If there is one thing Barkerville’s resource announcement demonstrates it’s that the market is clearly craving a new story. Over seven million shares traded in the two hours and sixteen minutes after the halt was lifted, and the stock moved up 49%, from $0.81 to close at $1.21.
The company reported an astounding indicated resource of 69 million tons at 0.154 ounces per ton (62.6 million tonnes 5.28 g/t Au) for 10.626 million ounces gold. We continue to receive numerous queries about our take on this announcement, despite Brent’s skepticism noted in yesterday’s letter. Out of interest I spent some time reviewing the available data and would like to provide immediate feedback here, and perhaps more insight later as we get our hands on additional information.
Before getting into the supporting commentary below let’s just visualize what this deposit would look like on the ground. It is an order of magnitude richer per cubic meter than the Timmins Camp in Ontario. To support such a resource, the 1,000 by 300 by 300-meter block of ground at Barkerville’s Cow Mountain would have to host approximately 39 kilometers of Mother Lode type veins, at a density of one 2-meter wide vein spaced every 7.6 meters. This assumes each and every vein is consistently grading 5.28 grams per tonne gold along a 300 meter strike and 300 meter depth. Got it?
In detail
We’ll steer away from commenting on some corporate anomalies at Barkerville such as the recent resignation of a couple directors and the very short tenure (45 days) of a CEO appointed in early March.
We do not have the luxury of having the final NI 43-101 report supporting this resource; therefore, this initial review comes from the June 29, 2012 news release and other publically available information from the company’s website and SEDAR. Having reviewed these over the weekend, there are several technical red flags to address around the reported resource at Cow Mountain.
1) This resource is a quantum leap in size and grade over the last resource for the Cariboo Gold Project published by Giroux (2006) which, at a 0.01 ounces per ton cut off (0.3 g/t), included an indicated resource of 479,504 ounces gold at a grade of 0.046 ounces per ton gold (1.58 g/t) and an inferred resource of 112,992 ounces gold at a grade of 0.033 ounces per ton gold (1.13g/t). Such growth over such a short time would be extraordinary, especially the increase in grade.
2) All of the resource at Cow Mountain is classified as indicated and none is classified as inferred. It is exceptional to see a resource, especially one of this magnitude, display such a high degree of certainty.
3) The news release mentions that if a block falls within the search ellipse of one drill hole, it is classified as “ore.” Most resource calculations require more stringent criteria for resource blocks to be classified as indicated.
4) From a drill plan map available on Barkerville’s website, there have been ~238 surface drill holes completed at Cow Mountain between 2007 and 2011. In the news release, there is a mention of 2,638 drill holes totaling 145,600 meters, mostly historic, used for calculating this resource. Although results from 2007-2011 drill holes are available in recent news releases and the NI 43-101 update report from 2009, data from the vast number of historic holes is not readily available. This lack of transparency is disturbing.
5) There are all of seven cross sections showing drill intercepts on the company’s website. Text displayed on these sections is painfully hard to read due to the very small font size used. Gold intercepts on these sections as well as in recent news releases are mostly narrow, typically no more than a few meters, and of highly variable grades ranging from less than one gram per tonne gold up to rare intercepts grading >100 grams per tonne gold. On the sections, no attempt has been made to connect veins from one drill hole to the next. A full set of cross sections, like those described as having been employed by the resource modeler in the news release, is not available on Barkerville’s website. This makes a critique of the news release’s assertions nearly impossible.
6) A review of recent news releases indicates some drill holes occasionally intersect narrow, very high grade veins. Mother Lode gold systems such as Cariboo commonly display such “nuggetty” gold. What is disturbing is that the company has employed extreme grade smearing utilizing these high grade spikes. For example, on December 12, 2011, the company reported an intercept of 62.3 meters at 14.2 grams per tonne gold in hole CM11-102. Within this are two intervals (veins), 0.9 meters at 858.1 grams per tonne gold and 0.7 meters at 84.6 grams per tonne gold. These smaller intercepts contribute 95% of the gold to the longer intercept, yet represent only 2.5% of its length. Although these high grade intercepts are intriguing, one look at the cross section displaying this hole indicates they do not extend to other nearby holes. Therefore, it is likely these represent small volumes of material, certainly not the large high grade zone implied by the longer reported intercept.
