There are countless strategies to mineral exploration. Some companies mold their models around targeting past producing mines that may still contain gold; others head to remote regions where advanced exploration has never been conducted; others hit surrounding areas of prolific areas, etc.
There are certain places, although limited in number, that the majority of strategies can be wrapped up and tied with a gold bow and greatly increase the odds of success. The Red Lake Mining District in Ontario, Canada is one of these places. Without question one of the most prolific gold-producing areas in the world, the Red Lake Mining District has produced more than 25 million ounces of gold over the past 60 years. Simply put, this area is to Canada what the Carlin Gold Trend is to the United States, and what Witwatersrand District is to South Africa.
Majors and minors alike flock to the area not only because of the sheer volumes of gold that have been unearthed, but because of the high grade of the precious yellow metal. This also goes without mentioning that the recovery rate of gold in the area rings in at one of the lowest production rates in the world. There is no doubt that the "big dog" of the area is Goldcorp, Inc. (TSX:G, NYSE:GG). Goldcorp’s holdings in the region are strong -- to put it mildly -- consisting of the Red Lake and Campbell mines, which were combined into one operation five years ago and the Cochenour Project. Cochenour is still in development, but the three as a group are simply referred to as the "Red Lake Gold Mines" by Goldcorp.
One of the largest mines in Canada, the High-Grade Zone has produced an amazing average greater than two ounces per tonne for Goldcorp. It was only about a decade ago that Goldcorp made a discovery at Red Lake that is virtually unparalleled in the history of mining. The find was gold that averaged 9.08 ounces of gold over 7.5 feet on nine drill holes. Drilling in November of 2010 intersected 34.7 meters of 136.3 g/t gold and 1.7 meters of 1,826.3 g/t gold.
With an estimated 12-year mine life, the property contains proven and probable reserves of 4.12 million ounces of gold. Production for 2011 is slated to equal 655,000 ounces, which is basically aligned with the past three years of production tallying 629,200, 622,700 and 703,300 ounces in 2008, 2009 and 2010, respectively. Not too shabby considering that mine alone represented $866 million in revenue for Goldcorp in 2010 by itself.
By-product cash costs did not exceed $300 per ounce which certainly helps the bottom line for overall net gains. The three aforementioned years have generated $2.027 billion in revenue for the industry giant from the Red Lake Mines.
With those types of numbers being registered, it is no wonder that companies strive to snatch properties as close as possible to Goldcorp’s projects. In fact, any area that is even remotely close to the prolific trends throughout Ontario is -- no pun intended -- worth its weight in gold. As a result of its blue chip status, the Red Lake District now contains more than 50 exploration companies all working to pluck as many gold coins as possible from the land.
Luckily, it appears that the ground contains enough gold to go around for all involved; with some areas just providing more than others.
For investors looking for a much cheaper alternative to Gold Corp, Sphere Resources, Inc. (TSX-Venture:SPH.H) is a Vancouver-based exploration company focused on identifying and appropriating exploration targets and other high quality assets in major global mining camps with a particular emphasis on precious metals.
The Company employs a strategy of being a low-risk explorer through focused acquisitions in specific mineral-bearing zones. Sphere is definitely focused on the gold hotbeds of North America as it is currently involved in exploring for gold mineralization in the Red Lake District of Ontario and in Nevada(home of the Carlin Gold Trend), and this Company is trading at less than $0.10 a share as of the release of this article.
The Company’s slogan of "Successful Gold Exploration Begins In The Best Mining Camps" is showcased through their portfolio of projects. In the Red Lake District, Sphere has the Dome Property and the Alcourt Property; in the Carlin Trend of Nevada, Sphere controls Poker Flats, Ziggurat and Gold Jackpot properties. The company has been strategic in their acquisitions; shouldering up next to Goldcorp’s land in Red Lake and Kinross Gold (TSX:K, NYSE:KGC), Barrick Gold (TSX:ABX, NYSE:ABX) and Newmont Mining Corp. (TSX:NMC, NYSE:NEM) in Nevada.
