Otis’s Kilgore deposit has multi-million ounce gold potential says analyst
The development of mining projects, from exploration to actual mining, seems so often to take years, and is rarely completed in anything like the proposed timetable announced when work began. That is one of the common trends in mining; the other is the fact that so many discoveries stay just that, and often for many decades.
And, when the right company finally gets hold of the project (in this case more than 70 years after it was first worked) suddenly that project can become transformed into a future gold producer that starts to get attention in the market.
The latter is the case with the Kilgore gold project in eastern Idaho, owned by Otis Gold Corp. (TSXV: OOO | OTC: OGLDF). Thanks to New York-based Scarsdale Equities, we learn that the earliest reported gold exploration and operation at Kilgore, 60 miles (96km) north of Idaho Falls, dates back to 1937 by Blue Ledge Co. There is no official record of production though there were reports that miners stockpiled “considerable ore of commercial value”. Mining ceased when the US entered the war in 1941 (and President Roosevelt banned all gold mining on the grounds it was not essential to the war effort).
Since then four exploration companies have worked at the project, all with the aim of identifying a million ounces-plus of gold. Exploration stopped in 1996 and it was not until 2008 that Otis acquired Kilgore and set to determine its potential.
On the day Scarsdale compiled its report on Otis, the stock was at C$0.18. Scarsdale slapped a C$0.50 price target on the junior. Needless to say, they also slapped a “buy” recommendation on the stock. It has decided to initiate coverage of Otis after recent high-grade drill results improved the prospects for a larger and higher grade gold deposit.
Otis is getting nearer to the million-ounce mark: so far it has an indicated resource of 520,000oz (grading at 0.59 grams/tonne) and an inferred resource of 300,000oz. Leach tests have achieved recoveries of up to 85.5%.
The proposed 2016 drill program has, according to Scarsdale analyst Mike Niehuser, the potential to both increase the grade and contained ounces, as well as reveal the potential for additional exploration of the geological formation, called Aspen, underlying the entire Kilgore project.
“We believe that the drill results from Otis Gold’s 2015 drill program have potentially unlocked the full opportunity of the Kilgore gold project,” the report says. The underlying Aspen formation, it says, presents the potential of a multi-million ounce operation.
There is another aspect to all this, and one that often gets forgotten in all the focus on any mining project: the economic benefits mining can bring.
The nearest town – if you can call it that – to Kilgore is Spencer. It has a population of about 40. In 1948, deer hunters stumbled upon a large deposit opals at Spencer, which are formed underground in still pools of water. As a result the town has billed itself as the “Opal Capital of America”. The Spencer opal mine company offers tourists a chance to dig for their own opals.
Kilgore (and Spencer) are located in Clark County, Idaho’s least densely populated county, with fewer than 1,000 people. Niehuser tells us that the 2010 average income was $22,518 – and just under 20% of the population lives beneath the poverty level. Development of a substantial gold mine has to boost the economy of the county.
Another positive for Otis is that the project is free of encumbrances: no royalties required, no environmental liabilities. The company has recently acquired claims in flat areas to the north of the project as potential locations for the operating plant, heap leach pads and tailings storage.
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