Billionaire mine developer Robert Friedland has said that real wealth in the mining sector is created by finding something.
Friedland would know this, having driven 5+ world-class mining discoveries in his career. He knows that to find a mine you have to spend a lot of money, and drill a lot of holes.
Another secret weapon of Friedland’s is people; he surrounds himself with impressive technical minds, and provides them with big budgets and plenty of autonomy to test their theories. Statistically speaking, explorationists who have already found mines are more likely to make future discoveries.
I first met Dave Broughton on an Ivanhoe Mines field trip to South Africa and D.R. Congo last year. Friedland stood beside Broughton at the site of Ivanhoe’s world-class Kamoa copper discovery. There, a Broughton led team had chased an exploration concept from stream and soil anomalies to drill targets and eventually, a world-class discovery. Kamoa was the first major copper discovery in the D.R.Congo in a hundred years.
At the 2015 PDAC conference in Toronto, Dr. Broughton and Mr. Friedland received the Thayer Lindsley International Discovery Award for their work finding Kamoa. This was the second time the Ivanhoe group had won the prestigious award at mining’s largest convention.
Just a few hours before Dr. Broughton received the award, he met up with Exploration Insights editor Brent Cook, CEO.ca cameraman Carter Smith and myself to talk a bit about his exploration methodology, as well as his plans for a next discovery.
David Broughton, Kaizen Discovery, Brent Cook, Exploration Insights, and Tommy Humphreys, CEO.ca discuss Kaizen’s Discovery Trail at the PDAC in Toronto, Mar 1, 2015:
Tommy Humphreys: I’m here with Dave Broughton who is the exploration boss at Kaizen Discovery as well as Ivanhoe Capital group, a very accomplished geologist, and my friend Brent Cook, editor of Exploration Insights. I wanted to introduce these guys because I think some of the work that Kaizen is doing is very fascinating and Brent hadn’t heard the story yet, and knows more than I do. To start off, what is the award that you’re receiving today and what brings you to PDAC?
Dave Broughton (DB): We are receiving, on behalf of a whole lot of people, the Thayer Lindsley Discovery Award, which is given every year by the PDAC for a significant international discovery. It’s the second time Ivanhoe group has won this. They won it for OT [Oyu Tolgoi] at the inaugural event when they first awarded it a number of years ago.
Brent Cook (BC): So now you’re up in the Yukon for something different?
DB: Kaizen, late last year, picked up a package of land and took over a small company with an adjoining package of land up in the Western part of Nunavut, and its another stratiform copper play like the one we found at Kamoa [Ivanhoe Mines’ DR Congo copper discovery]. There’s copper everywhere you land, so there are good signs when you just get on the ground and wander around. That’s been appreciated for a long time, it was discovered initially in the 60’s and some work was done then, but really, nothing’s happened for about 20 years. The last group of people to be in there in a significant way on the play we’re really excited about was Cominco and that was in the early 90s.
There really are two plays, there’s a volcanic hosted copper play, that has a lot of very high grade copper, well known, lode copper, I guess you’d call it, in volcanic rocks, and there’s a more, less appreciated play, which is what we’re really excited about, and it’s in the sedimentary rocks overlying it. The rocks are similar in age to those in the copperbelt which is intriguing, and there’s mineralization that’s outcropping and in most places it’s covered, certainly 95% cover. 150 kilometre strike of these sedimentary rocks with copper showing here and there but it really hasn’t been tested.
BC: How many holes have been put into this?
DB: Well, Cominco put about a half a dozen holes at the far eastern end of the area and the rest is basically untouched.
BC: What did they find?
DB: They hit mineralization. They didn’t hit an ore grade intersection over ore grade widths, but there are lots of holes at Kamoa or Kupferschiefer, or anywhere you want to go in these systems, you don’t always hit ore on your first hole. The usual things right: persistent and all that.
BC: What sort of width and thickness are we talking in this horizon from the drilling you’ve got so far?
