Volatility dominates the investment landscape as this inflationary spiral appears to have legs. There’s potential for tremendous shock value in the coming weeks as the Fed has taken on a decidedly hawkish stance leading up to its next meeting in May. The Bank of Canada may go even more rogue on rates with as much as a full point raise when they next meet in June. That’s the speculation anyway – ‘Solid case’ for Bank of Canada to deliver full-point hike: Scotia
In the wake of this menacing central bank patter, the general markets have been volatile as hell.
Trading in the gold arena has also been volatile – the swings in both directions are testing the convictions of the (gold) party faithful.
Below is a one-hour intraday chart depicting the last eight sessions of trade.
Those with broad exposure to crowded and overvalued stocks need to brace themselves for continued volatility and, perhaps, an extremely rough ride from hereon. As for those overweighted in precious metals, I’m not a licensed financial advisor, but if pressed, I’d say we’re on the cusp of a dramatic push to the upside in the weeks/months to come, particularly where the equities are concerned (this correction may offer a good entry point for those on the sidelines).
Aside from a plethora of supportive fundamentals underpinning precious metals – the current inflationary spiral, record levels of debt-to-GDP, printing presses gone wild, geopolitical uncertainty, etc, etc – there’s a dynamic lurking below the surface that could produce a furious catalyst if (when) triggered: Many analysts believe there are 20x, 50x, and up to 1,000x paper claims on each physical ounce of gold held.
Call it a fractional reserve gold market, one held together by sovereign governments, central banks, and the London Bullion Market Association (LBMA). And it could fly apart at the seams if there’s enough demand for physical delivery. A Force Majeure of sufficient magnitude could trigger a run on physical gold like we saw in the late 1960s. The recent short squeeze in the nickel—the most horrendous price shock in LME history – could be an analog for what may unfold in the gold arena (We stand to watch).
One needs to walk a fine line these days where any discussion of price suppression/manipulation is concerned – there’s risk in revealing one’s lids on one’s (secret) hat rack.
End games, ounce counts, and significant investments in the Golden Triangle of northwestern BC
Developments in BCs Golden Triangle continue to evolve at a rapid pace.
One example is Seabridge Gold’s recently updated resource estimate for its Mitchell and East Mitchell deposits, two of the five that make up its wholly-owned KSM project.
Crunching the numbers, KSM now boasts a global resource of 154 million ounces of gold, 820 million ounces of silver, 54.57 billion pounds of copper, and 1.15 billion pounds of molybdenum.
That is one colossal ounce count.
An updated PFS incorporating these new ounces/pounds in the ground is expected this June. A 2016 PFS shows a mine plan spanning some five decades, and then some. Average life-of-mine production is estimated at 540 million ounces of Au, 156 million pounds of Cu, 2.2 million ounces of Ag, and 1.2 million pounds of Mo per annum. Obviously, the CapEx for such a project would run into the billions.
It’s geological endowments like these – the upshot of the same geological processes that spawned monster deposits like Grasberg, Lihir, and Cadia along the Pacific Ring of Fire – that bolster the Triangle’s lofty status as a Tier-1 mining destination.
We’ve covered this before, but it’s worth reviewing again, if for no other reason than to keep our eye on the prize – the fact that significant new discoveries in the region will cross the sights of resource-hungry predators (Producers) looking to bulk up their mineral inventory (project pipelines rendered lean by years of under-investment on the exploration front).
Junior companies boasting significant (high-grade) ounce counts in the region could have an endgame. If true, the old adage of ‘be right, sit tight‘ comes into play – allow the acquiring company to set your ultimate exit point via a fat takeover bid.
Money is pouring into the Triangle
As I highlighted in a previous Highballer offering, M&A activity in the Triangle began to pick up speed roughly three years back when Australian-based Newcrest Mining paid $804 million for a majority stake in Imperial Metals‘ Red Chris Mine. In early 2021, Newcrest announced its intention to invest an additional C$135M in the project.
In the same area, in Q1 of 2021, Newmont acquired GT Gold’s Tatogga Project, a copper-gold porphyry deposit, for a cool $393 mill.
On Nov. 9th, 2021, Newcrest Mining, still hungry for Golden Triangle assets, took out Pretium Resources in a deal valued at $3.5 billion.
Newcrest’s total investment in the Triangle is closing in on $4.5 billion.
In Dec. of 2020, Seabridge acquired Pretium’s Snowfield property for US$100M.
In April of 2021, Yamana Gold took a $20.6M equity position in Ascot Resources.
In December of 2021, Franco-Nevada took a $31M equity position in Skeena Resources.
Canadian billionaire Eric Sprott has demonstrated an insatiable appetite for companies active in the region, homing in on the 27.3 million oz Treaty Creek Project, an extension of the prolific Sulphurets hydrothermal system, the same system that hosts Seabridge’s KSM project. Sprott acquired his foothold in Treaty Creek via multiple private placements in joint venture partners Tudor, Teuton, and American Creek.