All five of the Sphere properties could be rambled about for considerable length as to the potential of the properties simply based upon the surrounding properties. For example, Ziggurat is just north of Kinross-Barrick’s Joint Venture, the Round Mountain open pit mine, containing over 15 million ounces of gold. Meanwhile, the Company’s Poker Flats property is near Newmont Mining’s Emigrant project and south of Premier Gold Mines’ Saddle mine.
Their Gold Jackpot Project, which was just recently acquired in March 2011, has provided gold values up to 16 g/t on near surface samples as well as high grade gold, silver, copper and tellurium. The near surface tellurium samples (ranging up to 3,740 g/t) are some of the highest grade samples ever found in the United States. Tellurium has significant value not only today, but in the long-term as it is an extremely rare photovoltaic metal used in First Solar’s (NASDAQ:FSLR) "green" solar panels.
Of course, this is just a sprinkling of Sphere’s Nevada projects. The Dome Project in Red Lake is the combination of two adjoining properties acquired by the Company in 2009 (Dome property) and 2010 (McManus property). The Red Lake Mines are just over a kilometer away from Sphere’s project with the High Grade Zone where Goldcorp is positioned trending southwest; which could mean directly into Sphere’s property. Historic drilling on the Dome Property intersected a whopping 33 g/t gold; a feat that Sphere hopes to duplicate.
Sphere and partner Duncan Park Holdings Corporation (TSX-Venture:DPH) completed a survey of geophysical ground magnetics and the revolutionary IPower 3D induced polarization conducted by Abitibi Geophysics. The data, which is being transferred into a 3D model, will form the basis for selecting priority targets for a diamond drill program targeted to begin in late July or early August.
The Alcourt Property was acquired by Sphere in April 2011 and was the subject of some exploration a couple decades ago in which three gold veins were discovered in 1980. A non-NI 43-101 report suggested a resource of 20,000 tonnes grading 0.45 ounces gold per tonne. Further, Sphere has recently completed a Dipole-Dipole Induced Polarization and magnetic survey on the entire Alcourt property after exposing the three previously discovered gold veins by mechanical stripping.
Today, the Company disclosed information on its Dome Project which flows consistently with the possibility of Goldcorps’s High Grade Zone entering directly into the Sphere property. An update was provided by an audio-visual presentation by Mr. Gordon Yule, P.Geo., the project geologist who conducted a reconnaissance-type geological field assessment of the land based claims of the Dome Project, and a preliminary presentation by Abitibi Geophysics which conducted both a walking magnetic survey and an Induced Polarization (IP) study of the combined Red Lake properties.
Two huge anomalies have now been identified which are associated with sulfides related to gold; one located on the north east corner and one at the south east corner of the property. The #1 anomaly is 810 metres in strike length and 330 metres in width with a depth of 450 metres, while the #2 anomaly measures 725 metres in strike length and 250 metres in width and 450 metres deep.
Both anomalies may extend even deeper. Moreover, 22 drill targets have also now been located for the impending 1,500–2,000-metre drill project. In a follow-up to identify reserves controlled by Sphere, a winter drill program is planned for targets over the lake at the end of 2011 into early 2012.
Images of the anomalies from the geophysical survey can be viewed at: http://www.sphereresources.com/show_info.php?page_id=14&osCsid=4c17ce3ac42de
It’s not much of a secret that exploration companies represent a large portion of Canadian-traded companies. What is often difficult to discern amongst the listings is which companies represent a valued opportunity and stand out from the crowd. This requires much more savvy to sift through and make educated decisions.
Sphere Resources owns substantial properties in two of the world’s gold hubs, which is unique in and amongst itself, but has taken it one step further by aligning its projects in extremely close proximity to major, producing mines. The Company has cash on hand, budgets in place and management with a bevy of experience to bring the mines to production.
The technical components of the stock chart show a firm support level at $0.05, a level which could certainly be deemed as undervalued for a company with a portfolio chock full of assets.
Due to the prolific nature of the holdings and ever-rising mineral prices, Sphere Resources just may not be sliding under the radar of the investment community in the near term. Proper due diligence on the firm is encouraged, as always.
