Omineca Mining and Metals Ltd. (OMM:TSX.V; OMMSF:OTCMKTS) announced positive results of drilling the first of five depressions in the underground paleochannel at its Wingdam gold project in British Columbia, reported Research Capital Corp. analyst Bill Newman in a Feb. 8 report.
"The results of the 23-02 drill hole confirm a high gold grade comparable to the 2012 bulk sample but over a larger vertical thickness," Newman wrote.
450% implied return
Given the news, Newman reported, Research Capital reiterated its Speculative Buy rating on the Canadian gold mining company.
The financial services firm, however, lowered its target price on Omineca, to CA$0.55 per share from CA$0.75, to account for dilution resulting from its recently completed financing. In comparison, Omineca is currently trading at about CA$0.10 per share.
Despite the drop in target price, the projected return for investors remains material, at 450%.
2012 results similar
Newman discussed the drill results of highlight hole 23-02, though two holes were drilled (the other being hole 23-01) in this particular seismically defined depression in Wingdam's paleochannel. Located just downstream from the 2012 bulk sample crosscut, the depression is estimated to be 80 meters (80m) long and at its maximum, 40m wide.
Hole 23-02 recovered an average of 25.41 grams per cubed meters of placer gold. This was vertically through 8m of the paleochannel gravel, or pay thickness, above the bedrock.
This result, Newman highlighted, is comparable to that of the 2012 bulk sample test on which 173.5 ounces of gold were recovered, with one difference. The vertical thickness of the area from which the gold was extracted differed between the two data sets, 1.2m with the bulk sample versus 8m with drilling.
This drilled depression and the other four undrilled depressions all were identified within the first 300m of the paleochannel via a seismic survey conducted by D&L, Omineca's new partner on the project.
"Paleochannel depressions have the potential to host enriched gold-bearing gravels due to natural sorting of heavier material to the lowest point in the streambeds," Newman explained.
Change in project partner
In other news, relayed Newman, D&L has taken the place of Hamilton Gold Royalties as Omineca's earn-in partner on Wingdam. This resulted from a restructuring of Hamilton, of which D&L was its largest investor.
Though the partner company has changed, the agreement between it and Omineca has not. The partner, now D&L, must provide all equipment, labor and services needed to complete the initial 300m bulk sample to get a 50% interest in the Wingdam placer claims. Omineca, for its 50%, pays a fixed price of CA$850 per gold ounce.
Catalysts on the horizon
According to Newman, D&L is now advancing the access drift along the Wingdam paleochannel and will follow that with a 3.5m by 3.5m crosscut through the first depression, where the two holes were drilled.
"Results of this first crosscut could be a near-term catalyst for the stock," the analyst wrote.
Another upcoming event to watch for, also at Wingdam, is the start of gold extraction.
"With the reorganization of OMM's former partner now complete and underground operations once again underway, we are hopeful that the gold recovery phase will commence within the coming weeks/months," added Newman.
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