Further demonstrating Sprott’s appetite for high-quality ounces in the Triangle (a February 26 headline):
Sprott waded back into the Treaty Creek fray a few weeks back, ponying up another $2.5M.
In this world of increasing geopolitical tensions and fortified borders, expect M&A activity to accelerate in the weeks and months ahead. Juniors with high-quality assets in politically stable, mining-friendly jurisdictions will rank high in the order.
In the Fraser Institute’s most recent Investment Attractiveness Index survey, BC ranks 16 out of the 84 jurisdictions surveyed.
Optimum Ventures (OPV.V)
- 39.81 million shares outstanding
- $21.1M market cap based on its recent $0.53 close
Teuton Resources (TUO.V)
- 56.22 million shares outstanding
- $110.75M market cap based on its recent $1.97 close
Last week Optimum and Teuton, two expertly helmed Golden Triangle explorecos, dropped a headline marking what promises to be an active 2022 field season.
Before we delve into details of the April 20 press release, a quick look under the hood:
Optimum’s flagship 1,333-hectare Harry Project is strategically located along the Granduc Access Road near the mining town of Stewart. Ascot borders Harry to the east and south, Pretium (recently swallowed up by Newcrest) to the north, and Scottie to the west. The project benefits from abundant mining infrastructure throughout the region.
Optimum is earning up to 80% in the project by incurring $9 million in exploration expenditures plus staged cash and share payments ($1.5 million in cash and 4,000,000 shares) over the five-year option period. Teuton will retain a 2.0% NSR on Harry after all is said and done.
An unexplored gap along a tightly packed gold trend
This satellite map shows how significant deposits in the region line up. Note the gap between the Dilworth deposit and the historic Scottie mine. This gap, largely occupied by Optimum and Teuton, is vastly unexplored…
(click on the images to enlarge)
Harry is positioned in close proximity to Ascot’s high-grade Premier Gold Project, which, despite recent challenges on the financing front, is currently under construction and scheduled to pour its first gold in 2023. Ascot is a major player in this region of the Triangle.
Ascot is targeting 150k-plus ounces per year at an average grade of ~8 g/t AuEq. The Premier Project represents Canada’s highest-grade (undeveloped) underground project not owned by a producer. A feasibility study tabled in May 2020 demonstrates robust economics, including an after-tax NPV5% of C$341 million and an IRR of 51%.
Ascot’s Silback-Premier, Silver Coin, Big Missouri, and Martha Ellen deposits – 3M+ ounces of Au and 11.49M ounces of Ag all told – are located along a geological structure that continues onto the Harry property.
More specifically, Harry occupies a 3 x 15-kilometer corridor prospective for gold-silver mineralization across multiple settings – from large-scale bulk-tonnage material to bonanza grade epithermal-type mineralization.
Significant discoveries in the region may ultimately benefit from the infrastructure under development – a toll milling arrangement would be one possible scenario – but Ascot has established itself as a consolidator in the region. A significant discovery on Optimum’s ground will NOT go unnoticed by this soon-to-be producer.
The April 20 headline…
Results from an abbreviated 2021 drill program at the Swan zone – four short drill holes – were reported in this press release. This modest campaign tested an area along a boulder train that demonstrated high-grade gold-silver and base metal values. Other areas on the property returned positive results during the 2021 field season, generating additional targets for follow-up exploration in 2022.
The 2021 exploration concentrated on a broad zone of quartz-sericite-pyrite (QSP) alteration hosting several showings, two of which, the Milestone and Swann, have featured visible gold in surface samples. An outcrop of Premier Porphyry, a particular type of intrusive known to be spatially associated with precious metal mineralization at the nearby, formerly-producing Premier gold mine (now owned by Ascot Resources), has been observed in the vicinity of the Milestone and Swann showings.
Swan zone drill hole highlights:
- Hole S21-3 intersected 15.64 meters grading 1,437 g/t AgEq (433.4 g/t Ag, 3.10 g/t Au, plus significant base metal credits – see table below);
- Hole S21.4 intersected 9.26 meters grading 1,833 g/t AgEq (690.15 g/t Ag, 1.64 g/t Au plus significant base metal credits);
- Sampling from a float boulder train produced high-grade results: the average value of 22 samples taken from the vicinity of the Swann showings is 74.22 g/t Au, 842.9 g/t Ag, 37.6 % Pb, 1.18 % Cu and 28.9 % Zn.
All four holes were drilled from the same pad.
Not knowing the strike or dip of the Swan zone, the first two holes – S1 and S2 – were drilled into what’s interpreted as the footwall, where narrow stringers of base metal values were encountered (Hole S-2 returned 0.91 meters of 11.77 Ag and 2.17% Zn, as well as 3.05 meters of 21.66 g/t Ag and 2.24 % Zn).
