers, graphs, metallurgical studies and geophysics from the region. It became an obsession for him (almost an unhealthy one he admits).
Rasool was exploring the Chihuahua District of Mexico which lies within the Sierra Madre Occidental(SMO). For those of you who aren’t familiar with the Sierra Madre Trend, it is the largest epithermal trend (mineral veins and ore deposits formed from warm waters at shallow depth) in the world. Sierra Madre Occidental(SMO) is an area of the trend in Northern Mexico and is home to several multi-million ounce gold and silver deposits.
It has been described as ‘Elephant Country’ given the massive deposits within the region. Companies such as Fresnillo, Minefinders, Alamos Gold, Gammon Lake, Goldcorp and Agnico-Eagle are very active in this region and some have made massive gold and silver discoveries. Fresnillo has recently discovered a 9.6 million ounce gold deposit less than 15km south of Comstock Metals’ flagship asset.
It is considered to be the largest epithermal precious metals region of the world. With production from the area of approximately 40 million ounces of gold and up to 2 billion ounces of silver over the last 400 years, the Sierra Madre Occidental Range has become an area of global focus in the search for new precious metal deposits. This region in Mexico is characterized particularly by monster gold and silver porphyry systems.
Rasool proved himself in this region with Golden Goliath, when at his request, working closely with a geologist named Ron McMillan, the company drilled a hole that intersected strong results. This was in April of 2009. Later on down the road, Golden Goliath and Agnico-Eagle ($6.8 Billion Market Cap Mining Company) formed a joint venture agreement.
After three years of working in this region of Mexico, Rasool knew Golden Goliath’s portfolio of projects in the area intimately. He had been working alongside its very well-respected CEO, Paul Sorbara, and as he explained to our team, was paid as a hands-on consultant to provide his expertise and become familiar with one of the most prolific mining regions in the world.
After working with Paul, Rasool was motivated to lead a mining/exploration company in Mexico. He had aspirations to control one specific property thanks to his obsession with the geology in the Chihuahua District.
He negotiated with Golden Goliath, the company he had provided his expertise to when exploring the geology in the region, to option him a specific property. The property is known as Corona and of all of the projects Rasool had studied and worked on in Mexico, he found this one to be the most compelling.
Rasool now had an asset and was ready to get to work. Having made a strong impression on the right industry people, thanks to his track record, raising money proved to be a simple process for him. He got everything he needed and went public with Comstock Metals in the summer of 2011.
As we mentioned above, Rasool Mohammad is CEO of another company which, less than three months ago, announced a drill hole that intersected 213.9 metres (m) of 1.63 g/t gold (g/t Au), starting at 11.70 m depth. After the results were announced to the public, the company’s stock nearly tripled in a matter of hours, with several million shares trading hands.
This is a man who has proven he knows how to find gold and what characteristics to look for when selecting drill targets. He raises capital based on results – not hype.
Mineralization at Corona
His new company, and our Featured Gold Company, is at the onset of its first aggressive exploration and drill program to date. With early results already released, and its shares trading almost 50% off their highs from just two months ago, we felt now is a prudent time to introduce the company. Our new Featured Company, led by CEO Rasool Mohammad, is Comstock Metals (CSL:TSXV).
We’ve been shareholders in Comstock for several months now, long before we had ever decided to make it a Featured Company. And when its share price took off in early March to nearly $0.30, our team feared we had missed our shot at introducing it to our members in a timely manner.
However, thanks to the latest correction in the TSX Venture, Comstock‘s shares are off nearly 50% from where they were two months ago. The shares of Comstock currently trade at $0.15 and it’s our intention to increase our share position in the company this coming week.
Comstock 1 Month Chart
Our team saw this fall-back as an opportunity to introduce Comstock and explain exactly what Rasool believes he is onto in the Chihuahua District of Mexico.
Comstock acquired majority control of the Corona Gold Project nearly two years ago from Golden Goliath. It began its first drill program only a few months ago. Comstock has already begun and will continue releasing results from a drilling season that we eagerly await – hence the timing of this report.
Sample rock from Corona
Below is a map of the region in 2012, the current players making noise in the area and the location of Comstock‘s flagship asset, its Corona Gold Project. Take note of the massive gold deposits located around Corona. Also take note of all the world leading mining companies operating in the region. They’re there for a reason.
