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North Arrow Minerals (NAR-V): A fancy contrarian idea

By James Kwantes
Resource Opportunities

Trade and the resulting prosperity set the stage for the tulip bulb mania of the 1630s. Businessmen who became wealthy buying shares in the Dutch East India Company would decorate their estates with lavish flower gardens of tulips, which had been introduced from Turkey. The rarest and most valuable tulips were the ones with genetic impurities, which produced vibrant colours and unique patterns. Human beings love natural beauty.

In diamonds as in tulips, the rarest and most beautiful are the most valuable. Lucara Diamond Corp. (LUC-T) has been demonstrating it for years, pulling spectacular stones out of its Botswana diamond mine and selling them for prices as high as US$63 million. That price-tag, for the 813-carat Constellation, was more than Lucara paid for a controlling interest in the Karowe project before it became a mine. Fancy pink diamonds from Rio Tinto’s recently closed Argyle diamond mine in Western Australia also command high prices.

Human beings love natural beauty. It’s something of a counterpoint to the narrative that De Beers created the demand for diamonds with its legendary “A Diamond Is Forever” advertising campaign in the late 1940s. That branding certainly introduced diamonds to new markets, such as Japan, and established mass market appeal for diamond engagement rings. Natural diamonds, of course, have been objects of desire for thousands of years.

In diamonds as in tulips, chemical impurities create the vibrancy and colour. Fancy diamonds fetch higher prices because the stones are rare and because they are beautiful. The presence of nitrogen, for example, is what gives a population of diamonds from North Arrow Minerals’ (NAR-V) Naujaat project in Nunavut their vibrant orangey-yellow hue.

STAGE SET FOR A DIAMOND REBOUND

The staying power of natural diamonds has been challenged by everything from lab-grown stones to changing demographic trends to COVID-19. It’s been a rough ride for investors in Canadian diamond stories, too — Dominion Diamond Corp. and Stornoway Diamond Corp., operators of two of Canada’s diamond mines, were both forced into bankruptcy protection.

North Arrow has not been spared. The stock has mostly been in the penalty box since a disappointing 2015 valuation of a 383.55-carat parcel of Naujaat diamonds. The primary conclusion of the valuation was that results and modelled values should be treated with considerable caution because of the small size of the sample. North Arrow has cost-effectively advanced Naujaat and its other Canadian diamond projects since, with successes including the discovery of new diamondiferous kimberlite fields at Pikoo (Saskatchewan) and Mel (Nunavut). While other diamond explorecos went bust or switched commodities, North Arrow shed non-core assets, sold small royalties on secondary projects and did modest raises with help from its billionaire backers.

As the world slowly emerges from the pandemic’s grip and consumers from their homes, natural diamond prices and sales are bouncing back strongly. Rough diamond prices have rebounded and recently eclipsed pre-pandemic levels, reports New York diamond analyst Paul Zimnisky in the February 2021 edition of his State of the Diamond Market. De Beers just raised prices at its third consecutive sale, according to Bloomberg.

Sethunya

The pandemic appears to have created pent-up demand for jewelry and diamonds. Tiffany & Co., the world’s largest jeweller, reported record sales for the November 1 through December 31 holiday period. China is leading the way, as the growing consumer powerhouse leaves COVID-19 in the rear-view mirror. Tiffany’s Chinese sales rose 50% during the holiday period. Richemont, the world’s second largest luxury conglomerate, said Q4 sales in China surged 80% year-over-year (Richemont is the parent company of Cartier and Van Cleef & Arpels). Chinese jeweller Chow Tai Fook opened 286 net new stores in the country in the fourth quarter of 2020.

Large diamonds and rare coloured diamonds are leading the way. Last year Louis Vuitton, the world’s most powerful luxury brand and the recent acquirer of Tiffany & Co., purchased two of Lucara’s most prized diamonds  — the 1,758-carat Sewelo and the 549-carat Sethunya (right) — with plans to turn them into brilliant centerpieces. The Sewelo is the second largest rough diamond ever mined. A 59.6-carat fancy pink diamond, the “Pink Star,” sold for a record US$71.2 million in 2017.

ENTER THE AUSSIES

Smart contrarian investors are taking notice. One is Michael O’Keeffe, an Australian entrepreneur who has made shareholders lots of money in coking coal and iron ore. A metallurgist by training, O’Keeffe got his start at Mt. Isa Mines and Glencore Australia before launching his own ventures. O’Keeffe took Riversdale Mining, a $7-million Australian coal junior with assets in Mozambique, to a $3.7-billion buyout by Rio Tinto in 2011.

O’Keeffe (right) settled on diamonds after scouring the investment landscape for contrarian opportunities. He teamed up with diamond veteran Peter Ravenscroft, who was independently forming a strategy to consolidate the diamond project development space. They formed Australian-listed Burgundy Diamond Mines (BDM-AX), which plans to become a mid-cap diamond producer by developing premium projects that have been overlooked and/or under-funded.

In June, Burgundy signed a JV deal with North Arrow Minerals (NAR) that will see Burgundy earn a 40% stake in Q1-4 by funding a $5.6-million bulk sample of 1,500 to 2,000 tonnes at Naujaat, North Arrow’s coloured-diamond project in Nunavut. Burgundy advanced $300,000 of that last year so North Arrow could ship fuel and sampling supplies to Naujaat on the annual sealift. The objective of the bulk sample is to confirm that the more valuable coloured diamonds occur in larger sizes throughout the deposit.

The favourable JV deal allows North Arrow to retain majority control of Naujaat on a partner-financed path and established timeline. It undoubtedly helped that North Arrow CEO Ken Armstrong cemented a relationship with Peter Ravenscroft, Burgundy’s Managing Director and CEO, while the latter was in charge of resource delineation at the Diavik diamond mine in NWT. Ravenscroft is a diamond veteran with 40 years in the industry including with De Beers, Anglo American and Rio Tinto. 

So what is Burgundy buying into? Naujaat’s Q1-4 kimberlite hosts Canada’s largest undeveloped diamond resource 100% held by a junior. The deposit hosts an estimated 26.1 million carats (Inferred) from surface to a depth of 205 metres; 2017 drilling showed Q1-4 extends below 300 metres depth. The outcropping kimberlite has a distinct population of rare orangey-yellow diamonds that could drive the value proposition and make the deposit economic. The Q1-4 deposit is seven kilometres from tidewater, near the community of Naujaat.

If this summer’s bulk sample is successful, Burgundy could earn an additional 20% interest in Q1-4 (60% total). North Arrow and Burgundy have a non-binding letter of intent to negotiate a second option agreement giving Burgundy the right to earn the additional 20% interest by paying for collection of a subsequent 10,000-tonne bulk sample.

The purpose of that exercise would be to definitely answer the diamond value question. The price tag for that bulk sample would be much higher, too — in the order of roughly $20 million.

SIZE MATTERS. SO DOES SATURATION

Intriguingly, the fancy orangey-yellow diamonds tend to be larger than the other diamonds in Q1-4. The coloured diamonds are a distinct, younger population of stones. In earlier samples taken by North Arrow, they made up between 9-12% of the stones but as high as 21 to 30% by carat weight. Establishing the size-frequency distribution of that fancy diamond population is the main objective of this summer’s 1,500 to 2,000-tonne bulk sample.

High-quality diamonds that are saturated in colour can sell for multiples of the price of white diamonds, but the mines producing them are shutting down. The latest is Rio Tinto’s Argyle mine in Australia, the world’s primary source of fancy pink stones. Argyle closed last year. The Ellendale mine, also in Australia, produced 50% of the world’s fancy yellow diamonds and was Tiffany’s primary supplier for those stones. Ellendale closed in 2015 (although another company is attempting to revive the project).

There were some initial doubts that the Naujaat fancy coloured diamonds would cut and polish well. North Arrow addressed those concerns with its cutting and polishing exercise that yielded  beautiful, valuable stones. The polished diamonds received favourable certifications by the GIA (Gemological Institute of America). The diamonds were certified by GIA as fancy vivid orangey yellow — fancy vivid diamonds have the highest colour saturation and command premium valuations.

TOP TEAM, LOW PRICE

In the notoriously risky junior mining sector, investing with people who have track records of making investors money greatly increases the odds of success. Gren Thomas, North Arrow’s chairman and a Canadian diamond pioneer, fits the bill.

On the heels of Chuck Fipke’s September 1991 diamond discovery, Thomas and South African diamond expert Chris Jennings (now a North Arrow director) headed north on a cloak-and-dagger staking mission. They flew into Yellowknife and split up at the airport, staying at different cheap hotels as they systematically staked as much prospective ground as possible. 

“We got the feeling that the town was just trembling on the verge of a staking rush,” Thomas recalls. “At any minute, the whole place could blow wide open.”

That winter staking adventure eventually yielded the Diavik diamond discovery and Thomas’s Aber Diamond Corp. (40% owner) saw the rich mine through to production. That worked out rather well for shareholders.

Thomas owns 11.1% of North Arrow’s shares and recently increased his position by loaning the company $400,000. Jennings, his old staking partner, owns a 5.3% stake in North Arrow. Gren’s daughter Eira Thomas led the field exploration team that made the Diavik discovery leading to Canada’s second diamond mine. She co-founded both Stornoway Diamonds and Lucara Diamond Corp. and now runs Lucara, the world’s premier producer of large, high-quality diamonds. Eira is a North Arrow advisor and large shareholder who was key to securing Naujaat for the company. CEO Ken Armstrong is a 25-year veteran of the diamond space and has been involved in the discovery of 10 diamond-bearing kimberlites in Canada and Greenland.

Through Burgundy, O’Keeffe joins three billionaire backers who are involved with North Arrow. Mining tycoons Lukas Lundin (through Zebra) and Thomas Kaplan (Electrum) each own 10.3% stakes in North Arrow; Ross Beaty owns 8.8% of shares. All three put money into North Arrow’s last financing; insiders and key shareholders hold more than 53% of North Arrow’s shares.

A VALUATION GAP

There aren’t many active junior exploration companies backed by the likes of Lundin, Beaty and Electrum that trade below a $15-million market cap. And that’s not the only metric that suggests North Arrow shares are fundamentally undervalued at these levels.

Eira Thomas (left) and Gren Thomas (right) at the Diavik mine opening.

