West Africa Wows Again!

This old Geologist, turned financial analyst (Ret.) is a shareholder in Cassidy Gold. The latest, (Nov 18, 2004) press release underscores the enormity of the discoveries that Cassidy has in Guinea.  The announcement of high gold content zones, "virtually a jewel shop" moved the market a bit. The important "news" of this release (and previous ones) is largely unrecognized by the market.  Some background and lessons on how I interpret information releases made by the responsible but non-promotional management of this gold exploration project is given.  Here are some things that apply to Cassidy's finds and my observations about their meanings and values.

First off. There are two broad categories of gold occurrence found within the enormous area (near 1,000 square kms) held in Guinea by Cassidy.  There is gold found in "veins", ribbons of rock (often quartz) that follow weaknesses in pre-existing rock. These probably once extended to the surface of the ground and may continue to great depths the depth could be kilometers. Hot fluids carried minerals along these veins. The veins twist and widen and narrow unpredictably. When the fluid in them cooled, minerals precipitated. Sometimes the minerals include Gold or other desirable substances. 

There is also gold in a "saprolite" zone. Read "dirt" when you read the word saprolite. Saprolite is, simply put, rock soil, the result of erosion of pre-existing rock. In Guinea, the climate and topography is such that erosion products have not been carried a long distance from where they started to where they are now.

The truth about Cassidy's veins:  In the absence of a comment saying "vein" the clue for recognition of one in a press release is report of a "true width". Cores from vein zones may follow along the vein. Geologists look at the angles of bedding to calculate the true width of a vein. Veins can be the "mother lode" that prospectors lust for. They are the direct sources of the gold ores as are/were mined at famous "hard rock" locations in Ontario and Quebec for instance. Drill results show wider spread occurrence of veins and richer gold content than was expected in the region that Cassidy has the right to explore and mine. Intercepts of gold bearing veins at depths of 260 meters are reported. They may go much much deeper. Engineers project gold content determinations for only short distances from where they are measured. Even if a vein is confirmed deep in the earth and has a gold showing at the surface, the extension of the zone is ignored until close spaced drilling confirms conditions of distribution. The engineers' first reserve numbers will tend to be understated when first announced because such facts must be honoured.

Cassidy is picking areas where gold occurs with amazing accuracy. Their geologists aren't bragging to others about the knowledge, but they are directing the company to acquire added prospective areas.   

In Guinea the very dirt can be Golden: So remember: In a Cassidy press release, if the words "true width" are not used, that zone is probably measuring gold found in a stated thickness of  "dirt". Dirt is dirt. It does not have specific "geometry" like a vein does. If it has gold in it the gold is probably diluted at any spot, but mixed in over a considerable sideways distance. Weather eroded the rocks. Gold bearing veins that stuck out at the surface disintegrated. This freed the gold that was tightly contained in solid rock of the "mother lode" veins. Miners will crush veins mechanically to get the gold out.

Because of the climate and topography in Guinea, the erosion that freed the gold did not carry it very far from the vein it came from. (Areas of gold rushes we know about like those in California, the Klondike or Barkerville found gold that had been carried and scattered far from where it may have been freed when the mother lode rock eroded.). The gold in soil in Guinea is disseminated vertically as well as aerially. Erosion tended to work as if "running in place".

So what?  In Guinea, recognition of concentrations of gold occurred centuries ago. The saprolite gold has been mined for centuries. The gold grades found in the saprolite are very variable. Nuggets as large as 1500 grams (about 3.3 pounds) have been found. (See the nugget in hand at the top right of this page.) Cassidy undertook to explore a large area to better assure that it would find at least some areas to mine. Now Cassidy benefits greatly because it has a very large area where more gold is being found than could logically have been expected from historic knowledge.

Some explanation follows: The gold bearing saprolite ("dirt") zones in this area sometimes show as ridges, or as places that look like someone once spilt concrete  (called "dura").  These were recognized centuries, maybe even millennia, ago. The local people, typically family groups working together, mined them.  They are called artisinal workings. Cassidy continues to find even more artisanal mined areas. Some are still actively mined. Cassidy drills deeper for more gold. 

Primitive mining methods limit native gold recovery efforts to depths of only a few meters. Lack of equipment causes this to be very hard work. Typically, it is not very economically rewarding to these families. They would prefer regular employment.  

Mining occurred only along trends that are obvious, and near water so the dirt can be washed and where the rock has particles of coarse, visible gold to attract the "artisanal miners".

