California Gold Mining (TSXV: CGM; US-OTC: CFGMF) is raising more funds to explore its flagship Fremont gold project in Mariposa County, Calif.
The project covers 13.6 sq. km of historic gold mines and lies within the prolific Mother Lode gold belt, which has produced more than 50 million oz. historically.
Located in the southern part of the 200 km long belt, the Fremont property saw the operation of between five and 10 mines during the 1800s and early 1900s. California Gold estimates that 125,000 oz. gold has been recovered since 1850.
Mining on the property stopped in 1945. After the Second World War, California’s attitude towards mining became “very negative,” the junior’s president and CEO Vishal Gupta told The Northern Miner. “This was heavily influenced by the establishment of pro-environment lobby groups throughout the state. And this negative public sentiment towards mining persisted all the way from 1945 to 2008.”
But that stance softened after the 2008 economic recession left California flirting with bankruptcy and high unemployment rates. “There was a concerted effort made at the municipal level, the county level and the state level to open up California to hydrocarbon exploitation and gold mining,” Gupta says.
In the last four years, the junior says four major mining projects have been fully permitted in California. They include Molycorp’s (NYSE: MCP) Phoenix rare earth elements project, Sutter Gold Mining’s (TSXV: SGM; US-OTC: SGMNF) Lincoln gold project, Golden Queen Mining’s (TSX: GQM; US-OTC: GQMNF) Soledad Mountain gold project, and Shasta Gold’s privately held Washington gold project.
“There has been a bit of a paradigm change in California, and a lot of people are not aware of that,” Gupta says.
Gupta — who worked as an exploration geologist and mining analyst before joining California Gold as director of corporate development in May 2013, before quickly rising through the ranks to his current position in November 2014 — says the junior is one of the current era’s “first movers” in the Mother Lode gold belt.
In 2011, the junior, then known as Upper Canada Gold, signed an option agreement for Fremont with a private ranching family that owned the property. Two years later, it bought Fremont for US$5.4 million. The firm then put its Dingman property near Madoc, Ont., on the back burner and renamed itself California Gold Mining.
The junior is the second serious exploration firm at Fremont since Goldenbell Resources optioned the property in the 1980s. Goldenbell had drilled 140 holes — mostly on the Pine Tree–Josephine zone — to produce a non-National Instrument 43-101-compliant resource of 10.7 million open-pittable tonnes grading 2.76 grams per tonne gold for 953,045 oz., and 8.2 million underground tonnes of 4.22 grams gold for 1.1 million oz.
A 1989 feasibility study showed the project had a 25% internal rate of return at a US$425 per oz. gold price. But when the gold price dipped to US$300 per oz. in the early nineties, Goldenbell deemed the project uneconomic, and let its option expire.
“Ever since then the property bounced around between ranching families. They were growing walnuts and almonds, and raising their cattle on the property,” Gupta says.
That changed once California Gold arrived on the scene. Since March 2013, the firm has concluded two phases of drilling, consisting of 2,600 metres in 18 diamond holes.
The first phase began last May and included 14 holes that twinned 10% of the historic holes. “And the correlations that we got in terms of assay grade and terms of geological interpretation was 80–90%, so it was a high correlation, which was exactly what we were looking for,” Gupta notes. That proved up the geological concept of the property, he adds.
The second drill phase took place in early January 2014. The junior drilled four holes to gather enough representative rock from each of the three types of mineralization on the property to start preliminary economic assessment (PEA)-level metallurgical testing. The results, released in August, show recoveries of 86–93% for the oxide cap, quartz-hosted sulphide and sulphide replacement zones. “The results we got were fantastic, and beyond what we had expected,” Gupta says.
In September, California Gold reported findings from a property-wide surface geological mapping program that included 55 line km of geological traverses. It discovered five large exploration targets that could host large amounts of near-surface high-grade gold mineralization. Before this program, the company believes that only 15% of the 14 sq. km property had been mapped.
Three months later, the junior released encouraging assays from a property-wide surface sampling program, where it collected 91 rock chip samples. The best samples graded 32.81 grams and 20.67 grams per tonne.
“Some of the grades we got from the surface samples were mind-boggling,” Gupta says. “For us to find that kind of gold endowment on the rest of the property beyond the main [Pine Tree–Josephine] zone that was already drilled off by Goldenbell in the 1980s was unimaginable. And now we’re looking at a much bigger project than we’d expected when we actually purchased the project.”
To prove up that potential, the firm is looking to raise US$6 million in equity to fund its third-phase drill program in 2015. That program would likely include 7,500 metres to test the down-dip extension of the main mineralized zone and the five new zones. Most importantly, it will convert a large part of the historic resource into a NI-101-compliant resource estimate.
“We’re talking to two or three investment banks and there is a high level of interest [in the project] … we are hoping that by the end of February we will have the $6 million raised, so that by the end of March or early April we could actually start our phase-three drill program,” Gupta says.
If all goes according to plan, the company could release a resource estimate by the end of 2015, followed by a PEA in early 2016.
Given that only 25% of Fremont’s prospective 4 km strike length has been systematically explored and that historic drilling has gone down to 300 metres, Gupta says the project has enormous upside potential.
“I’m excited, and I think the entire team at California Gold is excited. We are doing our best to raise the money so we can go and do the third-phase drill program and show everyone that yes, this project actually does have the potential to be a world-class deposit and host between five and 10 — or maybe even beyond 10 million oz. — at pretty high grade. That is what we are working towards and of course, the results will speak for themselves.”
At press time California Gold closed at 4.5¢ with a $7.5-million market capitalization. It has $500,000 in cash and equivalents.