Yukon Gold (and Silver, Copper, Nickel, Platinum Too)

T.WRN, V.WGO,Yukon, ,T.WG, , V.CSL,

When you embark on a tour of the upcoming mines of the Yukon the first thing which hits you is the sheer size of the place. Miles and miles of untouched, trackless, wilderness separates many of the properties from any sort of population centre. To cover eight properties and a full-scale mining conference in six days means a lot of fixed wing flying, helicopter jumps and bumpy drives down gravel (if you’re lucky) roads.

Within a day you also realize just how small Yukon is. There are only around 36,000 people in the entire territory. But the mining community is much smaller and very interconnected. While every mining property is different, they all face the same issues of road access, power, the Yukon winter and the challenges of drilling in sub-zero weather, permafrost and spring breakup.

Anne Lewis, the Executive Director of the Yukon Mining Alliance, has her work cut out for her keeping track of the media and investors touring around her members’ properties. She is so busy that the media group, of which I was a member, didn’t even see her for the first two days of the tour. Instead, our guide was Canada’s only governmental Investor Relations officer, Corey Kanzig of the Yukon Department of Economic Development. The tour itself is jointly sponsored by the Government of the Yukon and the Yukon Mining Alliance.

The geology we were covering falls into two main categories: the Tintrina gold and silver belt which arcs up from the British Columbia border running north-west all the way into Alaska and a section of that belt known as the Dawson Range and the White Gold District in the south-west of the territory. This article will cover the Dawson Range and the next article will look at the Tintina.

The Tintina belt has been hugely productive. It contains the fabled Klondike centred around Dawson City as well as the richly endowed Keno Hill silver district. The Dawson Range or White Gold District is geologically similar and has one very unique characteristic: it was never covered by glaciers. This feature means that the soils on the hills and low mountains of the range have not been disturbed and that means that what lies beneath can often be well approximated by careful soil sampling.

yukon miningThe flagship project in the Dawson Range is Goldcorp’s (T.G) Coffee Creek property. Discovered in 2010, this project was originally owned by Kaminak Gold and was acquired by Goldcorp in May 2016 in a share transaction valued at 520 million dollars. At the time the property had total indicated gold mineral resources of 3.0 million ounces.

The Coffee Camp itself is an old outfitter’s camp on the bank of the Yukon River. We flew into the private airstrip and were met by Tim Smith the Coffee Exploration manager. An expatriate Australian geologist, Smith had worked for Kaminak and, like many of the other people at the Coffee site had stayed on after the takeover.

A recurring theme as you go to advanced stage camps is safety. We were walked through the basics over coffee and it was very clear that for Goldcorp safety is the top priority. Seatbelts in the crew cab are mandatory. I drove with Tim and the key did not go into the ignition until he shoulder checked that we were strapped in. Not being buckled in is a firing offence at Goldcorp. We had been kitted out with high vis vests, hardhats and safety glasses. But there was only the seat padding to protect more tender parts from the rough graded 20 km road to the exploration site up on a bare ridge.

The challenge at Coffee is that the gold is entirely invisible, nano, gold which can only be seen with a scanning electron microscope. What Tim and his crew are looking for are the sorts of rock in which this gold is hosted. Which, in turn, means looking very closely at soil samples. More than 30 parts per billion gold – which is not very much – suggests a hot spot which will justify exploratory drilling.

The drilling has revealed a series of long, narrow systems in the project area. At the moment the mine plan calls for four open pits to get at the resource and a single heap leach facility. However, that is likely to change. There are soil anomalies to both the east and west of the project area which have yet to be drill tested.

Strategically, having Goldcorp in the Dawson Range is hugely important. Not only does having a major validate the district, but it means that soil sampling and exploratory drilling can continue for several years in order to add ounces to the resource. Goldcorp is big enough that it does not need to rush to production. 3 million ounces is good, but the Coffee potential is likely significantly higher. Goldcorp has the deep pockets to be able to afford to really understand its property and, indirectly, the district which surrounds it.

yukon miningRight next door is Western Copper and Gold’s (T.WRN) Casino project. 8.9 million ounces of gold reserves, 4.5 billion pounds of copper reserves with 9 million ounces of inferred gold and 5.4 billion pounds of inferred copper, a huge potential mine. At the top of a mountain. Literally.