Consider the discrepancy in market capitalization between North Arrow and its JV partner, ASX-listed Burgundy Diamonds. The Naujaat diamond project is the recognized flagship for both companies; after this summer’s bulk sample, North Arrow will own a 60% interest in Naujaat and Burgundy a 40% interest. Yet consider the market cap comparison between joint venture partners:

North Arrow Minerals
60% stake in Naujaat (flagship)
Canada’s best portfolio of advanced diamond exploration projects
100% share in Hope Bay Oro, a gold project adjacent to Agnico Eagle’s Hope Bay mine
Market cap: C$12.2 million

Burgundy Diamond Mines
40% stake in Naujaat (flagship)
Exploration alliance in Botswana
Nanuk, an early-stage diamond project in northern Quebec
Legacy Peruvian gold/silver asset (25%)
Market cap: C$76.9 million

A GOLDEN CALL OPTION

North Arrow’s 4,103-hectare Hope Bay Oro property is three kilometres north of the Doris gold mine — the first to go into production at Hope Bay — and adjacent to Agnico ground. Oro hosts the same rocks, the same structural setting and the same mineralization style as Doris, where gold grades are about 10 g/t Au.

A 1,225-metre drill program completed by North Arrow in 2011 confirmed near-surface, high-grade gold mineralization over 300 metres of strike.

Ten of the 11 drill holes along the Elu shear hit significant gold grades, including:

  • 7.55 metres grading 4.91 g/t Au from 38.4m, including 4.2 metres grading 8 g/t Au;
  • 2 metres grading 20.22 g/t Au from 125m;
  • 4 metres grading 7.04 g/t Au from 42.6m;
  • 1.45 metres grading 31.92 g/t Au from 43.55m.

Acquiring Hope Bay Oro seems to be a logical bolt-on for Agnico, especially given the gold miner’s renewed focus on exploration. Selling it could provide North Arrow with a non-dilutive source of funds. North Arrow CEO Armstrong is evaluating next steps at the property, including a potential drill program.

A BEAUTIFUL FUTURE?

The bet on North Arrow is that 60% or even 40% of a diamond mine that produces valuable fancy diamonds would be worth multiples of the current market capitalization. North Arrow has a partner-funded path to determine if Naujaat hosts an economic diamond deposit sweetened by a population of valuable fancy orangey-yellow diamonds. The JV partner is top-shelf, with the financial backing to fast-track a mine into production.

A final word on tulips and diamonds. Contrary to popular belief, the speculative tulip bubble occurred primarily among a small number of Amsterdam businessmen who had grown wealthy from maritime trade. The tulip bulb trade was considered too speculative for the Amsterdam stock exchange, which was well-established by that time. As spectacular as the 1636-37 tulip price collapse was, it did not affect many Dutch citizens or even have ramifications for that small country’s economy, let alone the world. This was a niche phenomenon.

The appeal of diamonds, on the other hand, spans the globe. While America remains the dominant market, fast-growing and populous countries such as China and India are taking their place on the diamond center stage. Rising tides of prosperity have brought luxury consumer purchases within reach.

Human beings still love natural beauty. That bodes well for fancy coloured diamonds and the companies that can bring deposits hosting those stones into production. The quality of the Naujaat fancy diamonds, the strength of the North Arrow and Burgundy teams, and the recent rebound in diamond sales says North Arrow may be closer to that objective than its market capitalization suggests.

North Arrow Minerals (NAR-V)
Price: 0.11
Shares outstanding: 111.68 million (166.4M fully diluted)
Market cap: $12.17

DISCLOSURE: James Kwantes owns North Arrow shares and was compensated by North Arrow Minerals for the writing and distribution of this article. This article is presented for informational purposes and is not financial advice. All investors need to do their own due diligence or consult an investment advisor.

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Copper stock: A higher-grade prospect beside a giant in B.C. porphyry camp

  • Assays pending on deep holes drilled by GSP Resource Corp. (GSPR-V)
  • Building pounds at the Alwin copper mine project adjacent to Teck’s Highland Valley Copper mine

by James Kwantes
Resource Opportunities

GSP Resource Corp. is one of three Resource Opportunities sponsor companies.

Dwight Eisenhower was in the Oval Office and America was still on the gold standard when British Columbia prospector Dick Billingsley first staked mining claims. Then 14, Billingsley pounded in wood stakes north of Rossland in B.C.’s West Kootenays on behalf of an uncle who worked in the mining industry and speculated on claims on the side. That uncle worked for The Consolidated Mining and Smelting Company of Canada — otherwise known as Cominco, which merged with Teck in 2001.

Billingsley has been staking claims ever since. In the process, the 78-year-old Surrey resident has become one of the largest individual claims holders in B.C., with about 120,000 hectares of ground under his control.

Cycles have come and gone, and there have been some big wins. One of them was Tatogga, the property Billingsley and his wife and business partner Gaye Richards vended to GT Gold (GTT-V). GT discovered a gold-rich copper porphyry at Saddle North and a high-grade gold discovery at Saddle South, attracting a strategic investment from Newmont Goldcorp and hitting a $250-million valuation along the way.

The veteran prospector made the transition from midnight staker to keyboard claims when the province switched to digital claim staking in 2004. But he can still be found bouncing around B.C.’s back roads in his one-tonne Ford 350 pickup truck, snowshoes and other supplies on hand in case of emergencies. Different times call for different strategies, however.

“When you want to stake claims you don’t do it during the day, you do it between 2 and 4 a.m. — before 7 Eastern time,” Billingsley says with a smile. “At 7 the guys back east are getting up, having their coffee and turning their computers on.”

Dick Billingsley at Alwin’s “Copper Rainfall” showing

One of Billingsley’s claims packages is the Alwin property, which he optioned last year to GSP Resource Corp. (GSPR-V, GSRCF-OTC) for staged cash and share payments. That made Billingsley one of GSP’s largest shareholders and he has since added to his stake both in the public market and in financings, bringing him to just under 10% of outstanding shares.

The Alwin property, which hosts a past-producing underground copper mine, is adjacent to Teck’s Highland Valley Copper (HVC) open-pit mine 17 kilometres west of Logan Lake. Billingsley is excited about the potential of identifying more high-grade mineralization at Alwin. The mine was in operation at different times, producing a total of about 235,000 tonnes grading 1.54% copper.

Identifying further high-grade copper mineralization is also the mission of Simon Dyakowski, GSP Resource Corp.’s young CEO. Dyakowski is a CFA charterholder and former broker who grew up in the business — his geologist father, Chris Dyakowski, is GSP’s chairman and a director.

And family ties figure in the story of how Simon secured the Alwin property for GSP. His father Chris ran San Marco Resources (SMN-V) while San Marco explored Alwin between 2005 and 2008. San Marco drilled five shallow holes into the main mineralized trend near the eastern part of the mine workings, and three more holes that tested IP anomalies north and northwest of the mine.

Results were mixed and all the data is on the GSP website. The first three holes returned sniffs of shallow higher-grade mineralization, including 3.3 metres of 2.37% Cu and 0.5m of 8.45% Cu. Hole 4 hit 13.5 metres of 1.86% Cu from 117 metres downhole, including 0.9m of 4.1% Cu and 3m of 6.2% Cu. Removing those high-grade sub-intercepts still leaves a residual grade of 9.6 metres of 0.29% copper, slightly higher than the head grade at Teck’s HVC. Hole 4 ended prematurely in an old unmapped drift.

San Marco moved on to other projects and the Alwin claims were picked up by Billingsley. CEO Dyakowski believes GSP is well-positioned to tag shallow high-grade mineralization, the target of the initial drill program (permitting is well underway). One of the tools at GSP’s disposal is a new 3D digital model of the Alwin mine compiled by Renaissance Geoscience Services and released last week. The 3D model — assembled using historical drilling, mining and geological data from prior operators — will help GSP target shallow unmined material in two zones north of the historical Alwin mine.

GSP’s objectives are two-fold: 1) explore the prospects of an open-pit mining scenario by targeting higher-grade mineralization around the #4 zone; 2) target lower-grade porphyry-style mineralization to the north. GSP was successful with Phase 1 drilling, intersecting both high-grade copper as well as lower-grade bulk-tonnage mineralization in six drill holes. Assays are pending on two deep holes.

HVC is the largest open-pit copper-molybdenum mine in western Canada. In 2019, the operation produced 121,000 tonnes of copper at grades of about 0.27%, generating $196 million in gross profit for Teck. The Vancouver-based producer is mining increasingly lower grades at HVC and the mine was originally scheduled to close in 2028. However, Teck recently applied to extend the mine life to 2040.

On its website, GSP has a great satellite image of the Alwin/Highland Valley neighbourhood in 2004 and 2015, with a sliding bar to make comparisons more easily. Two differences are immediately noticeable: 1) the amount of logging that has occurred on the Alwin property since 2004; and 2) the extent to which Teck is moving westward towards the Alwin property. If GSP can prove up a near-surface high-grade copper deposit and/or the existence of a copper porphyry system at Alwin, it becomes a pretty compelling target for Teck. However, there are other possible outcomes for Alwin that don’t rely on a Teck takeout — two nearby mills, Craigmont and Afton, have spare capacity.

Alwin has a 270-metre-below-surface development decline and about 2,700 metres of underground tunnelling, as well as 649 diamond drill holes totalling 34,500 metres. One of the prior operators calculated a historical (non-43-101 compliant) resource around the mine workings of 390,000 tonnes grading an average 2.5% copper, assuming 25% dilution. But the mine shut down due to low copper prices before they could tap into that zone.

GSP’s low all-in drilling costs mean the company is poised to expand the drilling if they are successful during the first phase. CEO Dyakowski, right, owns about 10% of shares, accumulating in each financing round and the open market. Insiders hold a total of about 35% of shares. GSPR is well-structured with only 18.5 million shares outstanding and a free trading float of about 6 million shares when you take out insider holdings and escrowed stock.

As for Billingsley, he thinks Alwin ore could make a great high-grade feedstock to mix with the lower-grade ore that Teck is mining at HVC. That would increase the operation’s profitability ahead of a mine life extension at one of Teck’s core assets.

“Alwin could be my next big score,” Billingsley says.

GSP Resource Corp. (GSPR-V, GSRCF-OTC)
Price
: 0.35
Shares out: 18.5 million (24.2M fully diluted)
Market cap: $5.15 million

Disclosure: James Kwantes owns shares and warrants of GSP Resource Corp. and the company is one of three Resource Opportunities sponsor companies. This article is presented for information purposes and does not constitute investment advice. All investors need to do their own due diligence and/or consult a financial advisor.

