Orca Gold has plenty of Au, now it needs to discover H2O!

May 29

Orca Gold has plenty of Au, now it needs to discover H2O!

When evaluating gold exploration stocks there are three boxes that MUST be checked before making a “yes” investment/speculation decision:

1) The Right People

2) The Right Rocks

3) The Right Share Structure

As far as I can tell, Orca Gold (CVE: ORG) (OTCMKTS: CANWF) meets or exceeds the above criteria. Its team has a proven track record, including a BIG success story— selling Red Back Mining for $7.1B in 2010. While somewhat complex, I understand the geology (Arabian Nubian Shield) hosts plenty of gold, evidenced by thousands of artisanal miners working Orca Gold’s Block 14, of which it owns 70%.

The Right Rocks? — From 2012 Corporate Presentation

CEO Hugh Stuart suspects Orca Gold is just scratching the surface on its 926,645 acre land mass, looking at the map of “targets” below, the prospect for adding additional ounces is good (to quite good).

Regional Targets Outlined in Yellow — “GSS” and “Wadi Doum” Resource Currently 2 million ounces

Thirdly, for share structure, approximately 40% of Orca Gold’s 107 million shares are held by Zebra Holdings [Lundin Trust], Sinotec [Beijing based multinational] and its management/BOD.

Gold-gold-everywhere, but not a drop to drink.

Orca Gold needs to discover water!

In 2014, a Nubian sandstone aquifer was intersected 55km north of a potential mine site at depths of 35m to 80m. More recently, according to page 14 of the corporate presentation, a 24 hour pump test achieved 3.75 litres per second with good re-charge.

Is that good? – I don’t know for sure.

From what I hear, more than one sophisticated speculator doesn’t think Orca Gold will solve its “water problem” (so these initial results are an encouraging sign, but not good enough?). After asking around and listening carefully, I suspect pessimism surrounding H2O has dampened Orca Gold’s stock price thus far.

But, and that’s a BIG BUT… if Orca Gold discovers water in large enough amounts to support a low-cost starter heap leach operation, it would be a positive catalyst for the stock (and we could get confirmation any week now). Worst case scenario, Orca Gold, or a hypothetical acquirer/partner would need a 195km pipeline to the Nile River, additional costs associated would likely shift its focus toward drilling (as opposed to production).

Galat Sufar South: one of the Top 3 heap leach projects worldwide?

While more metallurgy work remains to be done, initial testing of “fine grind and leach” showed 81% recovery [pg 12]. Orca Gold’s PEA will consider three development options, one being a “low cost starter heap leach” at Galat Sufar South (aka. GSS).

a) According to its numbers>> 13.6 million tonnes of oxides @ 1.23 g/t Au [539k ounces]

b) According to my numbers>> 1.23 g/t Au multiplied by 81% recovery = 1 g/t Au “recovered grade”

Now then, water and country concerns aside (i touched on country risk here), according to the chart below, courtesy of Exploration Insights, GSS would rank among the Top 3 heap leach projects in the world— and #2 is being acquired by Goldcorp for $520M.

Heap Leach Deposits

Chart from Exploration Insights — GSS not listed, but could be in Top 3

Bottom Line: I don’t think Orca Gold has a PR machine, but if it does, it hasn’t been running lately… things have been VERY quiet. However, “smart money” tends to accumulate during quiet periods. With a scheduled PEA announcement (by July?) and further water testing, Orca Gold should have many important things to communicate to the market in the near future. With a market value of $26M and $16M cash to invest into advancing GSS toward production or drilling (historically, it hasn’t struggled to find more ounces), I continue to like the risk/reward.

 

*Author has a long position in Orca Gold Inc.

 

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