Source: Ron Struthers for Streetwise Reports 07/16/2019
Ron Struthers of Struthers’ Resource Stock Report discusses the gold bull market and one company that he believes investors should take a look at.
The World Gold Council issued its mid-year outlook last week and trends are very bullish. It states the central banks across the globe have signaled a more accommodating stance, bringing bond yields to multi-year lows—and in some countries all time lows. Central banks continue as big buyers in the market, accumulating approximately 247 tonnes though May. Gold-backed ETFs captured US$5 billion or 108 tonnes year to date, led by European funds.
Global monetary policy has shifted 180 degrees and will continue to be a driving force toward higher gold prices and gold equities. Gold and gold stocks have technically been in a bull market since the bottom in late 2015. From the $1050 bottom in gold, late 2015, prices ran up to $1360 in about 6 months to July 2016.
That is a 30% rise, easily qualifying as a bull market, which is defined as a 20% rise. At the recent high of $1441, the price is up 37% from that low and up 22% from the $1180 low in 2018. No matter how you slice and dice it, gold has started a new bull market.
All bull markets start with skepticism and disbelief. Many use the GDXJ (VanEck Vectors Junior Gold Miners ETF) to gold price ratio as a measurement and I believe it is an accurate indicator of sentiment with gold stocks. Today’s reading at 0.27 is not much above the 0.20 bottom in 2015 and has not responded much at all to the recent rally in gold.
The HUI (NYSE ARCA Gold Bugs Index) around 200 has just made fresh highs in this rally. It is up 34% since the 150 low in May and up 87% from the 2015 low. However, as sentiment above shows, there is little belief in this rally so far.
The HUI consists of more senior gold producers and this index leads the junior explorers. The index has cleared the first resistance and a little further and it will breach the second resistance level. This is about the level that sentiment will start to improve and the junior explorers start moving. The juniors can move several 100% in just a small move on the HUI, as we witnessed in 2016. This is setting up to happen again. Now is perfect timing to buy quality junior explorers, the ones that will appreciate the most.
I have come across another exceptional junior explorer and now is perfect timing to get a position in this stock. It has an excellent property in Nevada that has not seen a targeted drill program since 2002, despite multiple high-grade intercepts. Back then, we were at the depths of the gold bear market when gold had dropped under $300 per ounce. Initial drilling by Placer Dome, a senior company since bought out by Barrick and Teck Cominco, hit some high grade intersects.
Old subscribers will remember the fortunes we made with Franco Nevada and Euro Nevada back in the 1990s as penny stocks. I mean buying at $1 to $3, which was considered a gold penny stock in those days.
What first drove the early success of Franco Nevada was the famous Ken Snyder Mine that is still in production today as the Midas Mine. Blackrock Gold Corp.’s (BRC:TSX.V) property is near Midas with the same kind of structures, but has seen little exploration since 2002. It has the potential to be a company maker just like the Midas.
Blackrock Gold TSXV:BRC OTC:BKRRF Recent Price – $0.12
52 week trading range $0.03 to $0.125
Shares outstanding 49 million approx. Fully diluted 66.1 million
Highlights
- new management recently took control of company
- strong insider buying
- low-sulphidation epithermal gold & silver property on prolific Nevada gold belt
- little exploration since 2002
- no follow up work despite high grade drill intercepts (157 g/t over 1.5m)
- financing completed and exploration programs underway
- first targeted drill program to commence by Fall to follow up high grade intercepts by Teck and Placer
Management
Blackrock has a very strong management team that joined/took control of the BRC in the past several months.
For nearly fifteen years, Andrew Pollard, CEO, Director, has established himself as a sought-after management consultant within the mining industry. Mr. Pollard founded the Mining Recruitment Group Ltd (MRG) in 2006 and has amassed a “Who’s Who” network in the mining and finance world, leveraging his personal relationships to help shape what have become some of the most prominent and successful resource companies. In a sector where management is crucial, he has served as a trusted advisor to exploration companies and producers ranging in size from seed round to over $100 billion in market cap.
William (Bill) Howald, Executive Chairman, is a successful entrepreneur who founded several public companies as well as led the exploration division of a major mining company. He has over 34 years of experience building effective exploration teams and delivering quality resources. As an executive, Mr. Howald provided strategic vision, planning, and implementation of many value-creating programs for junior and senior gold producers. Most recently, he led the acquisition, build out and start-up of the Florida Canyon mine in west-central Nevada. The mine achieved commercial production within 18 months. To date, Bill has raised approximately $300 million for properties in Argentina, Brazil, Chile, Peru, Dominican Republic and Nevada.
