Tag Archives: Klondike Gold Rush

Klondike Gold narrows down search in Yukon goldfields

By James Kwantes
Resource Opportunities

It’s early afternoon on an overcast Yukon day and CEO Peter Tallman is in show and tell mode at Lone Star, one of Klondike Gold’s properties in the heart of the historic Klondike goldfields. The geologist is dressed in old jeans, a flannel shirt, muddy gumboots and a baseball cap. The trip to the rugged property outside of Dawson City had Tallman’s pickup truck bouncing and bucking like an ornery bull with a rider on its back. It’s 3,000 kilometres and a world away from Vancouver’s Howe Street, a global centre for mining exploration finance.

The Lone Star mine was one of only a handful of bedrock gold mines in the Yukon, albeit a small-scale operation. The mine produced a small amount of gold at average grades of about 5.2 g/t Au between 1911 and 1914. Exhibit A is a faded wooden two-storey building, constructed in 1908 and visibly leaning. The building was abandoned circa World War 1, although it was reinforced and has been used since for various purposes. Nearby are high-grade surface and underground vein workings.

As Tallman walks through high grass toward the sun-burnt structure, he spots something and stops to pick it up. Exhibit B: a dilapidated shoe, several rusted metal tacks keeping the sole on. Tallman marvels at the resilience of the oldtimers, as he outlines his own plans to develop an economic gold deposit on the property.

“Imagine you’re working in minus 30 and wearing these on your feet,” he says, shaking his head.

Inside the dilapidated building are glimpses of the lengths to which fortune seekers would go – and the distances they would travel – in search of gold. After catching up on the news, the miners would line the walls with their newspapers – makeshift insulation in a land where winter temperatures routinely drop below -20 Celsius (-4 Fahrenheit). Posted alongside English-language newspapers from Winnipeg, Toronto and Montreal are broadsheets in Swedish and German.

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In the Yukon, these bedrock miners were an anomaly. The Yukon Geological Society estimates that 20 million ounces of gold have been pulled from Klondike-area creeks and gravel beds since 1896. Virtually all of it, of course, has been alluvial gold. The lack of bedrock sources for the gold is one of the enduring riddles of the Yukon, where placer gold mining remains one of the largest industries. Several stores in Dawson City still accept gold nuggets as currency.

Tallman’s goal is to systematically explore the property and identify an open-pittable gold deposit of more than 1 million ounces, for starters. He joined Klondike Gold in December 2013. But before he got to the geology, Tallman spent most of the first year and a half cleaning up the corporate structure and rebuilding relationships in the Yukon. Predecessor companies had raised a lot of money, dug a trench that could be seen from space, and constructed some Cadillac core shacks. But little was spent on systematic property-wide exploration, and not much accomplished.

Diamond drilling is underway on this year’s 5,000- to 7,000-metre program. The 2018 exploration budget is $2.5 million, Klondike Gold’s largest yet, and work will include soil sampling and ground magnetics. The plan builds on last year’s exploration program ($2 million spent) and the Lone Star discovery of 2016, when Klondike spent $750,000 on exploration.

There is high-grade gold on the Lone Star property, as drill intercepts from both 2016 and 2017 have shown. They included:

– 2.4 g/t Au over 41 metres (Lone Star, 2017)
– 2.4 g/t Au over 37 m (Lone Star, 2017)
– 5.1 g/t Au over 14.3m (Nugget zone, 2016)
– 3.3 g/t Au over 11.93m (Nugget zone, 2016)

But key to a new geological interpretation is the presence of disseminated lower-grade gold, which builds ounces even though it doesn’t generate sexy headlines. The new interpretation was the focus of a PhD thesis from Leeds geology student Matt Grimshaw, who will be back this summer helping SRK Consulting map the entire property. Tallman thinks as much as 90% of the gold in the Klondike could be disseminated.

Tallman has also brought on a VP Exploration to help him solve the geological riddles of the goldfields: Ian Perry. The geologist has more than 35 years of experience managing advanced exploration and development projects in Canada and internationally.

Tallman has identified four faults that control gold mineralization at Lone Star: the Bonanza, Nugget, Eldorado and Irish faults. The gold was forced up through the faults and formed veins or was disseminated. Tallman’s theory is that those faults, in turn, are controlled by the Rabbit Creek Thrust, which he believes could run the entire length of Klondike’s 55-km claims holdings.

“Do we know that these gold-bearing structures, that we’ve proven are at Lone Star, do they extend across the entire 55-kilometre structure?” Tallman says. Determining the answer to that question is the goal of the 2018 exploration program, which will include drilling at Gold Run at the southern end of Klondike’s property.