With limited time and winter fast approaching, they swung the drill bit into the hillside in an easterly direction. That’s where they hit, picking up stringers of high-grade mineralization in hole S-3 (15.64 meters grading 1,437 g/t AgEq). The drill core’s color, texture, and sheer weight must’ve generated considerable excitement on the drill pad.
Leaning further into the hillside, they picked up even richer silver and base metal values in Hole S-4 (9.26 meters grading 1,833 g/t AgEq).
There’s some serious geologically sleuthing going on here. S-3 and S-4 are exceptional hits.
These initial results are indicative of an east-dipping stockwork – a system of structurally controlled high-grade veins. The interpreted width of the Swan zone appears to be in the five to seven-meter range.
Harry has the potential for scale. Surface sampling identified numerous east-west structures dipping to the south outside these two high-grade hits. A second set of east-dipping north-south structures were also picked up on surface. The goal will be to zero in on the intersection of these various structures – that’s where the real bonanza grade potential lies.
According to this April 20 press release, 16 boulder grabs from the Swan zone were collected and submitted for assay. Results include up to 286,2 g/t Au, 2202 g/t Ag, 62.19 % Pb, 2.87 % Cu and 28.9% Zn.
Of the 22 grabs collected from this boulder field, values range from 0.76 to 286.2 g/t Au, 246 to 2202 g/t Ag, 21.5 to 57.33 % Pb, 0.07 to 2.87 % Cu, and 0.41 to 32.11 % Zn. The average across all 22 samples = 74.22 g/t Au, 842.9 g/t Ag, 37.6 % Pb, 1.18 % Cu and 28.9 % Zn.***
Yes, these are grab samples, and yes, they are biased – the eye is always drawn to the shiniest material – but the (averaged-out) values are outstanding and may be indicative of what ultimately lies in Swan’s subsurface layers.
Of particular interest, narrow sulphide stringers in bedrock parallel to the indicated strike of the Swann zone located within 25 meters of the discovery boulders showed high gold and silver values. Sample A21-62 from one of these stringers assayed 45.2 g/t Au, 1111 g/t Ag, 9.38 % Pb, 2.74 % Cu and 20.88% Zn.
In addition, reconnaissance sampling was carried out on mineralized sub crop quartz along several other QSP zones along the lower Granduc Road prior to snowfall. These east-west zones of sub crop appear to be up to 5 m wide with strong pyrite veining and narrow quartz veining with base metals. One zone is located 1.7 km south of the Swann zone and sampling indicates up to 1.99 g/t Au and 15.63 g/t Ag, another zone 1.5 km south gave 1.58 g/t Au and 65.92 g/t Ag while a third zone 1.2 km south assayed 2.17 g/t Au and 245 g/t Ag.
Ed Kruchkowski, Director:
“Finding visible gold in massive to semi-massive boulders at surface leading to the discovery of the Swann zone confirms the potential of the Harry property. With the surface results from the Milestone zone discovered in 2020 (7.86 ounces per ton gold–269.5 g/t–across a 2 metre width) and Swann zone drill intersections, the Company is excited for the up coming 2022 exploration program being finalized. The Company initially plans an aggressive program including mapping, sampling and drilling once the 2022 surface work is compiled. The property shows similarities to both the Valley of Kings and Premier deposits based on my experiences working on them. With the rapid ablation of glacial ice and large areas of the property that have not been explored, particularly the bright gossans being exposed, the Company anticipates numerous new exciting discoveries.”
Tyler Ross, CEO:
“When we optioned the Harry property we anticipated the potential for some impressive grades, but these assays have identified multiple base and precious metals, and are well above initial expectations. We look forward to aggressively exploring the Harry project this upcoming drill season.”
There are multiple deposit types in Harry’s subsurface stratum, all relating to a robust epithermal system.
To prioritize targets for the next round of drilling, the Company will be undertaking an aggressive campaign of geological mapping and sampling.
To step up the target delineation process, they also plan to deploy a backpack drill – the Shaw Drill Mark1 (41mm) w/swive.
With the capacity to drill down five meters and produce 4.1 cm (1.6 inch) diameter core, there’ll be no need to dig trenches (a considerable time and cost savings). Click here for a Shaw Mark1 demo.
Summarizing recent events
These high-grade hits out of the Swan zone bring lots of momentum as Ross and Kruchkowski draw up plans for the upcoming field season.
Expect robust assay-related newsflow out of the Optimum camp over the balance of the year.
Forum Energy Metals (FMC.V) – (FDCFF.OTC)
- 170.03 million shares outstanding
- $32.31M market cap based on its recent $0.19 close
Forum updated progress at their wholly-owned Wollaston Project via this April 19 headline:
Wollaston is located 10 kilometers southeast of Cameco’s Rabbit Lake mill and 30 kilometers southeast of Orano/Denison’s McClean Lake mill, along the eastern edge of the prolific Athabasca Basin.