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Ridgeline Minerals: From bear-market bootstrapping to high-potential Nevada play

  • High-grade silver discovery takes shape at Selena
  • Ridgeline (RDG-V) has $3.5M in treasury to drill Nevada projects
  • Nevada Gold Mines is hitting boomers near Ridgeline ground

By James Kwantes
Resource Opportunities

Nevada’s silver-laden history branded it “The Silver State” but the present is paved with gold. The more valuable precious metal is Nevada’s top export, worth US$2.7 billion in 2019 (casino games is a distant second at $550 million).

Since the 1962 discovery of Carlin-type gold by John Livermore and Alan Coope, more gold has been discovered in Nevada than almost anywhere on Earth. Gold ore is blasted and trucked out of giant open-pit deposits like the Goldstrike pit in the Carlin trend. It’s dug out from high-grade operations deep underground in the Carlin and Battle Mountain-Eureka trends and the Cortez camp. Gold also bleeds out of dozens of oxide heap-leach projects that dot the state.

Nevada’s importance came into sharp focus two years ago when Barrick and Newmont — the world’s two largest gold miners — combined their operations in the state to form Nevada Gold Mines (NGM). That deal was struck only after Barrick CEO Mark Bristow launched a hostile bid for Newmont, backing off when Newmont agreed to form the Nevada joint venture. Barrick is the operator and owns 61.5% of Nevada Gold Mines, which produced 2.13 million ounces of gold in 2020. It’s an important profit center for both companies.

FROM PRAIRIES TO PREMIER
Gold is also what brought geologist Chad Peters from Manitoba to Nevada, where he lives with his wife Carla and their two young sons. Peters is president and CEO of Ridgeline Minerals (RDG-V, RDGMF-OTC), which IPOed last year and drilled two of its four exploration projects in Nevada’s most important gold districts. If junior miners are lottery tickets, Ridgeline is more like a handful of them — each project could be worth multiples of the company’s current enterprise value of $13.8 million.

Ridgeline is planning follow-up drill programs in 2021, with a focus on expanding their high-grade oxide-silver-gold discovery at Selena in the South Carlin trend, and Swift in the Cortez district. The goal at the latter is to identify a high-grade multi-million-ounce gold deposit. But Ridgeline’s most valuable projects could still end up being the two that are under the radar for now: Carlin-East and Bell Creek. Those properties are in the heart of the Carlin trend, near Goldstrike, and Nevada Gold Mines has been hitting world-class intercepts on the doorstep. More on those later.

Ewan Downie’s Premier Gold (PG-T) plays a primary role in the story of how Peters ended up in Nevada. While studying geology at the University of Manitoba, Peters landed a summer job with Premier Gold working in Ontario’s Red Lake gold camp. That gig turned into a 10-year career with the company, much of it in Nevada. Premier Gold made its first foray into the state in 2012 with the purchase of the mothballed Cove mine project in the Battle Mountain-Eureka trend. Peters and his wife Carla moved down to Winnemucca, Nevada the same year.

At 27, Peters was the senior exploration geologist in charge at McCoy-Cove, where he led the discovery of the CSD Gap deposit. Cove now hosts 1.7 million ounces of gold at 10.8 g/t and is one of Nevada’s highest-grade undeveloped gold deposits. It’s also one of the cornerstone assets of i-80 Gold Corp., the Nevada-focused spinout that will emerge from the friendly acquisition of Premier Gold by Equinox Gold (EQX-T), announced December 16. The CSD Gap discovery was based on a new geological interpretation, an MO that Peters is now employing with Ridgeline.

Peters rounded out his time with Premier as the Nevada exploration manager, overseeing all of the exploration projects as well as Premier’s JVs with majors — including the South Arturo mine with Barrick. As the company advanced its portfolio in Ontario, Nevada and Mexico, Premier’s focus shifted from exploration to development and production. Exploration is Peters’s passion and he decided to strike out on his own in 2018, co-founding private exploreco Ridgeline Minerals with good friend Steve Nielsen, who also happened to own a drilling company. That wasn’t a coincidence …

BOOTSTRAPPING IN A BEAR MARKET
“It was the best of times, it was the worst of times.” The Charles Dickens quote from A Tale of Two Cities could also apply to Ridgeline’s early days. Peters left a well-paying job with a solid employer and took the plunge, starting Ridgeline out of an “office” in the garage of his Winnemucca home. Local relationships that he built living in Nevada helped Peters secure the company’s land package through EMX Royalty Corp. (EMX-V) — now one of the largest held by a junior in the state with three of the four projects literally at Nevada Gold Mines’ doorstep.

Next, Peters partnered with Neilsen, a Nevada businessman who owns Envirotech Drilling and had worked with Chad at the Cove discovery. The two struck an equity deal that gives Ridgeline the cheapest drilling costs of any company in Nevada. That means more dollars into the ground, increasing the odds of new discoveries. This partnership is already paying dividends with a shallow-oxide silver discovery announced at Selena months after the IPO.

The launch forced a new skill set on a guy more accustomed to navigating rock types than capital markets: raising money for a private exploreco during the depths of a bear market. It was a rather gruelling experience that tested his mettle and made for some interesting dinnertime conversations, Peters recalls: “I told Carla it would take me three to six months to get the company financed, and she ended up supporting the family for 14 months.” Private financing rounds at 12 and 22 cents with Ridgeline’s core shareholders funded early exploration, with the Peters family putting in $150,000 of their savings.

Ridgeline VP Exploration Mike Harp at Bell Creek, with a Barrick drill in the background
at Nevada Gold Mines’ Sinkhole Breccia target.

Peters tapped Mike Harp, an exploration geologist with 8 years of experience with Gold Standard Ventures (GSV-T) in the Carlin trend, as Ridgeline’s VP Exploration. Harp was a senior member of the team that found 5 million ounces for Gold Standard in the Railroad-Pinion district, including leading discovery of the North Dark Star deposit. Duane Lo, a veteran of the mining exploration sector, came on early as CFO and splits his time between Ridgeline and Entree Resources (ETG-T). At the board level, Peters brought in Newmont’s longtime Nevada specialist Lewis Teal, who has decades of discoveries under his belt and has authored multiple publications on the Carlin trend.

Relationships are one of the keys to Peters’s success and it shows in Ridgeline’s share registry. Early shareholders include heavyweights of the junior mining scene such as David Elliott, Paul Stephens and Andre Gaumond. Peters remains on good terms with Premier boss Ewan Downie, who invested in Ridgeline while the company was still private. He has shareholders on both sides of the recent Premier-Equinox deal — the Equinox management team also put money into Ridgeline’s IPO and Equinox CFO Peter Hardie joined Ridgeline’s board in October 2020. “The Davids” from EMX — CEO David Cole and chief geologist David Johnson — both invested in Ridgeline personally before it was publicly listed.

Three years after that bumpy launch, Ridgeline sports a $17.3-million market capitalization, with $3.5 million in the treasury to drill four high-potential projects in Nevada’s most important gold districts. As it turned out, the early adversity Peters faced running a private exploreco was good preparation for going public.

The Ridgeline chart has been a roller-coaster since the August 2020 IPO at 45 cents that raised $5 million. The stock promptly ran up to 75 cents before a long slow slide — some investors bailed when there were no immediate discoveries — took shares down to lows of 30 cents in December. “Discoveries aren’t made overnight,” Peters remarks. “At Selena it took us three phases of drilling and 21 holes to make a discovery.”

“Discoveries aren’t made overnight. At Selena it took us three phases of drilling and 21 holes to make a discovery.”

Chad Peters, Ridgeline Minerals CEO

In this emerging gold bull market, Nevada is again a hotbed of gold and silver exploration, with hundreds of juniors searching for economic deposits across the state. Many of those projects are far removed from the main Carlin/Cortez/Battle Mountain-Eureka trends, a gold epicenter that hosts a combined 220 million ounces of past production and current resources. Ridgeline is well-positioned with 125 square kilometres of ground in the middle of all three districts.

ONE IS NOT LIKE THE OTHERS
Having a Canadian CEO who lives in Nevada sets Ridgeline apart in a state crowded with junior miners whose bosses live elsewhere. His northern roots also landed Peters, now 34, an unexpected side gig — he was recruited to coach his son’s hockey team after other parents discovered he was Canadian.

Those “boots on the ground” put Peters at the center of the action, allowing him to hear of new discoveries first or soak up important tidbits of intel. It has even opened doors to acquiring cheap but valuable data, or claims from the prospectors who still control large land positions on Nevada’s still-fractured claims map. Peters lives less than a two-hour drive from Ridgeline’s Swift, Carlin-East and Bell Creek projects and five hours from Selena.

It’s not Ridgeline’s only key edge. That strategic drilling contract has allowed the company to stretch those dollars and drill 1,300 metres at Carlin-East in 2019, a combined 5,636 metres at Selena and Swift last year, and still enter 2021 with a healthy treasury of $3.5 million to drill all four projects. As a 7.8% shareholder, Peters is incentivized to make sure those dollars go as far as possible. Management owns a combined 17% of shares and public companies — EMX, Vior and Ethos Gold — own another 19%. Institutions are at 12%.

HIGH-GRADE SILVER AT SELENA
At Selena, Ridgeline went looking for gold but found silver — wide intervals of oxide high-grade silver, along with lower-grade gold. The company hit paydirt with hole 21, which intersected 36.6 metres grading 67.08 g/t silver and 0.26 g/t gold (90.05 g/t silver-equivalent “AgEq”). The discovery followed two earlier programs that had encountered promising hits, including 3m of 823.5 g/t AgEq and 36.5m of 77.8 g/t AgEq.

Mineralization outcrops at surface and has good continuity, extending for more than a kilometre down-dip and along strike. “We are drilling wide-spaced step-out scout holes and they keep hitting,” Peters says.

On a gram-meter basis, Selena results compare favourably to other high-grade silver explorecos, including in Nevada, that have market capitalizations much higher than Ridgeline’s. Selena’s grades are also multiples of those at Coeur Mining’s Rochester open-pit mine in Pershing County, Nevada — America’s largest silver mine. Rochester’s proven and probable reserves average about 11.3 g/t silver and 0.085 g/t gold. Coeur is in the initial stages of building a major expansion of the mine.

