Almost exactly two years ago I was on the Yukon Mining Alliance Media Tour and went to the Victoria Gold (V.VIT) Dublin Gulch Eagle Mine project, 80 bumpy kilometres from Mayo, Yukon. There, VP Exploration, Paul Gray took us on a tour of the proposed mine site. There were some roads bulldozed out of the bush, drill collars, a large camp which was somewhat empty and a vision. John McConnell’s vision of a 200,000 ounce per year gold mine.
I reached McConnell by phone to get an update on the Eagle Mine. “It’s going pretty well right now,” said McConnell. “We’re working every day. Long days. The past year has been pretty much flat out and it’s put us about a month ahead of schedule. We’ve put the first ore through the primary crusher.”
“The build itself has gone pretty much according to plan,” said McConnell. “Though, at the beginning, we had the wettest May and June on record in 2018. It was so wet that Tara (Christie, CEO of Banyan Gold (V.BYN)) and I thought we might have to postpone our wedding so I could be on site. Fortunately, the weather got better and the wedding could go ahead. We had many of the mining CEOs in Canada up in Dawson.”
“Right now we are planning to do our first pour in mid-September and do a live broadcast during the Denver Gold Forum,” said McConnell. “We want to do a Grand Opening of the Mine on Victoria Day 2020 when we’ve achieved commercial production. Our stretch internal goal is to achieve commercial production by the end of 2019, but we are pretty certain to have achieved it by Q2 2020.”
Along the way to the first pour and eventual commercial production, Victoria has spent over 500 million dollars and has become the largest private employer in the Yukon. However, McConnell is most proud of the fact that we have now worked more than 1.5 million person-hours without a single lost-time incident.
“Victoria and our Construction Manager, JDS Energy & Mining Inc. created a strong safety culture right at the beginning,” said McConnell. “Early on, a contractor’s foreman was seen working up high on a piece of equipment without a safety harness. The foreman was suspended from the site for 100 days and that seemed to set the tone and show people we were serious about safety”
Creating a culture of safety is one job for a mining CEO, creating ongoing engagement with both the Government of the Yukon and the Nacho Nyak Dun First Nation, are two other vital elements of the job. “We get along well with the First Nation,” said McConnell. “But you have to constantly work at it. We’ve been through four chief elections.”
When you are in the Yukon you hear government people, First Nations members and resources workers all explain that the First Nations in the Yukon are a real level of government. Making sure that the Nacho Nyak Dun First Nation’s voice is heard at the Eagle Gold Mine and that their concerns are addressed is a big part of McConnell’s job. So, of course, is getting along with the Yukon government.
“Sandy Silver (the current Premier) is the MLA for Dawson City,” said McConnell. “Before that, he taught school in Dawson and his students’ parents were miners. He understands mining and he, and his government, are very supportive.”
In fact, the Government of the Yukon has what is probably the most effective mining support operation in Canada. Working with the Yukon Mining Alliance, Premier Silver and Energy, Mines & Resources Minister Ranj Pillai, have become fixtures at the major mining conferences all over the world.
While building the mine and tending to First Nations and Government of the Yukon relations would seem to be more than enough for McConnell to have on his plate, Victoria Gold’s investors had a surprise for him a couple of weeks ago. One of the company’s major shareholders, Orion Mine Finance Inc. came to an agreement with another of the major shareholders, Osisko Gold Royalties Ltd. to buy out Osisko’s entire shareholding – some 154 million common shares.
In the press release announcing the transaction, McConnell is quoted as saying, “Victoria was pleased to play a small part in assisting Orion and Osisko as they re-balanced their equity portfolios to facilitate Orion’s renewed equity commitment to the Company’s strategic direction with respect to the Eagle Gold Mine. We are grateful for their combined support in funding the development of the Eagle Gold Project and, notwithstanding its equity divestment, Osisko remains a valued partner with a major economic interest in the mine via its royalty.”
In our conversation, McConnell said, “This was a complete surprise. We knew that Orion was impressed with the mine build and they indicated that they wanted to increase their holding. But they did not tip their hand at all about Osisko.”
“We were able to get language into the agreement to protect the other shareholders,” said McConnell. “Orion is friendly hands, great, long term, shareholders. They are really smart guys. Some of the best minds in the business.”
As a bonus, Osisko Chairman, Sean Roosen will remain on the Board. “Sean is a good friend and very strong technically and financially. And Orion likes him.”
That surprise out of the way we got onto Victoria’s share price. “Look, compared to our peers we are fairly valued,” said McConnell. “People are saying “Show me.” But our price as a producer should be different. Orion bought the Osisko shares at $0.46 which means they hold 38% at an average price of $0.48. They’re savvy investors and they see the payday. There will be stumbles at the startup. I get asked about the share price all the time and eventually, you get a bit numb. But shareholders have the right to ask.”
“There have been ups and downs the whole way. But we are four weeks ahead of schedule, we have an excellent safety record, good relations with our First Nation and with the Territorial Government. 50% of our employees are Yukoners and a high percentage of them are First Nation,” said McConnell.
“Right now, we are in a perfect storm for gold,” said McConnell. “I’m happy when gold is at $1250 and the Canadian dollar is at $0.80 USD. All our planning was based on those numbers. 70% of our costs are in Canadian.”
Gold over $1400 and the Canadian dollar at $0.76 makes John McConnell’s new gold mine a very profitable venture right from the go. The market will figure that out, eventually.