Prior to creating junior mining companies, he was GM of Exploration, the USA and Latin America, for Placer Dome. During his tenure at Placer Dome, Mr. Howald was an integral part of the teams that delivered over 100 million ounces of gold resources to the Placer portfolio. Several of these, including Turquoise Ridge, Pipeline, Pueblo Viejo, are now mines. While there, he also oversaw the last drill campaign on Silver Cloud.
Tony Wood, director, currently serves as CFO of Aurania Resources Inc. Mr. Wood’s executive experience includes oversight of finance and operations of various publicly traded exploration, development and production staged resource companies. Over the last 20 years, he has successfully completed close to $1billion in financing and M&A transactions in the mining industry. Mr. Wood has a proven record of success with strategic planning, organizational development and company transformations. Mr. Wood is an honors graduate, Management Sciences (Marketing) B.Sc. from the University of Lancaster, U.K., and a qualified Chartered Accountant in the UK and Canada.
Mr. Hendrik Van Alphen, director, has over 30 years of experience in the mining industry. He has been a key player in such companies as Corriente Resources, Cardero Resources, Trevali Mining, Balmoral Resources and International Tower Hill Mines. During his career Mr. Van Alphen has been involved in raising over $1 billion in financing for various junior resource companies. He has been president and CEO of Wealth Minerals Ltd. Since 2005 . My comment: These juniors were all big success stories.
Dr. Alan Carter, director, has 30 years of experience in the mining and minerals exploration industry. He spent seven years working for Rio Tinto Corp. in South America and the United Kingdom, and, in 1996, he became president and CEO of Balaclava Mines. Dr. Carter joined Billiton Plc in 1998 and in 2000 moved from Lima, Peru, to Vancouver. Dr. Carter was president and CEO of Magellan Minerals Ltd. until its recent sale to Anfield Gold Corp. in May 2016. He is a director of Peregrine Diamonds Ltd. and Anfield Gold Corp.
The management group at Blackrock has been involved in numerous discoveries that became mines and have been instrumental in raising considerable sums for exploration.
Property
The Silver Cloud property is a large, 4,537 hectare (11,210 acre) claim block, strategically located near the confluence of the Carlin Trend and the Northern Nevada Rift within north-central Nevada, the richest gold mining area in North America. The property is located 8 km (5 miles) west of the Hollister mine, which has a Measured and Indicated Resource of 0.43 Mt @ 16.6 g/t gold. Hecla’s Midas Mine lies a short 20 km (12.5 miles) along strike of the Rift to the north of Silver Cloud and has a Measured and Indicated Resource of 1.11Mt @ 12.9 g/t gold (for 419,000 oz Au).
Silver Cloud, like both Midas and Hollister, is a low-sulphidation epithermal Au-Ag banded vein deposit. At Silver Cloud, despite the extensive presence of mercury-bearing silica sinters on surface, the property has not been extensively or systematically drill tested. However, a limited drill program completed by Teck (10 holes) between 1999 and 2001 encountered 157.7 g/t Au over 1.5 meters immediately below the Silver Cloud Mine area, and subsequent to that, in 2002, Placer-Dome drilled 5.53 g/t Au over 12.2 meters in the Northwest Canyon target area, confirming the presence of high grade gold mineralization at depth.Neither of these intercepts were ever followed up.
Near the end of June BRC identified a new vein system in the northeastern portion of the Silver Cloud property, noted above in top right. The east-west banded vein was found by mapping an area with highly elevated silver (up to 7.4 grams per tonne (g/t) silver), arsenic (up to 94.5 parts per million (ppm) arsenic), lead (up to 39.8 ppm lead) and zinc (133 ppm zinc). These values were returned from the company’s recently collected soil samples.
Assays are pending from rock chip samples collected on the outcropping vein. The gravity anomaly in this area is similar in scope and dimension to the one occurring over the Silver Cloud mine.
At the Silver Cloud mine, located approximately five kilometers to the south of the newly discovered vein, the high-grade gold drill intercepts (1.5 meters grading 157.7 g/t gold and 12.2 meters grading 5.53 g/t gold, including 1.5 meters grading 12.5 g/t gold and 1.5 meters grading 12.5 g/t gold) were encountered at elevations similar to the Midas and Hollister mines.
Mercury is related to gold and the graphic below shows the mercury in rocks or heat map trending east–west between the two high grade intersects. This work was completed in the past year and further confirms the east-west direction of structures.