Peters and Harp recently managed to acquire the historical drill-hole database for Selena from the 1980s. That data, combined with the new discovery, will help the team design the next drill program, which could launch in April if the weather cooperates. Early metallurgical testwork shows the silver and gold oxide mineralization is amenable to heap-leaching. It remains early days but Selena is shaping up to be a classic Nevada heap-leachable oxide deposit.

HUNTING A GIANT AT SWIFT
If Selena is a base hit in baseball terms, think of Swift as a home-run swing. It’s a Carlin-type gold project about 7 kilometres northwest of Nevada Gold Mines’ Cortez mine complex, which hosts about 35 million ounces at 3.08 g/t gold. The neighbourhood hosts large, high-grade Tier 1 deposits, which is what Ridgeline is looking for. Only five deep drill holes have ever tested the Lower Plate target rocks on the 50-square-kilometre property.

A three-hole, 2,413-metre drill program completed late last year hit widespread skarn alteration within favourable host rocks and produced some sniffs of low-grade gold and high-grade silver mineralization, including 0.2 metres grading 0.22 g/t Au and 860 g/t Ag. It’s an indication that Ridgeline drilled into the guts of the intrusive heat source — the largest Carlin-type gold deposits are associated with buried intrusives, Peters says. “If you’re too close, the gold won’t precipitate out. We now know where we are in the system, and we know where we’re going next.”

Two of the three deep holes intersected the favourable Wenban formation. It sounds like something out of a Star Wars movie, but Wenban is considered the primary host rock for much of the gold in Nevada’s Cortez trend, including 15 million ounces in NGM’s Goldrush deposit. Data from the Phase 1 drilling will help Ridgeline vector in on higher-grade gold mineralization in the Phase 2 program.

CARLIN-EAST/BELL CREEK CATALYSTS: LOCATION, LOCATION, LOCATION
Barrick CEO Mark Bristow has identified Nevada as “one of our main hunting grounds” and Barrick’s moves at the Fourmile discovery show those weren’t idle words. The company has rapidly advanced Fourmile — north of Goldrush — since announcing a maiden Inferred resource of 700,000 ounces of gold grading 18.58 g/t (Fourmile is outside the NGM joint venture).

In resource exploration as in real estate, it’s all about “location, location, location.” And Barrick has been aggressively exploring on the doorstep of both Carlin-East and Bell Creek. Last year NGM intercepted 21.3 metres grading 35.3 g/t gold at its North Leeville target, north of the Leeville underground gold mine. That’s just 3 kilometres away from Ridgeline’s Carlin-East boundary, along the Leeville structural corridor.

Barrick-controlled NGM is also exploring aggressively just to the west of Ridgeline’s Bell Creek project. Assays are pending on a deep hole NGM drilled at its Sinkhole Breccia target just 250 metres to the west of Bell Creek. It’s valuable land — a 2020 Laurentian Bank analyst report on Ely Gold Royalties (ELY-V) assigns a US$41-million valuation to Ely’s REN royalties, which lie directly adjacent to Ridgeline’s 100% owned Bell Creek property, on the west.

Peters plans to drill both Carlin-East and Bell Creek but will watch Barrick’s next moves in the neighbourhood and proceed accordingly, while Ridgeline builds ounces at Selena and drills for a high-grade gold discovery at Swift.

Ridgeline Minerals (RDG-V, RDGMF-OTC)
Price
: 0.36
Shares out: 48.1 million (58.5M fully diluted)
Market cap: $17.3 million

Disclosure: James Kwantes was compensated for the writing and distribution of this article. Kwantes owns shares of Ridgeline Minerals, purchased in the 22-cent financing round, the 45-cent IPO and the public market. This article is for information purposes and should not be considered investment advice. All investors need to perform their own due diligence.

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Kodiak Copper site visit: “It’s a good start”

by James Kwantes
Editor and publisher,
Resource Opportunities

Site visit: Kodiak Copper MPD project (October 17, 2020)

Sent to Resource Opportunities Premium Subscribers pre-market on Oct. 20

Dear subscriber,

My final site visit of the year — on Saturday, Oct. 17 — took me to Kodiak Copper’s MPD project and core facility outside Merritt, in the heart of southwestern B.C.’s copper porphyry country. It’s a three-hour drive from Vancouver. En route, the snow was already flying at the summit of the Coquihalla Highway pass — elevation 1,244 metres (4,000 feet). But at site, the only winter weather to be found was a chill in the air. That’s typical for the area, which usually experiences hot summers and mild winters with minimal snowfall.

The favourable weather — and year-round exploration possibilities — is one of the reasons Kodiak has further upside potential, even from these relatively lofty levels. Kodiak has added about $80 million in market capitalization since I touched on it in the August 16 letter, and about $40 million since the Sept. 3 Flash Alert. As the sector has lagged, the stock has run hard on the high-grade copper-gold intercept announced on September 3. KDK is no longer cheap and there are expectations built in. There’s also still much to like. I have averaged up twice since the initial 43-cent purchase outlined in the Aug. 16 letter — at $1.65 and at current levels.

The site visit started at Kodiak’s temporary core shack on the outskirts of Merritt. The company is rapidly outgrowing the facility, where it shares space with a salvage yard. The core shack was formerly used by both Westhaven Gold and Kaizen Exploration. Kodiak is looking for a more suitable processing and storage site as the metres build at MPD.

Both chairman Chris Taylor and president/CEO Claudia Tornquist were present, along with Discovery Group founder John Robins, analysts and Kodiak geologists (Taylor had to leave early to fly to Red Lake). Hole 4 — which returned 282 metres of 0.7% copper and 0.49 g/t gold, including 45.7m of 1.41% Cu and 1.46 g/t Au — was in the core boxes. The highlight intersection was heavily magnetic — copper occurs in the magnetite-rich rock.

Kodiak CEO Claudia Tornquist and chairman Chris Taylor (third from right) at the core facility outside Merritt.

Kodiak is now drilling hole 8 and assays are pending on holes 3, 5, 6 and 7 (5,316 metres have been drilled in 7 holes this year). The company has described hole 5 as carrying “similar porphyry-style sulphide mineralization” as hole 4. But the strong correlation between magnetics and copper mineralization offer hints of good assays to come — holes 5, 6 and 7 all have significant magnetic signatures. The gold values, in turn, seem to be closely correlated with the copper — at least in hole 4.

On Oct. 22, Kodiak reported complete assays for the remainder of hole 4 as well as for hole 2. Hole 4 intersected 535.1 metres of 0.49% copper and 0.29 g/t gold, or 0.76% CuEq, starting from about 200 metres downhole. Hole 2 assays were lower-grade, intersecting 642 metres grading 0.21% Cu and 0.06 g/t Au from 173 metres downhole, including 32.8 metres of 0.46% Cu and 0.12 g/t Au.

Chris Taylor is getting quite good at formulating new geological interpretations that drive discovery and create shareholder value. The acquisition of Man, Prime and Dillard (MPD) came together after a trip he took to the area looking for porphyry projects, his specialty (Taylor worked as a project geologist for B.C. porphyry operator Imperial Metals for five years).

At MPD, 129 historical drill holes and 25,780 metres had been drilled across the properties by operators including Rio Tinto and Newmont. But few of those holes went below 200 metres vertical depth. Taylor saw deeper drilling as key at the property, which has copper showings at surface and in drilling and trenches over a 10-sq-km area. The Gate Zone discovery hole (MPD-19-003), announced Jan. 16 to little fanfare, hit 102 metres of 0.53 Cu and 0.16 g/t Au — the best hole in the 50-year history of the property. The highlight intercept in hole 4 improved upon that by a wide margin.

The consolidation of the Man, Prime and Dillard properties followed a familiar script, especially for Great Bear shareholders — Taylor seeing value where others did not. As he put it during the site visit, “MPD was a great project to buy because everyone thought it was shit.” Kodiak paid just $200,000 plus 1.8 million shares of Dunnedin, the predecessor company, to secure MPD. Consider: Friedland-backed Kaizen Discovery pivoted away from their neighbouring Aspen Grove copper porphyry project after a modest 2016 drill program. Kaizen recently announced plans to restart exploration; it’s still listed as a “non-core project” available for sale or joint venture on their website.

(At Great Bear, Taylor and Bob Singh saw potential where others — including Mark O’Dea, who gave up on the property — did not. Great Bear paid $210,000 and 100,000 GBR shares to secure 100% of Dixie including royalties.)

Kodiak is cashed up to expand the drill program in 2021, after closing a $12.7-million private placement that saw neighbour Teck come in with a 9.9% strategic investment. “It’s a good start” had been the Teck geologist’s poker-faced assessment after a close inspection of the core. Teck is mining 0.29% copper at its Highland Valley Copper mine — Canada’s largest open-pit copper operation — about 90 kilometres north of MPD. To the south, Copper Mountain is mining 0.25% copper.

Kodiak now has about $15 million in the treasury, derisking it on the dilution front. The company also retains the Mohave porphyry project in Arizona and the Kahuna diamond project in Nunavut. There are also 2.3 million Brixton Metals (BBB-V) shares Kodiak picked up by selling a non-core asset in the Golden Triangle in August.

The MPD project is about a 45-minute highway drive from Merritt, through Douglas Lake Ranch country (the ranch, one of North America’s largest, also has grazing rights at MPD). On the way to site, on a sidewalk in Merritt, we passed a campaigning politician who knows the importance of mining even though he doesn’t talk about it much: B.C. NDP premier John Horgan.

The Man, Prime and Dillard target areas that have seen most of the historical drilling are located in close proximity to each other on the property’s northwestern quarter. There are several areas with outcropping malachite and azurite, copper indicator minerals. The Gate Zone discovery is close to Prime, which is in proximity to Missezula Lake. There is a cottage community at the south end of the lake that is located on MPD ground (it’s visible on the satellite image if you Google “Missezula Lake”). It’s not a fatal flaw. But the lake and cottages are close enough that if an open-pit mine is built at MPD that incorporates Gate Zone, those properties would likely have to be bought out.

Kodiak now has core from each of the three target zones, and there are similarities. Core from Dillard, two kilometres away, looks similar to core from the upper part of the Gate Zone holes. MPD is shaping up to be a multi-zone copper porphyry system with significant gold values. Next Kodiak plans to test a 1.5-km by 300-metre copper in soil anomaly coincident with a mag low that runs south of the current drilling, followed by Gate Zone analogues elsewhere on the property. Taylor told us the Gate Zone reminds him of the Northeast Zone at the Mt. Polley porphyry mine operated by his former employer, Imperial Metals. The copper/gold-rich NE Zone was what allowed Imperial to put Mt. Polley back into production after it had been mothballed.