7) Reporting “geological potential” is highly unconventional, but it is done very liberally in this news release. The QP asserts that the Island-Cow-Barkerville belt potentially hosts 405 to 684 million tons at 0.12 to 0.16 oz per ton (4.11 to 5.49 g/t Au) for between 65 and 90 million oz gold. The Rainbow Unit of the Barkerville Sequence is stated as being the preferential host to veins at Cariboo due to its brittle nature. The news release implies that the resource modeler used this observation to make certain assumptions about volumes of rock, vein density, etc. to help calculate this potential. While such theoretical exercises are entertaining, they are highly speculative and have no place in a news release.
What would this deposit really look like?
On the topic of theoretical exercises, two can play at this game. Cariboo is a classic Mother Lode type vein district with quartz veins and some sulfide replacement pods. Sixty-nine million tons (62.6 million tonnes), the quantity of “ore” in Barkerville’s resource is a lot of rock. We calculate such a tonnage would occupy a volume of 23.6 million cubic meters, assuming a density of 2.65 tonnes per cubic meter.
Scanning drill intercepts reported by the company over the past two years, we estimate the average width of vein intercepts to be in the range of about 2-4 meters. True widths of these intercepts are impossible to determine with available data, but we will assume 2 meters for this exercise. Grades reported in news releases are all over the map, but let’s assume the average grade of a vein intercept to be 5.28 grams per tonne, the average grade of the Cow Mountain resource.
The conceptual pit mentioned in the news release starts at 4,550 feet above sea level and extends down to 3,550 feet (I can’t stand English units) above sea level, so about 300 meters deep. The resource modeler used eight cross sections spaced 400 feet apart to help model the resource. We’ll call it a segment 3,200 feet, or about 1,000 meters, long that hosts this gold.
The Rainbow Unit, the rock formation that hosts these veins, appears to average about 300 meters wide. In short, we are looking at a block of rock 1,000 meters long, 300 meters deep, and 300 meters wide hosting the veins that make up this resource.
Ok, assuming 2 meter true width for the average vein, and a height of 300 meters (surface to the bottom of the pit), each linear meter of vein would contribute 600 cubic meters of rock. To generate the aforementioned 23.4 million cubic meters, it would take 23,600,000/600 = 39,333 linear meters (!) of veins to generate the 69 million tons claimed in their news release.
Assign a strike length of 300 meters (width of the Rainbow Unit) to each such vein, and this comes to 131 veins (each 2 meters wide, 300 meters tall and 300 meters long having an average grade of 5.28 grams per tonne gold) that are needed to generate this resource. If evenly spaced, this would be one such vein every 7.6 meters scattered along the entire 1,000-meter strike of this resource!
The old timers only managed to squeak a minuscule 1.2 million ounces of lode gold out of the Cariboo camp after riddling these hills with drifts over the years. Barkerville has apparently found what many thousands of eyes have missed.
Mother Lode type gold systems can make world-class gold camps without doubt. The famous Timmins camp of Ontario is a great example. Seventy-five million ounces of gold have been produced from numerous mines along its Porcupine Belt, 45 million of which originate from three mines, the Hollinger, McIntyre, and Dome mines scattered along about 7,000 meters of strike (similar strike to the Island-Cow-Barkerville trend).
Workings in these three great mines at Timmins extended down about 1,700 meters; this translates to about 2.65 million ounces for every 100 vertical meters. Over a strike length of 7,000 meters, this comes to 380,000 ounces every 1,000 meters in a 100 meter tall block.
At Cow Mountain, the conceptual pit is 300 meters deep. Apply the above calculated density of gold found at Timmins, and one would have 1,140,000 oz gold in the same volume of rock as that modeled in the newly released Cow Mountain resource. Timmins is one of the best Mother Lode gold camps on the planet, yet it appears to boast an order of magnitude less gold per unit volume of rock than Barkerville!
We have now beaten this one up sufficiently. It is up to Peter T. George, the resource modeler contracted by Barkerville, to, in his upcoming NI 43-101 report, fully illuminate investors on the methodology he employed to calculate this astounding resource. Like Brent, I shall be preparing a cold gin and tonic about 45 days from now in preparation.
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