On 2 August, Fortitude Gold announced solid Q2 results. The company produced 10,980 ounces of gold at their Isabella Pearl mine. The ounces were produced at a mere US$733 per ounce, using an All-In-Sustaining-Cost measure. With the gold sold at an average price in excess of US$1,800 per ounce, this healthy margin produced net income of US$0.27 per share for the quarter and increased the cash balance to US$40.7mln at the quarter end, 30 June 2022.
The next day, Fortitude Gold also announced drill results from their Golden Mile project, which looks likely to be the companies second gold mine. One drill hole intercepted 12.2 meters at 4.9g/t gold from a shallow depth of only 41.2 meters. Part of this intercept included 3.1 meters at 16.8 g/t gold. Drill results like this bode well for a positive final investment decision on the project.
As a shareholder, I was pleased with both the production and exploration news, especially since Fortitude Gold pays an inflation-fighting 7.1% dividend yield, as of the time of writing. One of the highest dividend yields in the gold equity space.
Listening to Fortitude Gold’s 3 August 2022 conference call, there was one further piece of information that I found interesting. CEO Jason Reid mentioned their County Line project, which I can’t remember being mentioned specifically for some time.
The following slide shows the location of County Line relative to Isabella Pearl, Golden Mile and their other Nevada projects.
On the conference call, Jason Reid commented:
“On another exciting note, we are receiving drill results from County Line’s initial drill program and have intercepted high-grade gold in nice widths. We look forward to updating shareholders with a drill result press release in the near future, and ultimately running an initial analysis on the potential of County Line.”
Then in the Q&A section of the conference call. Jason Reid refers to County Line again when answering a caller’s question, “Is there any other exploration drilling completed beyond the Golden Mile property? If you’re referring to our other properties, yes. And I just referenced we just had our maiden exploration program at County Line and we hit some excellent grade over there with really good intercepts. Some of it’s really shallow, some of it’s deep. So, I get excited about that too. That is a very exciting situation because, in that situation, at this point, we wouldn’t plan to build anything there. We would just move forward to try to, if there’s an economic deposit there, mine it and truck it to Isabella Pearl.”
So, what do we know about the County Line property? We know it’s located 23 kilometres (14 miles) north of the Isabella Pearl project, which, as Reid comments, is ideal for leveraging existing infrastructure.
Gold Resource Corp’s old news release from 12 March 2018 discussed the acquisition of County Line and shows the County Line tenement boundary (see image below). For those not familiar with Fortitude Gold’s history, the company was spun out of Gold Resource Corp at the end of 2020.
Gold Resource Corp’s March 2018 news release also makes the following comments on County Line:
“The County Line property is part of the Paradise Peak collection cluster of high-sulfidation epithermal deposits. The district historically produced a total of 1.5 million ounces of gold and 38.9 million ounces of silver. The County Line open pit historically produced approximately 81,000 ounces of gold and 760,000 ounces silver. The Porphyry (East) Pit, located approximately 2,500 feet south east of the County Line pit, produced approximately 7,400 ounces of gold and 8,000 ounces silver. While both open pits represent exploration targets, other targets include Newman Ridge and the Jackpot Zone.”
If you look at the image above, you can see the old Paradise Peak Mine main pit on the right of the image, outside the tenement boundary, and the historic County Line pit and the Porphyry (East Zone) pit on the left of the image. Other exploration targets Newman Ridge and the Jackpot Zone can also be identified.
The release goes on to say:
“The Company’s main objective with this acquisition is to explore new prospective areas of the property, as well as evaluate the potential of delineating and expanding mineralized material in the historic open pits. During Company due diligence, rock chip samples obtained from the bottom of the County Line pit averaged 2.2 grams per tonne (g/t) gold with cyanide bottle-roll tests on those samples yielded an average of 94.5% gold recovery in approximately two hours.”
A cyanide bottle-roll test is an early-stage metallurgical test to see how easily the gold can be extracted. 94.5% gold recovery in approximately two hours is encouraging news and while further tests will be needed, suggests that this ore from the bottom of the old County Line pit might still be oxidised and suitable for processing at Isabella Pearl’s heap leach operation.
Signs, so far, are encouraging, and I look forward to a full update on the maiden drill program at County Line. It’s pleasing to see more progress on another one of Fortitude’s projects. They have a large, exciting, tenement-holding in Nevada, which I believe the market has failed to recognise.