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Took a Flyer on a Gold Play in Red Lake

March 7, 2016

These days, I spend a lot of time on Ceo.Ca, it is a great tool for investors in the resource and venture capital space. There is a growing community of sharp people on every day, recently a poster that uses the handle @stateside wrote an article about a small gold stock that I had been following for around a decade. Then today, I heard something from an executive of a major gold mining company who was being interviewed on BNN from the PDAC conference in Toronto. He made a crucial point that caused me to take a flyer on a junior gold explorer they are partnered up with on a project in Red Lake, Ontario. He didn’t make any direct comments about the junior, but sometimes you need to connect the dots.

 

West Red Lake Gold Mines, (CSE: RLG), is focused on gold in Red Lake, Ontario which is the best gold camp in the world to look for high-grade gold. It is where Goldcorp got its start and what propelled them to become one of the largest gold miners in the world. Goldcorp and West Rest Lake Gold have a joint venture, 60% owned by RLG and 40% owned by Goldcorp. Additionally, Goldcorp has an option to gain a larger percentage of the project through additional work.

The reason I’ve been watching this company for so long is because when someone finds high-grade gold when drilling in Red Lake, I pay attention. During the last bear market in gold, which I’ve written about it being over at the start of 2016, this junior, like many, had been struggling.

 

Before I get onto why I think they are onto something exciting with their understanding of the geology and are drilling in the right spot, I wanted to go over some of their recent news. The company was recently under a management cease trade order, that the removal of the order required the company put out a technical report. Which they did, and the cease trade order has been lifted. They have also recently gone through some management changes. They have little money, but despite these issues, I was willing to take a flyer on the stock today.

 

I purchased shares, partially because of the results of the technical report they issued and the new direction of their drilling. There are two important structures running through the project, one is east to west, and the other is southwest to northeast. These two structures intersect, and it is this area that I’ve been waiting for a long time for them to drill. One of the structures has had minimal drilling and hit high-grade gold up to an ounce p/t and higher. The intersection of those two structures have not been drilled, but it looks like their technical team gets that this is the key target, and are ready to drill it.

 

In the image above, which I grabbed from the West Red Lake Mine website. The intersection where the two structures intersect they are calling the Hinge Zone. This is the kind of area suited for a spot where the gold can come up, drilling here I’ve believed is a crucial step to understanding the realistic potential of this project for years. I’m pleased with their current geological interpretation and that they are going to drill it.

 

Initially, when @stateside on Ceo.Ca wrote about West Red Lake Mines, I didn’t say anything, I was wondering how they were going to fund the exploration, it will get easier as gold moves up as I see it will in the short and long term. Goldcorp has also recently went through a management change, and what I heard from their new CEO in the BNN interview gave me the confidence to take a flyer at $0.10 on RLG and now write it up.

 

David Garofalo is the new Goldcorp CEO, as of around a week ago, so his debut really is this week at the PDAC. Earlier this morning, he was on BNN for an interview with Andy Bell, they went over several topics but one in particular really caught my attention. He talked about how the industry badly needs new discoveries to replace the mines that are being mined out. This has been a chronic problem since before the gold bull market started back in 2001.

 

I was really impressed when he said that he wants to refocus Goldcorp back into exploration. And that he would look at it like a portfolio and can put their money to work on a number of exploration projects. I have a feeling that if RLG can show their new geological interpretation is correct and they hit high-grade gold in that Hinge Zone, this project will become a place Goldcorp can focus some of their gold exploration budgets.

 

There is still a long way to go for West Red Lake Gold Mines, but I like what I’m hearing about the project and the drilling. Stay tuned, I will be following this story closely.

 

My reports are for information purposes only, it is important for you to do your homework and speak with your financial advisors before making any investment decision.

 

All the best,

Allan Barry Laboucan

 

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