One sometimes has got to wonder what the market is expecting from Contact Gold (C.V). Despite announcing the discovery of two new gold-bearing zones on its Green Springs gold project in Nevada, the share price didn’t move at all.

Perhaps the market didn’t fully understand the reason why those new discoveries are interesting? In any case, the discovery of gold at both the Tango zone and the X-Ray zone further strengthen the exploration thesis at Green Springs. Contact Gold diligently works through its exploration programs and will likely be in a position to publish a maiden resource estimate in 2022.

Green Springs Drilling

Contact Gold recently successfully completed its re-domiciliation as a Canadian company which should make it easier to raise money as it will no longer be subject to the US rules which required newly issued shares to be locked up for 6 or 12 months (depending on the availability of a prospectus).

Contact now also is an easier story to understand as it moved from being a US-domiciled company owning just one primary asset, to a Canadian company with two flagship assets: Pony Creek and Green Springs. The latter gets all the attention these days (and deservedly so given the new discoveries) but rest assured Pony Creek is far from written off.

Nevada Focus: Green Sprints and Pony Creek as Flagships

The recent discovery at X-Ray further strengthens the exploration thesis

Just last week, Contact Gold announced the discovery of a completely new gold zone at Green Springs as it directed the drill rigs to an area approximately half a kilometer southwest of the known Alpha zone. This drill target was identified by an extensive mapping and sampling program and those results were interpreted in combination with the drill results from the nearby Alpha zone. This resulted in Contact’s technical team designing some high-priority drill targets at X-Ray, and that has paid off.

Two holes were empty, and that’s fine for a first pass drill program, but investors should focus on the two holes that did contain gold mineralization: finding almost 40 meters of 1.28 g/t Au starting very close to surface is an excellent result. Hole 49 is also excellent with in excess of 24 meters containing 0.82 g/t gold. Lower grade than what was encountered in hole 48, but still a multiple of the traditional cutoff grades for oxide gold projects in Nevada. Additionally, the cyanide recovery levels in hole 49 were much higher than in hole 48 and based on a very preliminary first look, the recoverable gold values of both holes will be pretty close to each other. The pilot shale tends to have an increasing oxidation level at depth until a certain point where the mineralization is a bit more mixed than the Chainman shale, which explains the variation in the reported recovery levels.

Green Springs Region

X-Ray will likely see more drilling in the very near future as the mineralization appears to be open towards the south-southwest where the mineralized zones are underlying the Joana limestone. Additionally, there will likely be a few holes along the pilot shale (running from west to east) to check for the continuation of the mineralization in those directions.

Not only is the discovery of this new zone adding value (and hopefully mineable ounces) to the Green Springs project, the X-Ray zone also forms an important connection between the Alpha Zone and the northern portion of the mine trend as both zones are now almost linking up. This may mark a critical turning point in the evolution of the project where linking the 1.5-kilometer X-Ray through Tango trend to the 3 kilometer Mine Trend means a very substantial gold footprint to derive ounces from.

Plan map of the X-Ray discovery

Another important implication is that the X-Ray zone seems to make the gold mineralization at Green Springs more consistent than we had originally thought. While the Alpha zone was just about a kilometer away from the Mine Trend, the Alpha Zone still was an ‘outlier’. Now the X-Ray zone seems to be linking up the Mine Trend and Alpha, and two discoveries have been made on both sides of the Alpha Zone which makes it look like the Mine Trend is deflecting towards the northeast. And that could potentially have some interesting implications.

The discovery of the X-Ray zone comes right after discovering gold at the Tango Zone

Earlier in June, Contact Gold released the assay results from 17 holes drilled on the Tango Zone, an area of the Green Springs gold project that has never been drilled before. Of the 17 holes, 16 have actually encountered gold mineralization for a very impressive hit ratio of 94%. Most of the holes encountered gold values that would be seen as above cutoff grades for the average Nevada oxide gold systems.

The almost 55 meters containing 0.55 g/t gold is an excellent result, especially considering the mineralization started at a downhole depth of less than 20 meters. The 13.7 meters containing 1.01 g/t are also excellent and even lower grade zones like the almost 14 meters at 0.40 g/t gold should theoretically end up on a leach pad.