The old drill intersects align at the same elevation along an east-west zone with 1,500 meters of strike potential. BRC is planning a drill program to test the east-west theory and it will be the first systematic drill program to Silver Cloud in nearly 15 years. BRC is also focused on the northeast section of the property, which represents the westernmost extension from Hecla’s Hollister mine. This area is host to another past-producing mercury mine and a soil geochemical survey carried out in May of 2018 showed elevated silver readings, making this never-before-drill-tested section of the property a priority for BRC.
After Teck and Placer Dome, the project was with Allied Nevada, which made another discovery on one of Carl Pesico’s projects that kept it occupied. Then the property reverted back to the original vendor, Carl Pesico, who first staked the claims in 1998. Blackrock first optioned the property in 2017 but the previous management and with poor market conditions were unable to advance the project very far. The new management team amended the original agreement with more favorable terms in June of this year. Blackrock can purchase 100% of the project subject to a 3.5% royalty for $3.5 million any time prior to Oct. 27, 2023. Annual payments to keep the agreement in good standing begin Oct. 27, 2019, at $75k.
Oct 27 2020 $100k
Oct 27 2021 $150k
Oct 27 2022 $200k
Oct 27 2023 $500k
Blackrock can keep the option valid for another five years with payments totaling $5 million.
Financial
Last financials at end of April reveal little cash of $17,880 and no long-term debt. Since then a $600,000 private placement was completed at 10 cents per unit which included 1/2 warrant, priced at 16 cents, good until June 17, 2022. CEO Andrew Pollard participated for 1 million units.
This funding will be ample for BRC’s current exploration program and some shallow drill holes. I suspect BRC will complete another financing at higher prices before or during the start of a drill program. This would enable it to continue drilling upon a discovery. I do not expect that BRC will have any trouble raising more funds with this strong management group and property.
Summary
The new management group that took control of Blackrock is quite impressive. One of the first things it did was cancel a 5 cent financing to do it at a higher price of 10 cents. Very rare to see this, especially in recent markets. Insiders could have lined their pockets at 5 cents but instead bought shares in the market.
Management and insiders have been gobbling up stock since mid-May up to current prices, as you can see with insider trading filings here. They are walking their talk.
The Silver Cloud property is in a prestige location. It is quite amazing that it has seen little exploration in almost 20 years given its location and very excellent early results by majors Placer Dome and Teck. This makes it a unique opportunity we can take advantage of.
BRC’s recent ground geochemical and geophysical work confirms east/west vein trends. Both Placer and Tech were drilling based on north/south. Bill Howald did the work for Placer and he is now convinced the structures are east-west and they drilled the wrong way. If this is correct, a big discovery can be made. Regardless, I think the stock will run on the speculation.
A comment by executive chairman Bill Howald in a recent news release provides a nice summary of the project potential. Bold highlighting is my doing. “The newly identified vein gives the company a third meaningful target to explore. The three targets include the Silver Cloud mercury mine, the Jackson and Surprise mercury occurrence, and the newly discovered banded vein. In all these areas, the target is a high-grade gold and silver vein system with widths similar to the Midas mine (one metre to 2.7 metres width) and gold grades comparable to the nearby Hollister mine (plus 15 g/t gold and plus 80 g/t silver). The company is preparing the east-west-trending Silver Cloud mine/Northwest Canyon vein system for a drill campaign and has started the permitting process. The addition of the West Silver Cloud property provides additional strike potential to the west of Northwest Canyon. As I have stated before, the Silver Cloud project is an excellent under explored asset located in an extraordinarily productive part of north-central Nevada along the Northern Nevada rift.”
On the chart below we can see that a new uptrend has begun. The stock has crossed the 200 day MA and that average has turned up. A golden cross has just occurred where the 100 day MA crossed above the 200 day MA. A very bullish and reliable indicator. The volume of the last three months is the highest in the stock’s history and the OBV (on balance volume) indicator confirms heavy accumulation in the stock. The first break away gap higher ended at 12.5 cents and the recent consolidation since that high provides an excellent buying level ahead of the next move higher. The 9 to 10 cent level is the new support level.
Ron Struthers founded Struthers’ Resource Stock Report 23 years ago. The report covers senior and junior companies with ample trading liquidity. He started his Millennium Index of dividend stocks in 2003 – $1,000 invested then was worth over $4,000 end of 2014 and the index returned 26.8% in 2016. He retired from IBM after 30 years in customer service, systems and business analyst, also developing his own charting software. He has expertise in junior start-ups and was a co-founder of Paramount Gold and Silver.
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