If you’re an investor in gold exploration stocks, what’s your dream?
That one of your stocks will make a big discovery, ultimately becoming
a 500,000+ oz/year mining operation, with
reserve grades above 30 g/t Au,
98% recoveries, and
cash costs below $150/oz.
No, that’s not a fantasy.
That’s
Kirkland Lake Gold’s flagship
Fosterville Gold Mine in Australia.
For mining investors wanting to turn that dream into a reality, you might want to consider buying into recent spin-off,
Leviathan Gold (CAN:LVX / US:LVXFF).
Leviathan Gold holds
two huge land packages ~50 kilometers southwest of the Fosterville Mine, in similar geology. But those interested in this opportunity better not wait.
Leviathan has
two drill rigs turning on its Avoca Project and the first
high-grade gold intercepts are already being released. More on that later.
If there was a “surprise” concerning Kirkland Lake’s Fosterville Gold Mine, it is that such a discovery hadn’t come sooner in Australia. Australia is gold country.
The great Australian Gold Rush
From the mid- to late-1800s, Australia had a gold rush (in the neighboring states of Victoria and New South Wales) to rival the
California Gold Rush in the U.S. or the
Klondike Gold Rush in Canada.
Over 80 million ounces of gold (more than 2,500 tonnes) was harvested. Much of the gold was alluvial.
Many enormous gold nuggets were found, including the world’s largest: A single nugget (the Welcome Stranger) that had
a refined weight of 3,123 ounces (97.14 kilograms) – the weight of a large man.
In addition to legions of prospectors, numerous gold mining companies sprouted up across the two States, mining near-surface, high grade gold using the relatively primitive mining methods and technologies that were available at that time.
This epic gold rush died out nearly as quickly as it had begun. Why?
Was all the gold gone? No.
Did the gold mining companies simply lose interest in further mining operations? Not exactly.
Abandoned mines, forgotten gold
Nineteenth century mining technology was extremely limited by today’s standard. A particularly crucial limitation is that
earlier mining operations lacked the capacity to go below the waterline to mine ore.
Gold mining companies lacked the sophisticated pumping/dewatering technology that allows modern gold mining companies to routinely conduct mining operations at depths far below the waterline.
In Victoria State, the waterline of the geology containing this abundant high-grade gold was at little more than 100 meters of depth. Today, modern mining operations regularly go below that level in even open pit mining.
Australia’s prolific gold mines were shuttered and later abandoned at the end of the 19th century for two reasons.
- Much of the easily accessible gold (less than 100 meters depth) was gone.
- At the beginning of the 20th century, the financial world temporarily lost interest in gold and gold mining.
But the undiscovered gold remained.
The legendary gold mines of South Africa go kilometers below the surface to mine gold. The aptly named South Deep Gold Mine extends to a depth of nearly 3 kilometers (2,998 meters). Some mines go
even deeper.
Thus, it was always highly likely that modern mining exploration would uncover new deposits of high-grade gold in Australia – at lower depths.
Most gold deposits do not extend to a depth of several kilometers. But even if Australia’s gold-bearing geology only extends to a few hundred meters of depth,
it likely means that most of the high-grade gold in this prolific geology remains undiscovered.
Enter Leviathan Gold.
Leviathan Gold: cheap entry point for the new Australian gold rush
Kirkland Lake Gold (US:KL / CAN:KL) is a well-run senior gold mining company. But it has a market cap of $10.39 billion. Even with the monster production of the Fosterville Mine, KL’s Australian operations are only responsible for roughly half of its total gold production.
Investing in Kirkland Lake (today) is not the best way to participate in the upside of any new Australian “gold rush”.
Investors may want to look south of the Fosterville Gold Mine, literally:
Fosterville South Exploration Ltd. (CAN:FSX / US:FSXLF).
FSX is the early mover here. After Kirkland Lake’s success in turning Fosterville into one of the world’s most prolific gold mines, Fosterville South came in and bought up
five large land packages to the south of the Fosterville Mine.
These tenements didn’t merely offer similar geology to Fosterville. They had each previously hosted high-grade mining operations – from the original Australian gold rush.
Fosterville South made its own trading debut in April 2020, generating more than a five-bagger for investors during the peak of the 2020 rally in gold mining stocks.
