Prosperity Goldfields (PPG.TSX-V) $1.00—Gamblin’
http://www.prosperitygoldfields.com/

On August 5th Prosperity provided a drill update from the Kiyuk Gold project in Nunavut. Basically, all the drill holes from the Cobalt and Gold Point Zones that penetrated the target rocks intersected strong alteration and sulfide mineralization. The most exciting hole, GP11-003, comes from Gold Point, and is reported to contain “approximately a hundred small gold grains that are visible over a 78 m long interval of core starting at 148 m down hole depth in GP11-003. These grains are randomly scattered in numbers of 0-5 per meter of core.” From my experience, you don’t see this very often; still, it is nearly impossible to predict the assay results. GP11-002 (drilled about 100 meters away) contained similar small gold grains in the bottom six meters of core, while GP11-001 was strongly altered throughout but no visible gold was noted. These three holes cover a strike length of about 400 meters and are the initial test of a roughly 1 kilometer long geophysical target (IP) with coincident gold in rock chip anomalies where outcrop could be sampled.

Kiyuk is a very large conceptual gold play that offers the real potential of a multi-million ounce district within a proterozoic sedimentary basin (~2.2 billion years old, or just after lunch on Day 3, if you prefer). The mineralization is related to unusual granitic intrusions (that’s the story for now at least) and associated with strong magnetite and albite alteration (sodium, silica and aluminum- NaAlSi3O8). The magnetite and albite have been traced intermittently along a 20 kilometer trend that forms the southern rim of the basin, while the northern rim has yet to be prospected in detail (see Fig. 2).

(Fig. 2- Strong magnetic alteration (hot colors) associated with the basal conglomerates defining sedimentary basin margins. Gold is associated with the magnetic alteration)

The extensive magnetite alteration is concentrated within a lower sequence of conglomerates (stream sediments, etc.) near the contact with the underlying rocks. Within the magnetite alteration are smaller zones (100’s to 1,000’s of meters) of intense albite alteration that host the sulfide and gold mineralization. Prosperity has mapped north-south structural features using geophysics but, as yet, there are no obvious structural controls to the mineralization. Thus far, the only obvious control to mineralization is permeability within the various conglomerate units.

As to the flashy core, there is no way for us to even guesstimate what the gold assays will be—so we won’t. As most of you are well aware, impressive gold values are relatively easy to come by, and most of the junior gold explorers seem to report a few, regardless of their economic relevance. The important (and necessary) part of the story at Kiyuk is the size of the mineral system and its potential to host a world class deposit. PPG will live and die on how that plays out.

The entire trend of magnetite alteration extends over 40 kilometers of strike along the basin margins. Because we know so little at this point, it is all prospective for gold mineralization. It will not, however, all be mineralized! Figuring out why some is and some isn’t will be the key to successfully exploring this property. Prosperity has identified five zones of alteration with anomalous gold along the southern margin, three of which will see limited drilling this summer. Most of the rest of the trend lies under cover and has not even been seen or sampled. It’s all blue sky for now.

Kiyuk is an isolated property in Nunavut that can only be worked for a few months in the summer and the middle of winter. Power and a road are about 200 kilometers away. There is the possibility that the Nunavut Government will be building a road through the property to the Rankin Inlet and from there, Santa’s ranch. The nearest Inuit and Native communities have over 70% unemployment; I am told they are working together, and are very positively inclined toward mine development.

Given the above paragraph, any gold discovery had better be a good one. A one, two, or even three grams per tonne deposit will not cut it, regardless of size. As a rough hurdle, we need to see the potential for over three million ounces grading in excess of 5 grams per tonne assuming relatively straightforward mining and processing options. That means the results of these first holes need to indicate that potential does exist, by showing us long intervals of good grade. Grade in this instance is key, and if the results are only “encouraging” I have very little interest in waiting around to see the geology figured out. It’s either what she’s betting or it’s not.

(Come on PPG and PAU! Are we having fun yet?)

Evolving Gold (EVG.TSX) holds about 12 million shares of PPG (they vended the property in, and participated in the last placement). On April 6, PPG closed their most recent financing, having raised $4.6 million at $0.30 (11.5 mil units and 4 mil flow-through units) that included a half warrant at $0.45. Since the August 5th announcement describing visible gold in core, the stock has traded nearly 32 million shares and increased in price from $0.45 to the current $1.00. I have no idea how hard or easy it will be to buy this stock, and, given my expectations regarding PAU last week, you shouldn’t listen to me anyway.

Drill results should be available in two to three weeks. Those results will obviously determine which direction the stock moves. If they demonstrate a clear possibility that the Kiyuk property has the potential to host a high grade multi-million ounce district, the current fully diluted $56 million market capitalization is reasonably cheap. If the results fail to show much potential, the market capitalization could be cut in half immediately.