Forum announced having drilled eight holes for 2,062 meters at Wollaston. Highlights from this recently concluded campaign:
- Anomalous radioactivity in four holes on one of three targets drilled;
- Weak uranium mineralization was seen in core with associated bleaching, secondary hematite and minor uranium oxides in 4 holes;
- Follow-up drilling and further gravity surveys strongly recommended.
The bulk of drilling during this first phase campaign was at Gizmo.
Gizmo – Target one
Three zones of gravity lows – two in combination with EM conductors – were probed with the business end of the drill bit. The first gravity low, measuring 300 meters long by 200 meters wide, was tested with five holes and returned intensely altered rock immediately beneath the overburden at 40 meters and continuing to about 150 meters depth (above map).
Weak uranium mineralization with associated bleaching, secondary hematite, and minor uranium oxides was observed in the core along several holes (image below).
Anomalous radioactivity in four out of the five holes was detected with downhole radiometric probe*:
- 1,540 counts per second (cps) at 187.8 meters in DDH WO-1;
- 1,752 cps at 128.1 meters in DDH WO-2;
- 4,620 cps at 161.2 meters in DDH WO-2;
- 2,002 cps at 105.3 meters in DDH WO-3;
- 3,320 cps at 111.2 meters in DDH WO-4.
(* a Mount Sopris down-hole logging system (5MXA-1000 matrix, 4MXA-1000 winch and 2PGA-1000 gamma probe) was used for the radiometric probing)
The Company states that further drilling is required to test areas that were not accessible this winter. Example: an EM conductor that crosses a northwest section of the gravity low (second map).
Mugger and Stripe – Targets two and three
The sixth hole, testing a weak gravity anomaly at Mugger, returned relatively fresh calc-silicates and has been crossed off the list. The final two holes of this phase one campaign tested a third gravity anomaly at Stripe. This target, associated with an EM conductor, tagged “a series of faulted units with associated gouges and local alteration.” The Company states that these final two have been heavily sampled and sent off for assay.
Forum sent 393 samples of the drill core to the Saskatchewan Research Council for geochemical analysis and results are expected in a month. The Company is reviewing its plans for further exploration of the property, including drilling of the Gizmo target. Figure 4 (image below) illustrates areas that have had gravity surveys completed this past year. Excellent targets remain on the west side close to the highway, which will be investigated first before moving to the eastern targets. Further airborne and ground geophysical surveys are being considered to fully test the regional potential of the property.
Ken Wheatley, VP of Exploration:
“This is a tremendous start on this project in an area of the Athabasca Basin that is prolific with several uranium deposits in close proximity to two uranium mills. To intersect uranium mineralization in an area of very strong alteration in the first pass drill program confirms that this property has much potential for a near surface, basement hosted unconformity deposit with rich grades of uranium.”
I asked Forum’s CEO, Rick Mazur, for a geology lesson, specifically where and how geophysics is applied to prioritize targets for drilling.
“Gravity does not work very well in areas of thick sandstone cover (greater than 150m), but in areas like Wollaston, Fir Island, Maurice Bay, Highrock, and Nunavut where the sandstone cover is shallow or completely absent, gravity surveys work very well to detect more restrictive clay alteration halos around a basement hosted unconformity deposit. By drilling an electromagnetic conductor within a gravity low, analyzing the drill core with a mass spectrometer to detect the type of clay alteration and pathfinder element geochemistry and of course looking for signs geologically for a fertile uranium mineralizing system, we can determine if we are getting closer to a uranium orebody.”
That’s it for this one.
– Greg Nolan
Full disclosure: Optimum, Teuton and Forum are Highballer clients. I own shares in all three companies (mark me down as biased).
*** Note: Grab samples are solely designed to show the presence or absence of any mineralization and to characterize the metal tenor in this mineralization. Grab samples are by definition selective and not intended to provide nor should be construed as a representative indication of grade or mineralization at the property; and the grab samples analyzed from the property reflect a broad range in grade from below detection limit to the grades highlighted herein.Disclaimer - Legal Notice
Highballerstocks.com (Greg Nolan) is not a licensed financial advisor and does not give investment advice.
The content of this report is for information purposes only.
Nothing contained herein should be construed as a recommendation or solicitation to buy or sell any security.
Always consult a licensed qualified investment advisor in your legal jurisdiction before making any investment decisions.
Though Highballerstocks.com (Greg Nolan) believes its sources to be credible, and the statements contained herein to be true, readers must conduct their own thorough due diligence, and or consult with a qualified investment advisor before important investment decisions are made.
Highballerstocks.com (Greg Nolan) accepts no responsibility or liability for the accuracy of the contents of this report.