Two Good News Nevada Gold Junior Stories, Plus a Look at the Rubicon Minerals Debacle

Not great news, I agree. But I have stopped stressing about gold. We
may yet see gold mark a new bear-market low before the end of the year,
but chartists and I generally agree it would be unlikely for such a low
to be dramatically below this summer’s US$1,090 per oz. Of course there
are deflationists out there with far weaker predictions for the yellow
metal, but my belief that the broad US market run is dying supports a
brighter near-term for gold than that.

That
being said, I do not think the next six weeks are going to be good for
gold. I dive into that in a bit more detail in this week’s Macro
Observations below.

I
continued that discussion with my subscribers last week by detailing
what it means for mining portfolios – with actionable advice. If you
haven’t tried my free three-month trial subscription, click HERE to
sign up.

Without further ado, a look at last week’s Maven Weekly.

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In The News…

Great news from Nevada this morning, where Gold Standard Ventures (TSXV:
GSV) announced a healthy intercept of oxide gold mineralization
from the Railroad-Pinion project. Specifically, hole DS15-10 returned
149.4 metres grading 1.38 grams per tonne (g/t) gold.

All
told, four of five holes testing the Dark Star structural corridor
returned notable gold intercepts. This structural corridor target
extends northward from the defined Dark Star deposit, which currently
hosts 23.1 million inferred tonnes grading 0.51 g/t gold for 375,000
oz.

The intercept in hole DS15-10 suggest a new zone that is thicker and
significantly higher grade than anything previously drilled at Dark
Star. The hole sits 510 metres north of the Dark Star resource in an
area that had never before been drilled.

GSV
director Rob McLeod described the hole as “a massive game changer for
us, on multiple levels.” While hole DS15-10 seems from a thicker,
higher-grade zone than the Dark Star resource, the host rocks are the
same: an oxidized limonite- and hematite-bearing, silicified and
quartz-veined debris flow conglomerate.

This host rock alone makes Dark Star intriguing because it differs from
the limestone-type rocks that host most of Carlin-style mineralization.
As McLeod pointed out, the conglomerate host rock at Dark Star is not
especially reactive, so for it generate such a long, well-mineralized
intercept suggests a “large, robust system”.

A
large system of oxidized Carlin-style gold would indeed be exciting.
Newmont Mining knows the Carlin trend about as well as anyone and the
company’s most profitable Nevada operation is the Emigrant mine, a heap
leach operation only a few miles north of Pinion.

The
other holes released alongside DS15-10 were also promising. Hole
DS15-06 returned several gold intercepts from 30 metres outside of the
resource envelope. Hole DS15-09 returned 29 metres of 0.73 g/t gold
from 150 metres north of hole DS15-10, confirming the prospectivity of
the entire 6 km-long Dark Star corridor.

Gold Standard had been planning to update its PEA but those plans are
now on hold until the company gets a better hold of these new areas.
Even a resource update anytime soon is questionable, as the step outs
have been aggressive and therefore the resource model likely has some
gaps that need filling.

For
now the focus will be on continued drilling. Gold Standard is well
funded to keep working, with almost $18 million in the bank. In addition
to the rig testing the Dark Star corridor, Gold Standard also has a rig
working to expand Pinion, the larger oxide deposit 2 km to the west.
Pinion is already home to 20.8 million indicated tonnes grading 0.63
g/t gold and 55.9 million inferred tonnes grading 0.57 g/t Au, for 1.4
million combined oz.

GSV shares gained as much as $0.11 in intraday trading before closing
the day up $0.07 at $0.59.

—————————————-

Another Nevada explorer that moved nicely over the last week was Viscount Mining (TSXV:
VML).

Viscount owns the Cherry Creek property, but work on the ground is being funded
by Sumitomo as the Japanese major works to earn 75% of the project by
spending US$10 million and producing a feasibility study within 8
years.

The backstory here involves a splintered land package, long divided
amongst neighbours who hated each other. It took time and patience, but
Viscount managed to consolidate the district. The result is a land
package of more than 400 claims that includes more than 20 historic
silver, gold, and tungsten mines.

The area has a long history of production from high-grade vein and
replacement deposits, but the current program represents the first time
the lands have been explored using modern techniques.

Late last week the partners described their latest findings, which
include a new geologic interpretation of the Flint Canyon area.
Prospecting and mapping have identified east-west faults and fractures
similar to those that control mineralization at the nearby Ticup and
Star mines, as well as an abundance of mineralized jasperiod outcrops
along the base of the Dunderberg shale and within the Pogonip
limestone.

Both
are rock types regularly associated with Carlin-style mineralization
and mineralized jasperiods are common indicators for Carlin-style
zones.

