NetworkNewsWire Editorial Coverage: Whoever has the gold, makes the rules—this expression seems apt for 2020, as a confluence of factors has analysts predicting a “golden year” for the mining industry. Three decades of dwindling gold mine discoveries combined with increased industrial demand for gold across numerous industries has put a serious floor under the recent rise of the gold price.
- Gold price up 18.4 percent in 2019 and up about 44 percent since 2018 lows
- Many analysts see gold going to $3,000 and as high as $10,000 per ounce.
- COVID-19 impact and global market of near zero interest rates paints very bullish picture for gold prices, as well as safe haven demand.
- Three decades of underinvestment and over-regulation has resulted in a shortage of new economic discoveries, even as demand from new sources begins to inexorably devour more of finite global production.
Operating in one of the world’s premiere mining jurisdictions, Bullfrog Gold Corp. (CSE: BFG) (OTCQB: BFGC) (FSE: 11B) (BFG Profile) controls the mineral rights to a strategic 5,000+ acre land package with exceptional exploration and development characteristics. Located 125 miles Northwest of Las Vegas, the area was ranked number one on the Fraser Institute’s 2018 Investment Attractiveness Index. Within the last year or so, mining giant Barrick Gold Corp (NYSE: GOLD) merged with Randgold Resources and combined its Nevada assets with Newmont Mining, creating a true juggernaut with six of the global top ten tier-one gold assets under its thumb (three of which are in Nevada). Coeur Mining Inc. (NYSE: CDE) purchased Northern Empire for US$90 million and spent much of the last 18 months pursuing expansion drilling programs on this property located a few miles east of BFGC. Corvus Gold Inc. (TSX.V: KOR) (OTCQX: CORVF), another major player in the Beatty, Nevada area, has seen a significant expansion of the company’s Mother Lode resource position surrounded by Coeur Mining, as well as significant land and resource positions in the North Bullfrog Mining District located a few miles north of BFGC lands. AngloGold Ashanti Limited (NYSE: AU) recently secured the purchase of the Silicon project from Renaissance Gold for a reported $3 million and plans to roll out a sizeable 109 site phase one drilling program across the 3,630-acre project area, mainly located a few miles east of BFGC but also on its lands adjacent to BFGC’s western land boundary.
Dwindling Supply, Steadily Increasing Demand
Gold ($1727.60 June 15 COMEX close) hasn’t seen this kind of exciting price action since 2010— an 18.4 percent uptick in U.S. dollar terms last year and close to a 44 percent increase since the recent $1202.44 low in September of 2018. A powerful blend of safe haven buying, highly accommodative (near zero) interest rate policy from the Fed through 2022, and the looming spectre of COVID-19 haunting the stock market has sent many investors stampeding back into the yellow metal. The sudden surge in gold demand during the coronavirus pandemic has surprised many veteran industry analysts, with prices recently soaring to a seven-year-high despite key traditional offtake sources like jewelry seeing a big sales slump.
Jewelry normally accounts for over 52% of gold demand. However, World Gold Council (WGC) figures indicate a 65 percent year-on-year drop in the retail gold market within China, the world’s largest jewelry maker, as well as a similar drop in the other major global jewelry market, India. The reality of the shutdown and the transparency of accumulating safe haven demand forces on the gold price are now cast in stark relief.
S&P Global Market Intelligence data from April indicated that some 20 mines in top producing countries were forced to close due to COVID-19 and ongoing economic uncertainty could continue to produce unprecedented levels of central bank stimulus around the globe.
At the same time, emerging applications for gold’s unique properties continue to add new, broadening end markets across diverse sectors such as medicine, electronics, and high-tech industrial. Gold nanoparticles, for instance, are seeing increased use in everything from disease detection and treatment to enhanced efficiency solar cells and filtration systems. Tiny particles and circuits may not seem like a big deal when we measure the global gold market by tonnage. But, with key applications in critical systems like municipal-scale water filtration and robust/high-performance consumer electronics components, the roughly 16 percent of global production currently consumed by these end markets is growing steadily every year.
Price Spike Points to Supply Deficit
This gradual build-up of broader end markets for gold seems to have put a solid foundation under COVID-19 and zero interest rate related buying.
