Precipitate Gold Corp.
- TSX-V: PRG
- Shares Outstanding: 106M
- Share price C$0.30 (14.09.2020)
- Market Cap: C$32M
An interview with Jeff Wilson, President & CEO of Precipitate Gold Corp. (TSX-V:PRG). If you want our take on this interview and Precipitate Gold, go to cruxinvestor.com/club.
Matthew Gordon interviews Jeffrey Wilson, September 2020
Is this just yet another gold company looking to make a quick buck in a favourable gold bull environment, or is there more to this Dominican gold story? The share price has tripled since its COVID-19/market-reset base, which is a good sign. Now, it is time to delve into the company’s fundamentals to assess whether or not this is an investment proposition that investors should be considering.
Precipitate Gold is a is a gold developer with 3 gold assets in the Dominican Republic. Its flagship project is the Pueblo Grande gold project. Second in line, and gaining a lot of attention recently, is the early-stage Ponton gold project. Lastly, the parked up Juan de Herrera gold project continues to sit on the back-burner courtesy of regional licencing issues.
Pueblo Grande is located adjacent to a world-class gold mine that is operated by Barrick Gold, the Puebla Viejo mine. Pueblo Viejo is one of the top-5 gold assets in the world and is the largest active gold mining operation in South America. This is very good company to be amongst.
Barrick clearly spotted the potential of the 9,863ha Pueblo Grande land package, recently signing an earn-in agreement to develop it. Barrick has the ability to earn up to 70% of the project by investing $10M and delivering a PFS within 6 years from the start of the agreement. They have to drill at least 7,500m and also deliver a PFS. The JV is rapidly pursuing development, including selective surface geochemical sampling, systematic rock-clay alteration surveying (via portable spectral mineral analysers), geological mapping and, the most exciting component for investors, an initial 2,500m of exploration drilling.
Barrick paid C$1.4M in up-front cash, which certainly helped Precipitate Gold on its way. The company has $2.3M left in its “fully-discretional” treasury to continue the accelerated development of Pueblo Grande while pushing ahead with the Ponton Project.
A really encouraging aspect of this story is Barrick’s assurance of capital on favourable terms. Rather than requiring Precipitate to come up with their 30% share of any future funding, Barrick has agreed to arrange the funding. Precipitate has not raised a lot of cash compared to relative gold juniors, and Wilson appears to be keeping plenty of options on the table for future fundraising arrangement whilst minimising dilution through smart corporate structuring and a measured approach to spending. Wilson is candid, it is hard to spend a lot of money in the Dominican Republic, but the company is in a “fortunate position”: a 100%-owned portfolio with no underlying option payments and no work commitments. Holding costs are also. minimal. This is a tight, respectable balance sheet and indicates strong management practices.
With Barrick Gold taking care of Pueblo Grande for now, Ponton will be the primary focus of Precipitate’s capital for the next few months. Ponton is favourably located c.35km East of Pueblo Viejo and ‘hosted in the same Los Ranchos Formation geological terrain.’ It is also just 20km east of Pueblo Grande.
It is an early-stage exploration play, which carries inherent risks, but recent results have exhibited promising signs. The ground magnetics geophysical survey conducted at the Copey Hill epithermal gold target provided eye-catching highlight rock samples at surface of 53g/t gold and 17g/t gold.
Having inherited a data set from the previous operator, Precipitate Gold had not conducted a lot of work at the 3,250ha land package. A “really compelling geochemical target… a gold in-soil anomaly that has never been drilled.” It is peripheral to what appears to be a very interesting copper-gold porphyry. Could this be an exciting epithermal system? “Cashed-up,” and with no underlying vendor payments or work commitments, Precipitate Gold can now proceed to drill numerous targets at the site.
The historical surface geochemical database of Ponton exhibits 2,880 grid/auger soil, 1,403 rock and 317 stream sediment samples. Moreover, at the Majagual Hill copper-gold porphyry zone, the previous operators had also been hard at work, conducting surface trenching, 4.7 line-Km of induced polarisation (IP) geophysical surveying, and 1,666m of diamond drilling from 5 holes in 2017.
Juan de Herrera Project
Although this asset is sideliend for now, it is worth touching on it. Juan de Herrera sits adjacent to GoldQuest’s Romero/Tiero project, which has been struggling with all manner of licencing issues. This the the main reason why Precipitate Gold has chosen to take its foot off the gas; if its neighbour is struggling to obtain an exploration permit, why will it have any better luck?
Precipitate Gold has conducted a reasonable amount of geophysical work on the property and has also already acquired drill permits for up to 100 different drill pads. This could be monetised eventually, but for now, it will have to sit around for a while. I wouldn’t be surprised to see it sold for the right price to either GoldQuest or possibly to Agnico Eagle as they look to consolidate the district.
In the long-run, I also don’t see Precipitate Gold mining gold at Ponton. It seems clear to me that they will be developing it into a de-risked, district-scale gold resource before selling it to a mid-tier/major gold mining company.
There is a communal aspect of this story that I like. Since September 2015, all current and future Tireo belt exploration data compiled by both GoldQuest and Precipitate will be shared in a ‘collaborative effort’ to both assist and accelerate each company’s search for new gold discoveries in the Tireo volcanic belt. The 2 companies also agreed to a 50/50 equipment purchasing JV, with Precipitate’s new subsidiary holding onto the assets. This gives the company access to 1 fully-operation rig and a couple of others that can be updated or used for parts if needed in the future should both companies be drilling at the same time. If GoldQuest decides to operate a few rigs at Romero, and Precipitate wants to operate several rigs at Ponton, Precipitate can inject some cash to get things moving.
GoldQuest has suspended its drilling for now and has been very “passive” at it awaits an exploration licence. Precipitate will look to get this drill “turning at Ponton” in the near future.
What did you make of Jeffrey Wilson and Precipitate Gold? Would you invest? Comment your thoughts below and we’ll get back to you.
Company Website: https://www.precipitategold.com/
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