Drills
started turning in mid-October, with a reverse circulation program that
is initially targeting the area around the historic high-grade silver
Ticup mine. The drilling will test structural intersections and
lithological contacts. Flint Canyon will be tested soon, following a
soil sampling program. Sumitomo described the area as a “very high
priority target”.

Sumitomo seems to be moving pretty quickly at Cherry Creek, which is
interesting. Much of the Carlin Trend has been explored, but pockets
like this that were unavailable because of ownership issues certainly
stand out. Investors seem to like the story and have lifted VML’s share
price from $0.20 in July to near $0.50 today.

————————————–

I will not spend long on the debacle at Rubicon Minerals (TSX:
RMX) as there are many voices out there discussing this story. The
very short version is that in 2011 Rubicon decided to forgo the usual
pre-feasibility and feasibility studies and instead build a mine at its
Phoenix project based on a preliminary economic assessment.

The
mine poured its first gold in June but questions remained around budget
overruns and ramp-up challenges. Then, at the beginning of October,
Rubicon was forced to suspend mill operations because of a problem
managing ammonia levels in the tailings facility. The news contained
its fair share of red flags, including that the initial order to deal
with these issues had been issued a month earlier but that RMX had
failed to report the problem publicly.

At the time Rubicon said it would take two to four weeks to
address the problem, during which time the mill would be suspended but
underground development and other constructions works would continue.
The fact that Rubicon’s longtime president and CEO Michael Lalonde
stepped down hours later belied a deeper problem.

Now that deeper problem is out in the open. Yesterday Rubicon suspended
underground activities at Phoenix while it “enhances its geological
model of the F2 gold deposit and develops a project implementation
plan.”

The announcement included a quote from interim president and CEO
Michael Winship: “Similar to other high-grade, narrow vein, underground
gold deposits, the geology can be quite challenging and requires
additional analysis to be fully understood.”

There it is. The problem all along was insufficient prep work. I can
see why RMX wanted to just build a mine: a strong gold price in 2011
meant money was available, drilling had outlined a high-grade gold
deposit, and the hundreds of additional drill holes needed to inform a
full feasibility study would have taken years and cost many millions of
dollars.

But that’s a fallacious choice, because building the mine around a
complicated underground deposit without taking those extra steps simply
doesn’t work. To make money mining a complex deposit requires reams of
information. Rubicon went ahead before it was ready.

This is not a scam. It is a shame. And just because it is not a scam
does not mean blame is unwarranted.

Rubicon has $23 million in the bank. After yesterday’s news RMX shares
are trading at $0.22, giving the company a market cap of $103 million
(down from almost $600 million earlier this year).

Macro Observations

Gold’s Feeling Seasonal

Just when gold was gathering steam and looked like it just might break
up through resistance levels, the Federal Reserve promised to really
truly think about raising rates in December…and apparently that is
enough to support US indexes and the dollar, while smacking gold back.

It is highly frustrating, but not unexpected. Investors are
addicted to easy returns fueled by Central Bank support, so any hint of
that (which now need only take the form of Yellen saying she won’t
tighten for some time) sends traders in to buy. Ironically it also
supports the dollar, even though higher rates would theoretically be
good for the greenback. But bad means good in global economics today,
so on we go.

It won’t last. I see the US bull market having died in the fall, when
the S&P fell below 1900 coincident with the momentum indicator MACD
moving decisively lower. The market rallied respectably in October…but
the MACD never turned back up.

Momentum
never returned.

It’s
just the latest sign in a sea of indicators that the US bull is
weakening. Such tops take time to complete, so we may yet see market
strength through November and December, which tend to be strong months
for stocks. But I see these as the last days of a long US market party,
one that when it ends will send investors out hunting for undervalued
opportunities. Metals will attract a good chunk of that
attention.

Gold’s
recent retreat also correlates with the yellow metal’s seasonal
patterns, which have it gaining in August and September (the move
slightly delayed this year because – you guessed it – markets were
waiting to hear from the Fed) and then sliding in November and December
ahead of its usual early-year rally.

So what does it mean for right now? Tax loss selling is getting
underway, so think about selling your dogs now. If a news event or a
good day for gold lifts the share price, take advantage and sell. If
you truly like the story, you will be able to get back in for less in
two months. Downside leverage on underperforming mining stocks during
tax loss season is a very reliable pattern.

Selling your dogs will also mean you have cash at the ready to take
advantage of the January gold rally, which is as reliable as
gingerbread flavouring in every coffee, cookie, muffin, and cake from
now until Christmas.

As I have explained before, there are ways to make money in the near
term – if you know the patterns and are ready to act.

Resource Maven finds and explains the news that matters in the world of
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