NSGold Issues Most Important PR in its Young History

colour alterations in the rock at Dios Padre

The colour alterations in the rock is part of what will be mapped during the upcoming Phase I exploration Program at Dios Padre.

On Monday, NSGold Corporation (NSX – $0.48) issued, what I consider to be, its most important press release so far. The mineral exploration Company announced that it’s starting a phased exploration program at its Dios Padre silver property in Mexico. That in itself is good news, but what really got me excited was the fact that the PR was packed with interesting information about Dios Padre’s additional potential.

NSGold will implement a two-phased exploration program. Phase I will focus on getting a better understanding of the entire Dios Padre property and its potential, while Phase II is a drilling program aimed at determining the geometry and grade of the known mineralized pit and breccia pipe.

Based on historic exploration programs, sampling and historic resource estimates, the Company targets to get a resource estimate of at least 60 million ounces of silver at the primary zone. This estimate excludes the rest of the property. The financial picture looks like this:

Targeted Ounces of Silver at Primary Zone 60,000,000 oz
Current Price of Silver per Ounce $37.24
Current Value of Targeted Silver at Primary Zone $2,234,400,000

Unfortunately the historic resource estimates can’t officially be relied upon because they’re pre 43-101. But the good news is that, most likely, only a modest drill program will be required in Phase II to produce a 43-101 compliant inferred mineral resource. The Company expects to have this ready in 4th quarter of this year.

Phase I

Phase I is a $700,000 program in which the entire property will systematically be mapped. Next to the initial zone, where the historic workings took place, there are a large number of other areas at Dios Padre that the Company’s geologists want to take a good look at. So rock samples will be taken from all over the property, which has never been done on Dios Padre. Also, the known breccia and underground tunnel will be further investigated during Phase I.

Phase I is to start in the coming weeks.

Phase II

Phase II is a 10,000 metres surface and underground drilling program budgeted at $3 million, which will target the known resource in the Dios Padre breccia. The drilling will be done underneath the old workings to determine the geometry, shape and grade of this mineralized area. Obviously, when the geologists notice anything exceptional in the immediate surrounding of the old workings, they will try to find out what’s there.

Further Potential of Dios Padre

Next to the 60 million ounces silver estimate, there are several other items that make Dios Padre even more valuable.

  • First of all, the 60 million ounces of silver don’t include the source for the known mineralization. Remember that the historic workings, on the surface and underground, are part of a breccia pipe, which means that somewhere there has to be a source for the silver on top. Needless, to say that finding the source would take NSGold into another category.

  • Several zones on the propertyshow the characteristics commonly associated with a large mineralized system, and are similar to the main Dios Padre breccia. This may indicate that there are more breccia’s in other areas of the property. It’s too soon to tell whether they’re independent or connected with each other, but the above mentioned Phase I should shed some light on this.

  • And finally, NSGold’s press release also mentioned the assay results from recently taken surface samples from two channels (30 and 35 metres long) in the previously-mined Santa Gertrudis open pit (see table below). The two channels yielded silver values of 103 grams of silver per tonne (3.3 ounces per ton) and 2.08% lead over 35 meters and 178 grams of silver per tonne (5.7 ounces per ton) with 3.3% lead over 30 meters respectively.

    What’s very interesting here are the lead values. If I remain conservative and only use a 2.00% lead content per tonne, that makes 44 pounds of lead per tonne. Today, lead is selling around $1.14 per pound, so that means there’s about $50 worth of lead per tonne in those samples. This amount should be enough to take care of the mining and milling costs, making the silver a free bonus! Of course, more work will have to be done to find out if these results are consistent.

Average Lead Content per Tonne 2.00%
Pounds of Lead per Tonne 44
Current Price of Lead per Pound $1.14
Current Value of Lead per Tonne $50.16

Conclusion

Is NSGold the most undervalued resources stock out there? I don’t know, because I don’t know all of them. Is NSGold undervalued with its current potential and the current price of gold, silver and other commodities? You bet it is! Don’t let this opportunity pass you by to make some serious money.

Sample
Number
Silver
(g/t)
Lead
(%)
True Width
(meters)
Lower Level      
DP-11 79 3.30 5
DP-12 175 2.34 5
DP-13 139 1.57 5
DP-14 94 2.34 5
DP-15 173 3.37 5
DP-16 28 0.98 5
DP-17 33 0.64 5
Average 103 2.08 35
Upper Level      
DP-20 143 2.82 5
DP-21 274 4.38 5
DP-22 261 4.79 5
DP-23 245 4.34 5
DP-24 21 1.19 5
DP-25 122 2.25 5
Average 178 3.30 30
These values are derived from two continuous channel samples and were taken across strike, in the pit wall; one (lower level) 35 meters and the other (upper level) 30 meters in length. This initial sampling program is part of the study to establish benchmarks for NSGold’s upcoming exploration program.

For important disclosures, please read our disclaimer.
2 comments… add one
  • TCL June 13, 2011, 5:52 am

    My sentiments exactly. There is a lot to love about NSX and the way management intends to manage it. It seems pretty clear that NSX is flying below the radar right now, which coupled with the warrant exercises, has meant a lot of overhead offers pinning down the price. But, although I love this company and now have a large position, I think to a new prospective investor, there are two concerns: 1) how could such an amazing project really be bought so cheaply? I know the details of the story from Hans, but it still amazes me that this happened. 2) why would First Majestic pass on this property, not just given the historical silver intercepts, but also all of the exploration upside, including finding the source area? Sure, the silver price was much lower, but they have impressive geologists who surely would have warehoused this property if they really saw this much upside. I again have heard the explanation for this, but I think many will think, “if it sounds too good to be true, it usually is”.

    So, my question is, how and on what time-line, can NSX become a credible junior story, while on paper it is one of the most under-valued juniors I can see in the market?

  • admin June 13, 2011, 1:28 pm

    @ TCL,

    Well we won’t know for sure until the NI 43-101 resource estimates for Mooseland’s East Zone (this week?) and Dios Padre (Q4 2011?) are published. Until then we have to rely on pre-NI 43-101 reports and on the management of NSGold.

    But that’s of course the case with all small cap stocks. There are always a number of uncertainties. That’s the reason why so many investors hesitate to buy shares from smaller companies, but that’s also the reason why investors like you and I, who do their homework and take a calculated risk, can do very well in the stock market.

    Anybody can buy shares from Barrick Gold where there’s probably little downside potential, but there’s also little chance of tripling or quadrupling your money.

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