Tag Archives: world class mine

Exploration Titans Brent Cook and David Broughton Talk Kaizen’s Discovery Trail (TSXV:KZD)

By Tommy Humphreys, CEO.ca, Mar 17, 2015

Billionaire mine developer Robert Friedland has said that real wealth in the mining sector is created by finding something.

Friedland would know this, having driven 5+ world-class mining discoveries in his career. He knows that to find a mine you have to spend a lot of money, and drill a lot of holes.

Another secret weapon of Friedland’s is people; he surrounds himself with impressive technical minds, and provides them with big budgets and plenty of autonomy to test their theories. Statistically speaking, explorationists who have already found mines are more likely to make future discoveries.

I first met Dave Broughton on an Ivanhoe Mines field trip to South Africa and D.R. Congo last year. Friedland stood beside Broughton at the site of Ivanhoe’s world-class Kamoa copper discovery. There, a Broughton led team had chased an exploration concept from stream and soil anomalies to drill targets and eventually, a world-class discovery. Kamoa was the first major copper discovery in the D.R.Congo in a hundred years.

At the 2015 PDAC conference in Toronto, Dr. Broughton and Mr. Friedland received the Thayer Lindsley International Discovery Award for their work finding Kamoa. This was the second time the Ivanhoe group had won the prestigious award at mining’s largest convention.

Just a few hours before Dr. Broughton received the award, he met up with Exploration Insights editor Brent Cook, CEO.ca cameraman Carter Smith and myself to talk a bit about his exploration methodology, as well as his plans for a next discovery.

David Broughton, Kaizen Discovery, Brent Cook, Exploration Insights, and Tommy Humphreys, CEO.ca discuss Kaizen’s Discovery Trail at the PDAC in Toronto, Mar 1, 2015:

Tommy Humphreys: I’m here with Dave Broughton who is the exploration boss at Kaizen Discovery as well as Ivanhoe Capital group, a very accomplished geologist, and my friend Brent Cook, editor of Exploration Insights. I wanted to introduce these guys because I think some of the work that Kaizen is doing is very fascinating and Brent hadn’t heard the story yet, and knows more than I do. To start off, what is the award that you’re receiving today and what brings you to PDAC?

Dave Broughton (DB): We are receiving, on behalf of a whole lot of people, the Thayer Lindsley Discovery Award, which is given every year by the PDAC for a significant international discovery. It’s the second time Ivanhoe group has won this. They won it for OT [Oyu Tolgoi] at the inaugural event when they first awarded it a number of years ago.

Brent Cook (BC): So now you’re up in the Yukon for something different?

DB: Kaizen, late last year, picked up a package of land and took over a small company with an adjoining package of land up in the Western part of Nunavut, and its another stratiform copper play like the one we found at Kamoa [Ivanhoe Mines’ DR Congo copper discovery]. There’s copper everywhere you land, so there are good signs when you just get on the ground and wander around. That’s been appreciated for a long time, it was discovered initially in the 60’s and some work was done then, but really, nothing’s happened for about 20 years. The last group of people to be in there in a significant way on the play we’re really excited about was Cominco and that was in the early 90s.

There really are two plays, there’s a volcanic hosted copper play, that has a lot of very high grade copper, well known, lode copper, I guess you’d call it, in volcanic rocks, and there’s a more, less appreciated play, which is what we’re really excited about, and it’s in the sedimentary rocks overlying it. The rocks are similar in age to those in the copperbelt which is intriguing, and there’s mineralization that’s outcropping and in most places it’s covered, certainly 95% cover. 150 kilometre strike of these sedimentary rocks with copper showing here and there but it really hasn’t been tested.

BC: How many holes have been put into this?

DB: Well, Cominco put about a half a dozen holes at the far eastern end of the area and the rest is basically untouched.

BC: What did they find?

DB: They hit mineralization. They didn’t hit an ore grade intersection over ore grade widths, but there are lots of holes at Kamoa or Kupferschiefer, or anywhere you want to go in these systems, you don’t always hit ore on your first hole. The usual things right: persistent and all that.

BC: What sort of width and thickness are we talking in this horizon from the drilling you’ve got so far?

