FenixOro Gold Corp. outlines potential 2M ounce gold — conceptual exploration target — market yawns

For months I’ve been trying to convey (the possibility of) FenixOro Gold Corp. (CSE: FENX) / (OTCQB: FDVXF) being the next Continental Gold, a company acquired in late 2019 by Zijin Mining for ~C$1.4 billion. Based on FENX’s share price of C$0.325, one might argue that my efforts have failed (so far) to rally the troops!

The Feasibility Study that supported a C$1.4 billion takeout was based on gold / silver prices of US$1,200/oz. / US$15/oz., ~30% & ~40% below today’s levels. And, the Colombian peso has weakened by 25% vs. the US$ since the 2016 report.

As a reminder, Continental discovered & developed the world-class, high-grade Buritica project in Colombia, bringing it to 12.1M ounces of gold at just under 10 g/t, (Measured + Indicated + Inferred) and to within a year of commercial operations. Some pundits believe this is a 20M+ ounce mine, as the last reported resource is several years old. Zijin officially placed Buritica into production five months ago.

A portion of FenixOro’s Abriaqui project could host ~2M ounces gold

There are compelling reasons to believe that FenixOro’s flagship Abriaqui project could be following in Buritica’s footsteps, none more so than this press release of March 19th. In it is a preliminary analysis of the Company’s Phase 1 drill program — (nine holes / 4,029 m) — in which management lays out the potential of Abriaqui as it stands today at this early stage.

So, what’s in the press release that has me so excited? An approximation, a conceptual exploration target, of 1.6 to 2.4M ounces Au on four of the better veins, among 100+ identified on the Project so far.

How realistic is this 1.6 to 2.4M ounce conceptual target? I speak regularly with CEO John Carlesso and VP Exploration Stu Moller. They’ve been consistently optimistic in their commentary. Recently, their body language has been signaling that the team is quite pleased with Phase 1 drill results.

Although they could be wrong in their assessments, they strongly believe in the analysis and are willing to go on record. If they’re wrong, there will be negative consequences. The Board did not announce this news lightly, a great deal of vetting went into the press release.

Phase 1 drilling focused on the easily accessible northwestern part of the property. Nine diamond drill holes ranging from 100-750 m in depth, tested 250-350 m wide corridors, each containing multiple veins with thicknesses ranging from 15 cm all the way up to 7.7 meters.

The BIG question — are the assumptions used in the base case 2M ounce total reasonable, and if so, how likely is that number to grow? After spending considerable time examining the Company and these results, in this author’s opinion, the methodology & assumptions seem reasonable, and the conceptual exploration target of 2M ounces is likely to grow.

More time & drilling (read: cash) will be needed to deliver a maiden mineral resource estimate (“MMRE”). A MMRE could be published as soon as the third quarter. Note{if the MMRE is calculated soon after Phase 2 drilling, there could remain a gap between resource potential and calculable resource ounces).

In other words, the official 43-101 resource total always lags behind what sophisticated investors have already figured out in terms of where a deposit is headed.

Taking a step back, I remind readers that well before this initial drill campaign, FenixOro’s technical team already suspected it might be onto something big. They had mapped > 80+ known veins [now 100+ veins] grading up to 146 g/t Auall gold-bearing — that had been sampled in outcrop & drill core over 900+ m of vertical extent [now observed > 1,200 m].

FenixOro has a stellar technical team with vast experience in Colombia

One of the primary people behind Continental Gold’s huge success was its VP Exploration, geologist Stuart Moller. Mr. Moller has 40 years’ experience including senior roles at Barrick Gold & Pan American Silver. If that name sounds familiar, it should, he’s now VP Exploration at FenixOro.

Moller’s expertise in Colombia — at a globally significant project just 15 km away, (on which he led the discovery / development during its most formative years) — told him the geology of the two projects was similar.

Press Release outlines estimated dimensions, grades & thicknesses

In the press release, observations of length, width, depth & average rock density were provided on four veins to establish indicative tonnages. An average grade for each modeled area was also given. Then, simple math (approximate volume x estimated grade) resulted in ranges of prospective gold ounces in each zone.