DB: You’ve got mineralization over metres in lenses and so on. There is some government geophysical data that gives up some idea as to what the big structures might be that might help control mineralization. We have some old prospecting that we know about. It’s really going to be getting on the ground and walking those contacts and making up our own mind of where we can find mineralization. And then we’re looking at doing a series of widely spaced stratigraphic holes, just like you would in other districts. You’ve really got to step back. These things go for kilometres, Kamoa is 50 square kilometres in area, so you really have to look at it at a base of scale and then narrow in on what you find. We’re going to take a big-scaled approach to start with and test as much of the strike length as we can, I think.
BC: What’s the access like?
DB: The access is actually excellent. We’re just south of the old town of Coppermine.
BC: Ah, the old famous Coppermine?
DB: It’s a short helicopter ride from there to the project. There’s an airstrip, regular air service. There’s an old air strip actually on one of the properties we’re going to use for direct access with a fixed wing aircraft, so it doesn’t get much better in that sense.
BC: Conceptually, what do you need to see, what do you need to find there to take it to the Kamoa stage, or up to a stage where it’s a world class deposit or something that’s really profitable.
DB: Like anywhere, you want to drill a discovery hole that’s got an ore grade and width and then you want to step out from that and build tonnes. That’s what it’s all about.
BC: What grade do you need?
DB: Up there, good question. Kamoa’s average grade is close to 3%, there are other deposits around the world that have that. If you get 3% copper of sufficient width, you’re in business.
BC: So that’s how we can judge your program. Although admittedly the first round is basic geology which I think is really smart. Get a handle on what’s going on and then zero in. If we’re going to watch this play, it’s about, first off, we get the concept, it’s coming together or it’s not coming together, here’s our targets, next round or two rounds after that, we’re getting low cost mineable widths over 3+% copper, okay.
DB: That’s the objective but like anything, you find what you find, and you go with it. They are mining the Kupferschiefer at under 2%. It really depends on all sorts of other factors, I’m not going to be able to predict that.
BC: You’re not that good yet?
DB: Not that good yet, sorry.
BC: What sort of shape is the company in? How much cash do you have and what’s your market cap?
DB: We’re in good shape. We’ve got a unique strategic relationship with the Japanese trading houses, they fund a number of our exploration projects, and we’ve got a long history of relationships with them, going back to the Ivanhoe group as well. That’s kind of our key strategic difference that we’ve got. In addition, we’ve got a treasury and no debt so that helps too.
BC: They are funding by way of placements, or getting a piece of the project, or an offtake agreement, what’s their relationship?
DB: It varies project to project. We have projects in BC where they are funding the exploration directly. They are interested in the offtake in the long term for Japan; that’s really what’s driving them. And we’re interested in the metals that work for that reason.
BC: That was Kaizen. They are looking for stratiform copper in Nunavut. Actually pretty interesting concept. If they can pull together a large enough volume of rock at 3%, which is what they’re after, it sounds like the infrastructure is not too bad, that could be quite significant. They’ve got a good deal structured with a number of Japanese groups, so it’s worth watching for sure.
Statements in this video and article that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed here and elsewhere in Kaizen’s periodic filings with Canadian securities regulators. When used in this video and article, words such as “will, could, plan, estimate, expect, intend, may, potential, should,” and similar expressions, are forward-looking statements. Information provided in this document is necessarily summarized and may not contain all available material information.
Although Kaizen has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in the forward-looking statements, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management’s expectations or estimates of future developments, circumstances or results will materialize. As a result of these risks and uncertainties, the results or events predicted in these forward-looking statements may differ materially from actual results or events.
Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements in this news release are made as of the date of this release. Kaizen disclaims any intention or obligation to update or revise such information, except as required by applicable law, and Kaizen does not assume any liability for disclosure relating to any other company mentioned herein.
Disclosure: Author is a small shareholder in both Ivanhoe Mines and Kaizen Discovery. This is not investment advice. Consult a professional investment advisor prior to making any investment decision.
Northern Uranium CEO Chad Ulansky (left) and geological consultant and investor Chuck Fipke, in Kelowna, British Columbia. Photo: Northern Uranium
Chad Ulansky cut his teeth on Ekati, Canada’s first diamond discovery, but it’s uranium that he’s hunting for now in Canada’s frozen North.
