If you go to Google maps and look at the Dominican Republic you can see Barrick Gold’s huge Pueblo Viejo gold mine. It is the largest gold mine in the Americas and the fourth largest in the world. The mine has reserves and resources of over 15 million gold ounces.
Surrounding Pueblo Viejo, on three sides, is junior explorer Precipitate Gold’s (V.PRG) Pueblo Grande property. Looking at the map it was very clear there was a story here and Jeff Wilson, Precipitate’s CEO was more than happy to tell it.
“We’ve been in the Dominican Republic since 2012,” said Wilson. “GoldQuest drilled a world-class hole in the Tireo Gold Trend in central Hispaniola, the island upon which the Dominican Republic is located,” said Wilson. “While GoldQuest’s share price was rocketing from $0.06 per share to nearly $2.00 per share almost overnight, we were nimble enough to pick up ground immediately adjacent to them, stretching nearly 40 kilometres along the boundary of their project.”
While Precipitate did extensive mapping, IP surveying, soil and geochemical sampling and trenching and completed a 43-101 Technical Report in March 2016, there were regionally specific issues for GoldQuest’s next phase of permitting. “The byproduct of making a new discovery in an underexplored region with no mining history or understanding of mining meant limited local understanding of the potential benefits of mining, and that slowed the permitting process” Wilson explained. “Until the permitting issues are resolved for GoldQuest we did not want to put more money into the project next door. So, it’s on hold.”
At the same time, Precipitate had accumulated a lot of experience in the Dominican Republic, which meant that it made sense to look for another exploration project. “One of our directors, Alistair Waddell, has over twenty years experience in the Dominican Republic,” said Wilson. “He was the Founder and CEO of GoldQuest. We wanted to identify the right project in the Dominican Republic.”
As this decision was being reached, junior explorer Everton Resources was coming to the end of its ability to explore the land concessions it had obtained surrounding Barrick’s Pueblo Viejo gold mine. “Everton had pretty much thrown their hands up,” said Wilson. “They were low on funds and looking to make a change.”
“We made a deal with Everton,” said Wilson. “Light on cash ($25,000) and a few hundred thousand worth in shares which are “locked up” and only sellable in stages with the last 40% of the shares restricted from trading for 3 years”.
As part of that deal, Precipitate Gold got a lot of data on the property – soil samples, a drill hole database including 158 diamond drill holes and 62 shallow RAB drill holes; totalling about 29,500 metres, a Heliborne magnetic-GeoTEM geophysical survey and extensive mapping. “Our first step is to take the time to clean up this information,” said Wilson. “The next step will be to bring in a really high-level consulting geologist, familiar with the specific area’s geology, to prepare a technical report and some guidance on the best ways forward.”
All of which begs the question, “Why didn’t Barrick buy the concessions?”
“That’s a very good question,” said Wilson. “First off, Barrick already has 13-15 million ounces at Pueblo Viejo. The mine had previously been run by the state. The state ran it poorly and created an environmental disaster. After the state shut it down and put it out to tender Barrick won the bid on 20 million ounces. But the government wanted ongoing exploration and development in the area to find more deposits, therefore Barrick’s bid was restricted to the existing Pueblo Mine site and nothing more.” Interestingly, however, in an April 24, 2018, Financial Post article Barrick executives were quoted as saying the company is shifting to a growth strategy, focusing on Nevada and the Dominican Republic. Surely this bodes well for juniors who successfully identify new deposits in-country. Which seems to invite junior companies like Precipitate to go find more mineable resources. The problem being that the concessions surround Pueblo Viejo are not geologically straightforward.
“This is not a “real estate play,” said Wilson. “It is not “closeology”.”
Which means that some real geological talent has to be brought to bear to figure out where the best targets are located. The historical data, while it is useful for understanding the geology may be even more useful in defining where the targets aren’t. The fact is, Everton pursued certain geological hypothesis with varying degrees of success but never really found the “big prize”.
“Often, in this business,” said Wilson “it’s not the first or second guy in who makes the big discovery. It’s typically the third or fourth who benefits from the predecessors’ work and capital investment and takes the combined information to look at the targets differently in finding something that had been missed or overlooked in the past. I think we have a chance to benefit from prior work and data to pursue something new and untested in the shadow f one of the world’s richest gold deposits.”
Precipitate has one great advantage: its Board is packed with world-class geologists. Its Chairman, Adrian Flemming, founded Underworld Resources in the Yukon which was later sold to Kinross. Quinton Hennigh, founder of Novo Resources in Western Australia directed Novo to a $1 billion market cap last year, also serves. Alastair Waddell spent 6 years as a senior member of the Kinross team and brings extensive local knowledge of the Dominican Republic. A fourth geologist, Michael Moore serves as VP Exploration. If there is a gold target to be found on the property, these are the people who can find and evaluate it.
The company is closing in on a target which has never been explored. “We’re looking at areas which may have been missed,” said Wilson. “We are focused on a highly prospective area just west of the Pueblo Viejo mining pits that is highly altered and the host of a significant magnetic high anomaly which has not been systematically drill tested at all.”
In certain settlings and situations, explorationists look for magnetic lows as target areas for mineralization, however, Precipitate has a geological thesis that the magnetic highs may be indicative of a common cap rock associated with high sulphidation mineralized gold systems (the same type of deposit found at Pueblo Viejo next door).
“We’ll have boots on the ground soon to map and sample,” said Wilson. “We want to delineate and prioritize targets and start drilling before the end of Q1 2019. It could be an inexpensive initial drill program as we’re looking at 200-metre holes on average, but we’ll need to complete our review of the data before we can say for sure.”
The logic of the geological thesis is set out on page 14 of Precipitate’s corporate presentation.
If the magnetic high on Precipitate’s land is caused by the same sort of structure which underlies the magnetic high at the Pueblo Viejo mine, then a few, relatively shallow drill holes will confirm or refute the geos’ hypothesis. Basically, the company needs to drill through the “cap” and see if nature has repeated herself.
From an investor’s perspective, Precipitate offers the prospect of near-term, significant, drill results. The Pueblo Grande property has excellent infrastructure, nearby power, a highway and a mining friendly jurisdiction. Sooner rather than later the drill is going to determine if the Precipitate geos’ hypothesis is right. Precipitate is trading at $0.075 at time of writing. Right now, it is under the radar. That might change, a lot, when the drill results come back from Pueblo Grande.