SANTA MONICA, CA / ACCESSWIRE / July 25, 2017 / For the third time this year, spot gold found support in the area of $1,200 per ounce, lending credence to the idea that the precious yellow metal found its bottom late in 2015 at $1,045. It further lends to the notion that gold is heading for the next leg up in a super cycle after a more than four-year downtrend from a record high at $1,923.70 in September 2011 as well. It's a bit Buffett-esque to rely on the investment strategy of buying while there's blood in the streets, but the collapse in prices indeed created opportunities, such as that of now-public U.S. Gold Corp. (USAU) snatching prime property in coveted exploration areas in Wyoming and Nevada.
Formed in 2014 by two of the founders of Gold Standard Ventures (GSV), U.S. Gold made its way to the NASDAQ exchange in May via a merger with memory chip maker Dataram. A bit of odd bedfellows, Dataram, which generates about $20 million in annual revenue, remains a wholly owned subsidiary of U.S. Gold. However, USAU CEO Edward Karr said in a recent presentation that he has board approval to investigate divesting the asset to build shareholder value.
That alone is an interesting dynamic for a company with a market capitalization of approximately $32 million, especially when considering the mining assets that are the core strength of U.S. Gold.
To pick which project in the Elko, Nevada-based company's portfolio is most valuable at this moment is debatable. The Copper King project about 20 miles west of Cheyenne, Wyoming is an advanced exploration stage property and could be a near-term producer. An historic Preliminary Economic Assessment report completed in 2012 for Strathmore Minerals showed 926,000 Measured and Indicated ounces of gold and 223 million pounds of copper. The Inferred category showed another 174,000 ounces of gold and 62.5 million pounds of copper. At $1,100 per ounce gold and $3 per pound copper, the project had a Net Present Value of $159.5 million and a 31.2% internal rate of return.
Moreover, the known mineralization remains open at depth and in different directions.
With Copper King located on state property with Wyoming getting a 5% royalty, Cheyenne is likely motivated to see the project moved forward into production.
Over in Nevada, the company owns neighboring properties, named Keystone and Gold Bar North, with the potential for district-scale mining operations in the famous Cortez Gold Trend. In the gold world, this is elephant country for resources with more than 245 million ounces produced and many 20+ million-ounce gold deposits.
Geologist/explorer guru Dave Mathewson, formerly the head of Newmont's (NEM) exploration team in Nevada, knows this area as well as anyone, having made major discoveries for Newmont, including the Tess and Northwest Rain deposits. Mathewson came on board with U.S. Gold largely because of Keystone, which he has referred to as the best exploration project he's seen in his life.
So far, the company has only drilled six holes across the 15-square-mile property, with three more expected to be done this month. Other exploration tactics, including a detailed gravity survey, indicate that a large, epithermal gold system is present on the property, similar to the massive Cortez Hills Mine of Barrick Gold (ABX) only 10 miles to the north
Based upon the initial exploration, U.S. Gold staked an additional 2,000 acres (102 claims) in March to extend the perimeter at Keystone.
In the aforementioned presentation, Kerr said "100% yes" to the notion that Keystone could hold a major, Carlin-type deposit because the USG team led by Mathewson is seeing everything that they're looking for to support the contention. Investors will likely be keen to see the latest assay results and look ahead to more drilling to better define the property. Thanks to an $11.9 million equity offering completed in October, U.S. Gold is fully funded for its 2017 exploration programs at Keystone, Gold Bar North and Copper King.
Since coming public, shares of USAU have done little more than sink, which certainly can be considered a surprising occurrence given the robust economics of its Wyoming property, potential of its Nevada properties and fact that Dataram remains owned by U.S. Gold. All sorts of variables are swirling around the gold market - political disarray in the States and nuclear initiatives in North Korea, to name a couple - that are supportive of gold prices continuing to melt upward and keep emerging from the long downtrend, making it an opportune time to keep an eye on developments at USAU
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