Blackrock Gold Hits Nevada Jackpot

Bob Moriarty of 321 Gold comments on a company that has claims on land in the North Nevada Rift, the same formation as the Hollister Mine, which Hecla just acquired from Klondex Mines for $462 million.

Gold companies often work for years and spend millions of dollars before hitting the jackpot. Today I'm going to talk about a company that did a deal on a project and hit the jackpot right out of the box.

Years ago I wrote a short piece about some people I named the heroes of mining. By chance the first person I talked about is named Carl Pescio from Nevada. At one time, he owned more claims in the U.S. than anyone else.

Blackrock (NYSE:BLK) Gold Corp (V:BRC) announced an agreement with Carl Pescio last October on 552 mining claims near Elko, Nevada, located on the North Nevada Rift. The company calls the project the Silver Cloud. The North Nevada Rift contains two operating mines, the Midas Mine and Fire Creek. The Hollister Mine is in development stage.

On March 19th Hecla Mining announced an agreement to take over Klondex Mines for $462 million in a deal that represents a 52% premium over the previous day's price for Klondex. That will give ownership of Hollister to Hecla Mining. You may safely assume investors paid attention to the announcement and realized the potential in Northern Nevada. You can't beat that timing.

On March 22, Blackrock Gold announced the TSX has accepted the documentation for the agreement between Blackrock and Pescio Exploration on Silver Cloud. The agreement calls for total payments over ten years of $6.65 million, issuance to Pescio of one million shares and 125,000 feet of drilling over the ten-year period.

The deal looks expensive at first but it's rear end loaded with payments of only $300,000 in the first three years. While the Silver Cloud property is in elephant country, frankly the only options are they hit or they don't. If they don't hit in the first three years, it will be time to more on to better ground and if they do hit, the cost is pretty meaningless.

Like Midas, Fire Creek and Hollister, Silver Cloud is a low-sulfidation epithermal banded calcite vein system. Hollister is five miles to the east, Midas a dozen miles to the north. I have been on the Silver Cloud project years ago; it was home to mercury mines and is a sinter similar to Midas and Hollister.

Silver Cloud has not been systematically or extensively drilled. In 1999 Teck drilled ten holes and came up with one intercept of 145 g/t gold over 1.5 meters and another of 22.8 meters of 5.67 g/t Au. Place Dome tested the property in 2002 with a single drill hole and reported 12 meters of 5.53 g/t gold. Those would be home run holes today but twenty years ago was just after Bre-X and gold was 25% of what it is today.

Blackrock management just completed a $1.3 million private placement. The timing of Hecla paying a 52% premium for a mine only five miles away from Silver Cloud couldn't possibly have been better timed if you appreciate luck. There will be renewed interest in the North Nevada Rift and even a sniff of gold in new drill holes will interest potential investors to buy a lottery ticket.

Blackrock has 36 million shares outstanding, which gives them an enterprise value of about $2.5 million given the cash they have on hand. That's pretty cheap given the quality of the neighborhood. There are 59 million shares on a fully diluted basis with 16.5 million warrants at $0.15 and 6 million at $0.20. The warrants can be accelerated so given any success on the ground, Blackrock should have sufficient cash on hand to move the project forward.

It's a lottery ticket. I liked it so I bought into the PP, having walked the ground before. Blackrock is an advertiser so you should do your own due diligence and take responsibility for your own investment decisions.

Disclosure: 1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Blackrock Gold. Blackrock Gold is an advertiser on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector. 2) The following companies mentioned are billboard sponsors of Streetwise Reports: Klondex Mines. Click here for important disclosures about sponsor fees.