Kootenay Gold Hits a Home Run

In one of the very few bright spots in TSX Venture share performance, Kootenay Gold (TSX.V:KTN) shares jumped 52% on December 10th after the company announced widespread high-grade mineralization from a drill program at their 100% controlled Promintorio Silver Project in northwestern Mexico.

With intercepts like 18 meters grading 950 grams per tonne and 151 meters at 162 grams per tonne silver equivalent, all eyes are focused on the suddenly stellar Kootenay, whose success at Promintorio caps a year in which the company has seen major progress on a big chunk of its property portfolio.

But while the rich intercepts are what has driven the stock to new highs, CEO James McDonald is most interested in what the drill results are telling him from a large scale geological structure perspective.

"These results indicate that the individual breccias drilled in the first phase are part of a single, large mineralized system with distinct characteristics indicative of a porphyry system. Accordingly, drill data suggests the Promontorio may contain a deposit of larger scale and scope than previously conceived," he said.

That’s his technical way of saying that limits to both the depth, length and width of the mineralized system have not yet been reached. It remains open in all directions.

I asked him if that meant that these breccias referred to in the press release were sitting on top of a porphyry system.

“The point is not that there is a porphyry underlying the breccias but that the breccias themselves are part of a porphyry system,” he replied. “This is evidenced by the potassic (biotite) and phyllic (sericite) alteration grading from a propylitic (calcite chlorite) alteration.”

Perspective is what its all about at Promintorio. Its important to bear in mind that the region surrounding Promintorio, while historically the focus of small scale mining, has suddenly emerged as a precious metals hotspot in the last five or six years.

Current estimates from projects within a 200 kilometer radius of Promintorio put over 15 million ounces of gold and more than 480 million ounces of silver in various categories of mineral resources.

Deposits like Minefineders (TSX:MFL) Dolores project, with over 3 million ounces of gold and 148 million ounces of silver, and Alamos Gold’s (TSX:AGI) Mulatos deposit, at 3.71 million ounces of gold , are turning the region into a primary mining district for Mexico.

Other companies contributing to the previously stated regional resource include Agnico-Eagle’s (TSX:AEM) Pinos Altos, (1.6 million ounces gold), Gammon Gold’s (TSX.V:GAM) Ocampo project (2.86 million ounces gold, 133 million ounces silver), Palmarejo Silver and Gold’s (TSX:PJO) million ounce namesake property, Goldcorp (NYSE:GG), Pan American Silver (TSX:PAA), Fronterra Copper (TSX:FCC) and Tyler Resources (TSX:TYS).

Another perspective to bear in mind is that this program tested only a small fraction of the 40,000 hectares that comprise the entire Promintorio project. The project recently surveyed by an electromagnetic survey shows a number of areas with potential in addition to the 500 meter by 2,000 meter mineralized trend of which only a 175 by 200 meter portion was just drilled.

Nobody I spoke to wanted to be quoted as to what the potential could be. The company prefers to let the results do the talking.

So what’s next?

Well, according Kootenay president Ken Berry, “Given the success of Phase I Drill results we anticipate Phase II to commence early in the new year. We have also initiated an IP Study to source additional priority targets over the 500 meter by 2000 meter structure. “

When asked if the company was going to need to raise more money for Phase 2, Ken Berry responded that the company has “just under $2 million in the treasury and warrants and options outstanding which would yield an additional $6.9 million upon exercise.”
Considering the recent strong share price performance, it would appear likely that a good number of those options and warrants will get exercised.

“All in all”, Ken continued, “these results confirm the historic grades. From surface to depth, mineralization is rich and suggest the Promontorio may contain a deposit of larger scope than previously conceived. A porphyry system could have the set up for the possibility of an open pit.”

“This area of Mexico (Sierra Madre Region) had no major producers six years ago, now there are five major producers each having multi-million oz reserves (gold equivalent). There’s also another four projects expecting to go into production in the next 3 or 4 years.”

A key to Kootenay’s success is CEO, James McDonald, a founder of Alamos (National Gold) which produces 100,000 oz gold per year; and a the former president of Genco Resources (TSX.V:GGC), which produces 1 million oz silver per year. Jim remains on the board of Alamos and Genco Resources.

Kootenay Gold has just over 21 million shares issued and outstanding, and 28.4 million fully diluted.