Xtract Resources – Bushranger – Hole 1 920m @0.3% Copper.

 

Xtract Resources– Bushranger – Hole 1 920m @0.3% Copper.

Well, we have the first assay results for Xtract Resources (XTR) on the Bushranger prospect in Australia.

Porphyries are not easily understood by the market and the response from XTR has unfortunately, not been the exception.

There is no doubt that Bushranger is a copper porphyry. What I mean by this is that this porphyry is dominated by the later, copper rich intrusions, which have overwritten the early barren or gold centric intrusions. There was much talk about mineralisation evidence of the kind of quick fluid cooling that leads to a gold rich, copper reduced porphyry. However, it is clear that this has been over-written by the later copper stages of intrusion action.

For simplicity sake, also for the cheaper capex, being just copper rather than a small copper and gold, is probably an advantage.

Moving onto the geology of the later section of the hole. We still find solid, if not spectacular copper grades. At first glance this might be concerning, we expect copper and gold to increase at depth. However, we know that the best mineralisation results are in the alteration zone next to the intrusion. Hole 1 was drilled to intersect this mineralisation, using the location of the intrusion from the existing JORC and to see if it continues. The problem is that a drill, operates in a straight line -near enough, therefore when the intrusion plunges or flatlines, as per fluid dynamics, it is impossible to remain in the sweet-mineralised area. Particularly if you are going to drill over 1km in length.

It looks like the mineralisation has travelled at a shallower dip from around the 500m mark, meaning that drill 1 passed through the outer mineralisation zone from about 500-600m to EOH. Hole 5 and 6 will be crucial in understanding this depth, particularly hole 6.

If we look more closely at the results, we can see that the top section 110m – 550m 400m is 0.42%. This is important, as any development or commercial decision of Bushranger, will be split. The common method of developing these systems in Australia, is to open pit down to the 500m level and then undertake targeted underground mining. With this known, the top section of mineralisation needs to be good, and 0.42% is more than good enough. A comparison to Rio Tinto’s Winu is useful here.

We know from an internal Anglo American Geology report, that more than a single porphyry exists at Bushranger. The below is a sample I’ve taken from that geology report that talks about Porphyry 2 at depth and in the outer northern edge of their Bushranger drill program in 2014-2015.

“"Porphyry 2: Kspar+Plagioclase+Biotite-phyric Dacite Porphyry
This distinctive porphyry unit is present in TBRC030 @ 315.8m in contact with volcaniclastic
sandstone, and @329.6m, and@335.2m), in BRC032 @ 221.8m and @217.65 where it clearly
intrudes the monzonite), and in BRC034 (@ 169.3m, and @224.4m where it occurs in contact
with Porphyry 1). It also occurs in hole RACED020 where it is clearly intruding a volcaniclastic
siltstone.

This porphyry is distinctive in having large (to almost 1cm long) blocky Kspar phenocrysts that
often include one or more small plagioclase phenocrysts."

Given this and the alteration, porphyry mineralisation observed from as little as 50m depth in holes 5 and 6, we can assume that the second porphyry intrusion has an outer alteration zone that extends near to surface. Later assays will need to support this, but a safe assumption is that the second porphyry is also copper rich and will add to a potentially 1km east to west and 2km north to south open pit potential to 500m depth.

With this level of mineralisation, XTR should have no trouble increasing the JORC -after a planned infill program- to trigger the 2mt of Copper that requires Anglo American to buy 80% of the project. The company has talked about further IP surverys etc, but a second drill plan should complete a new, trigger JORC by the end of the year.

XTR has talked about finding new nearby porphyries that can attract an economy of scale in the same vein as the Cadia-Ridgeway grouping.

There is no doubt that further funding will be needed to complete the infill drilling and JORC creation of Bushranger to the 2mt mark. Whether that funding is created by the revenue streams of the African projects, via share issue or even by a partner coming on board for a cut of any sale price is largely immaterial for 2021.

So, to conclude; Bushranger this year will -very likely- become the second largest single copper deposit in the Lachlan Fold, behind Cadia East. The Rockley-Gulgong sub arc belt within the Lachlan Fold, was the sub belt that formed last in the geological history of the Fold, and as such, looks like the intrusions in the area will be predominantly copper rich. Just as Cadia is the gold work horse of the Fold, so the license areas held by XTR – which is the majority area of the Rockley-Gulgong volcanic area- looks to be the copper workhorse of the Fold. The unique characteristics of the sub belt leaves Bushranger and XTR in a unique position in a copper demanding world. If I can recognise that sat here thousands of miles away, I have no doubt that the copper experts in Australia do too!

Xtract - Hole 5

 An estimated position, of hole 5. Given Sentinel Sat Information.

Xtract - Racecourse becoming a little clearer.

Since my last update below. We've had the XRF results for Drill 1.  Three XRF results were taken every metre, giving what should be quite a conservative, but realistic indication of the copper. It will of course give no indication of the gold content. One take away for me is that from about 750m to 1000m, drill 1 looks like it maybe missed the exact centre of the intrusion.. This could be a step down, but might be a increase in the width...it will be interesting to see drill 3, when it crosses further down.

Back to drill 2. If drill 1 was all about the intrusion, drill 2 is all about the alteration. We know the alteration gives the greatest mineralisation at the edge of theintrusion and reduces as it goes out. For drill 2, it's about increasing the size of the mineralisation/alteration envelope within the 0.15% copper cut off or above .2% CU EQ.

There are 3 layers of alteration, the key zone, which is directly next to intrusion. The inner zone, pretty much the zone mapped in the 3D JORC modelling. The outer zone, which to this point has not been included due to the high cut off used.

So far drill 2 picked up the outer zone at about 150m and carried it to about 400m. The inner zone started around 400m and will hopefully go to 550m or so, then the key zone. Then everything in reverse.

I've included a very poor mock up of what I think it might look like and how this compares to the existing 3D model.

I've extended the inner alteration in a simple manner(green hash area), personally I think it might be wider, but would like that to be shown by drill 3.

The patchy green spray in the extent of the outer alteration zone, which will decline in mineralisation as it travels further from the blue centre. 

The yellow is there to represent the higher gold content as you go down, in what I believe is the first of several intrusion events. The first event is the gold and pyrrhotite event, the second etc the copper ones.

The important take away, is how much bigger the new mineralised system is to the old geological model that Xtract inherited.

Xtract Resources Bushranger - Racecourse Prospect

 

Bushranger – Racecourse Prospect.

   The aim of this very quick piece of research, is to understand the implications of both the Market update in the week commencing the 25^th of Jan 2021 – which is a geological interpretation of the visual core findings and the later assays, which should be available between the 8^th -19^th of February for part 1, if they are split in two. Or the 22^nd of February to the 5^th of March, for part 2, or the entire core length.

   This report is not, and could never be, exhaustive. Hundreds of pages and at least 30 scientific studies have been written concerning the geology involved and the individual prospects that have been Identified. Some of the science is still disputed. It would take many weeks and months to produce a concise report. I would encourage anybody interested to research in more detail any aspects which they think are too lightly touched. I’ve tried to stick to details which are relevant, in favour of comprehensive histories.

