Reserve Calculation Failure at Gatos Silver

Welcome to Mining Stock Daily. I’m Trevor Hall. And I’m Paul Harris.

Today is Wednesday, January 26th. 

Gold sold off overnight on Tuesday, likely in correlation with the overnight melt-down in stock futures. At 5:30 am NY Time, the gold price took a mysterious US$4 per ounce drop then reversed and began a steady rise in price from $1,834 to as high as $1,854 before settling at $1,848, up $8 from Monday. It was the highest closing price for gold since November 19, 2021.

 Silver followed the same price trail as gold, though with more volatility. After bottoming at US$23.64 per ounce when the NYSE opened, it shot up to as high as $24.02 before getting beat back down to settle at $23.82, down slightly from Monday. The Mining Stock Journal said that it was impressed with silver's big move higher while the stock market was getting savagely sold off. Recently the market has been treating silver as an industrial commodity that should move in correlation with the stock market. That said, the Mining Stock Journal said that both gold and silver feel like they are percolating for a big move and that it's rare when gold and silver rise in price while the FOMC is meeting. 

The mining stocks were weak early during trading hours but then followed gold's lead and rose on the day, with the GDX up 0.67% and Amex Gold Bugs index up over 1%. The Mining Stock Journal noted that a positive divergence by the precious metals sector from the stock market on days when the stock market is getting throttled lower could be signaling a move in the safety of precious metals assets.

We’ll get to the news out of the miners and explorers in a moment but first a mention of today’s sponsor…

This episode of Mining Stock Daily is brought to you by… Rio2

Rio2 is advancing the Fenix Gold Project in Chile, the largest undeveloped gold heap leach project in the Americas. Fenix consists of 5 million ounces in the measured and indicated resource category and 1.4 million ounces in the inferred resource category. With a robust PFS in place, Fenix is set up for fast-tracked construction and production. You can find a list of project and company information on their website, rio2.com.

And here’s what you need to know this morning….

Gatos Silver shares were down more than 30% pre-market after the company announced errors in the July 2020 resource report for its Los Gatos operation in Mexico and significant overestimation in the resource model, following reconciliation work. The company estimates a potential 30-50% reduction of the reserve after depletion and cautioned that it cannot accurately quantify the exact magnitude of the reduction, and that the mineral resource and reserve estimates in the 2020 technical report should not be relied upon. It is working with independent engineering consultants to better understand the magnitude of the overestimation as well as creating a new life of mine plan and anticipates this work will be completed in the second semester. The overestimation could constitute a default event and so the company intends to seek a waiver from its lender. Los Gatos has US$13 million outstanding under its credit facility. Gatos Silver trades on the TSX and NYSE under GATO.  News release

Elemental Royalties said its Board unanimously determined that the all-share hostile takeover bid from Gold Royalty is not in the best interests of the company or its shareholders as it significantly undervalues the business and unequivocally recommended that shareholders reject the bid. “Gold Royalty’s hostile bid is completely inadequate,” said CEO Frederick Bell. “The Board believes that shareholders will be better off if Elemental continues to progress its business plan, or if a more attractive alternative surfaces from our review of strategic options.” Gold Royalty has offered 0.27 shares of Gold Royalty for each Elemental Share, which it says values Elemental at C$1.78 per share, a 37% premium, which implies a total equity value for Elemental of about C$130 million on a fully diluted, in-the-money basis. Elemental Royalties trades on the TSXV under ELE and on the OTCQX under ELEMF. News release

Ridgeline Minerals announced it has picked up a new property for its portfolio. The company is optioning the Robber Gulch Project in Idaho from EMX Royalty. Robber Gulch is a Carlin-style gold property. This previous work confirmed several key gold zones that were delineated by coincident geochemical anomalies and prospective geology. Pursuant to the Agreement, Ridgeline can earn 100% interest in the Project by making execution and option payments totaling $750,000 over a five year option period, delivering 150,000 shares of Ridgeline Minerals to EMX by the second anniversary of the Agreement, and completing $650,000 in exploration expenditures before the fifth anniversary of the Agreement. EMX will retain a 3.25% NSR Royalty on the project, however, that can be decreased by various means. Ridgeline Minerals trades on the TSX Venture with RDG. EMX Royalty trades on the NYSE and TSX V with EMX. News Release

New Found Gold identified a second new zone of high-grade gold mineralisation during drilling to expand a newly discovered high-grade gold zone in the Keats footwall at its Queensway project near Gander in Newfoundland, Canada. Drilling returned an intercept of 4.5m grading 28.2 grams per tonne gold in hole 413, 145m below the Keats Main Zone and at a vertical depth of about 375m, making it the deepest intercept to date drilled at Keats. The company also received its first batch results using Chrysos PhotonAssay which it is testing to complement traditional fire assay testing following potential bias issues in its QA/QC programme with potential overstating of results. New Found Gold trades on the TSXV under NFG and on the NYSE American under NFGC. News release

Moneta Gold has announced the discovery of a new zone of mineralisation in the Windjammer Central target within the Golden Highway area of its Tower Gold project in Ontario, Canada in a previously undrilled area. Drilling intersected gold mineralisation over a strike length of 1,500m and a width of 300m to the north of the Windjammer South open pit gold resource, extending gold mineralisation into an area with no historical resources. Highlights included 162.65m grading 0.64 grams per tonne gold. Windjammer South hosts an indicated resource of 1.1 million ounces grading 0.84g/t gold and 1.03Moz inferred. Moneta Gold trades on the TSX under ME and on the OTCQX under MEAUF. News release

i-80 Gold announced results from ongoing underground drilling at its Granite Creek property in Nevada, USA from the 4790 Level targeting mineralisation proximal to and below existing mine workings to confirm continuity in an initial area being defined for underground mining. Highlights included 9.4m grading 10.7 grams per tonne gold. The 2022 programme has been upsized and is expected to comprise more than 30,000m from surface and underground as it seeks to delineate and expand underground mineralisation. It is expected that refractory mineralization from the underground operation at Granite Creek will initially be trucked to Nevada Gold Mines’ Twin Creeks site for processing until the company’s Lone Tree facility is operational. i-80 Gold trades on the TSX under IAU and on the OTCQX under IAUCF. News release

Skeena Resources announced the expansion of the recently discovered 23 Zone, located outside the limits of the company's current pit-constrained mineral resources at the Eskay Creek gold-silver project in British Columbia. New drill holes returned 2 g/t gold equivalent over 40.5m and 3.05 g/t gold equivalent over 7.5m. Positioned 200m east of the high-grade 21A Zone, the area was historically drilled from surface by previous operators on widely spaced drill centers. Selective drill hole sampling during this era meant that the discovery of the larger and more robust mineralized widths observed as a result of the 2021 drilling program, were missed historically. The Au-Ag grade is consistent with that observed in footwall mineralization elsewhere on the property. Skeena Resources trades on the NYSE and the TSX with SKE. News Release

That concludes today’s morning briefing.

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