Junior Companies Mine Their Own Business
Metals investors are used to seeing junior companies founded on a good idea and healthy amounts of hope. However, those times might be over as investors are witnessing an important shift in the market.
A few juniors have decided to start running small operations that are allowing them to keep the cash flowing and, in some cases, to start up parallel new projects while achieving growth targets.
Jazz Resources Inc., a company focused on acquiring, exploring and developing mineral properties in the Revelstoke mining district of British Columbia, Canada, is one of them. Listed on the TSX Venture Exchange, this junior owns three properties in the same area: Spider Mine, Teddy Glacier and the recently acquired Burniere, contiguous to Teddy Glacier.
The Spider Mine is located on the company’s Crown-granted lands. It was brought into production in 1952 and continued operations until 1958. Total production to the end of 1958 was 371 kilograms of gold, 53,481 kilograms of silver, 85 tonnes of copper, 10,845 tonnes of lead, 11,519 tonnes of zinc, 60 tonnes of cadmium and 4 tonnes of antimony from 128,063 tonnes of ore with a recovery grade of 0.086 oz Au/ton, 12.2 oz Ag/ton, 8.6% Pb and 9.14% Zn. This vein was developed from surface to a depth of 200 metres. Mineralized material, of grades similar to that mined previously, was intersected in drilling to an additional depth of 70 metres below this level.
It is the Teddy Glacier property, located about 15 km from the Spider Mine, which is allowing Jazz Resources to bring some cash back into the company’s coffers.
Five samples of mineralization from the property collected in 2004 assayed from .082 to 1.88 oz/ton gold, 7.23 to 22.9 oz/ton silver, 8.86% to 27.5% lead, and 5.11% to 22.1% zinc.
In 2009, mined samples assayed on average 13g/tonne gold, 372 g/tonne silver, 18.6% lead, 12.5% zinc and 1.2% Cu.
So far Jazz has extracted approximately 2,300 tonnes, which may not seem much, “but for a junior company can make a big difference,” says Bryan Glen, President and CEO of Jazz Resources Inc. This can also produce significant residual revenue for small junior companies.
As soon as the samples are milled, the company will go to the next phase; they will apply for another permit for bulk sampling on the Teddy to extract 9,000 tonnes.
The main goal is to bring the Spider and Teddy into production and prove up the Burniere property.
“We like the idea of mining in our own back yard because we are familiar with the area, geology and regulatory environment in B.C.,” says Glen.
Gold, silver, lead, zinc and some amounts of copper are the main commodities Jazz will be extracting from its properties.
Asked about the challenges of finding experienced mining people in the area, Glen says that the West Kootenays and Upper Arrow Lakes regions offer an abundance of skilled and qualified mining personnel. He trust that the infrastructure already in place is favorable for attracting workers and facilitating the commute to and from the mines.
Sona Resources, another Vancouver based junior, wsa founded a couple of decades ago and currently owns four projects, mostly related to gold exploration, development and mining in NorthAmerica.
The company was started in 1990 under the name Claimstaker Resources and acquired its first property in 1995. Later, Claimstaker changed its name to J-Pacific Gold and more recently to Sona. It currently trades as SYS on the TSX-V. Today, Sona Resources runs four 100% owned gold projects in various stages of exploration and development.
One of its most recent projects is the Montgolfier gold project, located in northwestern Quebec. The company entered into an agreement on the property in 2004 and conducted a series of test between 2005 and 2008. It has staked claims and taken ownership of those claims in accordance with an agreement with Ressources D. Villeneuve Inc., which retains a 2% net smelter return royalty. Exploration is still underway on this property.
Another joint agreement the company entered into in 2004 was on its Nevada-based project, Callaghan. The property has a mining heritage of nearly 80 years and Sona Resources has a royalty- sharing agreement with the previous owner. Sona’s 2005 exploration program has helped to identify drilling targets on this property.
These two projects are being developed and have considerable development still to go. Current-year goals are for Sona to focus on its two properties based in British Columbia, Elizabeth Gold property and Blackdome Gold property, considered to be Sona’s flagship properties.