The Kelowna geologist is president and CEO of Northern Uranium (TSXV:UNO), which is exploring in northwestern Manitoba just beyond the eastern edge of the prolific Athabasca Basin.
Ulansky got his start as a geologist with Chuck Fipke’s Dia Met Minerals, which discovered Ekati, Canada’s first diamond mine, at Lac de Gras in 1991. The discovery by Fipke and Dia Met partner Stu Blusson, which came after years of systematic exploration, rocked the global diamond industry and sparked the biggest staking rush since the discovery of gold in the Klondike.
The Ekati discovery also kick-started the Canadian diamond industry and upset the De Beers cartel. Canada is now the world’s third largest producer of diamonds by value, with four mines and another two under construction.
Last year, Fipke sold his 10% interest in Ekati for $67 million US to Dominion Diamond Corp., which owns 89% of the mine (Blusson retains a 10% interest).
The Fipke-Ulansky partnership began when Ulansky was just a teenager. An avid outdoorsman from a young age, Ulansky met Fipke when the geologist attended a presentation Ulansky gave to a Kelowna scout troop, and the two hit it off. Fipke told him he would call him at the end of the school year.
Sure enough, Fipke phoned in June and offered Ulansky a summer job, a gig that turned into a continuing, decades-long partnership.
Ulansky continued working for Dia Met until its purchase by BHP in 2001.
Along the way, he obtained a bachelor’s degree in geology at the University of Cape Town in South Africa, where he studied under renowned diamond geologist Dr. John Gurney.
Ulansky retained his love of the outdoors while living in Cape Town. In 2001, he set a record for the Three Peaks Challenge, a 50-km mountain running trail that involves ascents of the three major peaks above Cape Town — Devil’s Peak, Table Mountain and Lion’s Head.
He’s climbing a peak of a different sort as president and CEO of Northern Uranium, which is searching for an economic uranium deposit just outside the Athabasca Basin — home to dozens of competitors.
Northern Uranium has earned a 50% option on the Maguire Lake property from CanAlaska Uranium. The property borders on Saskatchewan and is located along the extension of the Mudjatik Wollaston tectonic zone, which runs southwest-northeast near the Manitoba border. The zone hosts many of the Basin’s major uranium deposits, including Cameco’s Cigar Lake, McArthur River and Key Lake.
Cigar Lake and McArthur River both have uranium grades above 20%, and Ulansky is out to prove that high-grade uranium exists on Northern Uranium’s property as well.
His thesis is that extensive glaciation stripped off the sandstone and sediments and left basement rock exposed, hosting shallow uranium mineralization.
There is some early evidence supporting his thesis. Prospecting work done by CanAlaska uncovered a boulder that contained 66% uranium oxide, and in situ grab samples have contained grades up to 9% U308.
Finding dozens of mineralized boulders in a small area is highly uncommon, Ulansky says, and Northern Uranium is now searching for the bedrock source of that mineralization.
“What we need geologically is all that uranium in trace quantities across huge volumes of rocks to be picked up and brought to one spot and concentrated there,” Ulansky says, talking about geological changes that occur over millions of years. “The mechanism for that is percolating fluids, waters that circulate through bedrock. When these fluids are slightly oxidizing, they scavenge uranium, they move thru cracks, fissures and preferentially strip out the uranium and carry it with them. The fluids migrate through rocks, when they get to a fault zone that’s permeable, they’ll rise to the surface and cool. Solubility drops and over millions of years, fluids will circulate and uranium will start to precipitate out.”
Northern Uranium has expanded on CanAlaska’s program using various methods — including electromagnetic, magnetic, ground gravity and radon surveys — to narrow down drill targets for a “focused” $1.5-million exploration program.
Airborne magnetics has identified faults that could provide an important pathway for mineralizing fluids, while electromagnetics has identified a 35-kilometre conductor path where precipitation of uranium mineralization is more likely.
RADON RESULTS STELLAR
Radon surveys — which are not being used by all early-stage uranium explorers in the Basin — are among the most useful tools in the hunt for uranium mineralization, Ulansky says.
Just as Fipke used diamond indicator minerals to find Ekati, Northern Uranium is using radon surveys to detect the presence of uranium mineralization.