But even well off its 2020 high, the market cap for FSX in 2021 is still CAD$107 million.
Leviathan Gold is a spin-off of Fosterville South, operating two of FSX’s five land packages: Avoca and Timor.
Did Fosterville South spin out these two projects because it had minimal interest in them? Quite the opposite.
FSX’s ‘problem’ was
too much highly prospective gold geology to be explored by one junior mining company. The decision was made to spin out Avoca and Timor so that they could be monetized sooner rather than later.
Historical numbers make it clear why these land packages are highly coveted.
High grade, near-surface gold mining operations with geology unexplored below the waterline.
Luke Norman, CEO of Leviathan Gold was only too happy to take the helm for this opportunity. With
nearly CAD$13 million in IPO funding, LVX is well-capitalized to begin aggressively exploring these properties.
Given the current depressed conditions for gold mining stocks and with Leviathan Gold still a new name to investors as a recent spin-off, Leviathan is presently trading at
a market cap of CAD$49 million – less than half the market cap for Fosterville South.
Leviathan begins exploring first 30 drill targets at Avoca
With the history of high-grade gold mining at Avoca and Timor, management didn’t have to look hard or far to begin identifying prospective gold targets.
The Avoca Project is a 106 square kilometer tenement in Australia’s Victoria State.
That’s a huge land package to explore. But even just narrowing the scope to areas with previous historical workings, Leviathan already has
30 hardrock gold-quartz vein targets identified for exploration on the Avoca property.
Consequently, the decision was made to move
two drill rigs onto the property, to accelerate drilling in Leviathan’s overall
30,000-meter drilling program at Avoca and Timor.
The initial focus of drilling at Avoca is on the Excelsior Prospect. This one vein structure has produced 9,260 ounces of gold at
an average grade of 22 g/t Au (historical numbers).
Eleven drillholes have been completed to date. Assay results have now been released for the first five drillholes, and high-grade gold intercepts are already showing up in the results.
Drillhole EH003:
- 8.24 g/t gold (starting at 161.95 meters depth) over 6.63 meters, including 11.54 g/t over 1.83 meters and 82.1 g/t over 0.28 meters
Drillholes EH005:
- 5.40 g/t gold (starting at 84.37 meters depth) over 11.02 meters, including 17.72 g/t over 2.19 meters
The grades are in line with historical numbers at Avoca. The gold is where investors would expect it to be found: at slightly lower depths, but still relatively near-surface mineralization.
No blockbuster intercepts at Avoca – yet.
Investors who don’t hold a position in LVX may be cheering that fact. Obviously, had Leviathan made any major discovery in its initial holes, it wouldn’t be trading anywhere near its present market cap of CAD$49 million.
As Dynamic Wealth Research has noted in previous coverage of junior gold mining stocks, several juniors have delivered ten-bagger returns to investors –
or better – in recent years. And those success stories came during more depressed bear market conditions for these stocks.
Under-valued gold stock ready to explode higher?
Leviathan Gold is already announcing
early high-grade gold intercepts, roughly 50 kilometers to the southwest of the world-famous Fosterville Gold Mine.
That headline could have been expected to produce a big pop for LVX. But with investors not currently focusing on gold mining stocks, Leviathan has only seen a more modest bounce.
Up 11.36% on Tuesday. And now up 34% from its March 25
th low.
But the stock is still trading
below its IPO price from February 2021, even after the robust drill intercepts. Bargain-priced for investors.
Leviathan’s initial 1917 meters of drilling from its first 11 holes is only a little more than 6% of the 30,000-meter drill program that the Company has planned for 2021. And assays have only been received for less than half of these first 11 drillholes.
Lots more drill results to come. And likely a lot more high-grade gold intercepts along with it.
Dynamic Wealth Research recently observed that investors have
“forgotten about gold” (and gold mining stocks) at literally the worst possible time. Don’t expect this error in judgment to persist as inflation fears continue to mount.
In other words, there is every reason to expect the bull market for gold and gold mining stocks to resume shortly. When it does, high-grade gold intercepts (such as Leviathan has already produced) will definitely not go overlooked by investors.
A good window for gold investments. A great opportunity to invest in Leviathan Gold.
DISCLOSURE: The writer holds shares in Leviathan Gold. Leviathan Gold is a client of Dynamic Wealth Research.