Gold prospects on the eastern portion of the property — which hosts epithermal/mesothermal mineralization — could be a potential spinout down the road, if Kodiak can delineate an economic ore body at MPD. Northeast of the MPD property is the Elk gold mine, which produced 50,000 ounces of gold grading 3 oz/t from surface. Elk was sold to a private company last year by Ross Beaty’s Equinox Gold for $10 million.

Drill results will drive Kodiak’s share price trajectory and there is reason to believe pending assays will continue to be good. MPD carries a hefty valuation for an early-stage copper drill play. But with early copper values that are multiples of grades being mined in the neighbourhood at Copper Mountain and Highland Valley — plus gold, this is no run-of-the-mill copper play. Kodiak ticks a lot of boxes:

— Road-accessible property in a mining-friendly area (low drill costs);
— $15 million in the treasury, with no need to finance;
— Tight share structure with strong management and Discovery Group backing;
— The makings of a high-grade copper-gold porphyry deposit, or a multi-zone system.

Kodiak Copper (KDK-V, KDKCF-OTC)
Price: $2.29
Shares out: 44.2 million (51.8M f-d)
Market cap: $101.2 million

Disclosure: James Kwantes owns shares of Kodiak Copper and Kodiak paid a fee for reprint and distribution rights. All investors need to complete their own due diligence on every investment including Kodiak, a high-risk junior mining equity. This Flash Alert is for information purposes and should not be considered financial advice.

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Genesis Metals builds high-grade ounces at Chevrier

by James Kwantes
Resource Opportunities

Genesis Metals is one of three Resource Opportunities sponsor companies.

Genesis Metals is building ounces and grade at its Chevrier project in Quebec’s Abitibi Greenstone Belt, as Phase 1 drill results outline growing zones of higher-grade material within the existing Main Zone deposit. The drill results are changing the profile of the deposit, which hosts current indicated mineral resources of 395,000 ounces (8.5 Mt averaging 1.45 g/t gold; cutoffs 0.5 g/t open pit and 0.95 g/t underground) and inferred mineral resources of 254,000 ounces (5.9 Mt averaging 1.33 g/t gold; cutoffs 0.5 g/t open pit and 0.95 g/t underground).

The latest drill intercepts are well above those average grades, with highlights including:
GM20-63: 9.71 g/t Au over 3.65 metres (within 76 metres of 1.93 g/t)
GM20-64: 9.73 g/t Au over 4.5 metres (within 84 metres of 1.65 g/t)
GM20-64: 9.64 g/t Au over 2.3 metres
GM20-64: 14.4 g/t Au over 2.2 metres
GM20-65: 5.57 g/t Au over 3.2 metres

Those intercepts were part of the second and final batch of assays from the 2,500-metre drill program at Chevrier that focused on southwest and northeast portions of the Main Zone. Most of the current resource estimate is contained within the Main Zone, with the East Zone hosting a small Inferred resource. Genesis used a new 3D model to better understand distribution and controls on high-grade gold mineralization.

Jimmy Pearson splits Chevrier core at the Genesis core shack.

Genesis CEO David Terry and his team are now reviewing the drill hole data as they evaluate the best targets for follow-up drilling, which is fully funded. The next drill program will likely take place in late summer or early fall; a further 5,500 metres of drilling is planned for the remainder of 2020.

Each of the Phase 2 intercepts above starts within 200 metres of surface, and holes 63 and 64 hit high-grade within wider mineralized envelopes. That bodes well for future inclusion in the pit-constrained resource once Genesis updates the Chevrier resource estimate. Hole 65 also hit deeper gold mineralization: 5.14 g/t Au over 3.95 metres from 213.3 metres downhole, and 7.88 g/t Au over 3.1 metres from 227.5 metres downhole.

Those assays followed Phase 1 drill results from Chevrier announced on June 2 that included:
8.92 g/t Au over 1.0 metres (within 1.79 g/t over 7.35 metres)
3.99 g/t Au over 3.0 metres
10.2 g/t Au over 1.15 metres (within 1.36 g/t over 19.7 metres)

“We look forward to additional drilling to better define this new high-grade component of the deposit, and to results from the ongoing surface exploration program focused on advancing priority targets elsewhere on the large Chevrier project,” Terry stated.

Likely targets include further definition of higher-grade shoots within and below the existing Main Zone deposit, as well as several high-priority targets elsewhere at Chevrier identified through last year’s property-wide glacial till survey. Ground prospecting to further refine those targets continues.

The biggest beneficiaries in this emerging gold bull market are juniors that can hit meaningful drill results containing high-grade gold. The Phase 1 drill program has delivered that for Genesis, with several hits that are multiples of average grades at the existing deposit. The company’s $15-million valuation — less than many pre-drill juniors — is backstopped by Chevrier’s existing gold resource and now, growing higher-grade zones.

The widths and grades of Genesis’s Phase 1 drill program compare favourably to the mineralization at well-known Canadian gold deposits including SSR Mining’s Seabee underground gold mining operation in northern Saskatchewan. Seabee’s average reserve grades are just above 10 g/t gold and the company is underground mining widths of 1-2 metres.

Genesis, of course, is an earlier-stage play. But the company’s shares remain under the radar, with the stock trading at or below where it spent most of 2019. That’s despite the developing high-grade zones as well as these positive features:

  • Backing of the serially successful Discovery Group;
    Located on a highway and near rail lines in the eastern Abitibi greenstone belt in a thriving mining district (Chibougamau) with other high-grade discoveries;
    More than $2 million in the treasury for further drilling later this year.
    Fresh approach under the leadership of Dr. David Terry and property-wide investigation and analysis, starting with soils.

Chibougamau is a rich gold mining district of high-grade discoveries and historical mines. More than 6.7 million ounces of gold has been mined in the area and there are plenty more ounces in the ground — including at high grades. Just southwest of Chevrier is the Monster Lake JV, where IAMGOLD and JV partner TomaGold have delineated 433,300 ounces of gold at 12.14 g/t Au.

Team, backers, project and neighbourhood — it all matters. So does price of entry. There’s a lot of money chasing a small number of hot junior stocks that have been running hard. But the big money is made positioning in promising plays that have yet to move. Genesis’s current valuation may spell opportunity for investors confident that this top team will identify more high-grade gold, both within the existing deposit and through discoveries elsewhere on the 290-sq-km property.

Disclosure: Genesis Metals is one of three Resource Opportunities sponsor companies and James Kwantes owns Genesis Metals shares, which makes him biased. This article is presented for information purposes and is not investment advice. All investors need to do their own due diligence.

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Strategic Metals poised to drill wholly owned high-grade gold project

By James Kwantes
Resource Opportunities

Well-run project generators are brick houses in a speculative corner of the market, where the winds of commodity prices and dilution are often house wreckers. Their share prices are typically backstopped by healthy treasuries, royalties and equity stakes, as well as extensive claims holdings. They are businesses, not cash-burning lottery tickets like most junior explorecos.

But for many speculators, that level of diversification is a knock. Those bricks provide stability but weigh down the “rocket ship” when a junior exploration company hits a bona fide high-grade gold discovery. Project generators typically retain only limited exposure to discoveries through royalties or small equity stakes.

The picture changes completely, however, when project generators make a high-grade discovery on a wholly owned project. Azimut Exploration (AZM-V) proved it in January with their Patwon gold discovery at the Elmer property in Quebec. Azimut is Quebec’s largest claims holder, diversified across metals and known for its technical savvy. On January 14, the project generator announced multiple high-grade gold intercepts at the James Bay project, including 12.43 g/t Au over 6 metres and 27.36 g/t Au over 4.7 metres.

The day before the discovery was announced, Azimut shares closed at 50 cents (@ $31M market cap). The stock rocketed to $1.50 the following day and remains at about that level, despite the uncertainty and tough market conditions that persist in the junior mining complex. COVID-19 forced the suspension of Azimut’s follow-up 6,000-metre diamond drill program at Patwon.

Azimut closely resembles another project generator with a wholly owned gold project that will be drilled this summer: Strategic Metals (SMD-V, SMDZF-OTC). Strategic, Yukon’s largest claims holder, is cashed-up to drill its Mount Hinton high-grade gold prospect in the Yukon Territory’s Keno Hill district. Strategic plans to spend about $3 million to explore Mt. Hinton this season, including up to 6,000 metres of drilling (diamond and RAB).

The program, of course, is dependent on how the Coronavirus pandemic plays out in the coming months. In Yukon, mining and exploration have been designated an essential service.

Strategic shares currently trade at about 35 cents, for a $34-million market capitalization. It’s a far cry from the $4.35 level ($381M market cap) that the stock hit in 2011. That share price was propelled by gold’s rise to US$1,900 an ounce — less than $200 an ounce higher than current levels — as well as ATAC’s high-grade gold discoveries at the Rackla property in Yukon (ATAC is part of the Strategic Exploration Group).

Doug Eaton (right), Strategic’s CEO and principal of Archer Cathro, the storied Yukon geological consultancy, was in the thick of it during ATAC’s high-grade discoveries.

But the veteran geologist says he’s more excited about Mount Hinton because of the volume of high-grade gold found at surface at such an early stage, during what appears to be a perfect storm for the gold price.

“Mount Hinton is the same kind of setup but the project is much more readily accessible than Rackla and it’s earlier-stage,” Eaton said. “It’s much more exciting than ATAC was at this stage. We have a chance of a major gold discovery under the till or talus.”

Eaton’s comments about Mount Hinton’s possibilities sound like fairly typical Howe Street-style promotion. But a couple of key differences make his observations worth a closer examination:

  • His comments say much more about Mt. Hinton’s prospectivity than they do the potential of ATAC’s Rackla project. Strategic holds a 6.4% stake in ATAC and is incentivized to see the company succeed. Eaton remains a believer that the Rackla deposits will one day produce tens of millions of ounces of gold.
  • Eaton, a geologist, has been working in the Yukon for almost 50 years. He has an almost-encyclopedic knowledge of Yukon mining projects, which helps Strategic snap up forgotten but highly prospective projects. Eaton has been involved in several of the Territory’s major discoveries, including the Casino copper-gold porphyry (now being developed by Western Copper and Gold).

