California Gold Discovery
The vast majority of people are familiar with the discovery of gold in California at Sutter’s Mill in early 1848. Fewer realize that Kit Carson and John C Fremont found gold on the lower reaches of the Mariposa River years before. The discovery created a bit of a problem for Fremont.
He soon purchased a 44,000-acre Mexican Land Grant from the last Mexican governor of California, Juan Baustista Alverado who had never even stepped foot on the parcel. But under Spanish law the landowner was not the owner of the mineral rights. Those belonged to the King. However under American law, the landowner also owned the mineral rights. From 1846 until 1848 Fremont fought to have the United States purchase the American Southwest including California from Mexico.
Finally in February of 1848, a mere ten days after the discovery of gold at Sutter’s Mill, the United States and Mexico signed the Treaty of Guadalupe Hidalgo ending the Mexican American war (1846-1848) and the deed was complete. Fremont’s next task was to have California declared a state amidst the invasion of 300,000 gold seekers.
Since the Mexican Land Grant didn’t contain borders, it took Fremont until 1856 to have the land formally registered to him. Kit Carson had begun mining for him with 28 miners at the Mariposa Mine and soon hundred pound bags of gold were on the way to San Francisco for sale.
Mariposa county on the southern border of the Mother Lode belt became home to hundred of mines and produced many millions of ounces of gold. But agriculture overtook mining as a source of wealth and eventually the mineral that formed the foundation for the economy of California took on less importance as one mine after another closed down. Gold mining in Mariposa more or less stopped about 100 years ago.
A company now named California Gold owns 3351 acres of patented ground in what was part of John C Fremont’s original parcel. It’s an interesting company because the land is worth about what the market cap of the company is. They could sell it off for olive orchards or 40-acre ranches to the computer barons from the Silicon Valley and it would be worth what you can buy the shares for today. In other words, there isn’t much downside.
But California Gold wants to be what their name suggests. After all, if you have the name you have to act the part. And they are doing exactly what they need to do to be a gold company. Given the disaster that is agriculture in California, that could come in real handy in the future. California needs something to tax.
The primary structure of the vein swarm in the area is called the Pine Tree and Josephine veins. Extending a known 2.5 km of strike, in places the vein is as much as 125 feet wide. Existing records show production of 11.5 g/t gold and about 6000 ounces yearly from 1860 to 1863. Records from 1900-1915 say the miners were recovering about 18.7-g/t gold.
California gold owns the property outright subject to a 3% NSR. There are 22,000 meters of historic drilling and a 1.6 million ounce historic resource split evenly between an open pit and an underground resource.
Unlike most Junior Mining lottery tickets, California Gold did not go into hibernation as the price of gold corrected from $1923 in September of 2011. They aggressively pursued ground mapping and drilling. Rather than maintaining a larger group of in house specialists, they bit the bullet and paid SRK for the expertise they needed exactly when they needed it.
The company has begun a major 35,000-foot drill program. The cost of drilling is half of what it was three years ago so they get a lot more bang for the buck. Company President Vishal Gupta intends to bring the historic resource into 43-101 compliance with infill drilling as well as testing the down dip of the structure well below the 900-foot historic basement. Also the company wants to put in some reconnaissance holes into newly discovered veins in five new areas.
I’m in agreement with SRK and Vishal Gupta that the structure needs to be mapped. The company is starting an airborne mag survey that should be complete in a week and results released within a month. Those veins swarms should glow in the dark on the mag studies and will tell SRK and CGM where they need to be putting more holes.
A lot of things are coming together. When I visited the project a year ago, the biggest real problem they faced was the fact that it is in California. But after a four year record breaking drought California is starting to recognize that they need to broaden their tax base. I flew into Fresno and rented a car to drive to Mariposa. I saw a lot of dry and empty fields. The drought is an utter disaster for the state destroying the tax base and disrupting the lives of millions.
While I was in town visiting the Fremont property, I made a stop at the California State Mining and Mineral Museum in Mariposa. If you ever happen to be in the area, I highly suggest a stop. It’s a real museum filled with rooms of history about mining in California. I didn’t realize the importance of Mariposa County and the surrounding area to the mining history of California. There were literally hundreds of mines and shafts in the area.
It made me rethink the potential for California Gold Mining as a company. True, there is the “California” effect that the market gives to the stock however that is turning into a positive rather than a negative. I believe the potential for discovery of a lot more gold is highly likely; the entire area has swarms of high-grade veins. The grade seems to be high enough to support underground mining; there wouldn’t be much surface disturbance.
Company President Vishal Gupta is doing exactly what he needs to do to advance the company at the least possible cost. While they did dilute the shares with their latest fund raising, they are getting a 50% discount on drilling and exploration costs. The company is lean and mean with no massive overhead as is so common with most juniors. When they need expertise, they go to SRK and pay for it.
I think CGM has the same potential that Cayden had when I wrote about them in May of 2013 when the stock was $.72 a share before climbing over 400% and being bought out by Agnico Eagle. Maybe even higher. I think Cayden went way too cheap but we were in the middle of a four-year bear market. Today we are in the opening days of a major resumption of the gold bull market that began in 1999.
California Gold will come out with an official 43-101 resource in early 2016. It will verify the 1.6 million ounce historical resource but depending on the drill results that will begin to be released shortly could be higher. I believe that given continuing drilling based on modern exploration techniques will add a lot more ounces. If CGM surprises the market, it will be on the upside. Given that investors are only paying about $10 an ounce for historical ounces, the stock has a lot of potential.
California Gold Mining is an advertiser. I am an investor both in the open market and through a private placement. I am biased. Please take some responsibility for your own due diligence.
California Gold Mining