Sona’s plans are to open up underground mines at both Elizabeth and Blackdome, with extracted ore trucked to Blackdome’s gravity and flotation mill just 30 kilometres away. In a 2010 presentation published on its website, Sona mines identified its next steps, which include additional economic assessments and exploration, permitting and then project initiation by 2013.
Like Jazz Resources, Sona owns 100% of these mines, which are built on existing mining infrastructure within mining regions. Therefore, both have access to roads and staff in a way that other more remote mines may not.
Another advantage for Sona is that each of these mines has a heritage within the mining industry, which makes them considerably better prospects than the “shot-in-the-dark” explorations performed by other juniors.
Xmet Inc. is a gold junior exploration company focused on advanced projects in existing mining camps in Canada, where exploration and mining costs are minimized and where previous and historic producing mines make for much easier permitting and minimize community and First Nations social risks.
These projects include a strategic project named the Duquesne-Ottoman, located in northwestern Quebec, which started operations in June this year.
Former gold producers located along strike to the west of the Duquesne- Ottoman property include the Beattie and Donchester mines, while the former producing Duquesne gold mine is located immediately east of the property.
These three deposits, which collectively produced over 1.5 million ounces of gold during the period from 1933 to 1991, are currently held under a Joint Venture Agreement between Osisko Mining Corporation and Clifton Star Resources.
Under the terms of the Duparquet Agreement, Osisko can earn a 50% interest in the Duparquet Joint Venture by investing $70 million over a four year period, with a firm commitment totaling
CDN $15 million in 2010. A 120,000-metre drilling program is currently underway on the Duparquet Joint Venture, under the supervision of Osisko, targeting the expansion of the Beattie, Donchester and Duquesne gold deposits.
Other Xmet’s projects are The Roy and Buchans Junction. The Roy project is located in the Chibougamau copper gold camp while the Buchans Junction project is located in the historical Buchans mining camp of central Newfoundland.
Eagle Plains Resources
Eagle Plains Resources, based in Western Canada, controls over 35 gold, silver, uranium, copper, molybdenum, base metals and rare earth mineral projects.
During 2009, this junior produced gold at its Yellowjacket mine site, 9 km east of Atlin, B.C., as a joint-venture with Prize Mining Corp. In June this year, Eagle Plains arranged to buy from Prize Mining the remaining beneficial right, title and interest in the Yellowjacket Gold Project, including mineral and placer rights and all equipment and infrastructure currently in place.
When it has 100% ownership, Eagle Plains will be exploring the new open pit area and possibly other undrilled targets, with the goal of resuming production in 2011. Mike Labach, investor relations manager at Eagle Plains, says that the company anticipates finding another jointventure partner to do the mining, as Eagle Plains continues with the exploration.
“The resource is being calculated this year in the area that we are planning to mine, while production last year went ahead because of previous good results of processing a 4,200 tonne bulk sample (8-10 grams per tonne head grade),” says Labach.
Eagle Plains did not achieve near that in its remaining 5,800 tonnes of the 10,000 tonne bulk sample, but Labach insists that the grades from the additional ore mined are encouraging.
“The deposit is ‘nuggetty’ (highgrade gold distribution is nonuniform and erratic), which makes measurements difficult; you either mine the whole area at a reduced grade or cherry pick it for the high grade. We are just figuring this out,” explains Labach.
About the challenges of running small operations, Labach explains that Eagle Plains still raises capital in the markets from time to time.
“A low share price obviously has consequences as well as presenting investors an opportunity. We minimize overhead by having an office in a small operations centre (the Kootenays, B.C., is cheaper than Vancouver), we own our office and rent space to other corporate tenants and our projects are all in western Canada, so it is relatively inexpensive to travel to them,” he explains.
Since its beginnings in 1992, Eagle Plains has developed a unique business model. The company acquires and develops mineral exploration projects using in-house geological expertise. It also utilizes joint venture participation to fund the development of its exploration projects.
Finally, it spins-off exploration successes into new companies to spotlight the value and makes these resources available to larger companies to put into production. This strategy is designed to create shareholder value.
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