DB: You’ve got mineralization over metres in lenses and so on. There is some government geophysical data that gives up some idea as to what the big structures might be that might help control mineralization. We have some old prospecting that we know about. It’s really going to be getting on the ground and walking those contacts and making up our own mind of where we can find mineralization. And then we’re looking at doing a series of widely spaced stratigraphic holes, just like you would in other districts. You’ve really got to step back. These things go for kilometres, Kamoa is 50 square kilometres in area, so you really have to look at it at a base of scale and then narrow in on what you find. We’re going to take a big-scaled approach to start with and test as much of the strike length as we can, I think.

BC: What’s the access like?

DB: The access is actually excellent. We’re just south of the old town of Coppermine.

BC: Ah, the old famous Coppermine?

DB: It’s a short helicopter ride from there to the project. There’s an airstrip, regular air service. There’s an old air strip actually on one of the properties we’re going to use for direct access with a fixed wing aircraft, so it doesn’t get much better in that sense.

BC: Conceptually, what do you need to see, what do you need to find there to take it to the Kamoa stage, or up to a stage where it’s a world class deposit or something that’s really profitable.

DB: Like anywhere, you want to drill a discovery hole that’s got an ore grade and width and then you want to step out from that and build tonnes. That’s what it’s all about.

BC: What grade do you need?

DB: Up there, good question. Kamoa’s average grade is close to 3%, there are other deposits around the world that have that. If you get 3% copper of sufficient width, you’re in business.

BC: So that’s how we can judge your program. Although admittedly the first round is basic geology which I think is really smart. Get a handle on what’s going on and then zero in. If we’re going to watch this play, it’s about, first off, we get the concept, it’s coming together or it’s not coming together, here’s our targets, next round or two rounds after that, we’re getting low cost mineable widths over 3+% copper, okay.

DB: That’s the objective but like anything, you find what you find, and you go with it. They are mining the Kupferschiefer at under 2%. It really depends on all sorts of other factors, I’m not going to be able to predict that.

BC: You’re not that good yet?

DB: Not that good yet, sorry.

BC: What sort of shape is the company in? How much cash do you have and what’s your market cap?

DB: We’re in good shape. We’ve got a unique strategic relationship with the Japanese trading houses, they fund a number of our exploration projects, and we’ve got a long history of relationships with them, going back to the Ivanhoe group as well. That’s kind of our key strategic difference that we’ve got. In addition, we’ve got a treasury and no debt so that helps too.

BC: They are funding by way of placements, or getting a piece of the project, or an offtake agreement, what’s their relationship?

DB: It varies project to project. We have projects in BC where they are funding the exploration directly. They are interested in the offtake in the long term for Japan; that’s really what’s driving them. And we’re interested in the metals that work for that reason.

BC: That was Kaizen. They are looking for stratiform copper in Nunavut. Actually pretty interesting concept. If they can pull together a large enough volume of rock at 3%, which is what they’re after, it sounds like the infrastructure is not too bad, that could be quite significant. They’ve got a good deal structured with a number of Japanese groups, so it’s worth watching for sure.

Source

 

Gold Canyon is Heating up – Institutional Buying is Evident

Gecko Research, Mar 6, 2015

As we dig deeper in our due diligence on Gold Canyon (gcu.v) and tell the story from our perspective, it’s evident to us that one or several institutional buyers have been (and still are) buying shares in the open market. In this article we will try to shed some light to that thesis and what they might find so attractive that the retail investors have missed.

Institutional Buying

We have been following the day-to-day trading of GCU very intensely for a while now and when we were buying shares around 16.5-17 cents, we noticed that someone was iceberging (see below) their order at 16.5 cents. This is a typical strategy for deep pocket institutional buyers and we think they weren’t very successful at that level. They probably picked up 400,000-500,000 shares before GCU started to move higher.

We are simplifying a bit here, but close to 70% of the company’s outstanding shares has traded in the last three months and although some of those shares are traded several times, a large huge chunk of that was Sprott and Pinetree dumping (as we explained here) their holdings. We are making a guess here that someone has been accumulating between 20-40 million shares at the very least in Gold Canyon lately and what we can say with a 100% certainty, those shares have not been bought by retail investors. Someone is still out there buying and the only conclusion we can make from that is that institutional buying is strong in GCU at the moment.

Life Cycle of a Junior Explorer

Placing Gold Canyon in the graph below, it’s our opinion that Gold Canyon is past the “discovery cycle” and has already bottomed out in time for its next cycle. We have seen the speculators leave (Sprott, Pinetree and very likely many retail investors) and now it seems like institutional money is moving in. Our whole thesis for our investment is that GCU is ripe for a take-over, so we see someone else moving the Springpole Gold Project forward with the next step being to take the Springpole Gold Mine to a full feasibility study.

