Penny Gold Stock – Countdown to production

Posted by Peter Grandich - Agora Small Cap Epicenter

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Hawthorne Gold Corp. Getting Ready For Production at Cassiar Gold Mine

Hawthorne Gold Corp. recently announced an aggressive exploration and development program at their Cassiar Gold Camp in northern British Columbia, Canada. What we all need to understand about this project is that it appears to have all the merits of a winning strategy to get into production and continue to develop into a solid junior gold company.  For those who don’t realize what Hawthorne controls up at the Cassiar Gold Camp, I shall touch on some of the key assets and points that make this a company you need to watch closely.

Management / Mergers & Acquisitions, Infrastructure, Blue Sky Opportunity, Upcoming Production – A winning combination.

The management team over at Hawthorne have a history of building companies, putting mines into production, successfully operating them, and finding new opportunities.  The group, to mention just a few, consists of Michael Beley, Richard Barclay, Michael Petrina, John Dadds, and their new Board advisor, Jack McClintock.  We all know how the Beley/Barclay team has been successful in putting the pieces together to build solid gold mining companies (co-founding Bema Gold/Eldorado Gold for example).  Michael Petrina, their VP Mining, brings a wealth of mine engineering experience Their Exploration Manager, John Dadds, came up from Barrick’s Eskay Creek Gold Mine, right down the highway from the Cassiar Gold Camp, where he acted as their senior geologist. Behind the scenes is Jack McClintock, who joined as a Board Advisor a few months ago with one specific task…assist in advancing their merger and acquisition strategy by identify projects that are undervalued, distressed, offer upside potential.  Mr. McClintock mining credentials speak for themselves.

Infrastructure – and lots of it!

Let me make things clear.  This is an established mining camp and they own 100%.  The camp includes a 300 tpd gravity/flotation mill and tailings impoundment facility that would likely cost $20-$30 million to replace, it is PERMITTED, and they have a solid relationship in place with the local First Nations group.  The property consists of 16 miles of underground workings, 13 adits (entrances to the mine), and close to 15 miles of roads throughout their property to gain access for drilling and exploration. There is an available airstrip that staff can fly directly into less than 6 miles from camp and the main highway runs right through their property.  This 40 person fully operational exploration camp is not remote by any means!

Blue Sky Opportunity – the drills are turning already and going deep?

After speaking with management, their technical team had a busy winter season putting together a comprehensive geological model that has highlighted some interesting targets directly at the Table Mountain area, regionally across their significant land position (135,000+ acres), and to depth (which it has never been drill tested).  This type of consolidation of both the data and camp has never been done before and can bring some excitement to the drill season. I believe this to be an incredible opportunity for the qualified technical team at Hawthorne.  This model, combined with geophysics, reconnaissance exploration exercises, and the money to drill targets (30,000+ feet this summer) should open up this camp like it has never been seen before.  Of interest is the fact they plan on drilling some targets to depth.  Why is this interesting?  The Erikson Creek Fault zone, which cuts right through their property and where gold has been found for 40 years, has never been tested below the surface horizon landscape of 650-1000 feet.  This camp has seen significant high grade deposits that were mined where some zones had grades of multi-ounce per ton and off the chart. The gold, which mobilized into the camp through the numerous faults and offsetting geological structures, came from some source that has never been found, and indications point to a potential feeder at depth. Management has indicated certain faults and cross-cutting linear structures identified from geophysics in 2008, are expected to be tested up to 2000 feet in depth. The potential for some interesting drill hole results from the camp this year appear good.

And before I forget they still have the Frasergold project.  They are currently completing a NI 43-101 Technical Report and Mineral Estimate After two seasons of surface drilling they are looking to define a gold resource along the Main Zone, which lies within a 6 mile mineralized strike length that was historically drilled and where gold was identified. This camp is something you may want to watch closely due to the potential of a significant gold camp rising out of the pine beetle infested woods. If you zoom out about 25 miles to the west, the Spanish Mountain deposit contains a multi-million ounce deposit. This area can become interesting ff Frasergold defines even the beginning of a potential gold resource, as you could have the makings of a gold camp with upside potential that could interest the majors.

Getting ready for Production – looks on schedule!

Yes another reason to like this story – getting ready for production.  Hawthorne announced that they will be commencing underground development in the short term to advance the underground workings to the East Bain gold zone to make ready for stope development. Of interest, the infrastructure I discussed above provides the opportunity to be able to access all future discovered zones underground and with minimal capital expenditures.  The East Bain zone is about 500 feet from the existing underground workings, thus reducing initial costs to gain access and remove the gold.  From what I understand this development would take 60-90 days and could quickly gain access to the gold zone for underground mining in late 2009 / or early 2010.

This can also be a significant advantage if they continue to define new zones at Table Mountain, as with 13 adits or access points already developed, new developed gold pockets can be easily accessed.  This should play a key part in keeping costs down per ounce removed. They are also currently defining higher grade zones at surface at their 100% owned Taurus deposit (where currently a lower grade million ounce deposit sits) to use as potential supplemental feed for the permitted mine and mill facility. There are few mining operations that look to get into production this quickly, and for minimal capital expenditure.  Based on mill capacity and the compliant resource, it’s not unreasonable to think they could produce 15,000 to 20,000 ounces in the first year, and subsequently increase their production based on potential new gold zones discovered (as the mill can operate up to 100,000 tons per year).

As Hawthorne advances their strategy, one could expect a strong flow of news releases highlighting their drilling, development and corporate activity that can give the followers and shareholders a reason to watch closely each step of the way as the Company rolls out their business plan.  They’ve an aggressive bunch of technical mining professionals that seemingly never have a quiet day in their office.  Hawthorne has a very busy year ahead of them. I have a high confidence that they can have a great season.

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An allotment of $0.30 shares came free trading on June 28th from a previous financing. As the free trading stock comes into the market, a good opportunity appears to have presented itself.

Gold

ML720

Silver

ML7201

Ed Note: Money Talks takes no position on this recommendation. We simply offer you the opinion of Peter Grandich.

On Major Moves, Grandich has been very right and not only saved many investors fortunes, but expanded them dramatically. On November 3, 2007 at the MoneyTalks Survival Conference, Peter Grandich of the Grandich Letter warned that “an unprecedented economic tsunami will hit American beginning in 2008”.   Peter advised publicly to short the US market two days from the top in October, 2007 and stayed short until the last week of October, 2008. He began to buy stocks in March 7th,  2009. He also bought oil and oil related investments near the lows after the dive from $147.
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