“The silver bullet for uranium is radon. It’s a gas, highly mobile, very short half-life, that percolates up from uranium mineralization at depth,” Ulansky says.
“Imagine if you were exploring for gold and it uniquely gave off something called gold gas. You’d just go look for the gold gas.”
Radonex, the same company that completed radon surveys for Fission’s high-grade Patterson Lake South project did lake-based radon work for Northern Uranium, and the results were comparable to PLS’s, Ulansky says. Results from the land-based radon surveys were also strong.
However, the challenging part is that the radon signature is much larger than the uranium mineralization associated with it.
“We are very, very strong believers in the fact that there is high-grade uranium mineralization there, it’s just a matter of figuring out where it is,” Ulansky says. “I firmly believe there’s a major discovery to be found, and it’s just a matter of drill testing to find it.”
Watch: Mr. Fipke’s Canadian Mining Hall of Fame 2013 Induction Video
TARGET ZONE IDENTIFIED
Ulansky’s team has zeroed in on an area 3 kilometres wide by 10 kilometres long, centred over Maguire Lake. The target zone is northeast and up ice of the high-grade boulder discovered by CanAlaska.
“The ice direction is from northeast down to the southwest, so it certainly hasn’t come from the Athabasca, which is down-ice,” Ulansky says. “That’s telling us that up-ice there is some exceptionally rich mineralization to be found.”
During the 3 coldest months of winter, crews have been testing priority targets underneath the lake.
Early drilling has hit some uranium mineralization but not in economic quantities, Ulansky says.
Drill results are expected in the coming months, and with $500,000 in the treasury, Northern Uranium will need to raise money to fund more drilling.
Fipke is a special advisor and major shareholder.
“All the geology to date looks exceptionally promising, it’s just a matter of raising the funds to continue drilling,” Ulansky says.
Northern Uranium can earn up to an 80% interest in the project by spending an additional $8.4 million in two tranches and issuing 7.5 million shares and 3.75 million warrants over four years.
Ulansky remains a key player in Fipke’s group of companies; he’s president of Cantex Mine Development and president and CEO of Metalex Ventures. The two companies share Kelowna office space with Northern Uranium, helping keep the burn rate down to $10,000 a month.
The group of companies also own the drill rigs.
The radon and boulder indicators that Northern Uranium has are promising, but now comes the hard part: finding high-grade uranium mineralization. Ulansky compared the exploration effort to trying to break a plate at the bottom of a swimming pool blindfolded, with a pool cue. You know the plate’s there, but to smash it, you have to find it.
If you’re going for that type of swim, the partners you want are Chad Ulansky and Chuck Fipke.
To receive drilling news directly from the company, email firstname.lastname@example.org with the subject line, “Please add me to your email list.” That or call the company’s Kelowna office at 1.250.448.4110 for more information.
For those of you attending this year’s PDAC in Toronto, the world’s largest mining convention, this is your invitation to our CEO Summit on Saturday Feb. 28th at the Hilton Hotel – that’s the day before the PDAC begins.
Click here for event details and here to register now.
This exclusive event is put on by three leading mining and energy newsletter writers, Keith Schaefer of the Oil and Gas Investment Bulletin, Eric Coffin of Hard Rock Advisory, and me.
The Summit is everything the PDAC isn’t. Rather than trying to put 25,000 people in a room we’ve invited 15 of our favorite mining and energy CEOs to present and meet with a few hundred of our subscribers in an intimate setting that’s for serious investors only.
Grow your wealth. These are hand picked companies presenting chosen for their immediate investment merit. No brokerage research, SEDAR filing of press release will ever tell you as much as a CEOs body language. Additionally, get all your questions answered directly from the CEOs themselves during breakout sessions.
Grow your knowledge. The newsletter writers and CEOs themselves will share their industry and regional expertise. The knowledge will allow you to make better investment decisions.
Grow your network. You’ll be in excellent company at the CEO Summit. Many of the most influential entrepreneurs and investors in our network, from investment bankers, fund managers, and analysts, to CEOs and technical professionals, will be on hand to take in the presentations and catch up over coffee and lunch. Building networks of like-minded investors is absolutely critical to becoming a successful investor (in addition to meeting the CEO’s in person).
