QUARTZSITE, ARIZ. -- Geologists often trek through some of the Earth's most isolated and treacherous areas in search of an orebody.
But every so often, their job is made easy. Almost too easy.
In the case of Riverside Resources' (RRI-V, RVSDF-O) SugarLoaf Peak gold project, prospectors only had to wander a couple of steps away from Interstate Highway 10 -- a stretch of road running from Phoenix towards the California border -- to hit upon gold and copper.
Such a prime location means the property has been struck by the drill and rock hammer of four companies, plus several independent miners over the years. And according to Riverside's chief executive, John-Mark Staude, they all had something in common: they never really got it right.
Part of the problem, according to Staude, was that previous explorers drilled the site as a potential copper project -- viewing the gold grades as too low to ever be economic.
Cominco -- the last company to test SugarLoaf Peak's rock -- wrapped up its program here in the early 1990s, before heap-leach technology had advanced to make large-tonnage, low-grade gold deposits as economic as they are today.
Such a lack of grade also provided little motivation for past companies to get the geology right.
"There were four different companies at different times with different concepts and different geologists, and the low gold grades limited their interest," Staude explains.
Staude believes that Riverside -- with its ingrained knowledge of Mexican and U. S. southwestern geology -- is just the company to finally pull back the geological veil and reveal the project's full potential.
To do it, Riverside has just embarked on a five-hole 1,000-metre drill program that will not only introduce the project to the diamond drill for the first time, but will also approach the mineralized zones from a different perspective.
"With so many companies having already drilled here, we're not going to try and copy or twin, we're going to drill angled holes across the structural controls to get representative material," Staude says. "And with that, we can look back at the historical resources and say what is or isn't likely."
That historic resource (not compliant with National Instrument 43-101) was done by Westworld Inc. in 1983 and came in at an impressive 60 million tonnes grading 0.6 gram gold per tonne for 1.2 million oz. gold. It was, however, based on only 10 reverse-circulation drill holes.
Importantly, those Westworld holes concentrated on a tighter central area, thus underestimating one of the key elements to the project -- its potential size.
"We've found surface gold anomalies over an area that runs a mile and a half," Staude says. "That's twice the size of the historic resource area. This is one big system."
But the larger strike length of mineralization is only part of the story. Staude also believes that mineralization could extend to far greater depths than previously believed.
"We have more optimism with regards to mineralization at depth because we think there is a stratigraphy," he says. "We think this is a folded system and if that turns out to be true, it will give us incredible depth."
To test the hypothesis, Riverside is drilling deeper holes on angles that will both test the depth and help determine if the shear zones it cuts across are indeed structural controls.
With regards to the stratigraphy, Riverside believes that a layer of more porous rock (which hosts most of the mineralization) lies beneath a layer of tighter rock. If the layers are indeed folded, as historical drilling indicates, then the porous, mineralized layer will have been pushed down to far greater depths than past drilling of just 100 metres would have found.
Riverside's determination to go deeper than before is evident in its decision to extend its first drill hole well beyond the 150-metre level it had planned.
Riverside's chief geologist on the site, Pedro Herrera, saw that the alteration continued at the 150-metre level and told the drillers to keep going.
Eventually the hole was stopped at the 250-metre level, and while assay results are pending, the core looks promising.
At the company's warehouse in the nearby town of Quartzsite, Staude turns in his hand core from the bottom of the hole.
"From top to bottom, it's homogeneous. That's a good sign," he says, "We went another football field beyond what we planned to drill and we're still in it, but we don't know the grades. So rather than just keep going, we'll go to the second hole."
Staude, who has a PhD in economic geology, exudes a passion for getting the geology at Sugar-Loaf right, realizing that when a company understands what's beneath it, less money has to go into the ground.
"When we drill, we're going to be pretty comfortable with where we drill," he says. "We're not wildcatting; we want to make sure its fish in a barrel because we've only got 23 million shares outstanding.
