Canadian Exploration
Juniors eye long-term payoff
The prevailing storm in capital markets has been a challenge to navigate over the past year. This is particularly true for junior gold explorers who faced an exceedingly tight funding environment in 2022. Capital markets have been convulsed with uncertainty over the extent of interest rate hikes and a rapidly strengthening dollar, and free cash flow became increasingly in vogue. The subsequent downturn clouded the path for emerging gold juniors who faced depressed valuations. Nevertheless, the gold price managed to end the year north of US$1,800/oz, ensuring profitability for any decent mining operation globally. The World Gold Council reported record-high demand for gold, driven by central bank purchases that underscore gold's enduring appeal as a safe-haven asset during times of geopolitical upheaval. As a result, producers will be empowered to reinvest their profits into exploration and M&A, and with Ontario's longstanding tradition of historic discoveries, the region is well-positioned to remain a hotbed of activity in the gold industry.
Timmins
Timmins has a long history of gold mining, with some of the first gold discoveries made in the early 1900s. The Timmins mining camp has produced over 70 million ounces of gold since its discovery, making it one of the richest gold mining regions in the world. Today, exploration continues with companies like Galleon Gold, which is located next door to Pan American Silver's Timmins West gold complex. Other notable companies, such as Moneta Gold, Mayfair Gold, and McEwen Mining, are also present in the Timmins area.
The area is also well known for its prowess in base metals, and Glencore’s Kidd Mine is the world's deepest base-metal mine below sea level, operating at 9,800 feet. Given the infrastructure and know-how that is already present in Timmins, it is no surprise that it is distinctly well positioned for the exploration and commissioning of mines that will fuel the energy transition.
Vance White, president and CEO, of Noble Mineral Exploration Inc. has made Timmins a cornerstone of his company's strategy for many years. The company has generated multiple successful projects, which were later sold for a premium. Most recently, the company spun out Canada Nickel to Noble shareholders. Canada Nickel has its flagship Crawford nickel-cobalt mine development in the Timmins mining camp, and has attracted interest from majors, with Anglo American taking a 9.9% minority interest in the company.
North of Canada Nickel’s Crawford Project is Noble’s Nagagami Project near Hurst, which the Company feels is most de-risked and ripe for acquisition today. “With the additional sampling of the core in Nagagami Project hole NG-22-02 wherein we have identified a 61.0 meter long mineralized zone that has an average grade of 0.554% Total Rare Earth Oxide (TREO) and 0.098% Nd2O3. It is a new discovery and at current market prices for commodities would be the equivalent of 5.2 g/t of gold,” White commented.
“The Pickle Crow deposit has clean ore as there is low sulphide content in the quartz veins and very high gravity recovery. This means that processing the ore will be relatively inexpensive.”
Darren Cooke, CEO, Auteco Minerals
Red Lake
One of the key success stories driving money into the Red Lake area in recent years was the high-grade gold discovery made by Great Bear Resources on its Dixie project that culminated in an acquisition by Kinross. Shortly after this discovery, in 2018 BTU Metals acquired its Dixie Halo project located in the southern part of Red Lake. Thereafter, Barrick raised its exposure to the area, which puts BTU in a favorable position considering its property is sandwiched between those of Barrick and Kinross. BTU Metals’ CEO Paul Wood asserts that, despite bleak market dynamics for junior gold explorers, the Red Lake district will press onward on the back of robust activity. “Evolution is doing a lot of work. Kinross has come in and has 11 drills turning, and they have a lot of pressure to do something with the Great Bear asset they acquired. As a result, they are going to devote substantial attention and capital to the asset and further develop the area,” Wood offered.
East of Red Lake lies the historic Pickle Crow mine, which is now under the ownership of Auteco Minerals. Over the past two years, Auteco has rapidly increased its resource from approximately 800,000 oz to 2.2 million oz at 7.8 g/t Au, and is now in the process of updating its resource. “There are two ways in which we plan to move forward. One revolves around the 2.2-million-oz resource we already have. It is still open, and we are going to continue to grow that, but we are also moving towards working out how to get underground to infill drill that resource. This will be a key focus for us in the next six to 12 months,” Auteco Minerals CEO, Darren Cooke said.