Klondike Gold has a dominant land position in a district where the mining of gold is already a multi-million-dollar business. A few numbers give a sense of just how large Klondike Gold’s property package is. The company owns 2,780 quartz claims, which make up 553 square kilometres to form a district that is 55 kilometres long. Road access is excellent – an important feature in a territory where planes and helicopters are common but expensive tools of modern gold exploration.

And the infrastructure is about to get better. The $360-million “Roads to Resources” plan announced last year by the Canadian and Yukon governments includes reconstruction of two roads that run through Klondike’s claims. The road connecting Goldcorp’s Coffee to Dawson City also goes through Klondike Gold claims. Goldcorp bought Kaminak Gold and its Coffee deposit — 120 kilometres south of Klondike’s claims — for $520 million in 2016. The takeover was part of a flood of Yukon investments from gold producers including Barrick and Newmont.

Tallman wants to build long-term shareholder value at Klondike Gold, so it’s a play that requires patience. On that front, it helps having deep-pocketed shareholders who take a long-term view of their mining exploration investments. Among them are billionaires Frank Giustra (14%), Eric Sprott (13%) and Francesco Aquilini, whose family owns the Vancouver Canucks hockey team. About 56% of Klondike’s shares are held by the top 20 shareholders.

A series of financings has the company fully funded for both this year and next. Klondike Gold has $6.5 million in the treasury and about $7.4 million worth of warrants.

Since bottoming in the fall of 2016, Klondike shares have been making higher highs and higher lows. Tallman has been buying stock in the open market this year, at prices ranging from 22-24 cents. The purchases take his stake in the company to about 2.7 million shares, or 2.8% of outstanding shares.

Klondike Gold (KG-V, KDKGF-OTC)
Price: 0.235
Shares outstanding: 96.8 million (120M f-d)
Market cap: $22.8 million

Disclosure: Klondike Gold is one of three Resource Opportunities sponsor companies and James Kwantes, editor and publisher of Resource Opportunities, owns Klondike Gold shares. Readers are advised that this article is solely for information purposes. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice. The information is based on sources which the publisher believes to be reliable, but is not guaranteed to be accurate, and does not purport to be a complete statement or summary of the available data.

Copyright​: This publication may not be reproduced in whole or in part, in any form, without the express permission of the publisher. Permission is given to extract parts of the report for inclusion or review in other publications only if credit is given, including the name and address of the publisher.

An UnderValued Mining Play in a Storied Gold District

Strategic Metals (SMD-V) is spinning out Trifecta Gold, with 4 projects in Yukon’s hot White Gold district

First-mover philosophy helps Strategic beat the majors into Yukon’s best area plays

By James Kwantes

Fortunes are made, and sometimes lost, in the great mining rushes that drive people, prospectors and dollars on the heels of exciting discoveries. One of the greatest was the Klondike Gold Rush of 1896-1899, kicked off by the August 1896 discovery of gold at Bonanza Creek by Skookum Jim, Dawson Charlie, George Carmack and Kate Carmack.

Almost a year after the discovery, the SS Portland steamship arrived in Seattle. Among its passengers were several of the most successful Yukon prospectors. Its cargo included more than one tonne of gold. Two days earlier, another gold-laden ship had landed in San Francisco. In Seattle, a crowd of thousands greeted the Portland. The Seattle Post-Intelligencer newspaper screamed “Gold! Gold! Gold! Gold!” in a banner headline. The race was on.

Treasure hunters came by the tens of thousands. But they soon discovered that the prime land around gold-rich creeks had already been staked by prospectors in the Yukon. For some who got in early, it was a ticket to riches.

Fast-forward 120 years and another gold rush is taking shape in the mineral-rich Yukon. This one is being led by major gold mining companies, who are systematically buying up stakes in exploration companies in a jurisdiction the Fraser Institute describes as one of the best in the world. Goldcorp (G-T) kicked off the new gold rush in May 2016 with its $520-million purchase of Kaminak Gold and the multi-million-ounce Coffee deposit in the hot Dawson Range gold belt.

In the original Gold Rush, those who arrived early — before the crowd — were most likely to secure their fortunes. It’s no less true today. In the hunt for geological riches, “location, location, location” is key for majors in search of the next big gold district. Public companies that can secure valuable land positions — and investors who get in early — will be the biggest winners.

ENTER BARRICK
The latest major to enter the Yukon is Barrick Gold (ABX-T), the world’s largest gold miner. In an option deal announced April 10, Barrick will invest up to a total of $63.3 million in ATAC Resources (ATC-V) for a staged buy-in that will give the miner up to a 70% interest in ATAC’s Orion project. The deal includes a flow-through private placement financing of $8.3 million that takes Barrick’s stake in ATAC to 19.9%. It’s a good deal made even better because the Orion project does not include ATAC’s major discoveries — Tiger, Conrad and Osiris.

