FreeGold ( T.ITF ) offers double 5+ Bagger.
I like the chances for success that exist for both the Almaden bulk tonnage open pit gold resource in Idaho, and the what appears to be a potential elephant gold resource at the Golden Summit in Alaska.
ITF has approx 40 million shares basic and about 47 million diluted.
Sprott owns about 19 %, which is a very strong index of underlying value.
This is likley a consequence of the fact that over the past 2-3 years, ITF has brought in an experienced production oriented team that appears to be on track for production beginning by late 2008.
The Almaden gold property is located 13 miles east of Weiser, Idaho, and approximately 60 miles west of Boise. The property is situated at the crest and on the western side of Nutmeg Mountain. Excellent road and power infrastructure exist in the vicinity.
Freegold holds a 100% lease interest in the project amd has accumulated a substantial drill database since acquiring the project in 1995..
The two known zones of gold mineralization that were previously delineated was the Main Zone (3,600 feet long, 460 to 1,700 feet wide, ), and the North Zone (1,400 feet long, 600-800 feet wide ). In both zones, gold mineralization commences directly at surface.
Following its optioning of the project in 1995, Freegold undertook additional confirmatory and metallurgical core drilling, conducted bulk testing at seven pit location throughout the deposit, undertook extensive metallurgical and heap leach column testing, and delivered a feasibility study in mid 1997.
The study by Watts, Griffis and McOuat in 1997 contemplated a 22,500 ton per day open-pit, heap leach operation producing an average of 95,000 ounces of gold per year with an overall 0.6 to 1 strip ratio.
The IRR was a very robust 28 % at a gold price of $364/0z .
Following the completion of the study, the price of gold entered into an extended period of decline, and the project was placed on hold.
With the return of higher gold prices, and with the introduction of a new, production-oriented management team, the project was re-activated in 2005.
Initial re-evaluation of the project to date has been positive, following a recalculation of resources through a new, independent 43-101 study, following preliminary cost updating, and following a positive review of the prior feasibility study and its underlying test-work by Hatch Limited, a world leader in the design and construction of heap leach gold projects.
In late 2005 Freegold commissioned a new resource estimate for the Almaden deposit. This estimate was designed to comply with Canadian National Instrument 43-101.
This first phase of resource re-evaluation calculated an Indicated resources of 551,834 oz, and an Inferred resources containing 359,802 oz, for a total of 910,000 oz.
Although these resources were previously categorized in the Measured and Indicated categories (with 94% being categorized as measured), the prior resource studies failed to use adequate geological modeling to help guide their resource calculations. information from tight spaced drilling.
As a consequence, Freegold in 2006 began a major 34,000 ft drilling program that had 3 main objectives..
....provide the drill information necessary to complete the appropriate geological model,which would bring all of the indicated and inferred 43-101 resources back into the highest grades of Measured and Indicated categories.
.... Given the strong similarities with Mule Canyon, Buckhorn and Hollister gold deposits, a compelling case can be made that high level silica encapsulated gold-silver mineralization at Almaden may be the upper part of a deep-seated hot springs system with potential for bonanza grade quartz vein-hosted gold-silver mineralization similar to that being mined at the nearby Ken Snyder mine... ie ITF planned to test this hypothesis by drilling below the floor ( about 200ft ) of the existing open pit
....Three possible expansion areas were noted in the original Feasibility Study and Freegold's own recent re-modeling of the deposit confirmed that there are areas of the deposit that are open laterally and at depth. Testing of these lateral expansion zones was a significant part of the 2006 drilling program.
The 34,000 ft drilling program will very soon be completed.These data will be used to update the 2005 43-101 resource estimates, and, following the metallurgical testing by McClelland, Freegold will update the 1997 feasability study to determine whether the original mine design in the 1997 WGM feasibility study remains the optimal manner in which to develop the deposit.
From the drill results todate, some conclusions can already be made..
...the gold resource within the original area defined by the 2005 43-101 study will not only be upgraded to the highest 43-101 categories, but those resources should also be significantly increased by perhaps 10 to 20 % ( ie at least 1 million oz ) .This expected increase is a consequence of (a ) gold grades of infill drilling have, on average, being higher than the original cores (b )preliminary mettalurgical testing shows improved gold recoveries ( c ) a much higher POG means a lower cut-off grade
.... the overall gold resource will be significantly increased due to drill results which have confirmed the lateral extenions of the open pit resource beyond the periphery of the Main and North zones.
A close look at the drill results released todate shows that substantial expansions of the open pit will be possible on both the east, south and western borders of the original zones.
....drill testing at depths below the current open pit ( 200 ft ) show continous gold mineralization down at least to the 500 ft level, at grades equivalent to and higher than the previosuly defined shallow zones at least in the southern extension of the Main zone.These drill results not only indicate the potential for a much larger gold resource below the original open pit, but also show potential for bonanza grade quartz vein-hosted gold-silver mineralization similar to that being mined at the nearby Ken Snyder mine.
In summary, the results available todate from the 34,000 ft drilling program at Almaden show that
.... the original 43-101 resource of 910,000 oz will increase to at least 1 million oz in the M $ I categories,
... that the overall gold resource will be expanded substantially by the addition of gold mineralization from 3 lateral areas,
... and that the gold resource will also be expanded due to the continuation of gold mineralization to depths of 500 ft at least in the southern portion of the original zones.
One can only speculate as to the quantity of the new additions at depth and laterally, but eye-balling the zone dimensions suggests that 500,000 oz would not be unreasonable..and would increase the overall gold resource to levels in excess of 1.5 million oz.
That is, from a resource level, the picture will be significantly improved relative to the 1997 feasability study, grades will improve and gold recoveries will also be improved.
The strip ratio of 0.6 to 1 is very low and suggests a cash cost significantly below $300 /0z.
In other words, it is increasingly likley that the new feasabiulity report coming in Q2 will recommend proceding to heap leach gold production at the level of 100,000 oz of gold per year.
Heap leach gold mines are relatively cheap to construct and can be built within a period of 8-10 months.
Should ITF proceed to produce Alamden, the fair value market cap at 10 times cash flow would be about $400 million at POG of $650.
As for current valution due exclusively to the Almaden gold deposit, a value of about $50 per oz of gold in situ would be appropriate for Indicated and Inferred resources.
That is, current fair value would be about $50 million or about $1/share.
When the new 43-101 is updated in early Q2,and the original 910,000 oz are upgrade to the M & I category, the average value per oz of gold in situ..based on peer values.. rises to about $150 /oz.
That is, the Almaden asset value would rise to about $150 millio or better than $3/share..and could be higher, depending on the extent to which the overall gold resource is increased by the 2006 drilling program.
The Golden Summitt project,a potential " super pit" gold resource, is also a company maker.
Also, lots of news flows in the near future as well.
