Sovereign Gold surges 25% as it flags the start of drilling at Halls Peak

By Trevor Hoey. Published at Nov 3, 2016, in Small Caps

There is the potential for market moving news to emerge over the next days and weeks as Sovereign Gold (ASX: SOC) commences drilling at the company’s highly prospective Halls Peak-Gibson project located in New South Wales.

The company’s initial drill program is planned for more than 1000 metres of diamond core and if results are positive the program will be expanded.

SOC is targeting potential Direct Shipping Ore (DSO) high grade zinc and silver. This is founded on the company’s progress to date which has included the delineation of zinc grading up to 32.8% and silver grading 48.2 grams per tonne.

Halls Peak is the inferred volcanic centre for extensive small but high-grade volcanic massive sulphide (VMS) deposits rich in copper, lead, zinc and silver.

SOC is reasonably confident that surveying has potentially located sulphide deposition, but economic grades and tonnage are yet to be proven.

Zinc dynamics looking strong

As can be seen in the chart below, the zinc price has surged in 2016, hitting a five-year high in the last week. With the likelihood of a sustained rally driven by improving supply/demand dynamics over the next three years, the prospects of identifying commercially viable zinc projects have improved significantly.

Furthermore, should evident start to emerge regarding the possibility of developing a high grade project with strong margins, SOC’s share price could undergo a significant rerating.

However, investors should not make assumptions regarding exploration activities, and independent financial advice should be sought if considering this stock.

SOC’s managing Director, Rocco Tassone, said he expects the drilling program to be completed in four weeks, after which drilling will commence at the group’s Mt Adrah gold project, also located in New South Wales.

Mt Adrah gold project offers further upside potential

The drilling program has been designed to follow 3D modelling of gold bearing structures. Management is of the view that there is the potential for a high margin mining operation focusing on gold mineralised quartz reefs.

The drill program is intended to establish an inferred resource with a focus of moving towards early cash flow by developing a near surface/high-grade operation.

While there is the potential for promising news to stem from the Mt Adrah project, the near term focus is on Halls Peak. A schematic of the target is outlined below.

It would appear that the market is preparing for promising newsflow in relation to this drilling campaign with SOC’s share price rallying 25% in early morning trading.

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