   From experience the market often doesn’t pick up on and or understand porphyry geology or results straight away. As an investor, being able to determine results and the geological indicators, gives you a heads up, before the market either heavily buys or sells the explorers share.

    I am not an expert in the Xtract Resources company. I don’t pretend to be. What I do have is 10-15 years investing in porphyry exploration companies. I am a new investor in Xtract Resources and I have invested based purely on the drilling of Bushranger. To further caveat this piece of work, Xtract Resources (XTR), have been very poor at giving out core information to date. We have very limited visuals and descriptions of the mineralisation. The stockwork has not been described, we don’t have visual estimates of percentages or even vein counts. We do thankfully have a few snipets such as the heavy feldspar presence, some of the existing older drill results and nearby similarities with extensive geological exploration. As you would expect we have been told about the extensive chalcopyrite findings, but little on mineralisation such as bornite, or primary and secondary source events. It has been, and continues to be my belief that XTR, are still coming to terms with the drill results. To my knowledge they have a single geologist overseeing operations who is not a porphyry expert. To remedy this XTR are in the process of hiring and appointing a local porphyry expert.

   All porphyry systems share similar characteristics, they are intrusions of magma, which undergo hydrothermal alterations. The mineral composition tends to be driven by how many alterations and often the speed of the alteration. For example, faster or slower cooling of the intrusion will provide more or less copper and inversely gold. So, porphyries tend to be either gold heavy or copper heavy. There is a sweet spot, with just the right speed of cooling, where both exist in moderate levels. To complicate matters, geology doesn’t just happen and then stop; so, you will often have two or more incursions of hydrothermal alteration. This provides a mixture of stockwork. For example, the older -primary- incursion with associated stockwork, tend to be gold heavy in this region, later incursions are normally more coppercentric, which is supported by local geology studies. Obviously, other factors will be in play and I am simplifying this greatly, not least that this region probably saw as many as 6, maybe 10 intrusions, in various stages of hydrothermal maturation. Alteration plays the key role in extracting, creating the mineralised halo. By far the highest mineralisation is based directly around the intrusion in the alteration layer. Some intrusions will exist that are completely barren of gold, copper and silver.

   Before we go much further, it’s important to identify similar localities within the geological system, that the Bushranger license lies. These are Boda, Northparkes and Ridgeway. Although, the much larger Cadia system of deposits is within the geological footprint, it’s characteristics are too different to the Bushranger prospect to be a much use currently, this might change with new drill results.

Boda: This is a predominantly gold primary; with copper secondary. Monzonite Porphyry pipes extend 1000m in length horizontally. Boda has an unusually large alteration zone, extending 400m across. The alteration zone is fed from several porphyry pipes of various but mainly early intrusions. Mineralisation has a similar spread to all of these porphyry types, being much stronger directly next to the intrusion, drill intercepts of 19m @0.82g/t Au. Compared to 152m @0.18g/t Au as you move 100-150m away from the intrusion, into the edge of the alteration.

Northparkes: Is a collection currently of five, Length of mine, (LOM); fingerstyle pipe porphyry systems. Mainly copper but some gold dependent on the pipe system. “Deposits are typical porphyry copper-gold systems, in that the mineralisation and alteration are zoned around multiphase porphyritic intrusions, which are of monzonitic composition. The monzonite porphyries form narrow (typically less than 50 m in diameter), but vertically extensive (greater than 1,000 m) pipes. As the copper grade increases (approximately > 1.2 per cent copper), the content of covellite, digenite and chalcocite associated with the bornite mineralisation also increases.

 * Taken from the Northparkes.com Nov 2020 disclosure report.

   Highest copper grades are generally associated with the margins of the syn mineral monzonite porphyries, in areas of intense stockwork veining.

   Gold normally occurs as fine inclusions within the bornite; due to the intimate relationship with bornite, visible gold tends to occur within the highest-grade zones of the central portion of the deposit.

   The magmatic-hydrothermal fluids responsible for mineralisation circulated in intricate fracture networks to produce K-feldspar-quartz-sulphate-sulphide veinlets and quartz sulphide stockwork veins, surrounded by K-feldspar–dominated alteration. Ore grade copper and gold mineralisation is exclusively located within the potassic alteration zones, with localised sericitic alteration overprinting.

   Importantly the percentage of vein coverage is 2-15%.

 

Ridgeway: The geology of Ridgeway is very similar to Northparkes; a collection of fingerstyle pipe systems. Ridgeway differs slightly as the vertical intrusions are dominated by earlier intrusion events, these provide a gold rich source. The gold rich mineralisation is mainly in Bornite, which is an abundant sulphide. The later intrusions are more biotite and magnetite, with chalcopyrite, hence being copper heavy.

   Gold mineralised quartz veins surround 50-100m pencil/finger porphyries, they extend 1000m and sit several hundred metres below the surface. Both copper and gold mineralisation is seen in heavy stockwork and sheet arrays. Like Boda and Northparkes, mineralisation is highest next to the monzonite intrusion core.

   Current Jorc 150M/t @ 0.52g/t =  2.4m oz gold and 0.33% copper = 0.48m/t

   The current JORC is lower than might be expected as open pit mining has already extracted a significant portion of the mineralisation. The copper and gold still it situ is thought to be underground mining only.

The above diagram shows the depth of Ridgeway, also the very high grades around the edge of the slanted porphyry.

   Importantly, It is also very uncertain whether any geophysical technique would have detected the deposit in the absence of the Miocene cover. It is debatable whether the 1994 IP survey really detected the deposit and further investigation into this is warranted. The deposit is not a conductor and was not detected by post-discovery downhole EM, even in a hole through the ore. The magnetic response at surface from the magnetite in the deposit veins is lost in the noise caused by stronger, nearer surface magnetic sources, which include the primary and alteration magnetite in the host volcanics and the monzodiorite. * Taken from John Holliday, Colin McMillan and Ian Tedder, at Newcrest Mining.

Bushranger; Racecourse Prospect In Detail:

   The Bushranger license area is located in the Lachlan Belt, just below the main Transverse Zone. It’s to the south in the Rockley Gulgong Volcanic sub zone. All the main sub zone’s are thought to be part of the same arc system, which experienced 3 distinct periods of activity. There is still some debate whether the Rockley zone has undergone all 3 (early, as well as the second and third which occurred near the same timeframe). There is growing evidence that it experienced the early activity, but probably to a lesser degree. Most of the mineralisation occurred in a 30-40m year period towards the end of the Arc activity.

 

   Racecourse has had several JORC updates. It’s a shame that not all of the data is available, the commonly used, PropectOre map above is very simplistic in nature and does not include drill data such as:

RCJ2 - 65m @ 0.60% copper · BRC013 - 52m @ 0.72% copper · BRC025 - 49m @ 0.70% copper · BRC014 - 2m @ 8.07g/t gold

   The prospect has been explored by various companies over the past 30 years. Anglo American being the most well known owner, where they increased the JORC estimate from 27.6 M/t @ 0.45 copper to a copper gold mineral resource of 71 M/t @ 0.44% copper and 0.064g/t gold.

