Colorado Resources suffers a discovery hangover at North ROK in BC

VANCOUVER — It is often difficult to maintain market momentum after a really strong discovery hole on a project. And Kelowna-based explorer Colorado Resources (CXO-V) found out just how trigger-happy investors can be when the company released two follow-up drill holes from an inaugural program at its wholly owned North ROK copper-gold project, 200 km north of the town of Stewart, B.C.

Colorado first garnered industry-wide attention when it made a copper-gold porphyry discovery at North ROK in late April. And that attention was justified, as the company cut 333 metres grading 0.51% copper and 0.67 gram gold per tonne from surface at the northern end of an area showing coincident soil, magnetic and chargeability anomalies.

Colorado then caught the imagination of investors, and has been in the midst of an extended market rally that saw its stock jump 725% from April 25 through June 4, when it closed at $1.32 per share. But making such an eye-popping entrance is typically a double-edged sword in the mining business — just ask gold explorer GoldQuest Mining (GQC-V) about its experience with its Las Tres Palmas discovery in the Dominican Republic — and Colorado found itself on the wrong side of that sword when it released its final holes from North ROK’s maiden program.

Colorado ended up with 1,500 metres of drilling over four holes at the project, all at the northern end of a 1,200-by-1,200-metre chargeability feature that remains open to the south. Drill hole 2 was collared at a secondary target 350 metres west of Colorado’s discovery hole, and returned no significant results. The company speculates it intersected a different phase of intrusion and may not have drilled to the depths needed to test the anomaly.

Hole 3 was collared at the same location as hole 1, though it was drilled with a minus-80 degree dip, while the discovery hole was drilled at a minus-45 degree dip. Colorado reported 154 metres grading 0.21% copper and 0.55 gram gold per tonne from surface at the target. Drilling intersected strong magnetite breccia zones for the first 152 metres, which transitioned into quartz-pyrite assemblages.

Hole 4 was drilled 100 metres southeast of Colorado’s discovery hole at a minus-45 degree dip. The length of the intercept was significant at 324 metres, but the average grade fell a bit short at 0.29% copper and 0.36 gram gold. Drilling cut into chlorite-quartz-pyrite mineralization, followed by strong secondary magnetite associated with mineralization for over 205 metres.

Colorado points out that it is early days for the project, and that the company should better understand a potential copper-gold system from the results. There is another 500-by-1,000-metre chargeability feature identified during induced-polarization surveys that has yet to be drilled, and Colorado has tested less than 5% of its geophysical anomalies to date.

But that did not stop an inevitable sell-off following results that featured a steep drop in average copper grade. Colorado had already been trading at high volumes for a junior — having seen 10 million shares trade hands in the past two weeks — but following the drilling update, volumes exploded. Colorado traded 8.5 million shares on June 6, with its stock price dropping 36%, or 44¢, en route to a 79¢-per-share close at press time.

But Colorado remains in a good spot despite a bump in the road. The company’s share price is still up 400% — or 64¢ since the discovery at North ROK — and with around $8 million in the bank it looks like Colorado should have ample capital to outline its copper-gold system. The company also maintains a tight equity structure with 39 million shares outstanding, and has some room to manoeuvre if it requires fundraising.