Earlier this week, Contact Gold (C.V) released the assay results from the first three holes from its ongoing drill program at Green Springs. All three holes were drilled at Echo, and the eye-catcher is hole 2 where the company intersected 2.18 g/t gold over a total length of 28.9 meters (including a higher-grade interval of 15.2 meters containing 3.7 g/t gold). Not only do these grades handsomely meet all cutoff standards by a quadruple digit percentage, it also extends the gold mineralization encountered in a 2019 hole by 20 meters.
A more interesting expansion of the known mineralized system was established with hole 3, which encountered 28.9 meters of 0.44 g/t gold. This expands the Echo zone by 75 meters to the south. And while 0.44 g/t sounds low, applying a recovery rate of 90% (as Contact Gold tests the cyanide solubility based on the reported fire assay numbers) results in a recoverable rock value of in excess of US$23/t based on the current gold price. Hole 1 did not make it to the bullet points in the press release, but 41.15 meters of 0.35 g/t gold would definitely also end up on the leach pad in Nevada.
These are decent (the 0.44 g/t interval) and excellent (2.18 g/t) intervals and it’s surprising to see the market either doesn’t realize this or doesn’t seem to care at all. We noticed some investors were getting fed up with the delay in getting the assays back from the lab and started to think this had negative implications. Turns out, the assay results of all three holes are more than acceptable (the assay results from hole 1 and 3 meet the typical cutoff grade for Nevada oxide-hosted gold systems, although the mineralization in hole 3 is quite deep), while hole 2 is excellent by any standards.
Not only is the ongoing ‘sell on the news’ surprising, it’s also premature. Contact Gold has reported on just 3 of the 34 completed holes, and the drill program is ongoing with an additional 2,400 meters (15 holes) to be completed. Selling Contact Gold after releasing just 3 of the 50 or so holes at Green Springs seems premature.
Disclosure: The author has a long position in Contact Gold. Contact is a sponsor of the website.