JrLifeCycle
Let’s assume that we are right and that one or several institutions (take your pick: funds, large-cap producers, Chinese interests) are trying to acquire a strategic position in GCU, what attracts them besides what’s already known? Sure, the 5.1 Million ounce open pittable deposit in a great jurisdiction is the obvious reason. But as we have touched on before, we suspect that the potential at Springpole is greatly understated and perhaps even misunderstood.

We have had a friend of ours, a geologist who we consult when we ourselves lack in knowledge and understanding of the technical aspects, go through all the technical reports and other available information. If you look at the map of Springpole below, all the drilling that has been done is in a small corner of the property, to the north-west. It’s clear that most of the project has never been drilled and if what our geologist told us is correct, Springpole could very likely become a >10 Million ounce gold mine. The deposit is open at depth, to the south and to the southeast.

springpole

The Springpole Gold Mine put in perspective

Springpole’s resources are 5.1 Million ounces eq. (4.4 Moz Indicated, 0.7 Moz Inferred). When one prepares a bankable feasibility study one has to do infill drilling to prove up the resources into reserves, so in that sense this comparison is not 100% accurate, but it will still get you an idea of just how undervalued Gold Canyon is. Two other large Canadian projects:

1) Goldcorp has one of their flagship properties in the Red Lake district, the Red Lake Mine, which produced 414,000 ounces in 2014. That mine has 2,550,000 ounces in Proven and Probable reserves.

2) Goldcorp recently acquired Probe Mines (valuing Probe at the time at C$526 Million) mainly for its Borden Gold Project. Borden has both higher grade underground resources as well as (perhaps?) open pittable resources, together totaling 4.35 Moz mostly in the Indicated category (similar to Gold Canyon’s resources).

Even if Springpole doesn’t contain a single ounce more of what’s been discovered so far, the current resource alone makes this a world class mine in the making. The metallurgy is non-complicated, the strip ratio is very low and the project is in a country that is considered one of the best in the world.

To be fair, Gold Canyon need to bring the Springpole Gold Mine further ahead in order for a comparison to Probe to feel accurate, but how much should 5.1 Million ounces be valued at in a take-over? C$100 Million? C$200 Million? And assuming we are right, how much should the potential to double the resource be worth on top of that?

Gold Canyon’s market cap is a mere ~34 Mcad at today’s 18.5 cents/share (184m shares x 18.5c) and we don’t want to speculate where a fair bid would come in at, but it sure isn’t going to be near where the stock is trading today. A shareholder’s dream scenario would be if more than one party eventually gets seriously interested, only then would we get a maximized and fair bid for Gold Canyon.

(Iceberging: When large participants, such as financial institutions, need to buy and sell large amounts. Instead of placing a single large order, it can be divided into smaller lots. Usually through automated order mechanisms, iceberg orders are used for the purpose of hiding the actual order size. By doing so, other participants only see a small portion of the total order at a time, the same way the “tip of the iceberg” is the only visible portion of an immense mass of ice)

 

Team Gecko Research
www.geckoresearch.com

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Ripe for a Take-over – Gold Canyon Resources

Gold Canyon Resources (gcu.v)

* Shares out: ~184m
* Share price: C$ 0.17
* Mcap: C$ 31 Million
* Cash position: Between C$ 1.5-2 Million
* Website: www.goldcanyon.ca
* Latest Presentation (pdf)
* Springpole Gold Project – Useful Facts & Links

gcu_banner

First off, let us quote ourselves from an earlier newsletter:
“We would like to find a “special circumstance” in the company for it to stand out in comparison to the rest. We are mostly focused on identifying small junior companies as we think they will be subjects to a coming wave of M&A activity during this year. For a large producer, there are plenty of companies/projects out there to gobble up on the cheap.”

In Gold Canyon, we think we have identified more than one special circumstance to motivate us to buy a position. Not only that, we have also made this holding larger than the other holdings we have in our “High risk – High reward, a portfolio within the portfolio” (link).

Before we start talking about Gold Canyon’s core asset which makes this an obvious take-over target, here’s the first “special circumstance”. Two funds, Pinetree and Sprott (no secret here, everybody knows), have since December been forced to liquidate holdings and Gold Canyon was severely hit by this and we see that as a clear over-reaction. This would be our first special circumstance.

