Even as fundamentals remain positive for gold, the geopolitical risk premium continues to leak away. If the views of many of the speakers at the recent New Orleans Conference hold true, however, it’s only a matter of time before the gold price is propelled far higher by a debt crisis. For now, I recommend Headwater Gold (HWAUF), says Brien Lundin, editor of Gold Newsletter.
The company is run by highly respected geologist Caleb Stroup, and the board and technical advisors include an array of big names in the industry. Still, the most impressive thing about the company is its seven properties in Nevada, no less than four of which are joint-ventured with Newmont in an innovative deal that could have the major spending as much as US$145 million to earn up to 65% in each project.
Headwater Gold (HWAUF)
To get up to 75% in any project, Newmont would have to deliver a preliminary feasibility study showing at least 1.5 million ounces of gold equivalent resource. Headwater gets a 10% management fee that virtually eliminates its G&A expenses and retains a 2% NSR royalty on each project (except Spring Peak, where a 1% royalty is retained).
It’s a great deal, or deals, and it’s why a number of newsletter writers recommended the company over the past year or so. I looked at Headwater while attending the PDAC conference in March of this year, but I found it a bit too expensive for a grass-roots exploration play at that point in the market. As it turns out, I didn’t miss anything...and we gained a lot...while waiting, as the share price is considerably lower.
The company, however, is considerably better. We’ll expand on this in further updates, but suffice it to say that drill results released by the company on Oct. 31 go a long way toward confirming the epithermal gold model that Stroup and his team have put forth for the Spring Peak project.
The drilling hit high-grade epithermal veins in a 70-meter step-out from previous drilling at the Disco Zone, with Hole 17 cutting 13.0 g/t gold over 1.21 meters and 9.0 g/t gold - 5 - over 3.11 meters within a broader zone of 20.46 meters at 2.59 g/t. The mineralization hit in this and three other holes remains open along strike and at depth, and the company noted that drilling continues to hit epithermal veins in the target zone.
That last part is important, because Headwater’s drilling looks to confirm the model, and there are 18 more holes to be released in the days ahead.
Recommended Action: Buy HWAUF