   The Racecourse Prospect covers a significant copper (and minor gold) mineralised zone of 1000 metres strike length. The tabular mineralised zone varies from 30 to 130m in width.

   The descriptions, particularly of Northparkes and Ridgeway are very similar to the expected 3D mapping of the Racecourse prospect. We should add the caveat, that 3D mapping, is not the same as good quality geological data. The Racecourse drill information, has been sporadic and shallow to date. However, we can only go with the data we have at present.

   The depth of Racecourse has been increased to around 1000m. Known mineralisation has a width and pipe like nature, at Racecourse. The mineralisation and mineral composition is very similar to date to that of Northparkes and Ridgeway.

   This report has not been written to try and evaluate the Racecourse Prospect. The purpose of this report is to ask the questions that we hope will be answered by detailed geological core date and assays. The first drill - that Xtract Resources has undertaken – has been to run parallel within the mineralisation of the intrusion. Nearly 1000m of “mineralisation” has been recorded, according to the company. It will be impossible to draw any conclusions as to potential resource increases from this drill.

   A common component of both Northparkes and Ridgeway is the varied pipe intrusions, although it might be easier to represent the mineralisation as a single homogenous finger. The multiple intrusions are more like, twisted roots, rising up. Now imagine a different root, growing up the side of it, sometimes wrapping around, sometimes a little farther away. Now imagine, roots of different sizes, growing up again and again in the same place. Some of the roots will be  non mineralised  intrusions. Hopefully this explains how the mineralisation will be a patchy; the copper and gold varying.

   The finger/pencil/pipe intrusions themselves are sourced from deeper, often much deeper areas of rising mantle.

   We can - by looking at the mineralisation present- determine which of these intrusions are dominant. The Racecourse prospect, will contain barren and mineralised events. It seems obvious, but the smaller the barren or lower grade prospects, the smaller the effects of the barren intrusions. We can understand whether there is a single mineralisation event, by the stockwork. Ideally we want to see different stockwork present.

   It will be very difficult to see gold or estimate gold mineralisation. As per the already released statement, Chalcopyrite is seen in a fine grain dispersed form due to intense alteration. As per all the regional mines discussed here, if Bornite is seen in a moderate to strong percentage, then it’s a good indicator of reasonable gold grades 0.3-0.7 g/t. It is unusual to see the gold visually due to the fine mineralisation. If the visual reports of the drill indicate the presence of gold, then I would expect some very good gold grades.

   It would be good to get veining and Chalcopyrite percentages from the visuals. Evidence from Northparkes, is that a percentage of 2-15% would give Northparke type mineralisation.

What evidence is there, that the width of the intrusion is wider at depth? The position of the follow up drill will likely give an idea of the updated 3D modelling, the greater the dip the more likely the width.

It is unfortunate that we don’t and I assume Xtract don’t, have access to Anglo American’s data. They will obviously see the data points of the JORC. However just as important will be the unsuccessful drilling and the extent drilling that was not in the JORC. Anglo, will – I have no doubt- be following the drilling closely and plugging the numbers into their own private model.

I am now going to outline a few possibilities, none of which will be proven by drill 1. There are a couple of key aspects. The first is the mistake that Newcrest made with Ridgeway. They have been open that the IP survey didn’t, maybe couldn’t, pick up the anomaly at depth. Secondly, these intrusions are rarely singlular. Even the Northparke finger porphyries have multiple intrusion nodes.

Scenario 1: A Singular finger porphyry, a continuation of the current width and grade down to 1000m. This is unlikely given the evidence of the nearby geology. Even so, it would greatly increase the current copper and gold content.

Scenario 2: Slightly early intrusions could be evident down the underside of the main porphyry target. All, of the higher gold grades are on this side. A test for this could be to drill another longer hole that starts on the underside, crosses the main body and then goes out on the top side from 700m or so onwards. It would hopefully, be able to test the width at depth, and prove or disprove mineral continuation on the topside. It might also increase the gold mineralisation for any future JORC.

 

Scenario 3: It is still possible that this is not a uniformed width, finger type porphyry, but instead has far more, wider sheet mineralisation. The upper section of the porphyry is not as uniform as we would expect. This might be due to the action that has given it an almost 45 degree dip from source. However, it is then highly lucky and or unusual that they have managed to drill to 1000m and stay in the moderate to strong mineralisation. This provides significant evidence that the porphyry widens down hole. The intrusion core, is often thicker lower down, as numerous intrusion attempts will not reach the height of the highest one. For example, an intrusion episode might reach 700m below ground, the next 100m below ground, then a third 500m below ground. Thickness might then increase at 700m below surface, 500m below surface and 100m below surface, in steps.

   I’ve drawn a drill, on the diagram below, that would intersect the width at approximately 700m down dip. If you decrease the dip it will intersect closer to the surface, if you increase the dip it will intersect at 800-900m. The dip that the geologist choose, might well indicate how much they think it widens.

 

 

Scenario 4: The final possibility, at least that I will discuss here, is that - similar to Ridgeway, there is a deeper mineralised system underneath the average mineralisation we’ve seen to date. Many of the reasons for this, are the same as Scenario 3 and I will not repeat them here. It will be interesting to see how much the stockwork increases at depth, whether there is a suitable change in mineralisation. My expectation, is that this would dip at a similar angle to the already known porphyry mineralisation. I’ve tried to show in purple where additional core intrusions could push up, a much larger one to the right of the known body and a smaller one to the left. There is no way to currently know whether this is the case, or how big it would be. But the mineralisation to 1000m would indicate, a likely reasonable chance of this and its likely size.

 

   These are what I consider - for whatever it’s worth, to be the four most likely scenario’s. The key points to take are: The presence of bornite for gold; the presence of gold for strong gold mineralisation. The amount of stockwork (2-15%) and the amount of Chalcopyrite is also important (Chalcopyrite normally contains 20-30% copper). The mineralisation will vary, depending on how far away from the intrusion - how far into the alteration – the drill travels. It will be impossible to say how much mineralisation there is with a single drill, even with assay results. If you buy an uncommercial prospect – which is what it was- you are taking a big risk that you can commercialise it. Uncommercial, it’s worth virtually nothing. Xtract, have done very well, either by luck or skill, the big increase in depth will greatly change the tonnage, probably moving it into the commercial category. It will also, probably, increase the chance that it now matches many of the similar prospects that extend to depth, also that the wider Bushranger license area contains additional prospects. That is of course if the new mineralisation is as described. At a £30m market cap, I am not of the opinion, that any of the scenarios are priced in.

SOLG and the The Battle of Five Armies or How to train your Mining Major Dragons and the defeat of BHP

 

In the end it was a nail biting conclusion, but the highly anticipated AGM for SolGold was a success for the Board of SolGold (SOLG) and particularly Nick Mather as he entered battle against the combined forces of Newcrest, Cornerstone and the might of BHP the worlds fifth largest mining company by Revenue.

SOLG with friendly companies including Blackrock and DGR, along with many smaller investors who answered a call from the company voted for all the normal resolutions that the company put forward. This included keeping Nick Mather as a director and CEO and the allocation of over 50% of the current share capital to potential new investors.