Resources distribution favours that greater amounts of fine gold compared with coarse visible gold will exist in almost every occurrence. So some of the areas that were not previously worked may actually carry more but finer gold. Sampling confirms that both saprolite and vein zones containing gold finer than can be seen by the naked eye exist. Native mining was not done for such gold. Such areas can represent enormous added amounts of gold that can be recovered at a profit. The area of old abandoned workings, current workings, topographic rises and abandoned ditches indicate where gold occurrence exists. These are not "mined out" if modern mechanical methods of mining are used. They need evaluation though. Drilling shows that the gold bearing saprolite can be up to 100 meters thick. Artisanal miners typically dug to only 5-meter depth. 

Gold bearing veins are found to go far deeper. They are attractive targets, indeed the main targets at some localities. Cassidy's ability to find the extensions of these veins and gold rich dirt keeps getting better.

Modern "geochemical" sampling indicates added regions where gold bearing sediments cannot be recognized by visual prospecting methods. Geochemical searching is cheap and is proving very effective for Cassidy.  Cassidy's website has maps  that show results of geochemical sampling to date. Note that there is a great deal of concession area still not sampled. Considering that Cassidy has explored only a small part of its enormous concession area, the results already reported are incredible. Although less than 10% of the concession land area has been explored by sampling, more than a dozen prospective trends are identified.

Literally everywhere that drilling or trench sampling was done has resulted in finding encouraging shows of gold. This indicates a very rich area. Drilling in the first discovery zone, the Sanu Filanan proves that gold occurs along a trend length of almost 1.5 kilometers. The same trend extends an unknown distance beyond this, both ways, past the ends of  Cassidy's exploration finds to date. Highly significant finds are also reported from drilling the nearby, ancillary, (possibly en echelon) separate trends, the Sanu Folo, North Sanu Folo, and the JJ Geologic theory suggests that these may all coalesce into a "super zone" at depth.

The "X" trend is the most recently announced high gold content discovery. It is many kilometers removed from the original Sanu Filanan discovery. The "X" trend found in mid 2004 is already confirmed to bear gold along a length of more than 650 meters. The probability that a "complex" of "X-related" gold bearing structures exists is a near certainty.

Another trend zone visited, the "Banjo" lies more than 15 kms to the NE. It was mined for more than 10 km along its length and is still actively mined. Drilling is scheduled here soon. So far, the major structure trends like Banjo have been found to be flanked by others that can be even richer.

The two next trends to be investigated are the Mani and Kinkine targets, 5 kilometers to the north and 4.5 kilometers to the east of X-vein, respectively. The distances between such targeted zones are great in terms of usual gold exploration practice, especially when one considers the amount of outstanding success that is being reported from so many localities. This is truly a Gold Camp!  

I realize that these simplified descriptions will, on the one hand absolutely mortify the geological professional and tend to overwhelm the investor who merely wants to know "Is the stock going up?"  I believe the answer is yes!! Very definitely and very substantially.  Soon!!  Here's why.

In a sense, most of Cassidy's efforts after discovery were designed to find out "how far the gold bearing structures DIDNT CONTINUE"!  Cassidy discovered early that even when drilling was done at "unusual stepout distances" for the gold exploration business, the structures continue to show gold content for these long distances. In fact, none of the trends discovered have yet been found to end!  Efforts to identify a "best" trend to concentrate on were confounded because so many gold bearing trends exist. When tested, all resulted in finds that were very worthy of follow up. To many, both the "knowing" and especially to the neophyte investor, the company appeared to have lost purpose. The greedy accused it of drilling here, there and everywhere without purpose. In fact, the company was exercising its fundamental purpose, which is to explore.  

Management's response, since spring 2004 is to concentrate drilling to determine numbers that will comfort investors by specifying a "resource" volume of gold at one or two localities at least. These efforts will satisfy the "conventional investor". Projection of results from those areas with concentration of data points will, hopefully, signal more widely that the region may become a major gold camp. I again remind the reader of  Cassidy's dominant land holding position here.  

The economics.  Occurrence of gold in potentially economic quantity over such large area and at so many localities is truly astounding by even Canadian standards. It is extraordinary for a small company to have so much early success and have so much room for expansion. The area held by Cassidy appears underlain by a very powerful heat engine, an "underground volcano" that is a "minerals fountain". The types of rock underlying this area are the host for major mines in nearby countries like Mali. After discovery, development of mining in Mali proceeded swiftly. Like Mali, Guinea needs to develop resources. The will to implement a balance of laws to see that this happens exists. Cassidy invests time and effort into being known as a good corporate citizen.  Guinea is host to giant mining operations. One gold miner company (Guinor) operating nearby recently announced major expansion plans.

