Kaminak takeover, gold bull bucks Yukon into spotlight
What a difference 9 months makes.
Back in August 2015 I was bouncing around the Yukon in planes, helicopters and trucks as part of a media tour of mining projects. Also, speeding up the Yukon River in a riverboat convoy that retraced the historic voyage of Klondike prospectors more than a century ago.
At the time gold was trading above US$1,250 an ounce — not much different than today. But there was a kind of weary cynicism after four years of a fairly relentless bear market. It was reflected in the share prices of the companies whose projects we visited in the Land of the Midnight Sun.
I was a Vancouver Sun mining reporter at the time and the trip was financed by the Yukon government and the Yukon Mining Alliance, a consortium of some of the territory's leading mineral plays.
Fast-forward to today: gold is only about US$20 higher but the gold bull has birthed a sentiment reversal. Goldcorp's purchase of Kaminak and its Coffee gold project for $520-million ($2.62 a share) confirms it. The share prices of many of those Yukon explorecos have risen — taken off, in some cases.
The Kaminak takeover is validation for the Yukon, where mining is lifeblood. It may also prompt other majors to have a look at projects in a northern territory regularly rated by the Fraser Institute as among the world's best geological jurisdictions.
Here's a closer look at latest developments for the Yukon projects visited, as well as a few others of note, and share price action (all stock prices as of Aug. 10, 2015):
ATAC Resources (ATC-V)
The first stop on our tour, ATAC is exploring for Carlin-style high-grade gold in two trends — Rau and Nadaleen — at its Rackla gold project. The Nadaleen discovery is in mountainous terrain, but the Tiger deposit (Rau) is 12 km from a permitted winter trail (48 km from a maintained government highway).
At 1,700 sq km, ATAC's property is vast — it hosts three air strips.
The company recently completed a $3.25-million financing for the 2016 exploration program, which includes road permitting (for Tiger), soil sampling and drilling. ATAC had $16 million in working capital as of Feb. 22.
Price then: .44
Now: .81 (market cap $103M)
Alexco Resource Corp. (AXR-T)
The road to Alexco is bumpy (which stood out for me primarily because of some free time spent in a Whitehorse pub the night before). Alexco is a high-grade silver vein play that owns the historic Keno Hill Silver District.
Alexco's path through the bear market has been marked with potholes too — the company shuttered its Bellekeno silver mine in 2013 due to low prices. But Alexco has been developing two new discoveries, the Flame & Moth and Bermingham, with some incredibly high grades in both. In September, for example, the company hit 5 metres of 7,462 grams per tonne (240 oz/t) Ag at Bermingham.
Bermingham will also be the focus of a $3-million, 8,000-metre drill program from June through September (announced as part of their first-quarter financials). Later this year Alexco will update its PEA on the entire Keno Hill silver district, which will include a resource estimate update on Bermingham.
With silver prices at $17 and trending higher, the prospects of a mine restart are improving. The share price has more than tripled since the visit. Alexco recently announced a $10-million financing of $1.20 units, and the stock has shot well beyond that in this bull market, as silver outpaces gold and the silver equities outpace the metal.
Alexco also owns a profitable environmental remediation business.
Price then: .43
Now: $1.49 (market cap $110M)
Wellgreen Platinum (WG-T)
Day 2 of the tour was a study in contrasts, with visits to Wellgreen and Kaminak. Wellgreen is a platinum group metals-nickel-copper project that has been around for decades and has seen limited historical production. A big bonus is its location off a major highway.
Wellgreen recently landed a $10-million financing from Thomas Kaplan's Electrum Strategic Opportunities Fund (Kaplan had an analyst on a separate Yukon tour coincident with the media tour).
Wellgreen drilled about 4,000 metres in a fall-winter program, announcing results on April 22 that included intercepts including 55.2 metres of 5.63 g/t platinum-equivalent and 547 metres grading 2.19 PtEq.
Former COO John Sagman is now Wellgreen's interim president and CEO, after the departure of Greg Johnson.
Price then: .27
Now: .295 ($55 million)
Kaminak Gold (KAM-V)
Sold to Goldcorp for $520 million, or about $2.62 a share, yesterday.
Price then: .66
Now: $2.54 (MC $550 million)
Victoria Gold (VIT-V)
When we met with Victoria Gold CEO John McConnell at the Eagle camp, he talked about how there were many "pirates" looking to swoop in and capture distressed assets for pennies on the dollar.
The stock was trading at 13 cents — near 52-week lows — despite many positives including a fully permitted mine and an agreement with the local First Nation.