REWIND: In the summer of 2017, Strategic sold six properties including Mt. Hinton to a private company called Territory Metals. The terms of the deal hinted that Mt. Hinton was no ordinary prospect — in addition to a 2% NSR, the agreement included a 10% NSR on any small-scale high-grade gold production and a $1.5-million milestone payment if Territory identified a 1-million-oz gold equivalent resource on any of the properties.

Territory’s go-public plans fizzled and Strategic got the property back. Archer Cathro geologists hit the ground hard in summer 2018. They extended a large geochemical soil anomaly and found multiple rock samples with high-grade gold samples that assayed greater than 9 g/t gold.

Last summer, Strategic hit paydirt with a prospecting program focused on the 3.5-km by 1.5-km gold-in-soil anomaly. One rock sample came back with a bonanza-grade assay: 2,340 g/t gold and 597 g/t silver. Follow up prospecting discovered visible gold at this site (the first reported native gold on the property) and subsequent samples containing visible gold were not assayed. Other chip samples also carried high gold and silver values, including:

  • 42.4 g/t gold & 94.2 g/t silver
  • 9.9 g/t Au & 5.45 g/t Ag over 1 m
  • 24 g/t Au & 36.1 g/t Ag over 1.25 m
  • 23.5 g/t Au & 1,720 g/t Ag
  • 202.0 g/t Au & 2,020 g/t Ag

The property has not seen much exploration despite its proximity to Alexco’s Keno Hill project — Mt. Hinton is just three kilometres south of Alexco’s Bellekeno deposit. That’s largely because of road access difficulties. But the situation has improved dramatically in recent years thanks to the thriving Granite Creek placer gold camp, located at the base of Mount Hinton. Two placer operators are pulling out multi-ounce gold nuggets and the Granite Creek drainage has become one of Yukon’s hottest gold camps.

Granite Creek placer gold operations, one of Yukon’s hottest mining camps, with Mount Hinton in the background.

Strategic brought in excavators last year to build a road network on the property, an effort that will continue this year once the snow melts. The planned 6,000-metre drill program is a large one for Strategic but so is the size of the potential prize. “To find this material at surface is remarkable,” Eaton remarked. Strategic geologist Steve Israel has now mapped three separate phases of mineralization on the property. More phases means higher volumes of mineralizing fluids, which can lead to more gold.

With Mount Hinton a potential near-term catalyst, Strategic’s share price — and downside — is backstopped by a healthy treasury of $6.8 million and large equity stakes, as well as its extensive Yukon claims portfolio. Significant equity stakes include:

  • ATAC Resources (6.4%): high-grade gold deposits on the Rackla property
  • Rockhaven Resources (36.3%): h-g 1.2M oz Au/28M oz Ag deposit, on a road
  • Terra CO2 (62.6%) – pending patent on non-CO2 generating cement replacement
  • Precipitate Gold (24.3%) – Barrick just signed a 70% earn-in agreement for Precipitate’s Pueblo Grande project beside Barrick’s Pueblo Viejo mine in Dominican Republic
  • Silver Range Resources (17.7%) – project generator focused on high-grade prospects in Nevada, NWT, Nunavut

With gold moving in the right direction, the Mt. Hinton drill program positions Strategic to capture the shareholder value that can result from a high-grade discovery. It’s an outcome Eaton has seen before — and why he kept Mt. Hinton in the portfolio when it came back, rather than optioning it.

“We’ve turned down some pretty good offers for Mt. Hinton,” he remarked. “That’s because everybody wants 100% of it.”

Gold is on the move as governments around the world fire up currency printing presses to counter the economic effects of COVID-19. That lift has not yet translated to the junior sector, despite gold hitting all-time highs in most major world currencies. Eaton believes the malaise of the past several years is partly a generational phenomenon — younger retail investors simply haven’t experienced the large multibagger wins that tend to drive money into the junior space.

“You have a generation of investors who have done well in mining but who are too old,” Eaton said. “The generations of younger investors haven’t benefited the way people who are older did in prior bull markets.” That may be about to change.

A high-grade gold discovery at Mount Hinton could trigger a rush to get into Strategic shares, if the action on Aug. 21, 2019 is any indication. That day, Strategic announced high-grade assays including the bonanza-grade rock sample. The stock shot from 39 cents to 47 cents on multiples of average volume. It could be just a taste of what’s to come if Strategic drills a high-grade gold discovery at Mount Hinton this summer.

Strategic Metals (SMD-V, SMDZF-OTC)
Price: 0.35
Shares out: 96.6 million (108.85M fully diluted)
Market cap: $33.8 million

Disclosure: I own Strategic Metals shares and Strategic is one of three Resource Opportunities sponsor companies. This article is not intended as financial advice and all investors need to conduct their own due diligence and/or consult an investment advisor.

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Fremont Gold gears up to drill for discovery at Griffon in Nevada

By James Kwantes
Resource Opportunities

Nevada is known as “The Silver State,” a nod to the 1859 discovery of the Comstock Lode. That rich silver endowment led to Nevada’s statehood, and profits from silver mining helped the North come out on top in the American Civil War.

But the discovery of the state’s rich gold districts, including the Carlin and Cortez trends, a century later quickly made Nevada one of the world’s premier gold mining jurisdictions. Those two districts alone have a combined gold endowment of more than 250 million ounces (production + reserves). And gold is the precious metal that remains Nevada’s largest export by dollar value.

However, U.S. Census Bureau statistics show that Nevada’s gold output is slipping. Gold exports of about $4.9 billion in 2018 dropped to $2.7 billion last year, a 45% decrease.

And Nevada is not the only gold-rich jurisdiction with a declining production profile. New discoveries are needed to replace the ounces being mined. And one of the best places to look for gold is on projects that have been orphaned by larger companies or by exploration companies that have shifted their focus elsewhere.

The latter is the story with the past-producing Griffon project at the southern end of Nevada’s Cortez trend. Fremont Gold (FRE-V, USTDF-OTCBB) purchased Griffon and its 89 unpatented mining claims from Liberty Gold (LGD-T) in December 2019, then raised $1.48 million to drill it. The project was orphaned by Liberty (formerly Pilot Gold), which is drilling out its Black Pine oxide gold project in Idaho. Griffon is southeast of Fiore Gold’s (F-V) Pan mine and Contact Gold’s (C-V) past-producing Green Springs heap-leach gold mine.


Fremont plans to drill 2,000 metres at Griffon, beginning in June. Twenty-six drill sites are currently permitted and the project is bonded. Fremont plans to drill a number of untested targets in the hopes of making a new discovery at Griffon.

Griffon was first drilled in 1988. By 1997 two oxide gold deposits had been delineated, at Discovery Ridge and Hammer Ridge. Over the next three years, Alta operated as a small producer, mining oxide gold from those deposits at average grades of 1.03 g/t in a heap-leach operation. That’s well above average grades of 0.6 to 0.7 g/t being heap-leach mined at typical Nevada oxide gold operations.

Alta’s focus was production, not exploration. The company did not thoroughly explore the property and almost all of the holes they drilled were less than 100 metres deep. Fremont has assembled a crack team of geologists to narrow down targets at Griffon:

  • Clay Newton, Fremont’s VP Exploration and a Phd structural geologist who brings fresh eyes to the project
  • Andy Wallace, Ph.D., a Carlin expert and co-discoverer of five Nevada gold mines as a principal of Cordex
  • Jamie Robertson, Ph.D., Alta’s former exploration manager and a regional expert on Nevada’s southern Cortez trend.

Target areas at Griffon include the untested three-kilometre long Blackrock fault to the east of the Hammer Ridge deposit (one of the two deposits mined by Alta Gold Corp.), the Pilot Shale horizon, and a number of geochemical anomalies. In addition, potential remains in and around the two past-producing open pits.

Clay Newton, Fremont Gold’s VP Exploration, checks out a jasperoid outcrop, an alteration style associated with Carlin-type gold mineralization, at Fremont’s Griffon property on the southern Cortez trend.

Drilling by Alta in an area southwest of Hammer Ridge hints at the property’s potential. Alta hit near-surface gold mineralization in many holes, including 57.9 metres of 0.86 g/t gold. Other drill holes in this area — all of them within 100 metres of surface — included:

  • 25.9 metres of 1.1 g/t Au
  • 36.6m of 0.93 g/t
  • 24.4m of 0.79 g/t

Last summer, Fremont sold its Gold Canyon project to McEwen Mining for 300,000 McEwen common shares in order to focus on securing more advanced-stage assets. The company’s first move was to option Cobb Creek from Contact Gold. Located in Elko county, Nevada, Cobb Creek is an advanced project with a historical gold resource that hasn’t been drilled since 1992. Although Cobb is an intriguing exploration project, Fremont plans to focus on Griffon this exploration season. The company also has the North Carlin, Hurricane and Goldrun projects in Nevada.

Gold is holding steady above US$1,600 an ounce and doing its job as a safe haven. The precious metal is also, increasingly, a buttress against the impending waves of money-printing as governments globally respond to economic paralysis caused by the COVID-19 pandemic.

Gold producers continue to rely on exploration companies to find the next economic ore bodies. That increases the appeal of well-managed juniors poised to create shareholder value with the drill. Fremont Gold fits the bill as it prepares to drill for discovery at Griffon. Insiders have been adding to their stakes, in both the public market and private placements. I have also been buying shares at these price levels.

Fremont Gold (FRE-V, USTDF-OTCBB)
Price: 0.06
Shares out: 81.5 million (121.2M f-d)
Market cap: $4.9 million

Disclosure: I own Fremont Gold shares and Fremont is one of three Resource Opportunities sponsor companies. Fremont is a speculative, high-risk exploration stock that may not be suitable for all investors. This article is not intended as financial advice and all investors should conduct their own due diligence and/or consult an investment advisor.

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Genesis Metals drills for high-grade gold in Quebec

Drilling later this year will test new targets identified by last year’s property-wide soil sampling.

By James Kwantes
Resource Opportunities

For veteran speculators, the latest hits to junior mining share prices feels like deja vu all over again. Sentiment is gloomy and market capitalizations are depressed. But gold in U.S. dollar terms is still up more than 25% year-over-year. And US$1,500 gold translates to more than $2,150 Canadian, an exceptional price for Canadian projects whose expenses are measured mostly in loonies.

Gold producers that deplete their reserves with every shift and every scoop still rely on junior exploration companies to find the deposits that will replenish their ore. Most juniors, meanwhile, had yet to respond even BEFORE the Coronavirus corrections — which has further pummelled the sector. Expectations are very low, along with share prices.

