Ontario's Gold Rush
The Red Lake region heats up
Historically, the Red Lake mining district in Northwestern Ontario is best known for its high-grade gold deposits, with overall production exceeding 30 million oz of gold, mostly driven by the iconic Campbell and Red Lake gold mines. Today, a host of factors such as declining gold reserves, global economic instability, and a rise in the price of gold have led to a resurgence in gold exploration in the region.
On March 31, 2020, Australian gold miner, Evolution Mining completed its US$375 million purchase of the Red Lake Mining complex from Newmont Goldcorp, with an additional US$100 million tied to additional discoveries in the complex. In the 2000s, Red Lake transformed Goldcorp into the most valuable gold company in the world after it consolidated the Dickenson, Campbell and Cochenour mines and discovered the famous 7 million oz high-grade zone. Now, Evolution Mining is looking to modernize the mining complex, and a multitude of juniors have become active in a region that looks rife with M&A potential.
One of the key success stories driving the Red Lake rebound has been the exciting high-grade gold discovery made by Great Bear Resources (TSX:GBR) in 2017. Their flagship 100%-owned Dixie project covers an area of 300 km2 and is situated 25 km southeast of the town of Red Lake. The property contains four separate projects and the success of GBR’s Dixie project has attracted a number of other junior explorers to stake claims and acquire properties in close proximity to the property.
GBR has the largest exploration program in the district and, from a physical footprint, it is the largest gold system that has been discovered in decades in the area. At the LP fault discovery, the company has drilled gold in it along 11 km of strike length, and according to Great Bear president & CEO, Chris Taylor: “There is no one else in the district that has anything like that. What we are looking at is one of the largest exploration programs and the highest success rate on drill holes. All of the drill holes that we have put in targeting our zones have hit gold mineralization, which cannot be said about any other project.”
GBR’s success certainly makes it a compelling target for M&A, and the company recently brought on Michael Kenyon as a director, who has been involved in several large mining project builds and eventual sales. Although his addition could be perceived as foreshadowing a future sale, Taylor pointed out that effectively, whether you want to build and operate a large mining project or sell it, you have to do the same things. “That means developing the project, de-risking the asset and making it appealing to yourself as a potential operator, or to whichever other potential operator might come in and buy it. We intend to transform GBR from a leading exploration company to a leading development company,” he stated.
Another Red Lake-focused junior based outside of Ontario is Vancouver-headquartered BTU Metals (TSXV: BTU), which joined GBR on the TSX Venture 50 list in 2020 thanks to a share price appreciation of 191%. BTU’s Dixie Halo project, a 200 km2 property that surrounds GBR’s Dixie project, was acquired after completing six separate land transactions, according to CEO, Paul Wood. “This area of the Red Lake camp is dramatically underexplored – only twenty holes had been drilled on our entire property by the time we acquired it,” said Wood, adding: “BTU is really the first group to seriously explore this land package, which is an incredible opportunity in such a marquis mining camp.”
On the topic of potential M&A in the Red Lake district, John Kontak, president of West Red Lake Gold Mines (CSE: RLG), commented: “There is certainly interest from people with the financial capacity to create consolidation and any transactions made in the near-term will be considered to have taken place early in the cycle.”
RLG holds joint venture claims at the Rowan mine property with Evolution Mining, a 1.1 million oz resource with an inferred grade of 7.57 g/mt, within 500 meters from surface.
Red Lake sits in the Uchi geological sub-province in northwestern Ontario, an area that is also home to a hive of junior activity outside of the famous Red Lake camp. One of the new players in the region is Auteco Minerals (ASX: AUT), led by the team that had huge success with Bellevue Gold, the Australian junior that reached A$1 billion market cap in 2020. Ray Shorrocks, Auteco’s executive chairman, explained what attracted him to the Pickle Crow project in Ontario: “It reminded me of an early-stage Bellevue: an unloved, disused mine, in a tier one jurisdiction, that had been discarded but had great potential.”
Between 1935 and 1966, Pickle Crow had been one of the most prolific gold mines in Canada, but stopped because gold had fallen to US$35/oz. Now, the Auteco team is looking to build on Pickle Crow’s inferred resource of 1 million oz at 11.3 g/mt gold, with a resource upgrade targeting 1.5 million oz set to be released in 2021, before drilling out the regional areas to move towards 2 million oz. “Importantly, we want to sustain the grade around 10 g/mt,” added Shorrocks.
Auteco Minerals acquired the Pickle Crow project from First Mining Gold Corp (TSX: FF), which decided to focus on its flagship Springpole gold project. Since bringing on Dan Wilton as CEO in 2019, Springpole, which is one of the largest undeveloped gold projects in Ontario, has made great strides. In 2020 alone, FF raised more than C$60 million to advance the asset through the environmental assessment process through to the point where they can negotiate and ultimately conclude agreements with their indigenous communities. The company also completed its Pre-Feasibility Study.