SOLG is the largest explorer in the highly thought after Gold and Copper frontier of Ecuador. They have built up a successful partnership with the Ecuadorian Government and the peoples of Ecuador by investing heavily in local employment, local sustainability schemes and the careful stewardship of licenses. SOLG currently sits on a mountain of copper and gold. Literally and figuratively. With projects ranging from the advanced Alpala to the new sleeping giants of Porvenir. Only today it has announced 500m of further mineralisation on a new deposit 3 km away from Alpala, which had never been drilled before this month, which will likely add world class gold and copper mineralisation to an already embarrassing about of reserves. SOLG currently has the largest amounts of combined copper and gold reserves and potential reserves in the world, not currently owned by the world’s major mining companies. A single project such as Alpala when in production would be the worlds largest silver block cave mine, one of the top 10 copper mines and one of the largest gold mines in the world.

It is no wonder then that over the last few years, Newcrest and BHP have both invested heavily in SOLG with the aim of taking these reserves for themselves. BHP have already made an offer for the company and has been rejected. For the first time in it’s investment relationship with SOLG it is out of a standstill agreement and no longer has to vote with the Board of SOLG.

For what is still a small company, under one billion dollars Market Cap. Keeping the wolves at bay, when combined Newcrest, BHP and the small Canadian company Cornerstone own over 30% between them, was never going to be easy and so it proved.

SOLG faced an almost impossible task and hired Citibank to advise them on strategy, to prevent the company from being controlled by hostile forces.

The AGM itself was a rather dry affair like many AGM’s, however the resolution to keep Nick Mather in place was passed by 55% to 45%, with nearly 80% of all shareholders voting, quite an extraordinary turnout for a smaller Market Cap company. Also passed was a resolution allowing the Board of SOLG to place over 50% of the company through new share issues to interested parties to allow for both further exploration and the potential high Capex costs associated with projects such as Alpala.

The strategy to force out Nick and take control of the company was without doubt a monumental failure for Cornerstone, Newcrest and particularly BHP. SOLG recently launched a failed hostile bid for Cornerstone, which is heavily indebted to SOLG due to their arrangement. Newcrest has been openly disapproving of SOLG’s strategy to involve Franco Nevada on financing terms for Alpala, instead of further dilution of shares (primarily to them). For BHP through it was high risk strategy that ultimately failed.

BHP has long been the favourite to obtain SOLG and its world class mineral wealth. Since the ending of its standstill agreement, BHP had the choice of two strategies to either work with SOLG as a valued partner in the same way that Franco Nevada is now or become hostile and try to obtain control of SOLG by forcing its will on the smaller company.

Major mining companies thrive and increase their reserves often by working in a friendly manner with smaller explorers. It was therefore surprising that BHP was willing to risk it’s reputation in an all or nothing bully tactic to grab control of SOLG in a hostile fashion. It was certainly an indication of how much they want and are even relying on SOLG as its main contributor of Copper and Gold for the next 10-15 years. Such a tactic was high risk, high reward for BHP, but it has failed.

BHP now has three choices, either give up on SOLG and it’s copper and gold with it’s tail between it’s legs. Whisper sweet things to SOLG to try and reinstate it’s friendly relationship or continue it’s hostile approach and make a quick bid for SOLG.

Any bid from BHP has to be quick as the next defensive move from SOLG, now that it has permission to place shares, will undoubtably be an allocation of shares to another Major, maybe Franco or Chinese interest of around 10% with a standstill agreement, possibly tied into an offtake preference agreement. Such a move would give SOLG and it’s board further protection from anything but a premium hostile bid.

It is rare for an explorer to escape the grasps of a single major mining company, rarer still to escape two, but SOLG’s expert understanding of its share register and a high stake gamble has delivered the battle and an embarrassing defeat for BHP and Newcrest. Normally a CEO would not survive 45% of the shareholders voting against them, however this is not a normal situation and the remaining 55% of SOLG shareholders have no interest in giving their riches away cheaply.

Understanding SolGold’s Porvenir

 

After a change in how often regional exploration news is released, we have the first update on Porvenir for nearly a month. In that time and since my last update, SOLG have produced assays for the first 750m or so of hole 1. It has finished hole 2 to 1300m, observing mineralisation to 1200m. It has produced assay results for the first 500m of hole 2 and SOLG has started hole 3, drilling to 450m.

SOLG has deployed a second rig to drill pad 2 (250m WNW of hole 1) and started drilling hole 4 to 50m. It has also deployed rig 3 to drill pad 3 (200m S of hole 1) which is due to start hole 5 very shortly. In conclusion there has been considerable activity in the last month all with the aim of understanding Porvenir.

In the near future a forth rig is due to be deployed. Assays are likely to take a little longer. Ecuadorian exploration companies are currently looking at 5-6 weeks for assay results due to the impact of Covid and the amount of drilling currently under way.

 

Unfortunately for investors the aim of the exploration isn’t about finding the most gold and copper, at least not directly. Porphyry Copper Deposits (PCD’s) all share similar characteristics, each characteristic has a similar mineralisation theme, so understand this and you understand where the best grades are. You will almost certainly sample the best grades if all components are found.

As per the diagram above, the major components are:

The low grade core.

The side mineralisation stacks, sometimes breccia’s etc, high grade (normally the best grade, often called the mineralisation core)

The inner pyrite shell or high pyrite content shell

The outer pyrite shell or lower pyrite content shell – both components, inner and outer shell can be present or just one, they are sometimes referred to as a mineralisation halo around the core intrusion.

The peripheral zone or alteration zone, which is a leached zone of low-moderate or good mineralisation.

The PCD is a bubble of mantle which rises up to near the surface, the mineralisation is then pushed through veins away from the source intrusion, as the pressure subsides and it cools the mineralisation is left behind. The rate of cooling helps to determine the mineralisation present, hence the outer shell of quartz pyrite etc.

Porvenir hole 1, showed evidence of reworking (at least 2 major re workings), so you need to picture the cooling and retreat, then a fresh wave of mantle intrusion changing it all a second time (new veins, extra shell formation in different places etc), alteration of the structure etc. Then possibly a third.

So SOLG needs to find the intrusion, the shell and the alteration zone. It needs to understand how far down these extend and importantly how far out the alteration zone extends. To find the best grades it needs to discover the vertical edge of the intrusion.

Hole 1: Intersected a small portion of the Shell and some of the alteration zone. It also seems to have intersected smaller portions of the intrusion core, thiner tendrils, that are low grade.

Hole 2: Initially went through surface alteration, then the PCD high quartz shell, before entering the low grade intrusion core. We don’t yet know whether the drill has come out the other side of the core, as assays are down to 500m. However assays have clearly identified the core characteristic of a PCD.

Hole 3: Has one job, to sample and confirm the spread and extension of the alteration zone. It looks like it will be drilled to 900m or until mineralisation ends. The shallow dip of the hole is such that adding even 100m to the alteration zone, provides a large extension of the resource area. CUEQ% of .3 or .4% would be more than adequate to if it extends beyond 450m. The full 900m would be high end tier 1.