Given Barrick’s history, the partnership with ATAC is a natural. In 1986, Barrick acquired the small Goldstrike mine in Nevada’s Carlin trend. Barrick soon hit a rich discovery and Goldstrike turned into a company maker, delivering enormous profits and 50 million ounces of gold production (and counting) to Barrick. ATAC has North America’s only known Carlin-type gold mineralization outside Nevada at its vast Rackla project in Yukon. And it was ATAC’s 2011 discovery of Carlin-type gold at Rackla that sent the company’s stock above $9 that year.

PRIME POSITIONING
As the largest claims holder in the Yukon, no company is better poised to benefit from the majors’ renewed Yukon interest than project generator Strategic Metals (SMD-V). Strategic holds valuable land positions in each of Yukon’s major mineral belts, assembled over decades using the proprietary database of storied geological consultancy Archer, Cathro & Associates. Archer Cathro has had a hand in most of the Yukon’s major mineral discoveries and deposits.

In each of the recent investments by majors, Strategic had already staked claims and was positioned in the neighbourhood. The growing list of majors that have stepped up to secure their Yukon stakes is a who’s who of gold miners. Their investments validate Strategic’s early-mover philosophy.

The Barrick-ATAC deal was just the latest example. Strategic owns more than 10.1 million shares of ATAC Resources, an 8.3% stake that has increased in value more than 50% since the JV deal was announced. Strategic also has several claims and large land positions adjacent to much of ATAC’s Rackla project in Yukon’s Nadaleen Trend.

Of any of the investments by majors, Newmont’s deal with Yukon junior Goldstrike Resources (GSR-V) may have been the most surprising. The agreement, announced March 6, includes a private placement and could see Newmont invest up to $53 million for a majority stake in Goldstrike’s Plateau gold project in the east-central Yukon. It was another case of Strategic beating the majors to a potential district — the project generator had already staked ground in the prospective area. And on April 6 Strategic announced that it had added to its land position near Plateau through staking.

Goldcorp and Coffee — yes, Strategic was already there. It was Strategic CEO Doug Eaton who staked the Dan Man property, which borders Coffee’s northern boundary and is owned by Arcus Development Group (ADG-V). The Coffee gold mineralization extends right to the Dan Man property boundary and Goldcorp followed up its purchase of Coffee by buying a 19.9% stake in Arcus. Strategic owns 3,333,333 Arcus shares, a 4.5% stake in the company. Arcus is planning a 2017 drill program at Dan Man, with technical help from Goldcorp.

A NEW WHITE GOLD PLAY, FOR ‘FREE’
But the Strategic Metals holding with potentially the most upside remains under the radar, its worth yet to be determined by the market. The company is Trifecta Gold, a new precious metals exploration company that will come out of the gate with four projects in the Yukon’s hot White Gold district. Pending shareholder approval — the vote is this Friday — Trifecta shares will be spun out of Strategic Metals early next month. Strategic shareholders will receive one Trifecta common share for each 4.5 Strategic shares held. Trifecta shares will trade as “TG” on the TSX Venture Exchange.

For Trifecta, the last gold play to go public in the prolific district offers a glimpse at the possibilities. It was White Gold Corp (WGO-V), which holds a large land package after purchasing Yukon prospector Shawn Ryan’s White Gold claims. Ryan, of course, helped put the district on the map with discoveries that culminated in buyouts from Kinross (Golden Saddle in 2010) and Goldcorp (Coffee in 2016). He’s also chief technical advisor for the new exploration play. In late 2016, Agnico Eagle paid $14.5 million for a 19.9% stake in the company, valuing White Gold Corp. at $72.5 million. The market capitalization has since surged past $130 million.

White Gold’s trajectory is evidence that the Dawson Range belt has become one of the hottest gold exploration districts globally. With gold approaching US$1,300 an ounce and risk capital tentatively returning to the exploration sector, the timing couldn’t be better.

The renewal of action and interest bodes well for Trifecta Gold stock, which is expected to begin trading in early May. The share distribution record date is set for April 27. Investors who own Strategic shares before that date are staking their claim to a promising, tightly held exploration play before the stock hits the public market. Strategic will retain about 9.8% of Trifecta shares and distribute the rest to its shareholders.

Trifecta’s properties in the Dawson Range gold belt are:
Eureka — Eureka is a 70-sq-km orogenic gold project at the southern end of the Klondike Goldfields. The Eureka claims straddle the headwaters of two of the most productive placer creeks — Eureka and Black Hills — in the southern Klondike. The creeks have spit out a reported 200,000 ounces of placer gold between 1978 and 2016, and the gold’s attributes suggest that it’s near source. Eureka is drill-permitted and exploration will focus on a handful of showings identified by soil geochemistry, trenching and drilling. Eureka is along the proposed haulage route to Goldcorp’s Coffee project and could progress quickly from exploration to development.

