John C Fremont’s Gold Mine
November 6, 2014 is the full moon and it’s common for either markets to accelerate in the direction they are moving or to do a U-turn in direction. With the washout in gold, silver and mining shares of all sorts in the last week or so, investors should be watching for a bottom and sudden move higher.
John C Fremont, first military governor of California was on a survey expedition in 1846 when one of his men brought to him a shiny gold nugget found when they were camping on the lower reaches of the Mariposa River. With his wife, he soon purchased a 44,000-acre Mexican Land Grant parcel from the last Mexican governor of California, Juan Baustista Alverado.
Under Spanish law, mineral rights belonged to the King. So when Fremont bought the land in 1846, people believed he only gained the grazing or agricultural rights. But Fremont knew that under American law the surface owner also controlled the mineral rights. Fremont fought to have California accepted as a state. That happened in 1850 and Fremont became one of the State’s first senators. You have to wonder just how much the Spanish mining law affected Fremont’s desire to have California become a state within the Union.
In late January of 1848 workers discovered gold at Sutter’s Mill. In early February 1848, Mexico formally transferred the American Southwest to the control of the United States. The discovery at Sutter’s Mill is credited with starting the California Gold Rush where over 300,000 people traveled to California to seek their fortunes.
Gold seekers began to mine on Fremont’s 44,000-acre property near Mariposa but he sued and in 1856 won a judgment that he did indeed own and control the property. Fremont and his wife began to operate a major gold mine at Mariposa and shipped hundred pound bags of gold to San Francisco for processing. The mine provided the source for his fortune.
What California Gold calls their Fremont project covers 3351 acres of patented ground, they own it entirely. The deposit covers at least 2.5 km of strike length. No one has drilled below 900 feet even though Mother lode mineralization typically extends to 3000-5000 feet deep.
In places the Pine Tree and Josephine mines showed veins as wide as 125 feet. Records from 1860 to 1863 show a recovered grade of 11.50 g/t and production of about 6000 ounces yearly. Running the material through stamp mills the miners recovered the gold and silver with mercury. From 1900 until 1915, the miners recovered about 18.7 g/t.
While California Gold does own 100% of the project, there is a 3% NSR. The property has had 115 drill holes on 100-foot centers for a total of over 22,000 meters. Various consultants during the 1980s came up with historic resources of between 1 and 2 grams with 800,000 ounces gold for an open pit and another 800,000-ounces+ underground.
Naturally those numbers are little more than an estimation of the potential but CGM does have the core and will bring the resource up to 43-101 standards with more drilling and surface samples. There were several mines on the Fremont claims and have been producing since 1850.
The company conducted a 6500-foot Phase 1-drill program in 14 holes in 2013. The primary purpose was to verify the accuracy of historic assays and that seems to have worked. They conducted a Phase II drill program early this year and released results in May. The Phase II program consisted of 4 holes in 1860 feet of drilling. Results show wide widths of ore grade material suitable for bulk mining.
As much as any company I have ever dealt with, CGM has derisked the project. As mini-rancheros near the western entrance to Yosemite National Park the land is worth at least as much as the current market cap. They could drill it until it looked like Swiss cheese and find nothing and it’s still worth California rural land suitable for small ranches or olives.
California Gold is the new name for what used to be called Upper Canada Gold. Upper Canada had mediocre management and a low-grade gold project in southeast Ontario. The Dingman property has a 43-101 resource in the indicated category of 361,000 ounces at just under 1 g/t Au and another 40,000 ounces in the inferred category. At today’s prices the project is non-economic. At some higher price for gold it would not be a bad idea for CGM management to do a JV on Dingman so they can focus on the Fremont property.
New management at the company dumped the dead wood, brought in a much better technical team and purchased the Fremont property in March of 2013. To fund the $5.5 million plus to buy the project outright, the company issued 80 million shares at a dime, with ¾ of a warrant at $.15. As a result of that private placement and others to fund exploration, the company has about 167 million shares outstanding and about 89 million warrants exercisable at an average price of $.134.
Management tells me, and I believe, investors with strong hands hold the extremely tightly held shares. Given the 1.5 more or less million ounces of gold shown in the old historic reports and the potential for a high grade underground mine and the obvious value of the real estate I think the shares will be early movers in any upturn.
I’m a bit uncomfortable with any stock under a dime. When I first visited the project the shares were about $.05. Below a dime suggests a company is on the verge of being delisted or disappearing into the ether. I’m also uncomfortable with companies with in excess of 250 million shares fully diluted. If indeed the shares are tightly held by serious investors, I think the management of CGM should go to them and insist on a roll back to a more reasonable number.
I think the shares could be $.20 to $.30 with any serious move higher in gold and a more mining friendly environment. In that case, the warrants would be in the money and would provide the next $12 million in funding without further dilution.
Management of California Gold has taken control of a company that was little more than a hobby mining venture designed to separate investors from their money and turned it into what can and should be the next big story in California gold mining. I bought shares on the open market as soon as I could get a signal at the project. It’s that good.
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