Victoria's Eagle gold project is road-accessible and fully permitted for an open-pit, heap-leach mine that would produce 212,000 oz annually at AISC of US$729/oz. The company has a resource of 4.8M oz Indicated (.68 g/t) and 1.5M oz Inferred (.6 g/t). Here's Kip Keen's recent piece on how Victoria Gold plans to sharpen economics at its Eagle.
McConnell has fended off the pirates and then some: Victoria recently closed a $24-million financing with Electrum and Sun Valley Gold. The stock has more than tripled, giving Victoria Gold a market cap of about $150 million.
Victoria has also been publishing nice intercepts from its Olive-Shamrock zone 2 km from Eagle, including 144.5 metres at 1.2 g/t Au and 73.8m at 1.6 g/t.
Price then: .13
Now: .40 (MC $154 million)
Western Copper and Gold (WRN-T)
Western has lots of copper and gold at its Casino deposit not far from Kaminak's Coffee. Specifically, proven and probable reserves of 4.5B pounds copper, 8.9M oz gold and 65M oz silver.
Western completed a bankable feasibility study in January 2013 — Casino's after-tax NPV (8% discount) is more than $1.3 billion and IRR is about 18%.
But permitting has been problematic — Western submitted its Environmental Assessment Application in January 2014, and two and a half years later, the company is still working through it. In February, the Yukon Environmental and Socio-Economic Assessment Board elevated the project to a Panel Review "for matters relating to tailings and waste management and potential effects to wildlife."
Casino would be a large mine, providing hundreds of good jobs in the Yukon and lots of tax revenue. But it has a large tailings dam to match, and that seems to be a sticking point.
Price then: .47
Now: .73 (MC $74.6 million)
There are other mineral plays worth touching on whose project we didn't visit and one of them is Klondike Gold (KG-V). Klondike is searching for the hard-rock source, never discovered, of the 20 million ounces of placer gold pulled out of the region since the great Klondike rush.
Klondike recently upped its 2016 exploration budget to $750,000 (from $350,000) for drilling on the the Dominion and Lone Star properties near Dawson. The drilling will target outcropping quartz vein arrays containing visible gold. Last year's programs yielded intercepts including 5.3 g/t Au over 7.6 metres and 75.6 g/t Au over 2.8 metres.
Klondike CEO Peter Tallman's response to the Kaminak takeover was "Game on in Yukon," as noted in an email to Tommy Humphreys. Tallman notes that the first 20 km of Kaminak's proposed road route south from Dawson is on Klondike claims passing through their Dominion property.
Klondike also has a unique source of funds. It leases its non-core McKinnon Creek property to Jerusalem Mining and Todd Hoffman, star of the Discovery Channel show "Gold Rush," for a 20% production royalty. In November Klondike received more than $500,000 in proceeds from the royalty.
Price then: .09
Now: .255 (MC $14 million)
Another play of note is prospect generator Strategic Metals (SMD-V), which has recently beefed up its presence but remains Yukon-focused. (Disclosure, I own Strategic shares.) Strategic, helmed by Archer Cathro principal Doug Eaton, is the largest claims holder in the Yukon and owns large stakes in several explorecos.
Strategic owns 8.6% of ATAC, 19.9% of Silver Range Resources (SNG-V, which recently moved into gold exploration) and 46.6% of Rockhaven Resources (RK-V).
Price then: .295
Now: .50 (MC $49.6 million)
Matt Turner's Rockhaven was on our itinerary but poor weather kiboshed our helicopter flight in to the company's high-grade Klaza gold project, which also hosts lead and zinc.
Ironic, because Klaza is one of the few Yukon projects that is road-accessible. On March 1 Rockhaven published a PEA outlining a 14-year mine life on a small operation that would combine open pits and underground. After-tax NPV on a 5% discount rate was $86 million and after-tax IRR was 14%.
Price then: .16
Now: .22 (MC $25 million)
Another recent entry into the Yukon is Rob McLeod's IDM Mining (IDM-V), which took possession of a vast portfolio of Yukon claims — including many staked by Shawn Ryan, who optioned Coffee to Kaminak — through a recent deal with Oban Mining.
IDM Mining (Disclosure: I own shares) is now the second largest claims holder in the Yukon, after Strategic. McLeod, of course, is no stranger to the Yukon — his Underworld Resources and its White Gold play in the Yukon was snapped up by Kinross for $139 million in 2010.
IDM'S flagship project is the Red Mountain high-grade gold development project in B.C.'s Golden Triangle.
Klondike Gold and IDM Mining are sponsors of CEO.CA. This is not investment advice and everybody needs to do their own due diligence.
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