You fly into the Casino project on a landing strip which goes steeply uphill.

For CEO Paul West-Sells, the mountain top location, the all air access and the lack of a road or power and a 2.5 billion dollar CAPEX are dwarfed by the sheer size of the deposit. Roads can be built, an innovative Liquid Natural Gas Power Plant is in the budget. What triggers building the mine is metals prices. $2.70 copper and sub $1250 gold leaves the Casino project on the drawing board. A sustained copper price of $3.00 or better and it’s full steam ahead.

The Casino project is about halfway through the Yukon’s permitting process and there is some indication that the company will be updating its feasibility study later this year. But, for the moment, West-Sells and his team are cooling their heels waiting for the supply gap in copper to begin to drive the price upwards. But a spike in the gold price would be welcome as well.

West-Sells is quick to point out that while a 2.5 billion CAPEX looks big, it is a pretty normal number in the world of large scale copper mining. Especially where there is a large deposit and one with gold credits in abundance. One interesting element of the Casino project is that it is open to the north and at depth. As West-Sells explains, at this point the deposit is large enough to allow a 22 year mine life. Finding more pounds of copper or ounces of gold, at this point, would not actually add much value to the project. The value is already there.

“At this point, we have invested between 80 and 90 million dollars. We need to spend another 20 million to permit and 30 million more to shovel ready.” West-Sells said. Proving up an asset of this size is not cheap, but the exploration costs to date versus the value of the deposit discovered is very attractive.

The Casino project is very much a leverage play on both the price of copper and the price of gold. Essentially, if either of those metal prices increases, the value of the proven reserves at Casino will rise. With only 95 million shares outstanding and a recent trading range between $1.20 and $1.40, Western offers investors an opportunity to option copper and gold on very attractive terms.

Two other factors add to the attractiveness of Western: first, as part of the Osisko Gold Royalties acquisition of the Orion Mine Finance deal announced June 5, 2017, Osisko picked up a 2.75% NSR on the Casino project. Second, Goldcorp’s Coffee project is right next door. Being bought by a major would not be the worst thing that could happen to Western Copper and Gold’s shareholders.

Yukon MiningStretched to the north of Coffee and Casino are the land holdings of White Gold Corp. (V.WGO). The key fact here is most of the soil on its extensive claims is unglaciated. Which means that soil samples are in place over associated hard rock deposits.

I learned all this at the Mining Conference in Dawson City in the middle of the tour; but it was brought home to me in the middle of the street outside a raucous bar between 2 and 4 AM when Shawn Ryan, the Chief Technical Officer of White Gold explained exactly how he had systematized soil sampling. He’d started out as a mushroom picker, figured out some very effective prospecting methods through his company GroundTruth Explorations and then discovered the deposits which went on to become White Gold, Coffee and QV for a total of 7.5 million ounces of gold.

Doing systematic soil sampling, compiling Ultra High-Resolution drone photography, inventing a remotely controlled drill which runs 70% cheaper than conventional diamond drilling and building a data base of 250,000 quality controlled soil samples has made GroundTruth the go to company for exploration and targets in the Yukon.

Having access to these technologies and the databases they are used to create has made White Gold very attractive to majors. Agnico Eagle holds 19.9% as does Kinross.

“We spend a lot of time training our people,” said Ryan. “Two or three weeks so when they get out of a helicopter they know exactly what to do. How to take the samples. We use Dutch augers and we train our people to get right down. Crank until you hear the crunch of the bedrock.”

As Ryan’s soil samplers work they “log in field” which means that they log the holes they drill, take pictures and geolocate the samples they take. This large scale, environmentally low impact exploration requires no permitting because there is very little disturbance to the ground.

Soil sampling leads to maps of where the mineralized fluids are likely to have flowed. “There were multiple metallogenic events, pulses of mineralization,” said Ryan, “We are fully funded to drill 200 holes a year for three years. Top 100 meters.”

