The Gold Report - Wed, Jun 13, 2018

Miner's Ontario Asset Shows 'Continuity of High-Grade Mineralization'

A Haywood Securities report reviewed the results this company released on its advanced-stage exploration project.

Mining Cores

In a June 5 research note, analyst Mick Carew with Haywood Securities reported that Vancouver-based Pure Gold Mining Inc. (PGM:TSX.V) initial results from underground drilling at its Madsen gold project in Ontario are "encouraging." Within this data set is the highest grade of gold the company has announced so far.

Assays were done on drilling in the South Austin and McVeigh horizons at Madsen, in Ontario. Hole PGU-0109, within the bulk sample area, "represents the highest-grade interval reported by Pure Gold to date." It showed 22.1 meters (22.1m) grading 57.1 grams per ton (57.1 g/ton) gold including 5.2m grading 232.4 g/ton gold including 1m grading 1,175 g/ton gold. This hole suggests that higher-definition drilling is intersecting unexpectedly higher gold grades from drilling nearby. Another highlight hole in this area, PGU-0092, revealed 4.5m grading 13 g/ton gold.

In terms of results from outside of the bulk sample area, hole PGU-0103, located 25m from the exploration drift, revealed 12.7m grading 16.2 g/ton gold. This hole suggests the possible existence of other high-grade lenses next to the existing resource. Hole PGU-0888, returned a gold grade of 19.6 g/ton at 4.5m, which beat expectations.

It also is possible that in the drilled area "higher-grade material is associated with lenses and lower-grade zones that may result in greater continuity," Carew pointed out. Should this be the case, then bulk underground mining methods could perhaps be employed to increase mine throughout and lower costs.

The purpose behind the underground drilling, Carew indicated, was "to delineate initial mining shape for the early years of production, which will also represent part of a 7,200 ton bulk sample once development of a new ramp has been completed." Pure Gold Mining will use the sample in mill commissioning, which is expected in 2019. Also, it will incorporate information from the sample into the feasibility study. That study also would encompass results from 21,000m of additional drilling along with the outstanding mining and processing permits.

As far as upcoming catalysts, results from surface drilling done at Wedge and Russet South will be released when ready. An updated resource estimate for Madsen is due out in Q4/18 with a definitive feasibility study following later in the quarter. By mid-2019, Pure Gold should have all of the requisite permits to advance the project to production.

In the interim, the company will continue its underground drill program, for which it has ample cash. With about $24 million, Pure Gold is "fully funded through mid-2019," Carew noted.

Haywood Securities has a Buy rating and a CA$1 per share target price on Pure Gold Mining, whose stock is currently trading at around CA$0.63 per share.

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