One can clearly identify the north-south trend littered with massive world class gold deposits. Fresnillo, the largest silver producer in the world, has recently discovered a 9.6 million ounce gold deposit, known as Orisyvo, which is along trend, less than 15 kilometres from Comstock’s Corona Gold Project.
The map above shows 9.2 million ounces of gold, but Fresnillo has reported 9.6 million ounces. Interestingly enough, from Comstock‘s base camp at Corona, you can see the tailings of the Ocampo Project (2.9 million ounce gold deposit) up to the north.
An added benefit to Comstock is that the Mexican government has already rushed in and begun building a massive highway to the Orisyvo Deposit, which happens to run directly by Corona. This is a government that takes care of its miners and the money these companies generate.
In a recent article, titled, “Mexican mining, digging its way in the world” which was posted on a government endorsed website, it explained just how pro mining and investment Mexico is. Below is an excerpt:
In terms of employment, Mexico’s mining industry employed over 280,000 people by the end of 2010. It is estimated that the sector is responsible for more than 1.5 million indirect jobs in the country.
As a matter of fact, mining was one of the first Mexican industrial sectors to show signs of job recovery after the 2009 economic downturn, adding more than 14,200 new jobs during the last year, mostly in the extraction and processing of metal ores.
This is a country our team at Pinnacle wants to have exposure to. Mexico, and in particular the Chihuahua District, is without question, one of the most mining friendly jurisdictions in the world. Cheap labour and solid infrastructure are plentiful due to the climate, geography and mining culture which dates back hundreds of years.
The majors operating in this region have never seen profit margins on gold and silver as strong as they are today (given historically high prices) and are not hesitant to make acquisitions of merit. If a junior makes a significant discovery, there’s no shortage of potential buyers. We have a direct example of this acquisition mindset to share with you shortly.
Rick Rule, one of the most successful junior resource investors on the planet recently stated that “As experienced junior gold speculators know, nothing adds to share value like discovery. Speculators will fondly remember hundredfold profits from discoveries like Diamond Fields and Arequipa.
We are now truly in a discovery cycle, one fueled by sustained capital investments in unprecedented amounts. Better yet, we have been able to explore frontier terrain that was off limits due to politics or social turmoil. This will add spectacular real value, and this prospectivity is discounted in the current market.”
Back to Comstock Metals (CSL:TSXV)
On April 1st 2012, it announced that drill hole CO-12-60 intersected high gold grades of 5.89 g/t gold over 3.5 m, including 21.9 g/t Au over 0.50m in oxides. This is significant because the results were among the first diamond drill- holes ever drilled on the project. From these initial results (basically considered to be test holes) Rasool was simply attempting to build a base to understand how the mineralization was trending.
In the second paragraph of the April 1st 2012 press release, Comstock stated: Mineralization at Corona is associated with the contact between the “Upper Volcanic Group” (predominately rhyolite) and the “Lower Volcanic Group” (mostly andesite plus sedimentary rocks).
This twofold subdivision is in widespread usage in northwestern Mexico, where many of the region’s precious and base metal deposits are found in the Lower Group and the Upper Group acts as a cover, concealing mineralization.
The sentence we’d like to re-iterate is this: “This twofold subdivision is in widespread usage in northwestern Mexico, where many of the region’s precious and base metal deposits are found in the Lower Group and the Upper Group acts as a cover, concealing mineralization.”
You don’t have to be a geologist to know what Rasool is after and why he is exploring in this particular region. He is searching for a system similar to the ones which are to the north and south of the Corona Gold Project along the Sierra Madre Occidental Trend.
An average investor scans a news release or scans a report like this looking for some eye catching results or drill holes that knock their socks off. If an investor is only looking for drill results in press releases, how can one ever invest in a company before a discovery is made? As Rick Rule states “as experienced junior gold speculators know, nothing adds to share value like discovery.” Intelligent investors make the time to read through entire press releases to understand what the company is going after. It’s not just about one magical drill hole.
One has to understand that a porphyry is large. It’s not like finding a thin vein system and attempting to average out the grades, knowing the veins come in and out like a spider web (this is how many gold deposits are made up). A porphyry is a massive ore body.