“Declaring reserves on this project for the first time truly was a milestone for us,” said Wilton, reflecting on the culmination of a year of detailed data collection, trade-off studies, and engineering and technical de-risking work done by the FF team and its partners. “The results of the study confirm that Springpole has the potential to become a strategically significant, highly profitable gold mine in one of the most attractive mining jurisdictions in North America. I think anyone who looks at our track record over the last 12 months can really understand that we have fundamentally improved the risk-reward profile of this business.”
“If you look over time, you will see that mineral bank, buy and hold ounces in the ground type strategies tend to cap out at about US$10 per ounce. When you have real projects and particularly those as compelling as our flagship Springpole project, there is an obligation for shareholders to move them forward. In this case, the assets’ value can become worth US$80-$100 per ounce, if you can get them permitted.”
Dan Wilton, CEO, First Mining Gold Corp.
During the past 100 years, the Timmins area has produced over 70 million oz of gold, making it one of the richest gold camps in Canada. The Porcupine Destor Fault Zone and its surrounding areas influence the location of many of the major gold deposits in the Timmins camp and the Abitibi Greenstone Belt. Timmins is also home to Kidd Creek, one of the largest VMS ore deposits in the world.
If the best place to explore for a new mine is near an existing mine, then Noble Mineral Exploration (TSXV:NOB) has chosen well with its Project 81. It is a contiguous parcel of land covering parts of 14 townships adjacent to Kidd Creek mine, and it is common that mega VMS deposits are associated with other satellite deposits. Despite NOB recently completing a drill program with a partner on the Dargavel Gold Trend and the historical success of surrounding areas, Noble president and CEO Vance White believes that Project 81 is in an area that has been underexplored. White explained: “It is covered by overburden and consequently there is no outcropping on it. As a result, the only way that you are going to be able to determine whether there is a successful deposit is by going out and drilling.”
Noble has taken out much of the early risk by carrying out up-to-date airborne EM/Mag surveys. Given the significant infrastructure in the area, the potential for the asset is very high.
Also near the Kidd Creek Complex is Canada Nickel’s (CNC) large Crawford resource. Noble announced a project property transfer to CNC in December 2019, and the Noble-CNC spinout deal gave Noble shareholders a direct benefit through exposure to CNC’s Crawford resource. As a result, Noble owns approximately 2.1 million shares in CNC and already distributed 10 million to its shareholders. If CNC wishes to pick up the second option, Noble can take back additional shares, depending on the number of options that they pick up, or take cash back. In White’s view: “We felt that there was an opportunity there that could encourage Glencore’s participation. That is going to be a call that CNC’s team will be making down the road. The prefeasibility study will be available in early 2021 and that should give us a good handle on the kind of numbers we are looking at, but we know it is a very large deposit.”
25 km south-west of Timmins and accessible by road all year-round is Melkior Resources (TSXV:MKR) flagship Carscallen project. Success on the project brought forward a partnership that was announced at the end of September 2020 with Kirkland Lake Gold. The details of this deal include a C$110 million option to earn-in and joint venture, which allows KL to earn 50% of the project in return for spending C$10 million on exploration. Upon earning the 50% the deal converts to joint venture, which allows KL the ability to earn another 25% for C$100 million. In addition to Carscallen, MKR established a partnership with Barrick on its White Lake gold project, which is 20 km east of Barrick's Hemlo mine. This is another option and JV deal that gives Barrick the option to earn 75% of the project.
MKR CEO Jon Deluce highlighted that in Melkior’s case, having partners such as Kirkland Lake and Barrick allows them to progress projects with the assistance of world-class outside capital and know-how. It also allows the company to now focus efforts on its Québec assets. “This leads to considerable de-risking as there is obviously a level of credibility that comes to a company when you partner with major mining companies. They have recognized our exploration success and they have the money, expertise and infrastructure that allows them to move the asset forward to potential production much faster than we are able to,” said Deluce.
HighGold Mining (TSXV:HIGH) is another company that has bet on the Timmins area and currently has three properties in the region, which constitutes a large land position that is well over 200 km2. The company, which is also present in Alaska, acquired its Timmins land package over 10 years and consequently has had a nice tailwind given the runup in gold prices. Darwin Green, president and CEO of HighGold Mining, remarked: “It would be very difficult to acquire the land that we have in today’s hot gold market.”
The crown jewel of HighGold’s land package is called Munro-Croesus, a former mine in the early 1900s which had relatively small total production. However, what they did produce was fantastically high grade. Gold samples from this mine had mineralization of more than 10,000 ounces per ton, making it the “nucleus” of their property position. The area is increasing in prominence within HighGold and now stands as a second pillar in the company’s effort to create shareholder value through exploration. “In Timmins, the lower hurdle point for success is offset by the fact that the ground has been picked over a lot more. That said, our claims in Timmins are surprisingly underexplored for such a mature and prolific gold producing district,” Green said.