Presenting companies include cash cow Nevsun Resources, high grade Colombian gold juggernaut Continental Gold, sister explorer Cordoba Minerals, the latest uranium discoverer NexGen Energy, and arguably the most exciting diamond junior, North Arrow Minerals. There couldn’t be a better time to meet the CEO’s of these companies, as current markets are resulting in profound change in the sector.
“Meet our hand-picked success stories for 2015 in person—and give yourself some high conviction stocks for the rest of the year.” Keith Schaefer commented.
“These are the companies positioned to make the most of a new bull market. Do yourself a favor and be there to meet the CEOs and hear their stories.” Eric Coffin added.
Personally, I’m excited about the chance to catch up with some of the CEO.ca subscribers who make all of this worthwhile. I know I’ll learn about investment opportunities, meet some in the know people, and potentially find the next big winner.
I am very pleased to welcome Tommy Humphreys to the Resource Opportunities team.
Tommy is a bright, energetic young man with exceptional contacts in the mining industry. He earned a great deal of respect for building the website www.CEO.ca, which has become an important information source, especially with regard to people and insights in the mining industry (See Lukas Lundin, Dave Lowell and other examples of Tommy’s unprecedented interviews).
One of the most important elements in the success of Resource Opportunities over the years has been in building close relationships with influential people, and in identifying the rising stars. We learned early that the people running the company and advancing the projects are the most important element in the success of any company.
Tommy has the respect of the old guard in our industry, and is equally tied in with the new generation of younger mining executives, geologists, engineers, investment bankers and analysts.
He is committed to identifying the up-coming talent: to being the first to identify the people who the other media will report on in two or three years’ time, after they have achieved success. Tommy will also continue to gain knowledge and insights from the people who are now the most influential players in this market. His relationships (current and future) will greatly enhance our analytical abilities and help us to be the first to identify the exciting new deals that can make money for subscribers.
I am looking forward to working with Tommy on upcoming issues, and the renewed energy he brings this newsletter.
We plan to further strengthen the team in the near term, with the next target being an experienced mining engineer.
Please join me in welcoming Tommy Humphreys to the Resource Opportunities team.
Many companies in the resource sector try to sell themselves to investors as proxies for the underlying commodity. Every company in the industry that has any sort of resource works out the market value of the company divided by the ounces or pounds. The implication is that if you can buy silver in the ground for, say, fifty cents an ounce, then an investment in the company will increase at a faster pace than the price of silver.
In arriving at those measures of value per ounce, of course every company uses the approach that makes them look best against a carefully selected peer group. Some use market value per ounce. Others use enterprise value per ounce. For the number of ounces, they can use proven and probable reserves, reserves plus resources, measured and indicated resources or total resources.
And, in determining the number of ounces, some companies stick with the number of ounces of silver. Most companies with byproduct gold will convert the gold to silver equivalent. A few companies will convert the base metal credits to silver equivalent ounces. I don’t like incorporating base metals into a silver equivalent, because most investors are looking at these companies as a play on precious metals.
It is vitally important that investors recognize that every ounce of silver in the ground is different from every other ounce of silver in the ground. Comparisons against peers are useful only as rough indicators of potential value and should be carefully evaluated.
Let’s look at an example of the share price of a silver company over time compared to the price of silver. Please note that this is not a rigorous analysis. It is intended as a first pass to arrive at some broad observations.
For many years, Silver Standard was a go-to silver equity for investors wanting exposure to the silver market. As expected, the Silver Standard share price rose much faster than the silver price from 2003 to 2007. In that time, the silver price rose three-fold while the Silver Standard share price rose by nine-fold. That is, Silver Standard rose 3 times faster than the silver price.
After a really dismal year for the resource industry, there are finally signs that the market is at the bottom.
Before looking at where the markets are headed from here, let’s have a quick look at a couple of indicators of the junior resource market to show just how bad the destruction has been.
The Toronto Stock Exchange Venture Index is not a perfect measure, with junior resources roughly two thirds of the index, but is probably the best indicator available of the overall junior resource market. The VIXJ declined 66% from its high in early 2011 to the low point in late June.