For exploration companies with strong management and backing, a flush treasury and potential for high-grade discoveries, it’s not a bad setup. Genesis Metals (GIS-V, GGISF-OTC) fits the bill. The Discovery Group company has $3.5 million in the treasury to drill its flagship Chevrier project in Quebec’s Chibougamau mining district. Chevrier is located in the eastern portion of the prolific Abitibi Greenstone Belt (180M oz of historical gold production).

Genesis is drilling an initial 2,500 metres (10 holes) at Chevrier, part of a planned 8,000-metre drill program this year. The initial program is designed to tap into high-grade shoots within the Chevrier Main zone deposit, expanding the higher-grade domain. Genesis’s market cap of about $7.9 million is backstopped by existing gold resources at Chevrier totalling 395,000 ounces Indicated grading 1.45 g/t Au and 297,000 ounces Inferred at an average grade of 1.33 g/t, at the Chevrier Main and East zones.

The company has already identified high-grade areas within the deposit — assays announced on January 22, 2018 included 8.73 g/t over 21.35 metres and 4.26 g/t over 19.4 metres at the Main Zone. But those results went unappreciated with gold trading at US$1,330 an ounce on its way down to $1,200. Later this year, Genesis plans to test targets elsewhere on the 295-sq-km property that were identified through last year’s property-wide glacial till survey.

Overseeing the exploration program is new CEO David Terry, an economic geologist who was appointed President and CEO on Dec. 2, 2019 (Jeff Sundar remains as Executive Director). Terry obtained a PhD in Geology from Western University in Ontario. He’s also well-schooled in the vagaries of bull and bear market mining cycles, through decades in the industry running projects — both large and small — for majors and helming explorecos. Terry is currently a director of several active exploration companies including Golden Arrow Resources, Aftermath Silver and Great Bear Resources. Great Bear, also a Discovery Group company, is drilling high-grade gold along kilometres of strike at its Dixie project in Red Lake, Ontario.

For Terry, the Great Bear directorship is a kind of return to Red Lake. His first summer job in exploration included mapping and sampling in the prolific district for a large mining company called Goldfields while he attended Western in the 1980s. He later worked for several years as a contract geologist with Cominco (which sponsored his PhD thesis) in Alaska, followed by a stint with Hemlo Gold exploring back in the Abitibi.

Geologist David Terry, the Genesis Metals CEO, in the field at a gold project in central Ecuador.

After obtaining his PhD, Terry worked for Westmin Resources then Boliden, as a geologist and project manager. When Boliden exited Canada with the mining sector in a post Bre-X slump, Terry took a position as a Regional Geologist for the B.C. Geological Survey in southeastern B.C. for three years. He spoke at the closing ceremony for Teck’s legendary Sullivan mine, which operated for nearly a century and produced 160 million tonnes grading 12% zinc/lead and 67 g/t silver. Since 2004 he has worked in management, director and advisory roles with a number of juniors exploring and advancing precious and base metal projects in both North American and a number of Latin American countries.

Terry joined the Great Bear board in July 2016, before the Dixie project was the company’s flagship. Great Bear’s mineralized LP fault is now recognized as one of the best gold discoveries of recent years, globally. But Terry remembers when the team operated in relative obscurity, with GBR shares trading for dimes not dollars.

As for Genesis, adopting a go-slow approach in 2019 laid the groundwork for an active 2020. Instead of drilling in the depths of a bear market, former President and CEO Jeff Sundar focused on building out the team and raising a war chest. Genesis joined the Discovery Group of companies and added Discovery principals John Robins and Jim Paterson as strategic advisors. The Discovery Group has an impressive record of wins in recent years, including the $520-million sale of Kaminak Gold to Goldcorp and the $117-million sale of Northern Empire Resources to Coeur. Rob Carpenter, the cofounder and former CEO of Kaminak, also came on as a strategic advisor.

Genesis’s successful financings were done in conjunction with a 5-for-1 share consolidation and the appointment of Terry as CEO. Rollbacks have a bad reputation — and rightly so — but consolidations done in conjunction with management changes and large financings can set the stage for success. Great Bear is another example of a successful rollback, its tight share structure helping to propel the stock post-discovery.

Chevrier is located in a prolific district of high-grade gold resources. Directly to the southwest is the Monster Lake gold discovery, where JV partners IAMGOLD and TomaGold have identified an Inferred resource of 433,000 ounces at 12.14 g/t gold. At the Nelligan project further southwest, Vanstar has delineated 3.1 million ounces of gold (Inferred) at about 1 g/t but last year hit 6 metres grading 56.46 g/t Au. IAMGOLD recently increased its interest in the project to 75%.

South of Chevrier, the Joe Mann gold mine produced 1.2 million ounces of gold at 8.26 g/t, as well as silver and copper. Infrastructure is excellent at Chevrier: a highway and power line runs through the property and the regional airport is a few minutes drive to the north. 

With Discovery Group backing, a strong management and technical team, and a full treasury to drill high-grade gold targets at Chevrier, Genesis has laid the foundation for success. And high-grade gold discoveries get rewarded by the market, even in these tumultuous times for juniors.

Genesis Metals (GIS-V)
Price: 0.18
Shares outstanding: 43.76 million (59M fully diluted)
Market cap: $7.9 million

Disclosure: James Kwantes owns Genesis Metals shares and Genesis is one of three Resource Opportunities sponsor companies. Genesis is a speculative, high-risk exploration stock that may not be suitable for all investors. This article is not intended as financial advice and all investors should conduct their own due diligence and/or consult an investment advisor.

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Site visit: Hunting for riches at Group Ten’s Stillwater West PGE-copper-nickel project

Site visit report: Stillwater West, Montana
Group Ten Metals (PGE-V)

December 3, 2019
By James Kwantes
Editor and publisher, Resource Opportunities

Initially published in Resource Opportunities. Subscribe now: coupon code PGE saves you US$100 on regular prices of US$299 for 1 year, $449 for 2 years. www.ResourceOpportunities.com/subscription-information/

Checking out fresh drill core

Assays are pending for holes drilled this season at Iron Mountain and Camp Zone, two of Group Ten’s most advanced targets at the Stillwater West PGE-copper-nickel project in south-central Montana. I initiated coverage on Group Ten in the Oct. 9, 2017 newsletter and recently went on a site visit to the company’s 54-square-kilometre Stillwater West property. The visit reinforced the enormous mineral potential and gave me a glimpse of some of the hurdles that will need to be cleared in order to create shareholder value.

I flew into Billings, Montana’s largest city with a population of about 110,000, and it was a one-hour drive to Red Lodge, where I stayed. Red Lodge is the “Gateway to Yellowstone Park” and nestled against the majestic Beartooth Mountains. With coal mining roots and a tourist flavour, Red Lodge has multiple bars alongside real estate offices, art galleries (with some mining-themed art) and stores selling MAGA gear.

It’s another hour’s drive to Nye (population 300), where Group Ten’s core facility and helicopter landing zone is located. Nye is also on the doorstep of the Stillwater mine complex, which has three producing mines that form the highest-grade major PGM deposit in the world. Group Ten inherited a vast amount of historical data on Stillwater West, including some 28,000 metres of drill core. Company geologists have re-evaluated about 12,000 metres of that core and some of that has been submitted for assay, in cases where it was not assayed or assayed for only certain metals.

Group Ten is that rare junior mining company that is on the radar of majors but still under the radar for most retail investors. Majors are interested because Stillwater West truly has the potential to host multiple economic deposits (overuse has rendered “district scale” an almost-meaningless cliche but it applies here). I believe Stillwater West hosts several bulk-tonnage deposits containing nickel and copper as well as platinum group metals, gold, rhodium, and cobalt.

And the company is closer to delineating deposits at Stillwater West than many people expect, because of the historical data and core (Group Ten’s qualified person, Mike Ostensen, was also QP for much of the prior drilling). According to their Oct. 31 news release, the company plans to publish mineral resource estimates at the three most advanced targets on the property: Iron Mountain, Camp Zone and Chrome Mountain.

Impression #1: It was quickly apparent that mining is part of this area’s DNA and it’s not just the Stillwater mine complex, a major employer. You can buy miner’s boots (among other more peculiar and charming items) at the general store in Fishtail, which has been open since 1900. Red Lodge was founded on coal; Nye used to be a copper mining camp. A short hike from one of Group Ten’s drill sites was a prospector’s cabin, near an old collapsed adit where the hermit used to hand-mine copper.

Prospector’s cabin: the roof had caved in but the foundation wasn’t going anywhere.

 

Group Ten first caught my attention in June 2017 when they acquired the Stillwater West PGE-nickel-copper project adjacent to the Stillwater mine in south-central Montana. A month before, South African miner Sibanye Gold had spent US$2.2 billion to buy Stillwater, rebranding as Sibanye Stillwater in a major diversification move out of South Africa. Much of the world’s palladium and platinum is mined in South Africa, but Stillwater is the world’s highest-grade PGM mining complex. The deposits host more than 105 million ounces of palladium and platinum (in all categories) at average grades of more than 12 g/t palladium and 3.5 g/t platinum.

The mineralization at Stillwater West is complex: the rocks are up to 2.7 billion years old, with multiple mineralization styles. Metal-rich magma was laid down layer after layer and cooled slowly, creating various deposit types. The closest analogue globally is Platreef in South Africa, the rich PGM-copper-nickel deposit that David Broughton played a key role in discovering (Broughton is a Group Ten advisor). And its mineral endowment makes Platreef one of the most valuable pieces of real estate on Earth.

Flying over Sibanye-Stillwater’s flagship mine (below) in a helicopter provided a good overview of the large operation. There were plenty of vehicles in the parking lot at the mill, which processes ore from three separate underground mines: Stillwater, East Boulder and Blitz. Local considerations are front and centre: a separate vast tailings pond located away from the mill site was built behind a bluff, making it all but invisible from the road.

Impression #2: Group Ten’s local knowledge at Stillwater West is a big edge. In addition to consolidating the previously splintered land package, Group Ten employs geologists with combined decades of experience working the project for prior operators. Chief geologist Craig Bow has 40 years of global experience as an economic geologist, including years of work at Stillwater from exploration to a production decision. Both project geologist Mike Ostenson and project geophysicist Justin Modroo (a professional extreme skier) are Montana natives; both men worked in the Stillwater complex for previous operators Premium Exploration and Beartooth Platinum. A small example of sensitivity to locals: the helicopter landing zone is a short ATV ride from the core shack, in a rural area where the flight path to the drills will cause the least disruption for residents. 