Home to the most successful gold producer of the past five years, Kirkland Lake has a host of juniors looking to replicate the exploration success that has transformed KL’s Macassa mine. Someone who knows about finding mega deposits is Danièle Spethmann, who worked on early exploration teams that led to the discoveries of Fruta Del Norte in Ecuador and the Choco 10 Carolina Zone in Venezuela.
Now back in Ontario as the president and CEO of Warrior Gold (TSXV: WAR), Spethmann described the company’s Goodfish-Kirana property, which sits on 4,100 hectares 5 km outside of the town of Kirkland Lake: “It has over 22 high-grade gold showings and three major mineralized structures… The property lies 6 km north of the Cadillac Larder Lake Deformation Zone (CLLDZ) and just north of a series of structures that have produced over 25 million oz of gold over the last 100 years.”
Another junior active in the Kirkland Lake region is Northstar Gold (CSE: NSG), which had operated privately for 11 years before its IPO in December 2019. The company has four 100% owned properties in a 2,300-hectare land package, including its flagship Miller gold property, situated 14 km southwest of Kirkland Lake.
Brian Fowler, NSG’s CEO, spoke of the similar style of gold mineralization between NSG’s Miller property and the Kirkland Lake South Mine Complex (SMC): “Gold tellurides are common in the Kirkland Lake camp and in some of the largest gold systems in the world – although rare elsewhere. We have the same rock types age-wise and the gold has been traced back to be the same age as that mineralized in KL. We have a large interconnected network of first-order faults. All of these similarities are highly suggestive that we are tapping the same sort of gold mineralization as the SMC.”
“The Goodfish-Kirana property lies 6 km north of the Cadillac Larder Lake Deformation Zone (CLLDZ) and just north of a series of structures that have produced over 25 million oz of gold over the last 100 years.”
Danièle Spethmann, President & CEO, Warrior Gold
Hemlo and Thunder Bay
Barrick’s Hemlo mine has produced more than 21 million ounces of gold, and has been operating continuously for more than 30 years. Located 350 km east of Thunder Bay, it has been one of the mainstays of Ontario’s gold industry. After the Barrick Randgold merger, there were rumors it may have been sold, but reinvestment by Barrick has given the mine a 10-year horizon to produce between 220,000 to 250,000 oz/y, according to Barrick chief, Mark Bristow.
The junior market in the region has also revitalized and will see a new publicly listed junior in 2021, Trojan Gold Inc. (TGI). Between 2014 and 2015, Charles Elbourne’s private company, Tashota Resources (TRI), acquired over 18,000 acres (100% optioned) of prospective claims in the Hemlo gold camp, known as Hemlo South, Hemlo West, Hemlo North and Black River. “At the time, everyone thought I was nuts because Barrick was rumored to be closing down its Hemlo mine in 2018. Having spoken in depth with Rudy Wahl, the geologist that ran the underground operations at Barrick’s Williams mine for 18 years, I disagreed that Hemlo would soon close, or that the area had been mined out,” explained Elbourne, whose conviction has been vindicated with the investments made into Hemlo in 2020.
Elbourne plans to take Trojan Gold public in 2021 to primarily focus on the Hemlo property, and can count on the experience and expertise of TRI board members Rudy Wahl, Russell Kwiatkowski, who discovered the LaRose property in Thunder Bay, and Rodney Barber, former chief geologist at Hemlo.
Slightly closer to Thunder Bay lies LAURION Mineral Exploration’s (TSXV:LME) flagship Ishkoday project, which is a gold and polymetallic mineralized project that straddles highway 807, 10 km north off highway 11. The property sits on 47 km² of highly prospective land and the company has spent over C$13 million to date, much of which has been devoted to drilling. In 2020, the company drilled a total of 7,667 m in 31 diamond drill holes. Cynthia Le Sueur-Aquin, president and CEO of LAURION, contends: “One of the key strengths of this asset is its demonstrated mineralized exposure to the surface. LME have a substantial 2D and 3D database, which we are very proud of.”
Looking to build on their potential at Ishkoday, in December 2019, LAURION acquired the neighboring Brenbar property, which is about 275 hectares and is contiguous and to the west of Ishkoday. LME completed a significant amount of mapping and channel sampling on Brenbar in 2020 and plans on completing a further significant program of over 10,000 m of drilling in 2021. In describing the company’s unique approach to funding through substantial insider ownership and access to high net worth investors and family offices, Le Sueur-Aquin indicated: “We are able to protect our company form potential predatorial behavior and it permits LAURION to move forward in a safe and transparent environment and achieve our objectives.”
Image courtesy of Great Bear Resources