However, a stifling regulatory environment combined with years of underinvestment in mining has led to a kind of perfect storm when it comes to spiking demand. Bank of America anticipates a 5 percent decline among senior global gold producers over the next four years, with declining production, lower ore grades and shorter mine life exacerbating the falloff in new, economically viable discoveries.
Overall, gold production fell by one percent last year, and analysts across the board are now predicting that the ongoing decline in gold reserves will continue to produce significant M&A activity throughout the gold mining sector.
A Bonanza in the Making
Bullfrog Gold Corp. (CSE: BFG) (OTCQB: BFGC) (FSE: 11B) (BFG Profile) looks poised to capitalize on prevailing market conditions via a host of factors which differentiate the company and its project portfolio from competitors. The company’s land package sits at the heart of one of the most active gold regions in the world—the same location where Barrick previously produced some 2.3 million ounces throughout the 90s via conventional milling operations. The enormous epithermal gold systems in the Bullfrog area previously yielded some 26.1 million tonnes of open pit and underground ores for Barrick, averaging 2.98 g/t gold and 4.57 g/t silver before milling was ceased due to the price of gold being under $290 an ounce.
With a well-established 43-101 compliant mineral estimate and significant exploration potential at the company’s sizeable land package in the Bullfrog Gold District, BFGC is a regional veteran that has been in this white-hot gold area for more than a decade, long before any of the majors arrived. To illustrate how well-situated Bullfrog is, imagine a small landowner who was smart enough to buy up acreage in Palo Alto back in the 70s—long before Silicon Valley was even a concept.
Exploration and Testing Confirms Established Model
Last year Bullfrog completed hugely successful heap leach tests on four bulk samples from the Bullfrog, Montgomery-Shoshone and Mystery Hill areas. In early June 2020, BFGC completed 12,520 feet of drilling in a 25-hole program to better define expansion limits of two pits and initially drill test the new Paradise Ridge exploration target that is a compelling analog to the Bullfrog deposit. Assays on the first six holes were released on June 17, 2020, and remaining results will become available in the coming weeks. The company is now in an optimal position to execute on a forthcoming independent preliminary economic analysis that will include updated resource estimates, optimized pit plans, capital and operating cost estimates and projected financial performance.
Bullfrog also completed two initial holes at its new Paradise Ridge target a mile east of the main Bullfrog pit, given the frenzy of activity by sector majors in the region, as well as promising results from extensive surface sampling efforts. The Paradise Ridge target even has host rocks that are identical to those in the main Bullfrog deposit. This evidence reinforces management’s guidance that much of the company’s lands have strong potential for expanding known resources and making new discoveries.
The value proposition is readily apparent: excellent location, very good potential for the company’s flagship site to become a mine with strong financial performance based on existing resources, strong exploration potential and the kind of acreage that will likely help cement the Bullfrog Gold District as a potential new, major gold production center in Nevada.
Over a year and a half was spent collecting four bulk samples from the main Bullfrog pit, the adjacent Mystery Hill area, and the Montgomery-Shoshone pit for leach testing at McClelland Laboratories in Reno. Reports published in 2018 and 2019 included results of the heap leach tests that yielded average gold recoveries of 85.8% when using high pressure grinding rolls (HPGR) to produce a very fine leach feed of 1/16-inch compared to 70.7% from a coarser 3/8-inch size typically produced using conventional crushers. In this regard, the Bullfrog area mineralization is highly amenable to producing very fine sizes from HPGR’s as their clay contents are very low compared to most other gold projects, and the brittle, silicified host rocks do not produce much superfine material during the size reduction process. Also, because of the low sulfide content when the deposits were formed and subsequent oxidation, lime consumptions for processing are low and the waste and mineralized rocks do not create acid.
Premiere Mining Jurisdiction, Low-Cost Logistics
Another key selling point for Bullfrog is the superb presence of infrastructure available to the project. The company has a paved Nevada State highway crossing the southern claims, and with robust existing access roads and haulage ramps in place to access the pits, BFGC can avoid millions in CAPEX otherwise required to place a greenfield project into operation. Additionally, the existing electrical transmission line and sub-station Barrick once used—as well as requisite water rights (via lease/option) and ample on-site water—make the project an easy kick off.
