Just how high can Lexington fly?
“…With money in the bank after an October fundraise and the imminent prospect of a maiden JORC Resource for a flagship project can LEX go higher?…”
The value of Lexington Gold (AIM:LEX) has soared through the summer and autumn as the company has continued to report strong progress in opening up mines dating to the US gold rush with cutting edge technology. With money in the bank after an October fundraise and the imminent prospect of a maiden JORC Resource for a flagship project can LEX go higher?
To recap on our past coverage, the company is developing four gold projects across a 1,675 acre section of the Carolina Super Terrane geological feature running through North and South Carolina. LEX took a 51pc interest in each project in 2020, with an option to move to an 80pc stake should venture partner Uwharrie Resources drop out.
The 179.66 acre Jones-Keystone-Loflin (JKL) Project combines the Jones-Keystone and Loflin Properties mined by small prospectors during the 19th century until the outbreak of the Civil War, and again up to the Great Depression. Pits, trenches, shafts and glory holes at several workings offer evidence of widespread gold mineralisation, with historic grades ranging between 0.5 and 2.5g/t. The Carolina Belle Project, in Montgomery County, just north of Candor, North Carolina, produced 50,000 ounces of gold until a 1916 dispute between the neighbouring mines ended further exploration and production. The Jennings-Pioneer Project, part of the Barite Hill Gold district in South Carolina, offers several greenfield exploration prospects with well-articulated and potentially continuous zones of gold and base metal mineralisation identified from historic mines and surface workings. The Argo Project in the northwest corner of Nash County, north of Nashville, was last mined in 1894.
Exploration got underway last year, assay results from the JKL Project indicating broad unbroken zones of shallow gold mineralisation. A JORC Resource estimate was published last autumn, stating a resource of approximately two million tonnes at 1g/t gold for 65,000oz of contained gold, and highlighting the potential for additional discoveries. A systematic surface sampling programme at the Carolina Belle Project, the location’s first, indicated gold anomalies beyond already identified mineralisation.
Progress through 2022
Significant work has been undertaken at both projects this year. At JKL LEX began the summer reporting ‘significant shallow level intersections’ at the Project’s Loflin resource, which remained open in multiple directions, highlights including 24m @ 1.07g/t Au and 2.76g/t Ag from 4m to 28m for Hole LFRC-018, and 16m @ 1.27g/t Au and 3.79g/t Ag from 16m to 32m at Hole LFRC-009. Promising assay results for the Project’s Jones-Keystone prospect recorded multiple intersections of 24m width and over and grades of between 1.37g/t and 1.69 g/t gold, the deposit remaining open in all directions, along strike and down dip.
By August LEX was able to publish an updated JORC Mineral Resource Estimate for the Loflin prospect stating a Total Inferred Resource of 2,596,000t @ 0.99 g/t Au for 82,700 oz of contained gold, 27pc up on the previous estimate. Potential for mineralisation remains open down-dip, to the north-east, along the plunge of the syncline, and a newly discovered Loflin South resource, estimated to contain more than 9,000 gold ounces, remains open in all directions. 3D geological modelling and drilling has delineated a shallow plunging synclinal fold structure with shallow gold mineralisation in the core of the structure.
The following month LEX announced that re-sampling of composites from drilling at the Project’s Jones-Keystone prospect confirmed shallow, high-grade intercepts of up to approximately 7.5g/t Au, as well as multiple intersections of widths of 20 metres or more at mineable grades, including 27 metres at an average grade of 1.52 g/t gold. The company believes the ‘results will facilitate the establishment of a significant maiden JORC Resource estimate for Jones-Keystone of potentially up to 100,000 ounces’.
There has also been encouraging progress at Carolina Belle. In March LEX reported that final assay results of exploratory drilling at the prospect had exceeded expectations, two targets, McMaster and Martha Washington South, recording multiple intersections of 1g/t Au or more close to surface, including 3m @ 3.68g/t Au from 64m and 4m @ 1.8g/t Au from 28m. The results are being interpreted and incorporated into a 3D model to facilitate the design of a Phase II drilling programme to further target, define and expand on intersected gold mineralisation at three of the Project’s targets.
Funded for future development
Last month LEX raised £0.5m to fund continued development, including the modelling, planning and design of next drilling programme at JKL; the JORC Mineral Resource Estimate for the Project’s Jones-Keystone side; the setting of a JORC exploration target for Carolina Belle; and trenching, surface and soil sampling work at the company’s other two Projects, Jennings Pioneer and Argo. At a time when other small cap natural resources companies have struggled to secure funds LEX was able to achieve a placing price of 4.75p at a 13pc premium to the company’s 30 day VWAP (volume-weighted average price – the ratio of the value of a security to the total volume of transactions) of 4.18p. Earlier in the year LEX had signalled its market ambitions through the appointment of WH Ireland, a highly ranked broker to AIM quoted miners, as the company’s joint broker. The company’s interims for H1 2022 reported it had ramped up its investment in exploration by 41pc to $0.61m, but succeeded in cutting operating expenses by 22pc to $0.36m. Total assets were $4.78m (2021: $4.76m) and cash stood at $0.37m (2021: $0.95m).
Outlook
LEX’s interims noted that ‘macroeconomic uncertainty, especially in light of the ongoing war in Ukraine and rising inflation, creates a climate that has in the past often supported gold prices.’ True, but the ongoing turbulence hasn’t yet led to the kind of stampede for the yellow metal witnessed at the outbreak of the pandemic. Indeed gold’s price touched its lowest levels for more than two years in the autumn, under the pressure ever higher US interest rates, rising bond yields and the soaring dollar. But with no end to the present turmoil in sight gold stands ready to resume its historic role as a bolthole against the investor’s nightmare scenario of stagflation, a choking combination of higher inflation and slowing economic growth. Last month the Royal Mint reported record profits as demand for gold coins and precious metals surged, investors hedging their portfolios with physical precious metals such as gold and silver.
2022 has been another year of solid progress for LEX, the blossoming promise of JKL and Carolina Belle pushing the company’s share price up by more than 150pc over the past six months, from 2.5p in May to 6.35p at the time of writing, taking its market cap to £17.7m. LEX has been open about ambitions to follow in the footsteps of fellow Carolina Super Terrane explorer Romarco Minerals, which was acquired by ASX-listed OceanaGold after delineating a resource estimate of 4.5Moz @ 1.8g/t. In the meantime investors seem to have more good news to look forward to, notably the release of the maiden JORC Resource for the JKL Project ‘expected in early November’, and further drilling at Carolina Belle.