Hole 4: This has a more complicated job. It’s trying to find the WNW extension of the alteration zone for 200-400m. Then sample the thinner, higher quartz/pyrite shell on the edge of the intrusion 100-150m. Hopefully it will then sample the bonanza, top grades of the mineralisation zone 200-400m. Finally entering the intrusion core, potentially coming out from that.

Hole 5: Not much detail on this, but it looks to expand the alteration to the south, possibly looking to hit the main structure from a southerly angle.

There is more than a little guess work in the above, as very limited information has been given so far. What we can confirm is the presence of a PCD, we can confirm the .4% to .8% CUEQ% in some of the lesser mineralisation zones, which is exceptional and we can confirm a substantial structure of tier 1 potential. Holes 2-5 have been chosen to provide firm evidence of all the PCD components, with indicative grades along with a 1km by 1km by 1km footprint.

It is important to understand what each hole is trying to prove when assessing the success or failure of the results as they are released. Hole 1 and 2 have proved everything that has been asked of them so far, showing strong evidence of a substantial open pit, good grade PCD. This is the kind of project that Major’s will happily mine all day, lots of reserves on the balance sheet, steady predictable return and LOM measured in generations.

So the future looks bright copper and golden for Porvenir.

SolGold's Porvenir #solg

It’s been awhile again since I wrote one of these, but there has been more misunderstanding by the Market of the significance of SolGold’s second discovery Porvenir. For the avoidance of doubt, I hold SOLG shares and have done continuously since last year, sporadically before then.

Alpala is not a new story, The world of mining knows the story of Alpala, the worlds largest Tier 1 Copper/Gold project that is currently not in the hands of majors, although both BHP and Newcrest, now also Franco, all have finger tips caressing it. The core is quite far down, so block cave extraction is the answer. This is going to require considerable Capex, but will be worth it. The story of SolGold has been the story of Alpala.

For me though an untold story was what led me to invest into SolGold, the story of the regionals. SolGold has the largest amount of exploration licenses in Ecuador, the most undeveloped mineral area in the world, something the Market was ignoring -maybe for the obvious reasons of the world’s number one…..resource-.

However for the last two weeks a different story of SolGold has been unleashed, due to the first drilling of the none Cascabel/Blanca region (Alpala’s larger area). The first of these was at La Hueca (pending), now Porvenir and then by month end Rio.

Porvenir has just completed its first drill and already the term Discovery has been used. 900m of mineralisation has been logged, which is considerable in anybody’s book and assays should come around the 5-10^th November. The drill has exceeded all expectations and already laid the groundwork for a Tier 1 project, which is current 100% owned by SolGold.

Most of this is known in the Market, but it’s the release on the 13^th of October that people haven’t grasped as it demonstrates the size and bulk of Porvenir. I think it’s worth comparing it with Alpala and how much it has grown just during the few weeks of this single drill.

Figure 1. Taken for the SolGold RNS, shows the initial size of the core and mineralisation area. Drill 1 was planned to intersect the core and the dispersed alteration zone, shown by IP, along with depth of mineralisation. The first drill often tries to sample both core and alteration boundaries to understand the geology and dispersal of the mineralisation, as well as the presence of A,B and C stockwork. The first drill was expected to reached around 500-600m with low mineralisation at depth. If the drill showed the core near the surface then Porvenir had a much cheaper Capex route to extraction, smaller than Alpala, but still a large and very profitable Tier 2 project.

Logging from drill 1 provided some very high 11% by volume Quartz veining and 6% Chalcopyrite. An excellent shallow core, comparable to Alpala at its best, It also showed, A,B and C Stockwork indicating extensive mineralisation episodes. So a very, very happy team of geologists continued drilling, but the mineralisation instead of taping off, continued..It continued and it continued. A further higher core was observed at 400-600m and still it continued, well beyond the IP anomaly, Again A,B and C rework was observed, where B stockwork was seen, mineralisation was in large, thick veins. This has continued all the way to 900m. See Figure 2.

Now this would have been amazing, in and of itself -900m of gold, moly and copper mineralisation is Tier 1- but it’s what it has meant to the larger mineralisation system that matters.

Now lets skip to Alpala, if we ignore the NW zone, which is pretty low grade and only likely to be mined after 20-40 years, then Alpala is 1500m deep and 1000m across at a slight dip. See figure 3. The core is obvious and sits around 500-700m below the surface.

Now a switch back to Porvenir(see figure 4), The core here is from surface to approx. 500-700m according to modelling and drill 1 intercepts(the red line), which intercepted the core. Figure 4 also shows Purple, the zone of the very highest grades, along with Yellow the zone of none core but still high grade. Caveat – mapped using the figure 1, drill 1 visuals and descriptions and my own estimation. But this still compares well with the companies own green area of now expected mineralisation.

Moving back to Figure 2, we have the companies further expectation, drill 2 which will be down to 50m or so by the time this is published (14^th), it will tell us all about the core, its characteristics and when the assay comes, its grades. It should go to 1400-1500m, intersect all aspects of the core, help to define the extent of mineralisation width and at a deeper depth of 500-800m a secondary core, finishing with a third zone of high mineralisation near the bottom. The hope is that like drill 1, it will continue to find moderate mineralisation throughout.

The really big hole will be drill 1, from pad 2. As per figure 2, this should intersect 1600-1800m of high to very high mineralisation. This should be drilling in 10-15 days time.

Grades are of course as yet unknown, but the prevalence of Chalcopyrite, along with the abundance of Quartz vein, along with a gold signal shown by pyrite, all mean that grades should be within the range of 1 to 1.5x that of Alpala, with a potentially higher core.

Conclusion:

The market has failed to recognise that the news release on the 13^th, increased by a factor of 4 the size of Porvenir. It shows SolGold has the expectation that Porvenir will be a similar size to Alpala, with a potential for a greater length and a higher certainty of better grades. The company for obvious legal reasons can’t say that out right without the drill intercept, but the ramping up of rigs confirms this.

With the added grades, we are probably looking at something 1 to 1.5x the grade of Alpala.

Without Alpala’s need for two years of digging prior to commercial extract, Porvenir will be producing quicker and more cheaply. High grade ore will be commercially available after a few months of preparation work, once mining complex, tailings has been constructed.

By the middle of Nov, Drill 1 Assays will be available, Drill 2 will reach depth and drill 1 from pad 2 will have passed through much of the core. The assays from drill 1 will give much greater confidence of grade ratio’s and particularly gold content. Combined the middle of Nov will be call time for the likely size and grade of Porvenir.

SolGold will be the only company in the world with two tier 1 projects, not in the hands of Majors.

By the middle of Nov Rio, which is expected to contain one or two further potential 1 projects, will have shown visuals and the process of determination.

No none major mining company in the history of mining has ever been in pre production majority ownership of 3 or more Tier 1 projects.

The Battle for Sol Gold in Ecuador (Cascabel)

The Battle for Sol Gold in Ecuador (Cascabel)

Normal Disclaimer, I have a Long Position in Sol Gold (SOLG), however I am under no illusion that what I write here will make a jot of difference to the share price. This is a big £400-500m MCap company. Many column inches have been written in the national press and associated mining expert publications.

So why write this?

There is a lack of discussion in my opinion as to why BHP have invested and why now. SOLG’s current situation also interests me with its machinations and relative complexity.

