A summer of news and activity beckons for Lexington Gold
“…With a fully funded drilling programme offering the prospect of further strong results at JKL, and a second campaign at Carolina Belle on the horizon, we repeat our suggestion that Lexington – especially at this lower price – is one to keep an eye on this summer…”
It’s not so long since we last covered Lexington Gold (AIM:LEX), the miner focused on bringing contemporary exploration technology to the historic sites of the US gold rush. But with the results of the company’s current drilling campaign now in, and other operations afoot, it’s already time for an update. Readers should also check out Sarah Lowther’s latest interview with Lexington CEO, Dr Bernard Olivier, published last Friday.
First, a brief reminder of the Lexington proposition. The company is working to realise the potential of four gold projects across a 1,675 acre slice of the Carolina Super Terrane (CST) geological feature in North and South Carolina, location of the world class Haile Mine run by the OceanaGold Corporation (ASX/TSX:OGC).
Lexington is the product of a reverse takeover completed earlier this year when Richland Resources (AIM:RLD), an AIM cash shell, took ownership of Global Asset Resources (GAR), the previous owner of the projects. At present Lexington has a 51pc membership interest in each project, with the rest owned by joint venture partner Uwharrie Resources Inc. The deal gives the company the option to take an 80pc stake after four years should Uwharrie choose not to fund its share of future costs. Lexington followed up the acquisition with a £3.3m placing to fund a two year work programme.
The company’s management team have considerable experience in developing the potential of mining small caps. Dr Olivier, who previously headed Richland, is credited with restructuring and returning his former company to profitability, and during a previous role at Bezant Resources led efforts to establish a maiden JORC Resource estimate of 3.9 million gold ounces at the Mankayan project. Non-Executive Chairman Edward Nealon founded South Africa and Zimbabwe miner Aquarius Platinum, which went on to become the fourth largest platinum producer in the world, and established well regarded AIM miner Sylvania Platinum (AIM:SLP).
The Jennings-Pioneer Project, part of the Barite Hill Gold district in South Carolina, offers several greenﬁeld exploration prospects with well-deﬁned and potentially continuous zones of gold and base metal mineralisation already identiﬁed from historic mines and surface workings. During its 19th century heyday the mine produced 45,000 ounces of gold.
The Argo Project in the northwest corner of Nash County, just north of Nashville, was last mined in 1894. Lexington believes the Project offers potential for systematic surface prospecting and mapping to deﬁne extensions to known mineralisation.
The Carolina Belle Project, in Montgomery County, just north of Candor, North Carolina, has rarely been mined since it was discovered at the turn of the last century when it produced 50,000 ounces of gold until a 1916 dispute between the neighbouring mines ending further exploration and production.
Progress at the JKL Project
Lexington’s current programme focuses on the 179.66 acre JKL Project, which combines the Jones-Keystone Properties and the Loﬂin Properties that were first mined by small prospectors from 1852 until the Civil War (1861), and then again up and until the mid-1930s. The site is littered with pits, trenches, shafts, adits and glory holes at several workings, offering evidence of widespread gold mineralisation with grades ranging between 0.5g/t to 2.5g/t. Lexington believes the Project shares intriguing geological resemblances with OceanaGold’s Haile Mine.
The JKL campaign began in March with the drilling of six diamond holes on the south-western Loflin side of the Project, following up on historical third-party drill intersections such as hole LOC90-01, where a 48.8 metre interval @ 1.12g/t Au from surface including 18.3m @ 1.57g/t Au, was recorded.
Assay results for the first three drill holes were received in May, the highlights including 35.7 metres @ 1.15 g/t Au from surface to 35.7 metres, and 32 metres @ 0.97 g/t Au from 53.9 metres to 85.9 metres. The remaining results came in last month, with highlights including 12.2 metres @ 1.39 g/t Au from 23.5 metres to 35.7 metres, and 35 metres @ 0.79 g/t Au from 9.8 metres to 44.8 metres. All six holes, drilled for a total of 562 metres, intersected gold mineralisation above 100 metres depth with multiple broad zones of more than 30 metres. The results will be incorporated into the company’s 3D model, with a view to establishing a maiden Mineral Resource Estimate.
The company’s most recent operations update reported that Pivot Mining Consultants have been engaged to review and analyse the new drilling data, and recommend whether a second phase of drilling will be required to develop the estimate. Inherited drilling data must be assessed alongside the new information before Lexington can announce the establishment of a maiden resource with confidence.
Early work at Carolina Belle
The update also noted progress at the Carolina Belle Project, where samples from a soil geochemistry and surface rock sampling programme have been sent for analysis. A separate study is assessing the findings from a 937 line-kilometre magnetic, radiometric and very-low-frequency fixed-wing airborne geophysical survey over the JKL, Carolina Belle and Argo Projects, undertaken in April. Both will be used to design a future drilling campaign for Carolina Belle, which it may be possible to optimise through integration with a second phase campaign at JKL.
Gold’s ebb and flow
Lexington’s quiet progress comes against the background of a somewhat confused but generally positive long-term outlook for gold.
The metal’s price rose some 10pc through the spring as inflationary fears started to kick in this spring. Gold miner ETFs, perhaps the easiest way for retail investors to get exposure, rose particularly sharply, the Lyxor NYSE Arca Gold BUGS UCITS ETF, for example, returning 26.5pc. But the question of just how long higher prices might stick around is fiercely contested. The US Federal Reserve and Europe’s central banks have been clear they think the current uptick in prices will prove transitory. And it seems the markets by and large accept their argument that inflationary pressures will subside as commodity and labour shortages ease.
That confidence was reflected in gold’s biggest monthly drop in four and a half years last month, the metal falling 7pc to $1,779 an ounce. The price plunged as a stronger dollar and rising bond yields followed remarks from the US Federal Bank that interest rates might rise in 2023. Gold falls when bond yields rise, because the metal provides no yield to investors. The FT however quoted the view of analysts at Citi that gold prices are more likely to decline gently over the summer rather than crash. They forecast prices of $1,760 an ounce next year.
Lexington’s share price gained strong momentum through May as its drilling programme got underway, racing up from 3.25p to nearly 6p. Subsequent selling brought it down to around 4p, where it seems to have stabilised. With a fully funded drilling programme offering the prospect of further strong results at JKL, and a second campaign at Carolina Belle on the horizon, we repeat our suggestion that Lexington – especially at this lower price – is one to keep an eye on this summer.