Nevada Hustle: Open Gold’s Independence Mine Acquisition a Fast Track to Production

SOURCE: VantageWire.com -- A rapid pace towards production is now in the cards for Open Gold Corp. [OPG:CA] after its recently announced acquisition of the Wilson Independence Gold-Silver Project in the Battle Mountain gold district of Nevada. With a historic resource reported to contain an estimated 1.3 million ounces of gold,a revised 43-101 currently in the works and a PEA is nearing completion. The strategic property acquisition vaults Open Gold into a contender status, especially due to the property’s favorable location.

Located in the prolific gold producing state of Nevada, surrounded by a crescent shaped land package held by Newmont Mining’s [NMC:CA], world famous Phoenix and recently announced Sunshine projects, the Independence Mine is visible by Newmont’s trucks on a daily basis. Now, it’ll be Open Gold’s mission to bring this property up to today’s resource standards, conduct further exploration to build additional ounces into the resource estimate and show the world class potential represented in this property.

The acquisition of the asset adds to the company’s portfolio that already includes a recently acquired 2,256 hectare VMS property in Ontario. Going forward, the company is focused on a new business plan based on success through very near term production and shareholder valuation through physical gold. All of this was made possible through the addition of a new President and CEO with previous successes of note.

THE INDEPENDENCE MINE PROJECT - NEVADA

Through the recent acquisition of the Independence Mine Project previously held by General Metals Corporation, Open Gold went from zero to almost 1.3 million ounces of gold in the ground with the flick of a pen. As impressive as this boost is, more impressive is the fast track to production and the healthy return on investment for Open Gold shareholders.

The Independence Mine forms an island embraced by Newmont Mining’s massive Phoenix Mining complex. A simple Google search shows the scale at which Newmont is mining the area. Each day Newmont’s equipment and personal pass by the property, and very soon could be directed to enter it.

The mine itself operated intermittently as a silver producer between 1938 and 1987. Production numbers from the various operators of each era totaled 750,200 ounces of silver, and 11,029 ounces of gold. Average grades recovered over that time were 0.17 ounces per ton gold, and 11.53 ounces of silver per ton.

According to a historical report on the property, put out in 1997, “the gold resource potential of the Independence property occurs in two distinct categories: a shallow open-pit mineable target, suitable for heap leach and a deep underground target.” Another 1997 estimate by Carrington (1997) pegged the shallow target to contain 235,000 ounces of gold, and 2,500,000 ounces of silver, whereas the deeper target could hold as much as 1.4 million ounces of gold.

Here is where Open Gold has an opening to truly put some value into this property. The property is open for exploration on all sides and clearly shows room for growth at depth. Future drilling campaigns will most certainly be aiming to build ounces into this resource estimate. With another revision to the 43-101 to follow the drill program. As well, with this kind of proximity, it’s understandable to believe that Newmont will be keeping a close eye on the work at hand as an inclusion of this property to their land packages adds ounces with very low Capex.

Despite the fact that the market is still weary of junior miners these days, companies that can boast an increase from nearly zero ounces to approximately 1.5 million ounces so quickly, tend to get rewarded. As well, the change in valuation based on over 1 million plus near term ounces is sure to generate attention when investors realize the new Open Gold is significantly undervalued based on this acquisition. How far along Open Gold gets with the property’s development before Newmont comes knocking on their door with cheque book in hand is anyone’s guess but anyone can see it’s an obvious fit for Newmont’s future development plans.

MITCHELL PROPERTY, ONTARIO

Immediately upon installing Bryson Goodwin as President and CEO, Open Gold entered an agreement with Foundation Resources Inc. [FDN:CA] to acquire 100% of the Mitchell Massive Sulphide Project. Located approximately 10km southwest of the former South Bay Mine (produced 1.6 Mt at 2.5% copper, 14% zinc and 120 g/t silver), the 2,256 hectare property put Open Gold on the map in Ontario.

This secondary property compliments Open Gold’s Nevada interests, with some attractive highlights of its own. Close proximity to important infrastructure, including the town of Red Lake only 80km to the west, and access via the South Bay Road which is an eastern extension off of Highway 105 with the benefit of electrical power that runs along side it.

The Mitchell Property falls within the southern Birch-Uchi Greenstone Belt of the Canadian Shield. Before the acquisition, Foundation had flown a HELI-TEM (time-domain electromagnetic system) survey in September of 2011 that detected two prominent “bulls-eye” anomalies of potential base metal-sulphide (copper-zinc-silver) on the western and eastern parts of the property. The first measured approximately 1.0 kilometre in both W-E and N-S directions, while the second trended N-S over 1.6 kilometres in length and 200-400 metres in width.

Since acquiring the property, Open Gold has completed an assessment report and sent surface samples to be assayed at the lab. Results on those samples are yet to be released.

MANAGEMENT

Open Gold’s story really took a turn for the positive when President and CEO Bryson Goodwin took the helm in May of 2012. Goodwin had previously had a successful tenure with Klondex Mines Ltd. [KDX:CA] where he took the company from $1 to $3.85 before moving on. Goodwin’s fundraising ability is renowned, including a successful $10 million raise during the peak of the 2008 market crash, backed by a very strong network of investor relationships across three continents.

Given the strategy that Goodwin imposed upon Klondex, Open Gold seems like a perfect fit for the veteran. The strategy of acquiring this assets from an underfunded US company, and breathing it back to life with renewed investor interest is a plan that has worked in the past, and should work again here.

At the time of his arrival, the company needed some help. Goodwin’s knack for raising funds immediately proved valuable as he got straight to work, bringing in a mini fundraise to the tune of $300,000. This was oversubscribed almost immediately and doubled their bank account size at the time in order to give some wiggle room as the company went in search of new properties.

The first property to be brought on board was the Ontario Mitchell project, which held on as the flagship until this recent announcement regarding Nevada. The project had had some preliminary exploration work done on it, but needed some extra attention. Adding Mitchell would prove to be a favourable secondary project, once they could find their new flagship.

Along came a very near term production Independence Mine project in Nevada with nearly a 1.3 million ounce gold historical resource. With that announcement the rebranding of the company appeared to be complete.

Some house cleaning later led to the offloading of the company’s Eholt Property in British Columbia, as drill results coming from the project were not up to Goodwin’s team’s standards.

THE BOTTOM LINE

With the addition of the Independence Mine, Open Gold very quickly becomes very noteworthy, and will probably jump onto a lot of people’s radars; adding an immediate injection of 1.3 million ounces of gold tends to do that.

Today’s market is fickle, and weary about how long it will take to see income generation. Bringing on the Nevada project allows Open Gold to jump the queue and bring themselves incredibly close to production within a short period of time. Looking at overhead maps will show you how the Independence Mine property is surrounded by a crescent shape owned and operated by Newmont.

The reward for bringing the historical resource calculation into the 21st century’s standards will most likely be a lucrative takeout. That said, there’s no reason why Open Gold couldn’t try to go the distance itself, or with a partner, should Newmont do the unlikely and pass on the project all together.

G. Joel Churyfor the Bottom Line ReportVantageWire.com

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