Almost every resource company, be they on AIM, ASX or TSX have a number of people saying that the big players are interested, our projects are fantastic, they are Tier 1, our grades are exceptional. 

They might even have a large discounted NPV which can be used to justify those comments. 95% of the time such utterances are at worse disingenuous and out right lies, but mostly pipe dreams, wishful thinking that never materialises.

SOLG is rather different. It has attracted massive investment, it has attracted ten’s of millions from world leading companies (Newcrest and BHP), it has moved into a much higher MCAP bracket than almost any non producing resource company.

Over the last year the share price has struggled due to lack of clarity on the Cornerstone bid, the mining cycle and external copper factors and last and but not least the country risk associated with Ecuador. They now find themselves on the verge of another MRE, with a PFS to be released in the next 3-4 months, likely to be the largest maiden Copper PFS of 2020 in the world.

Moving on to the machinations! A nice place to start here is with the Cornerstone response to the proposed bid by SOLG. One of the key points of defence is that SOLG has some unhealthy relationships with Nick Mather and DGR. (They are for all intent and purpose, one unit for voting and strategy). I understand why they are miffed by this as this is 15% of the company, as of today and is more than the 9% owned by Cornerstone. It gives the CEO (Nick Mather), considerable, none normal control of the company that most CEO’s could only dream of.

The point of DGR is that their holding is a strategy.

Other key investors are Newcrest at 15%, Cornerstone at just under 10% and until recently BHP at 11%.

There has always been some concerns within SOLG that Cornerstone and Newcrest are a little too friendly. There have also been concerns that a low ball offer will come in (25-30p) backed by Newcrest and Cornerstone. With 25% to Nick and BHP against the 25% to Cornerstone and Newcrest that would have been a tight contest, probably won by Nick and BHP, but corporate business at this level can be unpredictable and nasty.

The share price looks to have had a hand pushing the price down over the last 3-4 months, probably to support the low ball bid and make it more appealing.

The key news trigger for the low ball offer would have been the release of the new MRE, but certainly prior the release of the PFS.

Let’s move forward to this week’s announcement that BHP are raising their stake to 15%.

BHP wanted more in the placing, however SOLG had one reason and one reason only for the share issue and that was to increase DGR/Nick’s holding and BHP’s holding to 30%, therefore giving a clear block to any potential low ball bid. The share options were added as a nicety  at a much higher price. The news that BHP will help not just with Cascabel, but also be a technical partner for SOLG confirms their support to the SOLG management.

Nick has the added incentive to keep BHP honest with the Cornerstone/Newcrest partnership, who would certainly block any BHP low ball offer.

To cement the requirement for SOLG to be involved they have developed extensive environmental and ecology credentials with the local community and Ecuadorean government, above and beyond what either BHP or Newcrest could achieve given past history.

That leaves Nick/SOLG to progress their main strategic objective to sell off the majority and operatorship of Cascabel, without any party having the option to just buy the company outright.  SOLG will look to maintain maybe 30-35% of the project, giving them sufficient exposure without the headache of crippling Capex debt. The ownership of Cornerstone would have given them more jam to play with, but is not vital.

SOLG will be looking to get 200-500m for 50% and operatorship of Cascabel. This would pay to get two of the near production gold projects going in their portfolio over the next 18 months, providing the 30-35% capex requirements for Cascabel and pushing the company into the mid tier.

For SOLG the key trigger to sell Cascabel will be the creation of the PFS. I don’t believe SOLG want the costs or concerns of creating the final Bankable Feasibility Study.

So to recap:

The BHP deal has allowed SOLG to safely fulfil its ambition of a meaningful and speedy monitisation of Cascabel. This will allow SOLG to maintain a sizeable exposure to one of the most important copper projects of the 2020’s.

SOLG will have the capital to quickly progress some of its other potential Tier 1 assets.

There are a number of important share price power ups. The BHP deal is one. The MRE will be another, the PFS a third. Regional developments will be a forth and a partial sale of Cascabel the final, crowning glory. 

All in the next six months.

Ode to our Political Democracy.

Ode to our Political Democracy.

Politics is often a cacophony of noise, it seems to be there purely to grate and frustrate, most “normal” people hopefully just ignore it assuming not too much is done, with varying degrees of either hope or trepidation depending on which group is winning at that time. Despite largely being an irritating noise, we need to be aware that it will at times become an overwhelming flood dangerous to life and limb if not managed, or controlled by the voters in charge of it.

This is unfortunately where we find ourselves. The main culprit for this resides in deliberate obfuscation of the word “Democracy”. Regardless of your political leanings, support and beliefs this affects you. Such a thought has been in front of me for a while now, it is not a new thought, nor a unique thought or even an unusual thought but it is a good thought to have. We are currently quickly moving pass the point of being able to do anything about it. We risk losing our political democracy and the only thing that can take its place is absolutism and populism.

Whilst watching a BBC politics program, a discussion was taking place with “experts”, please do imagine me saying this word as if I have bile rising up in my mouth. These experts came from various organisations. All these organisation were recognisable and so you could take their biases into account, all except for one expert, who came from an online organisation called Spiked. No mention of this organisation was made by the BBC, which in itself made it difficult to assess bias. On the surface the mutterings of the said expert were popular (democracy mattered, all politicians are useless etc). I am sure you know the type. But there was a persistence and undertone that I found more than a little scary which reminded me of the obfuscation of democracy that I mentioned above. A small amount of investigation of Spiked and I quickly understand why I started to feel scared. For those that don’t know, it’s an organisation funded by the Koch Foundation, (Yes the famous brothers who spend hundreds of millions a year buying US politics). It has a stated aim of not just reporting on the world, but changing it.

I was angry, not angry that they were given a voice or that they were deemed an expert, but angry that the BBC put somebody like this on a platform without first giving the viewer information concerning their bias and agenda.

I was angry enough to want to write this, a political piece on a none political blog. I was angry that I felt I had to stand up for political democracy as no other bugger is doing it!

In western democracies, whether the US, UK, Germany or even the EU. Each democracy has a system of checks and balances. Each sub area is represented, be they each US state, each UK constituency or each EU member state. There is normally a second chamber elected in a different but similar way, often at different times. I am not going to go into much more detail, it’s a well known, well trodden path. The key aspect is that they are all political democracies. They were not created with a whim, some of the greatest thinkers of their appropriate times, deliberated and fashioned the systems we now have. So a political democracy looks at how a form of democracy is used to create a stable political system in the best interest of and to reflect, all the people in the political area.

Democracy is different. Democracy is one person, one vote. Majority rule. It is how you vote for the leader of the bowling club, or how a group of friends might decide what film to watch at the cinema. 

It is a binary choice, whoever had the most votes wins, the least loses.

Donald Trump won power through a democratic election, but didn’t win the most votes. In the UK Teresa May won power, but didn’t get the majority of the votes. Angela Merkel in Germany etc. To be clear no Western Democracy actually uses a democracy, but rather a form of political democracy.

Imagine actually living in a true democracy.

If you are a minority your view would simply be worthless.

If the majority of people live in urban areas, then rural areas would be left to their whim.

If you were a member of a religion, then your religious freedoms would be left to other people’s whims.