This part of Chihuahua, Mexico, the region in which Comstock’s Corona Project is located, is not new to buyouts and large discoveries of the porphyry variety. In 2011, the La India Deposit, which is located and named after a railroad station in the Chihuahua District of Mexico, was bought out in a major deal.
The La India deposit was initially discovered by Grayd Resource Corporation, a TSX Venture listed company, who quickly proved a 1.2 million ounce gold deposit. Agnico-Eagle ended up buying out Grayd Resource in late 2011. Agnico-Eagle announced a take-over bid to acquire all of the outstanding common shares of Grayd at a price of $2.80 per share.
The offer represented a premium of 65.7% to the volume weighted average price of Grayd shares on the TSX Venture Exchange. This buyout occurred last year at a time when the TSX Venture was collapsing in value. Bull market or not, deposits like La India are going to find buyers. And this is the kind of money the big players are willing to pay if they have reason to believe the deposit contains the right ingredients. Understanding this is important if you want to become a more knowledgable, diversified mining investor.
Key Fact: The president of Grayd Resource and Rasool, CEO of Comstock, worked together at HDI Mining.
GoldCorp describes its multi-million ounce El Sauzal gold deposit (roughly 100 kms south of Corona, but on trend) on its website:
El Sauzal is as an epithermal deposit of high sulfidation defined by mega breccias and volcanic event flows. It is a disseminated oxide ore body of high grade and gold mineralization associated with advanced argillic alteration. Gold is largely disseminated within the ore body and less commonly found along fractures where gold is visible. The oxide ore body is underlined by sulphides with little exploration.
Diagram of Porphyry System
(click to enlarge)
On the right side you can see the ore system with zoned alteration. This is a high sulfidation porphyry system. It is the same type of geological formation Fresnillo discovered at its 9.6 million ounce Orisyvo gold deposit. Fresnillo is the largest silver producer in the world and its new discovery is located in the Chihuahua District of Mexico, just a few kilometers south of Comstock’s Corona Project. The Orisyvo Deposit falls along trend with Comstock’s Corona Gold Project.
High sulfidation porphyry discoveries have been most prominent in Mexico and South America. In the Mexican District of Chihuahua there have been a handful of these world famous discoveries.
Comstock has also reported that:
Prospecting and mapping has located areas of vuggy silica and alunite alteration up to 900 metres northeast and east of these initial drill holes. Early results suggest this may be a low-grade high sulfidation “lithocap” sitting atop an igneous intrusion-driven hydrothermal system.
Gordon Davidson, a Director of Comstock stated “Early geological indications are that Comstock has exactly the right ingredients that you need to create a large gold deposit in that area.”
Comstock has also been working up in the White Gold District of the Yukon. It has an option to acquire 100% of a project (known as the White Gold North Project) with one of our favourite locations in the gold-rich region.
It didn’t take us long to become very interested in Comstock‘s Yukon play after learning about its locale and supporting data. It is exceptionally well located with respect to some of the known mineralization in the White Gold District. Below is the map of Comstock’s White Gold North Project (take note of the projects nearby and adjoining):
Comstock conducted an extensive soil sampling and geophysics program last summer and is returning this year to drill.
CEO Rasool Mohammad and Director Gordon Davidson lay out exactly why they are confident that Comstock has an extension of the Golden Saddle deposit on the company’s White Gold North Project. Watch the short video of them explaining the significance of this assets by clicking on the image below:
The company outlined a few key highlights already made on the White Gold North Project:
· Soil gold assays run up to 1,030 ppb gold, or 1.03 g/t.
· The suite of elements that are often found in association with the gold mineralization are referred to as pathfinder elements. Pathfinder elements indicative of a gold system similar to Kaminak’s Coffee project are present on Comstock QV claims.
· The gold and the associated anomalies are of the same strength as at Kaminak’s Coffee project.
· QV trend of north-easterly orientation measures 2600 m in length and open along the trend. Gold values range from detection limit to 1030 ppb (1.03 g/t Au). This trend lines up with a break in the magnetic highs.
What our team found most interesting was the structure shown on the left side of the below photo. Comstock‘s positive soil sampling and trenching appears to line up with the Golden Saddle discovery made by Underworld, which led to its buyout by Kinross.