White Gold is very much a pure exploration and project generator play. 68.5% of its shares are owned by insiders. Trading at around $1.90 on low volumes with approximately $22 million cash in its treasury, White Gold is a bet on Shawn Ryan’s insight that the soils will tell the story of the bedrock beneath. So far it has been a pretty attractive bet: two and a half years ago the company was trading at $0.04.

Yukon MiningThe QV project is on ground Comstock Metals (V.CSL) optioned from Shawn Ryan. Unfortunately, we didn’t visit the site and, for complicated reasons, David Terry, Comstock’s President and CEO and I could not meet at the Dawson City Mining Conference. However, I was able to reach Dr. Terry by phone after the tour.

“The property had not been worked on since 2013,” said Terry. “I came on a year ago to revitalize the project. We have one identified area, the VG zone, which has veined gold, stockwork and breccia zones.”

As with other projects in the Dawson Range, Comstock had targets which begin at surface. “We have a good initial discovery but it is a very large property. There are lots of new targets,” said Terry. “The area was never glaciated with is important for exploration. There is also a range of gold types on the property. But the VG zone is called “VG” for a reason.”

“The drilling chased the deposit down several hundred feet below the surface. But the zone is open to the west, down dip and beneath the mafic hornblende gneiss to the east,” said Terry. Add to that another half dozen targets identified by soil sampling, magnetic data and surface mapping and Comstock has a lot of exploration work and drilling ahead of it. “It is early days in the White Gold District.”

Yukon MiningTo round out the South Western side of the Yukon we went to the polymetallic Wellgreen Platinum (T.WG) project not far from Burwash Landing along the Alaska Highway.

Wellgreen holds an 18 kilometre stretch of ground and its principal exploration site at Wellgreen Mountain hosts 2 billion pounds of nickel, 1 billion pounds of copper and 6 million ounces of PGMs and gold in the measured and indicated categories in a 2.8 km section.

We were driven into the mountain by Michael Johnson of the Kluane First Nation in a bus owned by the Elders and, I suspect, more used to taking seniors sightseeing. It was a rough road with creeks to ford and on the steep slopes, 100 yard wide land slips had fallen off the mountains. None of which seemed to faze Mike.

Wellgreen had been mined before with Hudbay Minerals operating underground to pull massive sulphide rock in the 1970s. The portal still exists and the sheer weight of the waste rock demonstrates the high metal content.

A tour colleague coined the phrase, “steep and deep”. Which is stunningly obvious as you stand at the base of the mountain. The challenge, which has defeated many, is to come up with a feasible mine plan which can effectively exploit the currently stranded resource.

The new management at Wellgreen, led by ex-Romarco Minerals CEO Diane Garrett, has done significant metallurgical work leading to the idea that it may make more sense to produce separate nickel and copper concentrates. This, in turn, changes some of the details of mine construction. Pit mining the side of a mountain efficiently is a huge challenge and Wellgreen wants to get it right the first time.

Wellgreen is blessed with easy access to the Alaskan seaport of Skagway for effective transportation of the concentrate. And the company enjoys an excellent relationship with the Kluane First Nation on whose settled claim the proposed mine is located. At the Wallgreen hosted barbeque the night we saw the site, Chief Bob Dickson and his wife, as well as Colin Asselstine, the GM of the Kluane Community Development Corporation, joined us for dinner.

A sense of community pervaded the dinner. At the moment, the First Nation is pleased to have a new grocery store in operation. Now they are looking for ways to create a school for ten or so kids so that their children do not have to go 276km to Whitehorse in order to attend highschool.

For all of the companies we visited, First Nations engagement is simply a given. Any exploration camp or mine under construction needs people to work and many of those people, given the demographics of the Yukon, will be First Nations.  The First Nations need to be included and respected as the mines proceed. They are, after all, as I was told repeatedly, government. A fact which all of the explorers and miners I spoke with seemed completely relaxed about.

For the Yukon mining business, First Nations and the new Yukon government are all positive elements in an emerging story. Each group needs the other to succeed. With the tremendous mineral endowment Yukon has, there is a very good chance that everyone will succeed. Build a mine at Wellgreen Mountain and the Kluane First Nation is a lot more likely to get its school.

On to the Klondike, silver and what may very well be Canada’s new Carlin trend. And Dawson City.

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