The other aspect of Auteco’s strategy, as Cooke puts it, is to aggressively explore regional ground to find other deposits in Auteco’s landholding. “We believe that we are sitting on a whole mineral district, not just the single Pickle Crow deposit,” Cooke added. As for its startup costs, Auteco is poised to benefit from a small mill located on-site, giving the company with a low capex option.
Wawa
Ontario’s Michipicoten greenstone belt in the Wawa region is another area where meaningful exploration continues. The area hosts Argonaut Gold’s Magino deposit and Alamos Gold’s producing Island Gold mine, both orogenic gold deposits. The Michipicoten greenstone belt has a long history of past production, but many historical mining sites remain underexplored by modern methods. Manitou Gold’s Goudreau project is bookended by the Island Gold and Magino mines on the west, and by Barrick Gold’s past producing Renabie mine on the east. With its 366 km2 land package that was consolidated over the course of nine distinct transactions, Manitou is the largest landowner in this greenstone belt, and received investment from Alamos Gold and O3 Mining for its potential to make a significant discovery. “I think Wawa and the Michipicoten Archean Greenstone belt is quickly emerging as one of the most important gold belts in Ontario and Canada,” Richard Murphy, President and CEO of Manitou Gold stated.
Red Pine Exploration drilled throughout 2022 with between two and four drills constantly in use on its Wawa property. This enabled the company to complete approximately 38,000 meters of exploration drilling on the property, and demonstrate that the mineralization that forms part of the Surluga and Minto deposit extends beyond its current footprint to 6 km in strike length. Management anticipates this will result in a substantial increase in the potential value of assets on the property. Red Pine also recently closed a bought deal in September 2022 for C$5 million, which Red Pine president and CEO Quentin Yarie referred to as a “feat” in the current market. “Dilution is always an issue juniors struggle with, but I think market conditions will be challenging over the next year. Therefore, we are cashed up, and do not intend to need to raise money until our stock price improves,” he said.
“If you are invested in high-risk juniors, you know dilution is coming, but if you believe in the project, and you believe in the management, financing in these times is a good option because you are averaging down immensely compared to 2021.”
Quentin Yarie, President and CEO, Red Pine Exploration
Hemlo
To the extent that doing a bought deal has been complicated by market sentiment, getting an IPO over the goal line could be considered an even greater challenge. Nevertheless, that did not stop First Class Metals from persisting. The company is a mineral explorer that holds 100% ownership of seven claim blocks in the Hemlo-Schreiber-Harte greenstone terrain, and a further block in the Atikokan area. According to First Class Metals CEO Marc Sale: “The listing process was torturous. There were IPOs being canceled, suspended, forgotten about all around us. However, we ultimately got across the line and became one of very few new London listings in 2022.” Perhaps what propelled the company forward was a deal with Power Metals Resources, who also had claims in the Hemlo area, and agreed to combine claims with First Class in exchange for a 30% stake in the company. It could have also been the attractive geological potential of the claims the company thus acquired.
For Sale, the nearology is what makes the project so compelling. For example, Palladium One's Tyco project, which includes the high-grade nickel discovery Smoke Lake, is near the claims. He also investigated the vectors on the western side of North Hemlo where Panther Metals' Dotted Lake project is found. “Either geophysically, geochemically, or geologically, those trends continue onto our property,” Sale asserts. “In addition, there is a distinct lack of exploration on our properties,” he added.
Adapting Strategy
One strategy that has served investors well over the years has been the project generator model, which effectively spreads risk across many distinct assets in the hopes that it will increase the probability of being exposed to a sizable discovery. The idea is to bring in partners to help mitigate early exploration risks, while also preserving an element of upside. Of late, however, the model has fallen out of favor, largely because underdeveloped assets are not resonating with their typical partners. This is potentially due to capital constraints, but it could also be that companies are taking a wait-and-see approach given macro uncertainties. Consequently, companies like Transition Metals, with 22 projects across Canada, are tweaking their model. “The problem I see with the project generator model is largely one of selling the business model to the market. We are now taking more of a traditional junior view on specific projects, where we are willing to make an investment directly and drill the projects and advance them ourselves,” Scott McLean, president and CEO of Transition Metals commented. “By doing that, we create more optionality, so if the project is a big winner, we can take it forward ourselves or create higher leverage on our investment if we choose to bring a partner to the project.”
Article header image courtesy of First Class Metals