Moreover, BFGC is already in possession of a huge database of some 155 miles of drill information, as well as all the extant project plant, site condition, geologic, mining and processing data. The company estimates that the treasure trove of data amassed by Barrick throughout the district and available infrastructure would cost more than $40 million to re-create.
In addition, the project plan favorably indicates that the north Bullfrog pit and Montgomery-Shoshone pit can be sequentially mined in such a way that the vast majority of waste from both pits can be filled into the south Bullfrog pit—thereby drastically reducing waste haulage expenses, avoiding the building or enlarging of waste dumps on the surface, and minimizing environmental permitting and reclamation costs.
Friendly Face Off
Soaring gold prices and enhanced M&A activity have ignited a firestorm in the sector, with operators both large and small looking for low jurisdictional risk
Barrick Gold Corp (NYSE: GOLD) recently reported Q1 sales in April of some 1.22 million ounces of gold, as well as preliminary Q1 production of 1.25 million ounces, the lion’s share of which came from Nevada Gold Mines. This puts the company well in line to achieve targeted 2020 guidance despite extensive efforts on Barrick’s part to mitigate the spread and impact of COVID-19 across its entire global footprint. One example of these efforts is the $1.1 million dollar stimulus program initiated by the company to support businesses in Northern Nevada via checks issued to all Nevada Gold Mines employees by the Chamber of Commerce. The follow-up report on May 6 confirmed that trajectory and saw Operating Cash Flow up roundly to $889 million and Free Cash Flow up to $438 million from Q4. Barrick’s share price has seen a significant rise since the Randgold merger as well, and the company was able to increase its dividend three times in 2019, even as debt was slashed in half.
Coeur Mining Inc. (NYSE: CDE) was able to post 8 percent reserve growth at Rochester, Nevada in 2019, even as significant additions at the company’s Kensington, Sterling location in the Bullfrog area and Crown properties helped increase overall inferred resource calculations. Kensington more than doubled its inferred gold resources with the addition of the new Elmira vein. Sterling and Crown saw a 35 percent uptick year-over-year of inferred resources, driven by aggressive expansion of the numerous Crown Block deposits. 2020 exploration initiatives will be centered around further expanding the resource base at existing properties such as Sterling and Crown while new discoveries at Palmarejo and Kensington receive increasing attention.
Corvus Gold Inc. (TSX.V: KOR) (OTCQX: CORVF) has been champing at the bit since the company discovered a large new gold mineralized zone below the existing Mother Lode deposit, with the first hole intersecting125.5 meters at 2.56 g/t, including 14.8m at 8.9 g/t. These findings have tipped off a sweeping geophysical survey program throughout the Mother Lode trend, in order to unify the company’s existing belt-wide exploration model and district-scale analysis. This work is part and parcel of the broader push by operators in the Bullfrog Gold District to efficiently unlock the significant potential throughout the region. To this same end, Corvus has amply increased its land position near AngloGold Ashanti’s new Silicon project and the sizeable claim block recently staked by Kinross.
AngloGold Ashanti Limited (NYSE: AU) reported a whopping $2 billion in available liquidity in early May, with Q1 cash flow from operations more than tripling, as key assets from the company’s geographically diversified portfolio of 14 mines across 9 countries managed to deliver a showstopping performance. AngloGold seems to be weathering the COVID-19 storm quite well, with free cash flow before investments in growth projects up 231 percent year-over-year to $94 million despite stoppages at several sites during the first and second quarters. All-in sustaining costs around $1,047 an ounce on average put AngloGold in an enviable position as the company ramps up production amid ongoing redevelopment of the Obuasi Gold Mine in Ghana, where output is expected to double by Q1 of next year.
It certainly appears there is a bit of a land rush going on in the Bullfrog Gold District, and with share price-accessible companies like BFGC right at the epicenter on historically proven acreage, retail investors and big players alike are starting to take note of the long-term value proposition.
For more information on Bullfrog Gold Corp., visit Bullfrog Gold Corp. (CSE: BFG) (OTCQB: BFGC) (FSE: 11B).
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