Prime Meridians: 1.67 Billion Ounces of Gold

This week in Pierce Points: 

Zimbabwe shocked platinum miners. In a surprise move, the government of the cash-strapped nation imposed a tax on exports–as of January 1. 

North America’s LNG regulators softened up. From streamlining permitting to cutting pipeline fees, officials are trying to revive the fading sector. 

China got a secret passage for oil supply. A newly-opened pipeline through Myanmar gives Chinese buyers preferential access to Middle East crude

The palladium crisis got worse. New data show that the market was badly in deficit in 2014–and is likely to remain so until the Russia problem is solved.   

Gold demand jumped 50%. At least in one of the world’s top-consuming nations.

1.67 Billion Ounces of Gold
“How did all of this get started?”
That was my favourite question to ask, back when I was an analyst.
Meeting with resource companies, I was always fascinated to hear the stories about how a firm’s slate of projects came together. And–after asking the question hundreds of times–I started to notice a pattern.
Most companies are yard sales.
A yard sale is a random assortment of items–usually collected haphazardly over years or even decades–that someone is trying to peddle. And most resource companies are no different.
I can’t count how many times I heard stories from managers along the following lines. “Well, we met a person who had a gold project in Brazil. It looked good so we decided to pick it up. Then nickel got popular, so we acquired a project in eastern Canada. After that, our VP Exploration was at a conference in Cape Town and met a person who…”
Yard sale. A random assortment of resource projects.
Far fewer times, I had the pleasure of talking to companies that were the opposite of yard sales. Firms that had built themselves to target a very specific and well-defined opportunity.
Sometimes the opportunity was a place. Like when Arequipa Resources went after gold in newly-opened Peru in the early 1990s–a time when the country was vastly under-explored, and security had just drastically improved with the end of the Sendero Luminoso insurgent threat. Sending the stock from $0.50 to over $28.00 on an $800 million buyout after the discovery of the Pierina gold deposit–still one of the greatest charts I’ve ever seen.
AQP
Arequipa Resources gains 5,500% on the Pierina gold discovery — a well-targeted opportunity
The opportunity could also be technical. Like AuEx Ventures, which was built around cutting-edge remote sensing techniques for spotting epithermal gold and silver deposits. That firm went on to be bought out for $280 million after discovering a new precious metals district in Nevada.
Whatever the particulars, our chances of success are greatly enhanced when we focus on a well-reasoned and high-impact concept right from the get-go. Unlike the numerous yard sale firms, who invariably hunker around for years, just collecting bric-a-brac while paying for management’s camping trips with investor cash.
And here’s a current example.
I was doing my weekly review of breaking research from geology and mining journals last Tuesday, when a story leapt out about another firm targeting a great idea. Using new science to find the world’s largest gold deposits.
The science in this case is fresh observations on the world’s largest gold deposit–the Witwatersrand sedimentary ores of South Africa. A package of rocks that has yielded an estimated 1.67 billion ounces of gold production over the centuries.
Despite the long history of the Witwatersrand, it turns out we’re still learning new things about the deposit. Evidenced by research published last month in the leading scientific journal Mineralium Deposita, by Professor Hartwig Frimmel of the University of Cape Town and Dr. Quinton Hennigh of exploration firm Novo Resources.
In their paper, these workers combine field observations with historic research on Witwatersrand ores. Leading to a ground-breaking conclusion: the massive gold deposits here formed because of some of the first lifeforms on Earth.
The thing is, one of the big questions about the Witwatersrand has always been: where did all the gold come from? The gold here is in “paleo-conglomerates”–meaning that it was eroded from a primary source, and redeposited in ancient stream beds and river deltas.
But no one has been able to figure out what that primary source was. Perhaps until now.
Authors Frimmel and Hennigh conclude that the source was actually ancient micro-organisms. Which developed on the bottoms and edges of rivers and streams when the first oxygen started to appear in the atmosphere.
At the time, there was a lot of gold dissolved in the planet’s acidic surface water. And the newly-formed microbes were the perfect trap for this gold–causing an oxidizing reaction that made the dissolved metal turn solid, forming mats of gold along the river systems.
These mats were delicate structures, which were quickly ripped up by the currents. With all of this gold becoming re-worked into nearby stream channels, forming the massive and rich Witwatersrand deposits.
Here’s the most important thing: this research provides some critical clues as to where other, similar gold deposits might be found. Specifically, the work pinpoints rocks of particular ages that are ripe for discovery–and certain types of geology that might tell us when we’re getting close to the ancient “gold mats” that provided the feed for big ores.
This is well-founded and thoughtful work. The kind that forms the basis for a big discovery opportunity.
And the authors are putting it to work.
Researcher Quinton Hennigh in fact is using this science to target Witwatersrand look-alikes in another country that holds similar ancient geology: Australia. His Novo Resources is now drilling on prospects here that may have the same geologic make-up–thus providing the chance for a major new find.
And it’s not just Dr. Hennigh that loves a well put-together concept like this. Gold major Newmont Mining has come on board with the search–buying one-third of Novo in 2013, to become the company’s biggest shareholder.
That’s the power of great targeting. We need to identify specific opportunities right from the start of a project–and then follow a well-planned strategy, in order to make a billion-dollar discovery.
Here’s to great concepts and great targets,
Dave Forest
dforest@piercepoints.com / @piercepoints / Facebook

Add a Comment

Your email address will not be published. Required fields are marked *