If you were a high earner, then your tax rate could be determined by the majority of the lower earning people.

If you had Chinese heritage you might be forced to sign a register of fealty.

Imagine being a CEO of a small company where your bigger majority competitor company made all the rules.

Many countries have constitutions and laws to counter this, however under a true democracy, these would only be a democratic decision away from being changed.

If you think that's a good idea, maybe try out the kind of Democracy that Putin enjoys in Russia. His treatment of minorities is a perfect example.

This is where the murdering of the word democracy comes into play. You will often hear, “We live in a democracy. The people must be heard. This is what the people want.” Such utterings generally come from those we term populist politicians.

You know them, they wrap themselves in their countries flags and utter exactly what the majority want, often at the expense of the minority.

They might be categorised as right or left wing, it doesn’t matter. But make no mistake it’s about mob rule.

But, I hear you cry, we have democratic referendum. Yes we do, unfortunately. They are generally used to grant or extend powers and not to limit them. There is a good reason for this as you then don’t get the majority limiting or affecting the rights of minorities. Good examples might be lowering the voting age to 16, which would extend democratic rights and not remove them for anybody. Equally another might be the legalisation of cannabis, which again extends rights.

I am sure most are thinking about the EU referendum and that is where we have a problem as it does limit people’s rights, it is the majority limiting the minority. It would have been regardless of who won. For clarity I was one of those that thought that the ratification of the Maastricht Treaty should have been done with a referendum. But whenever we have a referendum we need to square its use with our parliamentary system which will enact it.

Our MP’s are voted in with a straight democracy. However they are expected to represent not just the views of those that voted for them, but of all of those they represent, their entire electorate, the majority and the minority, the voters and non voters.. It is therefore no surprise that MP’s have and will continue to struggle implementing such a big change that will affect everybody, which has been approved by 17m out of 66m people. Again for clarity I do think the referendum should be respected and that we should leave the EU, however it needs to be done with the least amount of impact on those that didn’t vote to leave. This is how our political democracy works.

Politics has certainly muddied the waters thanks to the inane splashing of all groupings, but I do believe that this is the way forward that allows Parliament to do its duty for everyone, as it should.

I also believe that eventually parliament will get there.

It will have got there far quicker though if the main parties did NOT adopt true democracy to elect their leaders….Did they not learn anything about the founding principles of democracies around the world. All they have done is ensured that the majority have all the power and the minority have none. That “mob rule” or populism is the decider. It is therefore no coincidence that both main parties have leaders now that embrace rather extreme versions of populism thanks to the relatively recent changes in the election methods.

With the spreading of absolutism, the spreading of populism, the well known magnifying affect of social media, the interference of organisations such as those funded by the Koch brothers, it comes as no surprise that we are in this mess.

Is there a way out?

We need to realise that talk of democracy is often false and means mob majority rule.

We need to realise that people v parliament means mob majority rule.

We need to realise that hateful words and attitudes lead to violence.

We need to understand our political democracy, value it and take part in it.

We need to understand that as well as our rights in our political democracy we have our responsibilities.

We need to understand and protect the guardians of our political democracy, such as an independent legal system and the inability to buy influence.

It really doesn’t matter whether your views are left, right or centrist you can be part of the problem or part of the solution. Regardless we should be counted amongst the people that are prepared to stand for our democracy and not support those that seek to circumvent, destroy or lessen it.

I am fed up of people using the term Brexiteer or Remainer to describe themselves, are their political opinions so shallow that they can be defined by a single issue?
The terms have one purpose, to keep and define divisions, to foster absolutism. Even worse are the people that turn it into an insult, the "Racist Brexiteers or the sore losers Remoaners."

This at least is my view. I certainly don’t force anybody to read this, but knowing the above don’t be surprised if I think less of you.

Savannah Resources Resignations Required.

Open Letter to

David Archer CEO of Savannah Resources.

Matthew King Chairman of Savannah Resources.

Dated 16/09/2019

Dear Sirs.

I have been a patient and loyal investor in Savannah Resources. I have spoken by phone and Email to the Board. I first invested in Savannah Resources at the start of the companies journey, before many of the projects and employees were but a twinkle in our eye.

The projects that Savannah has are world class, the development of the projects has been very fast paced at times.

It is then with obvious reluctance and frustration that I must call on somebody at Savannah Resources to take ownership of the disgusting and insulting way that existing retail investors have been treated by the company.

To make myself crystal clear, I fully hope and expect either the CEO and/or Chairman of the company to resign.

A company must do two simple things. Firstly it must keep shareholders informed within reasonable timeframes. Secondly the Chairman and the CEO must have the trust of shareholders.

In 2018 Savannah Resources published a list of targets it expected its board to meet and in return receive remuneration bonuses. Not a Single target was hit.

In July 2018 the company raised funds with the purpose of funding the company and project through to the decision to mine in early 2019, after having completed its feasibility study. This has been proven untrue.

Today you announced that the Feasibility study will now not be completed in Q2 2020, with a potential that the decision to mine will now not take place until after this date. This is a clear delay of over 12 months. After delays to both the Omani project and the Mozambique project.

There is NO incentive for shareholders to believe that the current statement today is any more believable than the statement last year.

It is unacceptable for the company to have allowed its cash position to have fallen to only £1.8m. The decision to raise funds should have taken place many months ago. (When the Share Price was 6p rather than 3p).

No material explanation has been given for either the extra cash required or the extra 12 months extension to the project go decision. You MUST inform shareholders as to why? a simple “additional resource delineation and work programmes” are not acceptable. You SHOULD be clear about this, shareholders are not stupid, stop treating them as if they are. The first rule of project management is DO NOT ALLOW SCOPE CREEP, since you are doing exactly that, be open and honest about your reasons for it.

The company MUST inform shareholders in a timely manner, you the company must have known months ago that the company wouldn’t meet its 2019 delivery target for the Feasibility Study. You SHOULD have told us months ago that this was the case.

Retail shareholders often find themselves utterly in the dark with regards to timeframes, activities and updates to projects. The company does not even have a 3 month update for shareholders, being Australian I am sure your aware of the requirement of ASX for this.

The company cannot just hide behind the poor market conditions for its share price. The Board of Savannah Resources seem to be think that PR and even RNS’s that might attract new investors are a detail they can skip as meaningful communication to retail investors simply don’t matter. This isn’t the case. Some positive PR would have kept the SP up, which along with better timing of the share issue would have led to much less dilution for ALL shareholders.

On a final note, simply tweeting everything that concerns Volkswagen and having a quote on your new presentation isn’t good enough. This drip drip of EU and Volkswagen hints is just not acceptable. The company either needs to be open about any possible relationships or stop doing it after 12 months it’s become a running joke amongst retail investors..

Somebody in the company, anybody MUST have the interest of ALL shareholders, this is lacking and MUST be addressed.

I would still consider the company a buy for my own portfolio, however the company is currently being held back by the combination of yourselves and serious failings within the company.

Yours

Mr Swift AKA Icebergshares.

AAOG – Jokers and Clowns.

“Clowns to the left of me…

Jokers to the right….here I am.

Stuck in the middle with you..”

