Argentina Gold Corp
ARP
Shares issued 33,113,389
1998-11-24 close $2.59
Wednesday Nov 25 1998
Russ Cranswick says why
ARP - $2.70
After holding up the release of its first "batch" of drill results in
order to include hole 90, Argentina Gold released assay results for
five more reverse circulation (RC) drill holes this morning. Not
surprisingly, hole 90's splashy gold grade over significant width has
reinvigorated the market's enthusiasm for this stock. If one takes
the uncut gold assays provided at face value, you could arrive at a
current implied value of approximately $2.20 for ARP shares.
However, we still recommend exercising extreme caution as none
of the reverse circulation drill results on the property, let alone
those for this high-grade material, have been confirmed by diamond
core drilling
RESULTS
The results for hole 90 should be read as 10.25 g/t (0.30 ounce per
ton) gold over 147 metres. The longer intercept of 6.15 g/t (0.18
ounce per ton) gold over 255 metres has much higher grade
unrealistically blended over subore grade material. Furthermore,
a)
the 10.25 g/t material should ultimately be cut back as
high-grade gold is erratic and unpredictable; and,
b)
grades for this high-grade coarse gold in a reverse circulation
hole will not be accepted at face value until diamond core drilling
has reproduced and confirmed them.
The fact that holes 86 and 88 returned low-grade mineralization
supports our previous observation that none of the holes drilled
within the resistivity anomaly have returned economically
significant mineralization. Instead, all significant mineralization has
been returned from holes that test the edge of the resistivity
anomaly.
The fact that hole 87 returned only a narrow, low-grade intercept is
very disappointing. This hole and hole 81 limit the Amable zone's
strike extent to a maximum of 800 metres.
Hole 89 returned a potentially economic intercept of 1.88 g/t (0.05
ounce per ton) gold and 53.5 g/t (1.56 ounces per ton) silver over
81.0 metres. While this is encouraging in that it extends the
mineralization in hole 84 approximately 75 metres to the east, it
implies that mineralization in the zone is erratic as hole 88, which
cut the space only 40 metres to the south and, did not intersect any
mineralization of significance.
DISCUSSION
Being in close proximity to hole 80, hole 90 is likely testing the
same "sweet spot" suggested by the much higher than property
average grades in hole 80. Given this fact, we emphasize that one
small area of higher grade does not make an economic deposit in a
remote area like the Andes. While we believe in the longer term,
bigger picture potential on the Veladero property, we feel that once
again the market is not seeing the forest for the trees (holes 80 and
90).
VALUATION
In our last Morning Comment of Nov. 16 we said that we believe that
Argentina Gold should be worth approximately $1.60 If one were to
give full credit for the uncut 10.25 g/t gold interval in hole 90, and
excluding the contribution of silver, we could see a new current
valuation in the $2.20 range. However, we remain very cautious
because of the total lack of diamond drilling on this property.
CONCLUSION AND INVESTMENT OPINION
With our revised valuation that suggests that Argentina Gold could
be worth approximately $2 20, we are sticking with our accumulate
recommendation and a 52-week target price of $3.00. This target
price will not be modified until diamond drilling has confirmed gold
grades, geological interpretation or that unidirectional drilling is
okay.
(c) Copyright 1998 Canjex Publishing Ltd.
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