Private equity-firm resumes drilling at high-grade Nevada Gold project

Terraco Gold Corp. (TEN:TSX.V; TCEGF:OTCPK), a gold royalty company with a portfolio centered on the Spring Valley Gold Project in Nevada, has reported that Waterton Global Resource Management, the project’s owner/operator, is drilling on the property. The company first reported the drilling on October 31, and followed up on November 13 with more details.

The royalty company noted that Waterton is drilling as many as 30 holes on land where Terraco holds up to a 3% NSR royalty. Most of the drilling is in a grid pattern. “The drill grid pattern is at the southern end of Spring Valley and covers part of a high-grade gold section of the resource. The drill grid also appears to test the west and southwest extension of this targeted high-grade area,” Terraco reported.

The grid is just south of an area where Barrick Gold and Midway Gold reported in 2013 a drill intercept of 361 meters of 1.47 grams per tonne (g/t) gold, including 23m of 3.02 g/t gold and 21m of 7.54 g/t gold.

The accelerated progress on the project continues to give us confidence that Spring Valley has the potential to be a world-class gold mine in the near future.

Todd Hilditch, president and CEO of Terraco, commented, “We believe that Waterton is now moving Spring Valley forward on the same track that Barrick had been on as operator of the Spring Valley joint venture prior to its sale in late 2015. Based on the number of 30 spotted holes and an assumed drill depth in line with previous Spring Valley drilling, this program is a further multi-million-dollar financial commitment of Waterton.”

Barrick Gold had an earn-in agreement with Midway Gold and actively explored the project. In Barrick’s Third Quarter 2014 report, the company stated, “The Spring Valley project, 70 percent owned by Barrick and approximately 60 miles west of Cortez, continues to advance through a prefeasibility study which is on track for completion in late 2015. This is a low capital cost, heap leach project with the potential to become a standalone mine. Barrick expects to report an initial resource estimate with its 2014 year-end results.”

In August 2014, Midway announced “substantial resource growth” in the Spring Valley Project, which included a 102% increase in the Measured and Indicated ounces, to 4.37 million ounces of gold, over the 2011 resource estimate, as well as a 20% increase in the Measured and Indicated gold grade. The resource estimate also included 1.07 Moz gold in the Inferred category.

Those results prompted Ken Brunk, then CEO of Midway, to comment at the time, “The accelerated progress on the project continues to give us confidence that Spring Valley has the potential to be a world-class gold mine in the near future.”

Barrick’s Spring Valley project budget for 2014 was $17.4 million, for both in-fill drilling and an internal prefeasibility study, and was planning to conduct “additional metallurgical studies, hydrological studies, environmental baseline studies, and geotechnical wall rock stability studies required for mine planning.” Midway noted at the time, “Beyond the resources added by the infill program, Spring Valley has excellent growth potential and exploration upside. The current resource remains open to the south, to the northwest and at depth.”

Midway’s subsequent bankruptcy led to Waterton’s purchase of the Spring Valley property at the end of 2015. Waterton then consolidated the area in 2016 by purchasing Terraco’s adjacent Moonlight property and additional lands.

“We believe that Spring Valley is the only remaining multimillion-ounce Nevada-based gold asset that is currently not owned by a major gold production company,” Hilditch noted.

Terraco’s royalties on the Spring Valley property date from 2016 and include:

  1. Up to a 3% NSR on a majority of the current resources of Spring Valley (claims boundary in red);
  2. Up to a 1.5% NSR on a portion of Spring Valley on the north side of the resource (claim boundary in green);
  3. Up to a 0.5% NSR within a one-half mile of the red claims and outlined in blue (not including the area in green);
  4. A 2% NSR on the 35sq km Moonlight Project adjoining Spring Valley to the north.
    Terraco map

Waterton Global Resource Management is a private equity firm that specializes in metals and mining. According to the firm, it has raised two private equity funds with total combined committed capital of $1.75 billion and holds a portfolio of more than 75 assets in the U.S. and Canada.

Waterton states that it “actively manages its project-level investments and leverages its in-house mining, permitting and investment origination expertise to create value at its assets by:

Improving resource quality and size
Advancing permitting initiatives
Developing and implementing mine plan optimization strategies
Right-sizing mining equipment and infrastructure to reduce mining costs and capital expenditures
Determining optimal processing methods to improve recoveries
Consolidating assets to achieve greater economies of scale
It also states that the firm “employs a disciplined approach to exiting investments, waiting until value creation initiatives have been completed and market conditions allow, in order to maximize value for its investors.”

Terraco is one of several royalty holders on the Spring Valley property; all the royalties combined total 7%, but Terraco owns the largest portion of up to 3% NSR.

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