Triple Crown and Treble — The properties are located halfway between Coffee and Rockhaven’s (RK-V) Klaza, a polymetallic gold deposit. Initial prospecting at Triple Crown yielded a rock sample assaying 6,680 g/t silver, 30.22% lead and 0.80 g/t gold. A follow-up trench there returned 570 g/t silver, 2.76% lead, 0.08 g/t gold over 6.4 metres and 106 g/t silver, 0.84% lead and 0.03 g/t gold over 9.6 metres. There are several geochemical anomalies at Treble; 2011 prospecting at one of them revealed a 100m by 120m zone of brecciated hydrothermal quartz and gold mineralization in rock samples.

Trident — The road-accessible Trident property consists of 525 claims, 195 wholly owned by Strategic and 330 optioned from two other companies. At the Squid project, optioned from Metals Creek Resources, limited drilling returned results including 21.0 metres of 1.55 g/t gold and 114 g/t silver and 12.0 metres of 1.7 g/t gold and 81.78 g/t silver.

Trifecta’s CEO, Dylan Wallinger, witnessed firsthand the type of shareholder value that discovery can create during the summer of 2010. Working out of Archer Cathro’s Whitehorse office, Wallinger was part of a small field crew at ATAC’s Rau property, where his duties included everything from prospecting to splitting core. The project was not yet a major focus for ATAC. But that changed quickly when assays were returned from one of the cores Wallinger split. It turned out to be the Osiris discovery hole announced on Sept. 1, 2010, which returned 9.26 g/t gold over 31.13 metres within a larger interval averaging 4.65 g/t over 65.20 metres.

That discovery, as gold surged toward an eventual peak of US$1,900/oz the following year, was one of the catalysts that fuelled ATAC’s rocket ride in 2010 and 2011. The stock climbed above $8 in 2010 and cracked $9 the following year on excitement about the discovery of a new Carlin-type gold district outside of Nevada.

TRIFECTA CEO: ‘PROVE IT OR KILL IT’
As president and CEO of Trifecta, Wallinger will have the chance to play a more central role in creating shareholder value. The former Archer Cathro project manager has stepped down as a partner with the geological consultancy to focus on Trifecta. Strategic is seeding Trifecta with about $750,000. Depending on the work program, Wallinger knows he’ll have to raise more money. The CEO wants to finance at higher prices than where Trifecta shares start trading.

Trident may be Trifecta’s most intriguing project. The road-accessible property hosts an air strip and several roads, as well as gently sloping terrain amenable to a mining operation. There are drill permits in place but Trifecta has applied for more extensive permits. Trident has resource-sharing possibilities — there’s a producing placer mine on the property — but also spending obligations. On the Squid option, Trifecta must spend a minimum of $500,000 in the first year ($2.25 million over three years and issue 6.5 million TG shares) as part of a staged 60% earn-in.

Wallinger says Trifecta won’t spend any more than necessary to either prove mineralization at the optioned claims or walk away. If results are positive, the company plans to mobilize more drills, heavy equipment and fuel by road and continue to work into late fall. “The idea is to go in and explore aggressively, and prove it or kill it,” Wallinger says.

Strategic has more than 100 wholly owned projects in Yukon available for option, many of which are drill-ready and fully permitted for advanced exploration.The company also has an investment fund with dozens of junior exploration investments at various stages of development. Strategic owns major stakes in:

Rockhaven Resources (RK-V) — Strategic owns a 45.2% stake in Rockhaven, which is expanding and advancing the high-grade, polymetallic Klaza deposit towards production;
Precipitate Gold (PRG-V) — Strategic owns 31.2% of Precipitate, which is advancing the flagship Juan de Herrera project located within the emerging Tireo Gold Camp in the Dominican Republic;
Silver Range Resources (SNG-V) — Strategic owns 15.3% of Silver Range, which owns four zinc-lead-silver projects in Yukon and high-grade gold projects in NWT, Nunavut and Nevada.

For some mining-focused investors, one of the knocks on project generators is a structure that prevents them from capturing the full shareholder value driven by discovery. But with the spinout of Trifecta Gold, Strategic is changing the game by surfacing value unrecognized by the market. Shareholders will have exposure to both discovery upside in one of the world’s hottest exploration districts AND the diversification of Strategic’s valuable shareholdings and Yukon claims. The price tag is low — Strategic’s working capital amounts to almost $40 million currently and its market cap is just $50 million.

Price: 0.58
Shares outstanding: 89.1 million
Market cap: $51.7 million
Working capital: $39 million

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Disclosure: The author owns shares of Strategic Metals, Rockhaven Resources, Silver Range Resources and Arcus Development Group. Strategic Metals is one of three Resource Opportunities sponsors, who help support the subscriber-funded newsletter by keeping subscription prices low. The work included in this article is based on SEDAR filings, current events, interviews, and corporate press releases. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value, so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.