Full realization of the potential for mining all of Cassidy's areas may take years. However, the actions leading to anticipation of earnings from the first of these finds should be visible within months. Most likely, competitor companies in the business already recognize the attraction in Cassidy. The fact that control of the company is still held by the original "grubstakers" who financed efforts means that any attempt to take over the company or to enter into a joint venture with it must be proposed at a "fair" price. Moreover, the company has attracted persons who can both find finances and manage operations to effect mining.

One aspect of Cassidy's reporting in metric or SI units needs to be explained to most North Americans unfamiliar with metric measures. All one needs remember is that a meter is a little bit longer than 3 feet (1650 meters = approx. 1 mile) and, for gold measuring, there are about 32 grams to an ounce of gold.

Mining economics facts in Guinea

Three "conventional" corporations already operate gold mines in Guinea.  These were profitable even when gold prices were US$340 per oz ($10.50 or less per gram). Now with gold at the US$440 range ($13.75 per gram) they are either far more profitable or able to take lower grade ore and maintain earnings returns for longer to earn more in total. Without splitting hairs, the results of past operations of those profitable mines can be summarized to say that the operator with the highest cost reported it to be less than $8.00 per gram produced. This means that even at high operating cost, grades as low as 0.6 gr/ton could be a "break even" ore grade. The perspective for what is needed to justify gold recovery effort changes when one considers those facts.

So an investor needs to adjust his or her perspective away from the attractions of zones like the 151 g/t  (over 4 oz/t) true width over 2 meters reported by Cassidy last week. Clearly, the reporting of thick (111 meters of 1.88 g/t grade rock) in another zone also looks very profitable. It is important to recognize that the average grades may be higher or lower not far from where a specific measurement is taken. It is much easier to believe the constancy and continuity of the 111-meter thick zone when assessing the risk of possible discontinuous extent in the making of a mining plan. 

The more than 8 g/t gold bearing intervals are absolute "gravy" zones. Conventional expectation is for low grade to be found. The numerous occurrences of higher grades reported here attest to the area being geologically very "lively".  The favorable expansion of mining economics by the existence of high grade intervals is profound. Such "lively" areas do create multimillion ounce deposits potential.  (The "million ounce reserve" is a seeming holy grail in this business.) The key question will be," if there are xxx thousand ounces indicated in yyy meters, how much gold can there be in xx,000 meters of known trends?"  

A factor to be considered in thinking about stock price is the continuing educating of investors. I think that few investors appreciate that the Company hires the best "outside" technical advice in the world. For instance, the metallurgy, (i.e. gold recovery process and rate) was determined for Cassidy by Lakefields Laboratories. That Ontario firm has the best possible worldwide reputation. Lakefield reported that 98% of the gold could be recovered by a simple, inexpensive, gravity settling procedure that will not harm the environment. 

For the same truth seeking purpose, Cassidy engaged the Australian firm, RSG Global to determine the quantity of resource in the trends and to advise where and how much more effort needs be put in to properly calculate possible resources and make sensible investment decisions. RSG Global should be able to provide a first numbers in this before Christmas 2004.

While these firms names do not impress the average Canadian small mine investor, they do engender respect worldwide. When Cassidy deals with international banks, financiers or joint venturers, the confidence that such firms words instill will be there. Shareholders should stay aware. The "knee jerk" regulatory environment imposed on mining exploration company communications after the Bre-X affair prevents management from communicating honest anticipatory information. The pattern of actions taken by Cassidy strongly conveys that management's anticipations exceed most ordinary expectations. Most investors are truly too inexperienced to appreciate the significance of gold occurring in such promising quantity at so many localities. There are no comparable gold find historic examples in North America. The finds made in Africa that could be compared do not have a publicly available history of exploration and development. Recognition of what Cassidy's participation in such excellent good fortune can mean is slowly unfolding. 

The calculation of resource potential for parts of even one or two of the zones will lay out a picture. Confusion should be resolved. More people will project potential for recovery of gold by comparing the studied areas with the early-indicated areas. Although the determinations may be used to under or over anticipate content of other zones, they will at last, provide guidelines to alert the shareholders of the enormous potentials that I believe are becoming increasingly apparent.