With a helicopter-assisted drill program, Group Ten’s exploration costs are relatively high. (There are trails running to most of the drill locations but they are winding, time-consuming mountain ATV trails.) That makes dilution a major risk factor for Group Ten, but the company does have a few aces up its sleeve. Namely, in-the-money warrants that should help boost the treasury, as well as non-core assets in Yukon (Kluane PGE-Ni-Cu) and Ontario (Black Lake-Drayton Au) that CEO Mike Rowley is working to monetize. 

There has been M&A action in the PGM sector, especially South African producers expanding outside of that (troubled) country. The latest was Impala Platinum’s $1-billion purchase of North American Palladium and its Lac des Iles PGM mine in Quebec. Majors also continue to be on the lookout for nickel and copper, which Group Ten has in abundance at Stillwater West. I was also intrigued to see Group Ten reference rhodium in its Oct. 31 NR headline and wonder if that’s a sign of good things to come. Rhodium is currently trading at about US$5,000 an ounce and palladium trades at US$1,833 an ounce, up almost 45% this year.

The path to shareholder profits for Group Ten probably involves doing a JV deal with a major mining company prepared to spend the money to turn Stillwater West into a drill-hole pin cushion and advance the deposits. That would leave Group Ten with a smaller slice of a very valuable project, which could still be worth many multiples of the current market capitalization. Execution will be key, but Group Ten could be sitting on if not a gold mine, multiple deposits containing PGMs, nickel, copper and cobalt. Upcoming catalysts include drill results and mineral resource estimates from three of the most advanced Stillwater West mineralized zones.

Group Ten Metals (PGE-V, PGEZF-OTC)
Price
: 0.17
Shares out: 81.1 million (122M f-d)
Market cap: $13.8 million

Disclosure: This report was published and sent to paid Resource Opportunities subscribers on Nov. 3, 2019. James Kwantes is a Group Ten Metals shareholder and the company covered costs associated with the site visit and for distribution. This report is for informational purposes only and all investors need to do their own research and due diligence.

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Cashed-up explorer prepares to drill large gold-copper porphyry target

By James Kwantes
Editor and publisher, Resource Opportunities

Speculating in junior mining equities is a dangerous — and sometimes extremely lucrative — game. Some of the key qualities that lay the groundwork for shareholder value creation in an exploration play are:

  • Serially successful management
  • High-quality projects
  • Stable jurisdictions
  • The right commodity, at the right time
  • Tight share structure.

Discovery drill plays carry both the most risk and potential reward. A discovery can create tremendous — even life-changing — shareholder value. But it’s only the drill — aka the “truth machine” — that will determine whether an economic ore body lurks beneath the surface. Orestone Mining Corp. (ORS-V) is funded to drill two large porphyry targets in British Columbia and Chile and has positioned itself for success by ticking the above boxes.

Next comes a drill program at Orestone’s Captain property, which is host to a large gold-copper porphyry target near Centerra’s Gold’s Mount Milligan copper-gold mine northwest of Prince George. Orestone plans to drill between up to 1,250 metres in 5 holes at its Admiral target. The project is located on flat terrain and accessible via logging roads, making year-round exploration possible.

Mobilizing the drill at the Captain project.

I initiated coverage on Orestone at 7 cents in Resource Opportunities on Sept. 26, 2018 and the stock has since traded as high as 25 cents. Shares now trade at 12.5 cents, giving the company a market capitalization of about $3 million — very modest compared to other cashed-up, high-potential drill plays. Orestone has about $700,000 in the treasury and is raising another $500,000 in flow-through funds to drill Captain. The company is selling 16-cent units, each of which includes one flow-through share and half a warrant (one-year, 22-cent).

Orestone has a clean share structure, with a serially successful management team advancing two high-calibre projects in neighbourhoods that host very large mines. Let’s take a closer look.

MANAGEMENT

Orestone’s chairman and CEO David Hottman and Gary Nordin, an Orestone director and senior consulting geologist, have deep industry experience with successful companies including Bema Gold, Eldorado Gold, Nevada Pacific Gold and Polaris Materials. All of those companies were acquired by larger companies except for Eldorado Gold.

Nordin, a co-founding director and VP of Bema, has been directly involved in several multi-million-ounce gold discoveries, including Refugio in Chile (6-8M oz). He was also a co-founder, director and VP of Eldorado, where he was involved in the Kisladag discovery in Turkey (12M oz) and La Colorada in Mexico (1M oz). Hottman owns about 5.3% of Orestone’s outstanding shares; Nordin owns 4.2%.

The latest team member is Bruce Winfield, appointed president on June 3, and I recently stopped by Orestone’s modest Vancouver offices to meet him. Winfield is a Spanish-speaking geologist who got his first taste of Latin America working on the Cerro Colorado porphyry deposit in Panama for Texas Gulf. He later spent three years working in Spain, including opening a Boliden office in Madrid.

When Winfield (right) returned to North America, Latin America was opening up to mining and his language and operations skills were in demand. He spent seven years working for Greenstone Resources, where he helped acquire and develop four deposits that later became producing mines. One of those was La Libertad gold mine in Nicaragua, the first asset sold after the defeat of the Sandinista government.

La Libertad later became one of B2Gold’s foundational assets (B2Gold recently sold La Libertad to Calibre Mining).

Winfield also spent two years working with Hottman and Nordin at Eldorado Gold, where he was VP Exploration. The focus during his first year there was to increase the resources at the La Colorada mine in Sonora, Mexico to expand production. La Colorada is now owned by Argonaut Gold.

During his second year at Eldorado, the company bought Gencor’s Brazilian and Turkish assets, which included nearly 24,000 square miles of exploration land including several small resources. Persistent exploration subsequently yielded the prolific Kisladag gold porphyry discovery. Winfield was most recently president and CEO of Defiance Silver (DEF-V), a Mexico-focused silver exploration company.

Orestone’s bench strength extends to the board. Director Julia Aspillaga is a Chilean national who played a key role in the development of the Refugio deposit for Bema Gold and also brought the group the Cerro Casale project, where a mineral reserve and resource of more than 23 million ounces of gold, 5.8 billion pounds of copper and 58 million ounces of silver has been drilled off. Barrick Gold and Newmont-Goldcorp are now 50-50 partners on the project.

Daniels is a mining engineer who graduated from the Colorado School of Mines and has worked in 13 countries and more than 50 projects with companies including Gustavson Associates and Caterpillar. Daniels worked on the startup of Bema Gold’s Champagne gold mine in Idaho, the company’s first producing asset, in 1989-90.

PROJECTS

The flagship Captain project in northern British Columbia is a gold-copper porphyry target about 30 kilometres (18.6 miles) south of Centerra Gold’s open-pit Mount Milligan copper-gold mine. With drill permits in hand, Orestone is mobilizing the rig and plans to start drilling later this week, once the flow-through financing closes.

During the last drill program, in 2013, hole C13-03 hit a three-metre xenolith fragment of highly altered rock grading 1.9 g/t gold and 0.226% copper over three metres, within a post-mineral dyke.

Orestone’s Gary Nordin believes that fragment is a transported piece of a 2-kilometre by 1-kilometre monzonite porphyry body that correlates with an Induced Polarization (IP) anomaly. The drill will target that interpreted mineralized body with five initial drill holes and about 1,000 to 1,250 metres. The modest program has the potential to hit “pay dirt” — Mount Milligan to the north has proven and probable reserves of 4.7 million ounces of gold and 1.8 billion pounds of copper.

Geologists Gary Nordin, left, and Barney Bowen check out historic core.

The Resguardo project is an 11.3-square-mile copper-gold porphyry target that covers historic oxide copper workings northeast of Copiapo, Chile. A large IP chargeability anomaly under the oxide copper suggests there could be a sulphide copper porphyry at depth — theory that has never been tested. That’s the target for Orestone’s planned drill program.There are several giant gold and copper-gold deposits within 100 kilometres of Resguardo, including El Salvador (CODELCO), Cerro Casale (Barrick/Newmont-Goldcorp), Candelaria (Lundin Mining) and Maricunga (Kinross).

STABLE JURISDICTION

British Columbia has its detractors, but the province remains a favourable place to operate large mines. Australian gold giant Newcrest evidently thinks so, having recently purchased a 70% interest in Imperial Metals’ Red Chris mine for US$807 million. So does Teck, which operates copper and coal mines in B.C. and recently bought a 14% stake in B.C. copper-gold explorer Sun Metals.

As for Chile, the nation produces up to a third of the world’s copper and plenty of gold. Much of the metals come from giant deposits — of 5-30M oz gold and/or more than 5 million tonnes of contained copper. Chile is recognized as one of the most stable mining jurisdictions in the world. And in director Julia Aspillaga, Orestone has a capable operator with excellent in-country connections.

COMMODITY

The gold market has come alive and looks better than it has in years — since 2013, to be precise. And back then, gold was on its way down after hitting US$1,900 an ounce. Copper has been weaker — along with the other base metals — on U.S.-China trade wars and growing fears about the health of the global economy. The civilization metal appears to be basing at the US$2.60 level. Copper’s long-term demand case remains intact, however, and a supply crunch is looming as legacy mines deplete their reserves and begin to shut down.

Orestone’s timing could be fortuitous. The company is focusing on a deposit type — gold-copper porphyrys — that is expected to produce an increasing amount of the world’s gold, according to a July 2014 article in the Society of Economic Geologists newsletter. Copper-gold porphyrys have only been mined since the 20th century. Orogenic gold deposits have been mined for thousands of years, while the Witwatersrand has been producing gold since the late 19th century. Production in the rich South African gold belt — an important gold source — has steadily declined since 1970.

Orestone has two planned drill programs in “elephant country” for porphyry deposits. With drilling success, the company projects could eventually contribute to global gold and copper production in already established mining camps. Owning Orestone shares gives you exposure to two large exploration plays and the potential for a dramatic rerating from this $3-million valuation.

Orestone Mining Corp. (ORS-V)
Price: 0.125
Shares outstanding: 23.8 million (39.6M fully diluted)
Market cap: $3 million

Disclosure: James Kwantes owns Orestone shares and the company is a sponsor of Resource Opportunities. Orestone is a lightly traded, high-risk junior exploration stock. This is not financial advice and all investors need to perform their own due diligence.