"With such a tight share structure, if we hit one good hole and we can control it, we could have an NPV (net present value) of $250 million and Riverside, right now, has a market cap of just $10 million."
To try and maintain the potential of such a strong market cap to NPV multiple, Riverside is taking the need to raise more capital seriously.
Its exploration budget for Sugar-Loaf comes in at just one-tenth of the US$3.5 million it has in the treasury.
It also plans to move through drilling at the project at a good clip to keep costs down. The plan is to wrap up the program in December, with results following shortly thereafter.
With a tidy sum still in the kitty, the company is in a good position to drive drilling forward should results call for it.
But if the project is to capture more exploration dollars, the current drills will have to hit some intercepts above the average grade of 0.6 gram gold in the historical resource.
Staude is confident that will happen.
"The historical resource was a global number, but what we have found is that there is a sweet spot inside of that, and following that sweet spot means we could start a pit with three quarters of a gram or a gram of gold," he says.
"The key point is that a certain horizon sucks up mineralization," he continues. "If you can find those horizons through stratigraphy, you'll have a better average grade."
But even getting to the point where the company could begin to understand where such sweet spots are, was surprisingly difficult given the amount of historical work done on the project.
Exploration started on the site in the 1950s and over the course of the last 60 years, some 61 holes were drilled. Much of that field work was scattered about in unknown places, however, by the time Riverside arrived on the property.
Fortunately, the Vancouverbased company has a few cards up its sleeves when it comes to hunting down geological information.
Thanks in large part to his doctoral thesis on Mexican geology, Staude has compiled one of the most comprehensive geological databases on Mexico.
"Riverside has data from Mexico and we traded it for data on this project," he says. "We exchanged for it like you would with baseball cards."
Such trading has armed Riverside with the most cohesive set of historical data that any one company has ever had on the project -- and that alone has already given it a better grip on the geology than any of its predecessors.
Staude says the principal source of the geological activity that brought mineralization to SugarLoaf is a massive fault that runs from the site all the way to Tucson.
Standing on the side of SugarLoaf Peak, looking out over the arid desert, Staude points out that the break in the Dome Mountain range where the interstate runs through, is where the fault runs.
"The big fault allows for fluids to come up and makes for a big mineralized area. Fluids drove up through Tertiary rocks, they get to the old Jurassic area and boom, you have gold," he says.
Such activity has spawned mines in the surrounding area. Nevada Copper's (NCU-T) Copperstone mine and New Gold's (NGD-T, NGD-X) Mesquite gold mine, both sit within 100 km of SugarLoaf Peak.
And as if having a project just off a major interstate highway wasn't convenient enough, the site also offers another distinct advantage -- the colour of the surface rocks indicate the location of mineralization.
Wherever the desert brown sand gives way to a lighter cream colour -- which is actually sericite and rhyolite tuff -- there's a good chance that mineralization lies below.
That's because extensive shearing beneath shot hot acidic water through the more porous lower unit, often leaving gold behind, but was unable to penetrate the upper, tighter unit, scalding the rock and turning it white.
The origins of a deal
So how did Riverside end up with such a potentially high-tonnage gold project in a dream location?
Staude credits the purchase to a little help from some friends -- and his staying by the phone.
He explains that late summer is the time when claims often come up for renewal, leaving cash-strapped prospectors to work the phones in hope of finding a cash-rich company to save the day.
"That's when you get the good calls," he says, "so I never go on vacation in August."
It was just such a call from a geologist and prospector team Staude has long known that led Riverside to SugarLoaf Peak. The company stuck a deal to earn a 100% interest in the property by paying the team US$300,000 and completing $1.5 million worth of work on it. The original owners also maintain a 1.5% net smelter return royalty that can be reduced to 0.5% if Riverside makes an additional payment of US$1 million.
Riverside has already spent roughly US$700,000 on mapping, sampling and acquiring data and expects to meet the US$1.5-million threshold in the near term.
If the drills can find the kind of tonnage that Staude believes is there, that investment will have proven to be a wise one.
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