Comstock plans on finding out if the trend continues this summer with the first ever drill program planned on the project. The White Gold District continues to be at the epicentre for junior gold discoveries in Canada and will no doubt bring in the herds once again.
Additionally, the famed prospector, Shawn Ryan, is a technical advisor to Comstock, a large shareholder in the company and will be leading the planned soil sampling and first ever drill program this summer. Being a few months ahead of this program was also critical to our introduction of Comstock Metals at this time.
Mr. Mohammad has over 15 years experience in the mining and mineral exploration industry. He has worked for companies such as BHP, Miramar Mining, Hunter Dickenson Inc. and Cumberland Resources Ltd. He has worked on mining projects in Canada, the United States, Mexico, Peru, and Brazil. He speaks English, Spanish, Portuguese, Urdu and Pashto.
Ronald H. McMillan, PhD, P.Geo.Chief Technical Consultant
Dr. R.H. McMillan has over 45 years of experience as an exploration and mining geologist throughout Canada, North America, and on several other continents, where he has undertaken detailed and regional property evaluations as well as estimation of mineral resources.
He has served as Exploration Manager or Consulting Geologist with several well-known mining companies including Westmin Resources Ltd., Cameco Corp., Noranda Exploration Co. Ltd., Teck Exploration Ltd., and Falconbridge Nickel Mines Ltd.
Several important gold deposits were discovered by exploration programs under his direction. Ronald has authored numerous papers on uranium exploration and uranium deposits presented to, among others, the Canadian Institute of Mining and Metallurgy, the American Nuclear Association, the Royal Society (of London), the Institution of Mining and Metallurgy, and the Mineralogical Society of Canada.
He has also served as a Board Member/Director with the Canadian Institute of Mining and Metallurgy, Geological Association of Canada, the B.C. and Yukon Chamber of Mines, and the Canadian Geoscience Council. Dr. McMillan is a Fellow of the Society of Economic Geologists and a Fellow of the Geological Association of Canada.
Jerry Blackwell is also a consultant to Comstock and has been working closely with the company on its Corona Gold Project. Mr. Blackwell has been working in the mining business for more than 40 years and got his start with Cominco Ltd. back in 1974. He worked for the company for 6 years and then came back to them in 1983 and worked with them for another 5 years. He has been on teams responsible for dozens of world class discoveries.
During Mr. Blackwell’s second stint with Cominco, he worked throughout Canada, Greenland, the U.S. and Australia for Pasminco, Echo Bay, Placer Dome, Platinova, Aber Resources, Highwood Resources and Skyline Gold amongst others. During this time he worked for Cominco-affiliated companies in Tasmania (polymetallic massive sulphide projects such as Hellyer in the Mount Reid), Rio Blanco porphyry deposit in Peru and evaluations in Mexico.
Comstock Metals (CSL:TSXV) finds itself in the very heart of two modern day gold rushes. In Mexico, it’s not only in the same region as Fresnillo’s 9.6 million ounce gold discovery, but it’s in the heart of ‘Elephant Country’ with world leading mining companies making discoveries and acquisitions.
Early geological indications are that Comstock has exactly the right ingredients that you need to create a large gold deposit in that same region. Its other asset in the White Gold District of the Yukon will see its exploration efforts led by none other than the famous Yukon prospector, Shawn Ryan. Shawn and Rasool are close friends and work diligently on all aspects of the White Gold North Project, which is adjacent to Kinross’ Golden Saddle Deposit. Shawn Ryan is also a large shareholder in Comstock.
Management is confident that the White Gold North Project has an extension of the Golden Saddle deposit within it. Comstock‘s CEO has a track record of proven results, its management and technical team have worked for some of the biggest miners in the world and our team is proud to be announcing it as our new Featured Gold Company.
We are bias given that we are shareholders in Comstock, will be adding to our stock position this coming week and the company is a client of ours. As always, we encourage you to practice independent and thorough due-diligence.
Comstock trades at $0.15 after hitting a high in March of $0.29 per share. Its last financing was completed at $0.20 per share and the company’s market cap is roughly $6.6 million.
For a company of its size, Comstock Metals (CSL:TSXV) has a lot going on in a very short period of time. With results expected from the Corona Gold Project shortly, we will have further reports on the company over the coming weeks.
Please feel free to contact us with any questions you may have.
All the best with your investments,