Assuming that the four mapped, high-grade veins contain a total of ~2M ounces gold, that would mean, all else equal, that FenixOro would be trading at ~C$12/oz. (of moderate-to-high-grade gold) in the ground.

Importantly, additional upside is reasonably possible as the announced conceptual target does not include 80% of reported drill intercepts. Only about half the known veins have been drill-tested. Substantial potential exists on those same veins at depth, on many additional veins intersected, and across the un-drilled parts of the property.

Although management is rightfully focused on demonstrating growth of the known structures and the potential in new, untested areas, in my view (not necessarily that of mgmt.) we can’t rule out a resource of 5M+ ounces gold, grading 5+ g/t across the entire project. Surpassing 5M ounces (if ever), would probably require 2 or 3 years of additional drilling.

This Spring, Phase 2 drilling will start, potentially followed by a MMRE

In April / May, a (minimum) 4,000 m, [8-10] hole Phase 2 program is planned to start. It will consist of both infill & step-out drilling on the 1,400 x 350 m northwest trending corridor (“NWC”) consisting of at least nine veins.

Although more time & drilling will be required, if one of the world’s best gold mines (Buritica) is one’s closest analog — it’s prudent to start making assumptions & contemplating potential exploration outcomes.

Readers should recognize that the calculations & assumptions adopted for FenixOro’s preliminary review represent a sound modeling methodology that sophisticated investors, investment funds, sell-side research analysts, strategic partners & potential acquirers of the Company are already doing. Management is working on estimating additional structures.

FenixOro CEO John Carlesso commented,

“We recognize that for many investors it can be challenging to decipher drill results & technical information disclosed in press releases. We believe we have an obligation to state as plainly as possible that our Phase 1 drilling has identified a significant gold discovery, with clear potential for 1.6 – 2.4 million ounces of gold on just four of the vein structures drilled to date….

…. Additional potential exists on those same veins at depth, on many additional veins intersected, and throughout the portions of the property that remain un-drilled. The process of turning that potential into NI 43-101 compliant resources is a function of time & drilling, but we believe the most difficult challenge, the initial discovery, has been achieved.

Four of the better veins were chosen for this initial modeling exercise. On each section, the topographic surface is plotted along with all available surface & drilling data. The targeted tonnage potential for each vein is a simple volume calculation of:

Length X average width of drill intersections X vertical extent (depth) X rock density (averaged from over 200 measurements of drill core). Note: {these observations are estimates subject to further exploration work & drilling}.

Cautions from the press release included:

1) There’s downside risk to this preliminary form of analysis, most veins around the world are not homogeneous blocks of ore-grade material, there may be lower grade sections. 2) the assumed grades & thicknesses are based on relatively few data points. Time & drilling will be required to convert potential ounces into a NI 43-101 compliant resource.

3) There’s no guarantee that a resource of any size will ever be delineated. 4) There’s not enough information available after nine drill holes to precisely estimate future resource potential, so average thicknesses & grades are presented as +/- 20% of the best estimates derived from existing data.


It’s still early days, but internal modeling points to the potential (no guarantees) of a 2M ounce deposit. There will be a lag in booking NI 43-101 compliant resources vs. estimating ounces, due to the need for subsequent infill drilling, assay lab turnaround times & report writing.

Buritica was taken out by Zijin at roughly C$110/oz., based on a Feasibility Study done at US$1,200/oz. Au + US$15/oz. Ag. With a stronger US$ plus higher precious metal prices, Buritica could be worth C$2 billion today.

Assuming that FenixOro Gold Corp.’s (CSE: FENX) / (OTCQB: FDVXF) share count was to double in coming years, and Abriaqui turns out to be worth half (C$1 billion) of Buritica, FenixOro is trading at only ~5% of its potential C$1 billion value. Make no mistake, pre-MMRE the Company warrants a steep discount to an operating mine.

However, if management can book even 1M ounces in a MMRE this year, at moderate-to-high-grade — that would demonstrate the Company’s understanding of the geology & structure. And, at that point, the valuation could be substantially higher than it is today.

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