The cyanide recovery levels are slightly lower compared to other areas at Green Springs, and this is likely caused by the fact the gold is hosted in the Pilot shale rather than the Chainman shale (where CN recovery rates tend to be higher). Of importance is the size of the discovery as Contact Gold is mentioning a 250 meter by 500-meter surface area, and it looks like the company expects the mineralization to continue towards the rest where it dips under Joana Limestone and potentially to the northern end of Tango as Contact has staked additional land. A wise decision, especially as the Green Springs Mine Trend seems to be evolving into a mineralized corridor that’s much longer than previously anticipated.

This was the very first time ever the Tango zone has been drilled, and it clearly was a success as the drill program encountered a consistent zone of gold mineralization close to surface. Another important factor highlighting the importance of the Tango discovery is the fact this Zone represents a step out of about half a kilometer from the Alpha zone drill holes. This truly was a step-out discovery as the mineralization at the Tango zone appears to be open towards the south and the west. So while the very high hit ratio in the first drill program was an excellent start, it appears there might be more to be found here.

The discoveries at both X-Ray and Tango confirm the Green Springs project is benefiting from a fresh set of eyes and a new exploration approach.

Green Springs Mine Trend

While most of the zones highlighted on the image above were discovered by previous operators, the recent discoveries of the Tango and X-Ray zones literally within walking distance from the known gold-bearing zones highlights the exploration potential of the Green Springs Mine Trend.

And because all satellite zones are in very close proximity to each other, it also means the required scale to be developed as a satellite open pit would be relatively low. Considering everything is located within a radius of a few kilometers even a small satellite pit containing just 100,000-125,000 ounces of gold could be worth developing (obviously depending on the grade and metallurgical recoveries). But before getting ahead of ourselves and thinking about development scenarios, let’s first wait for Contact Gold to actually release a resource estimate.

Conclusion

It’s been two years since Contact Gold acquired the Green Springs project from Ely Gold Royalties (ELY.V), and we can clearly say the exploration efforts since the acquisition has been successful. The initial exploration theory was successfully tested while the technical team also discovered some new zones. Both the Tango and X-Ray zones appear to be very promising as the initial results indicate these areas meet most of the requirements for a Nevada-based gold oxide project: the grades are generally above the standard cutoff grades for an oxide gold project, while most of the gold was found close to surface.

Contact Gold should be in a position to release a maiden NI43-101 compliant resource estimate on its Green Springs project in 2022 or early 2023 depending on if discoveries continue to add runway. Although the million-ounce gold mark may not be achieved in this first resource calculation, it should be possible to put a resource together that would support an open pit and heap leach mine plan. The proof of the pudding will be in the eating, and additional drill results may strengthen Contact’s case at Green Springs. What has become clear is that after two years of re-modeling and working the ground, Contact’s technical team now seems to have Green Springs figured out and the discoveries are now coming in quick succession. Now the process of mapping, sampling and drilling has resulted in new discoveries, Contact Gold may also be more confident in pursuing additional drill targets that were developed in the same fashion. We expect Green Springs to continue growing and perhaps becoming a very appealing take over target to mid-tier operators in the state

Neighbour Fiore Gold recently announced the acquisition of the Illipah oxide gold project in Nevada, which is just north of Green Springs and was a similar sized old heap leach mine further strengthening its presence in Nevada. Fiore Gold would be a logical contender to get its hands on more oxide gold projects in the state as the company has built up excellent expertise in building and operating oxide gold projects. Fiore may be making a play to consolidate assets in the district to backstop their Pan and Gold Rock Mines and Green Springs sits in the heart of the district and boasts the best grades and widths being discovered.

For now, the market appears to be underwhelmed by Contact Gold’s progress. And that’s a pity as Contact Gold is doing everything right culminating in what could be considered as two virgin discoveries. For some reason, nobody cares about the Green Springs exploration successes while everyone also still seems to be ignoring the Pony Creek gold project, bordering Gold Standard Ventures (GSV, GSV.TO) Railroad project.

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Disclosure: The author holds a long position in Contact Gold. Contact Gold is a sponsor of the website. Please read our disclaimer.

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