Submitted by Morgan Smith as part of our contributors program.
Bullfrog Gold Corporation (BGFC) is one of the most interesting small cap gold plays out there. The company is a startup that only started trading on Oct. 17, 2011 and did not receive permission to start electronic clearance and settlement of its stock until May 2012. That means you could only buy actual paper shares of Bullfrog until May 2. Having electronic clearance and settlement capability means that you can now buy Bullfrog shares from online brokerages.
Bullfrog is a mining corporation, but it does not currently have any active mines. Instead, it owns mining claims at the historic Bullfrog Mine near Beatty, Nevada, and options to purchase two potential mines. These options and claims are what could give Bullfrog a lot of potential value.
Bullfrog’s Beatty is located next to the Montgomery Shoshone open pit mine, where Barrick Gold (ABX) dug out 220,000 ounces of gold in the1980s and 1990s. Bullfrog’s claims are located less than a mile from Barrick’s Bullfrog open pit mine, which produced 2.3 million ounces of gold in the 1980s and 1990s. Barrick has since left the area around the Bullfrog, but other mining companies are interested in it.
A Canadian company called Corvus Gold (KOR) is drilling for gold at the North Bullfrog Project nearby. A press release indicates that Corvus’ geologists have discovered enough gold at that location to justify a surface mining operation there. Corvus will begin a feasibility study on building an open pit mine there early next year.
Bullfrog is planning to resume its own drilling program at the Bullfrog mine later this year. The results of that should determine whether Bullfrog will start developing the mine located near the California/Nevada state line in Death Valley or not.
The results of Bullfrog’s drilling at Beatty are not known, but some data from another Bullfrog project could increase the company’s value. It seems to have struck gold at a historic site in Arizona.
Newsboy Project
Bullfrog is currently focusing its efforts on two other exploration projects in historic mining districts in the American west. The most promising of these seems to be the historic Newsboy Mine located near Wickenburg, Arizona. The Newsboy is located in the Vulture Hills, where 1.2 million ounces of gold and one million ounces of silver were mined before World War II. Bullfrog owns an option to purchase the Newsboy if conditions justify mining there.
Earlier this year, Bullfrog drilled a number of holes at the Newsboy and discovered what its geologists consider high grade gold. A press release indicates that ore contain .084 ounces of gold and .18 ounces of silver, and a short ton was present in a vein that ran for 50 feet. The same release states that five holes drilled on the site of an open pit mine that was proposed in 1992, but never built, averaged .048 ounces of gold and 1.2 ounces of silver for ton in a 64-foot vein. These results seem to indicate historical data from drilling by Moneta Porcupine Mines (ME), which was behind the earlier open pit attempt.
Bullfrog resumed drilling at the Newsboy on May 19; it planned to drill 30 more holes and be done by early July. This drilling is aimed at the basement schist level, where Bullfrog’s management thinks the richest gold deposits are located. The results of this drilling are not known, but Bullfrog plans a third round of drilling at the Newsboy later this year.
If it is successful at the Newsboy, Bullfrog could greatly increase itsstock value because it will have successfully reopened a historic mining district. The Vulture Hills were Arizona’s top gold producing area in the late 19th and early 20th century. The Vulture Mine – Wikipedia, the free encyclopedia Vulture Mine, located about 10 miles from the Newsboy, produced 340,000 ounces of gold and 260,000 ounces of silver during 80 years of operation between 1863 and 1942. Bullfrog’s management believes that quartz formations at the Newsboy are similar to those at the Vulture Mine.
In addition to its own drilling, Bullfrog has bought all of the data that Porcupine Mineta accumulated when it was drilling at the Newsboy inthe 1980s and 1990s. This includes geophysical survey results and sampling results. Bullfrog’s drilling seems to have confirmed these results.
The Newsboy appears to be Bullfrog’s best opportunity to develop a large new gold deposit. If the exploration work there works out, Bullfrog will have shown that it is a successful exploration and development company that can look at large potential gold deposits.
Klondike Project
Part of the reason why Bullfrog could be a good buy is that it is moving aggressively to purchase options to explore promising minerals depositsin the American West. On July 10, the company announced that it had purchased an option to buy the Klondike Project located in the Alpha Mining District in Eureka County, Nevada. This project is located near Barrick Gold’s Cortez mine, which produced 1.42 million ounces of gold in 2011.
So far, no drilling has been done at the Klondike, but rock chip samples taken at the project found ore that contained 1.3% zinc, .8% lead,and .16% copper. Bullfrog’s geologists think that a silver-zinc mineralization on the property could indicate the presence of a rich molybdenum deposit. The minerals could also indicate the presence of a rich silver copper deposit. A mineralization indicating the presence of a Carlin-type gold deposit has also been found there.
Actual drilling will need to be conducted to verify this theorizing. Bullfrog has not announced when it will start drilling at the Klondike.
Investing in Potential
Investors in Bullfrog would not be buying into actual gold mines like they would with an established producer, such as Newmont Mining (NEM) or Goldcorp (GG); instead, they are buying potential. That obviously makes Bullfrog something of a speculative play; it is betting that it can find new deposits and that the price of gold and othermetals will justify developing them.
Some observers, including Franco Blanch of Merrill Lynch, believe that the price of gold will climb later this year. Blanch told CNBC Asia that he thinks gold could reach a price of $2,000 an ounce by the end of 2012. If observers such as Mr. Blanch are right, the potential value of Bullfrog’s claims and options could be enormous.
Such a rise in the gold price could give Bullfrog the ability to finance further exploration, and if warranted, development work at the Bullfrog and Newsboy Properties. It would also give Bullfrog the resources it needs to start drilling at the Klondike Project.
If Bullfrog was to begin actual development work at any of its projects, its stock value will go up because it would be in a position to start generating revenue. Bullfrog also has the potential to generate revenue by selling its existing resources to other more established mining companies.
The company currently owns 164 mining claims at the Klondike, all of which could be attractive to other gold miners. Corvus Gold’s exploration work at the North Bullfrog indicates that other mining companies are interested in some of the same properties. If you’re interested in a speculative gold play, check out Bullfrog. It is an interesting little company with some interesting resources.
Transparency/Disclosure: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research. I am a consultant to a third-party and have received one hundred fifty dollars for independent research. Always discuss investments with a licensed professional advisor before making any financial decisions. Statements made herein are often “forward-looking statements” as stipulated under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. While I have researched this company thoroughly, my due diligence is not a substitute for your own.