Let’s get one thing straight. I am invested in AAOG. I’ve had a small top up today at 5p and am keeping some more cash in case of a rights issue or fund raising.

It does seem as if we are stuck in the middle at the moment. We have a BOD who have performed a terrible job in communicating what’s been going on. I have been waiting and waiting for the final results as it’s at last a chance to see where the company is in an official RNS with all the backing that entails through accounts sign off and nomad oversight.

Key bits for me are the affirmation that the topside can cope with 2500bopd currently. Djeno oil is not just seeping through, but as James puts it (a reliable none spin source), the Oil is flowing everytime they open the well. The oil has managed to come up from a crack in the bottom cap.

There are now three plans

.

A)     To produce from the middle or top Djeno depending on 103 sidetrack.

B)      Produce from the known top Djeno

C)      Produce from the Mengo/R layer

The write downs etc are irrelevant for me. Many companies do this but just keep quiet about it.

Now imagine if this news had been properly managed, instead of negative comments they talked about the possibility of increasing revenue by $1m a month by taking a further 6 months to finish the hole etc. Over the course of 3 years by taking it’s Djeno strategy the company is probably going to generate over $50m more revenue through this route than the Mengo route (for just the 103 hole).

A few issues re funding, but this is a 28 day event, rather than the 100+ day event of the 103C drill. With that in mind the cost is likely to be no more than 4m, so 2.2m or so for AAOG.

AAOG have also heavily dropped the hint(not confirmed by RNS), that its looking at maybe offering a percentage of the license for funding, hence the strong desire to get SNPC to swop debt for more percentage of production. David also confirmed that he had been speaking to the key shareholders. Probably for their AGM support. They don’t want lots of dilution and some kind of commitment was likely given.

We’ve also heard today that SNPC have just paid a further $850k. Plenty of money coming in.

So we’ve covered the clowns.

Now for the jokers.

I hope folks have been reading and following some of the happenings over the last few weeks on the boards for AAOG.

Take note of the names.

We have seen some brainless, spineless, idiotic, mange induced, personalities. People so low on the scale of humanity that even a pound shop wouldn’t trust them to shelf stack.

We all know who they are.

They are the people that constantly tried to sow fear by talking about suspension due to no accounts.

They are the people who talked about legal action from SMP.

They are the people that talked about fund raising over the last 6 months.

They are the people that have spread lies about Ebola, strikes, SNPC taking the license away, no oil etc etc.

They are the folks who this morning sold, complained how the share price would crash, then in a blink of an eye brought back and then turned really positive.

They are the cretins who think that because it’s AIM they can do and say whatever they like. It’s all OK because everybody is doing it. They are probably the kind of people who would, in a war, commit war crimes, because everybody else was doing it. Or even in Nazi Germany happily send innocents on the death trains, because everybody else was doing it.

The honest answer is not everybody does, there are some really nasty players on AIM, but you don’t have to join their ranks to make money. If you do, then it’s because you choose to do so. However you might try and justify it.

I have had enough success to not care too much about AAOG this year, it will come good at some point, but every investor has their own choices to make. I just hope, without much anticipation, that the Jokers on AAOG realise what kind of person they really are.

AAOG – Djeno Unmasked AAOG are “looking to produce from the Djeno using 103”

Well I’ve been on some holidays for the month of April. During that time most of my shares have been pretty stable.

However my first focus has been on AAOG.

As per my past Blogs, I’ve been a massive fan of Djeno. In my opinion AAOG’s 103 drill was the most misunderstood on AIM in the last few years. The success of finding a column of oil in the Djeno beneath the cap should have re-rated AAOG. The failures of the rig to drill further were disappointing, however it shouldn’t take anything away from what was a massive success. Many share pundits became openly sceptical that anything except a few oil shows had been found, along with a difficult to produce Mengo and small section of R2 sands.

Back in February, pundits also claimed the company had no cash and needed to raise more money urgently. Wrong!

Open on record predictions from AAOG of 1500bopd from the Mengo/R2 have been made to counter this, as well as firm denials of any fundraising plans.

Of the $8-9m owed to AAOG from SNPC, a payment plan has been entered into, with the 3^rd payment due to be made in the next 10 days, bringing over £1m into the bank account of AAOG already, a further half a million every month and a very thin monthly expenditure.

AAOG’s plan from the first quarter to produce from the Mengo/R2 was pending the arrival of the one time simulation kit that was due to arrive in April and give first oil in April.

After being shut in for 45 days, the 103 well was opened at the end of March and Djeno oil flowed readily to the surface, under “considerable” pressure. AAOG commissioned a company to look at producing from 103, under the preconceived idea of producing from the Mengo/R2. After Djeno oil first flowed, a decision was taken to include the Djeno reservoir into the CPR to be released this month.

The market should have cottoned on to the importance of the Djeno flowing at this stage, however it didn’t.

Djeno: One of the world’s most sought after oils. A premium is paid for Djeno oil, due to its high quality and ease of processing. It’s also very low in sulphur. Most oils around the world are lucky to get Brent minus 2-3 dollars. A few oils get true Brent price. Djeno is one of only a handful of oils that get a premium to Brent, rising to Brent plus 30 cents in April due to very strong demand.

The Djeno reservoir is highly productive. With a natural gas mechanism, the Djeno field is highly pressurised. It’s low sulfure nature and ability to flow, means that it naturally flows, normally at a rate of 5000bopd and doesn’t have the tendency to reduce in flow unlike more waxy oils, until the reservoir is depleated.

We know that producing 1500bopd from Mengo/R2 would be fantastic, plenty of money in the coffers (1m a month), paying for other drills. Mengo/R2 has a decline rate after the first year or so, but it would pay for Djeno drills.

The first change to the plan to Mengo/R2 occurred with the cryptic note from Fincap that AAOG were deciding whether to produce from Djeno or Mengo?

We know that Djeno flowed, that in itself was unexpected. But surely it was a just a bit of oil and couldn’t compare with the 1500bopd from Mengo/R2?

Fast forward to after my holidays and yesterday I asked David out right about 103. His reply, “Yes, as a result of analysis of the data and also the oil coming to surface, the engineering team is looking at how to produce from the Djeno in 103C.”

Yes, we could have a major delay from this decision but.... Switching to production that won’t decline, switching to production that is one of the most sought after oils in the world and most importantly switching to production which will clearly derisk 104 and beyond would be fantastic news.

To exploit the 5000bopd from a clean Djeno hit, then as per the RNS, the topside facilities would need upgrading and truck transportation wouldn’t be able to cope. If Djeno flows at 1500-2000bopd (as we’ve just hit a bonus upper section), then the topside will likely be able to cope with the pressure values (hence the 45 day test). We would also be able to cope with the transportation with very limited new topside, it will easily be able to be choked back.

All of this might take time though and the market is not kind. Good news then that David also added that the new plan will be produced and communicated to the market next week, with work to start shortly after that.

Maybe, the market will start to realise then that AAOG is serious and not faking it about 103. Maybe the CPR will show the market how large these new horizons are. But when the oil is flowing and folks should remember that the hole is drilled and production facilities in place, the market won’t be able to be sceptical any more….