When the stock was trading at 11 cents, we were buyers at 10c and unfortunately we didn’t get any shares down there. But we like this stock even at today’s price (16.5-17c) and it’s at these levels we have built a position for ourselves. It was quite obvious that a bounce would come when the large selling was over with and we suspect that GCU at today’s levels is just “breathing a bit” before the next run up.

We don’t prefer to value a company for their ounces in the ground, but when something gets too cheap, it’s easy to point out. Gold Canyon has 4.4 Million ounces in Indicated resources and another 0.7 Moz in Inferred. With today’s Mcap of ~31 Mcad, 5.1 Million ounces in the ground are valued at US$5/oz. In our mind, that’s too cheap and we consider this to be our second special circumstance.

The Springpole Gold Project
Before we invested in Gold Canyon, we consulted one of the geologists in our network and had him look over the Springpole Gold Project, we got very good feedback. The deposit is an open pit, bulk tonnage with good grades at surface (~2gpt) and simple metallurgy. It’s located in Northwest Ontario, Canada, around 70 miles from the Town of Red Lake.

Since the Preliminary Economic Assessment (PEA) was done in 2013 a lot has changed in terms of costs for the mining industry. Not only has material and machinery become cheaper, the same is also true for labor and energy. So even at $1,200 gold (the PEA was done @ $1,300) we think there’s reason to believe that the economics are even better today despite a lower gold price. This has strengthen our view that this is a very robust project and we would go as far as saying that this is exactly what a large mid-tier or even a major is looking for.

To paraphrase Mr. Hennigh from the interview (see below) we did on Tuesday, “There’s a strong likelihood that both the capex and the operating cash cost would come down significantly and it would make an even stronger case today despite the lower gold price”. One should keep in mind that the $438 Million capex for a 20,000 tpd operation is not shabby in the first place. If that number is lower today, as many indications suggests, it’s easy to see why this project is ripe to be taken over. According to the PEA, cash cost was estimated to be US$636/equivalent ounce gold (eq.oz Au) with all-in cost of US$860/eq.oz Au.

What is even more favorable now compared to when the PEA was published, is the relation between USD/CAD. The Canadian dollar has come down a good 20% against the US dollar which will do wonders for the cash cost. Put in a different way, gold is trading at $1,500 Canadian today.

With what has been drilled to date and what we know today, the Springpole project is in our view of very high quality but interestingly enough, the majority part of the mineralization is still untouched as only a small north-western section of the project has ever been drilled (and still Gold Canyon has shown >5 Million ounces). The rest of the project offers significant opportunities to expand the currently known resources and to discover new areas of mineralization. In terms of exploration upside and resource growth, we assume the potential is definitely there to actually double the size of the deposit.

Risks
There is always risk involved, as with all investments. The companies we chose to invest in and write about should be considered nothing but high risk. The biggest risk we see in the near term (0-9 months, we don’t intend to hold it any longer than that) is Gold Canyon’s financial situation. The company has enough money to muddle along, perhaps even through the fall, but the low cash position is to us the largest risk with this investment. GCU doesn’t have the kind of cash to aggressively take the Springpole project forward and there are also no guarantees that they will be able to raise more cash when needed.

Gecko Podcast interviewing Mr. Quinton Hennigh
On Tuesday of this week, we talked to Quinton Hennigh, technical advisor and a Director on the Gold Canyon Board. Quinton has a background as an exploration geologist with Newmont Mining Corp., Newcrest Mining, and Homestake Mining.

In the interview we learned some of the history of Gold Canyon. Did you know that the company is one of the oldest listed companies on the Venture exchange with over 30 years of listing? We didn’t. Another interesting detail is the fact that Gold Canyon has never done a share rollback, the share structure as we see today is the original one since day one.

Listen to the interview by visiting our podcast section

Conclusion
We’ll make this short. Gold Canyon is all about risk vs. reward. The special circumstances mentioned above makes it very clear why we see a lot of value and upside at 17 cents with very limited downside. As we have stated before, we feel strongly that 2015 is the year when large producers and well financed companies should go out and acquire high quality projects. Gold Canyon has a very high quality project and if our assumptions/guesses are anywhere near the truth, GCU’s flagship property could be a world class mine in the making.

There aren’t many 5-10 Million ounce gold projects located in one of the best and safest jurisdictions in the world. And of the ones that actually exist, how many are up for grabs?

 

Team Gecko Research
www.geckoresearch.com

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