Perspective: Expanding the universe of exploration capital
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Perspective Issue Twenty Three - July 25, 2017

The Northwest Territories – Open for Business

By: Gary Baschuk, VP Senior Mining Analyst

We recently visited Nighthawk Gold Corp.’s (NHK-TSX) and TerraX Minerals Inc.’s (TXR-TSX.V) Northwest Territories properties. Both companies control very large land packages in favourable geological terrain in a region with strong government support.

During our site visits, we had the opportunity to meet NWT Government Officials Wally Schumann (Minister of Industry, Tourism and Investment), Tom Jensen (Deputy Minister, Mineral and Petroleum Resources) and Pamela Strand (Assistant Deputy Minister of Mineral and Petroleum Resources) to discuss the work being conducted to assist the mining industry. With a population of approximately 44,000 scattered over 32 small communities and the capital city of Yellowknife, the Northwest Territories encompasses over 1.17 million square kilometers. NWT ranked 7th as the most attractive Canadian jurisdiction for mining investment and 48th in the world according to the 2016 Fraser Institute Study. In 2016, exploration expenditures were estimated at $66.4 million and over $46 billion in mining revenue has been generated since 1932. According to Natural Resources Canada, all $1.265 billion of mining revenue generated in 2016 was from the diamond mines – Ekati (owned 88.9% by Dominion Diamond Corp., (DDC-TSX)), Diavik (60% Rio Tinto (RIO-LSE) and 40% Dominion Diamond Corp.) and Gahcho Kue (51% DeBeers and 49% Mountain Province Diamonds Inc. (MPVD-TSX)). In the past, gold production in Yellowknife was prolific with the Giant Yellowknife Mine producing over 8 million ounces at a grade of 16.0 g/t and the Con Mine producing over 6 million ounces at a grade of over 16.1 g/t. The Giant Mine ceased production in 1999 and the Con Mine closed in 2003.

In a pro-mining effort, the NWT government has created a Mineral Development Strategy including a $1 mln mining incentive fund for explorers and prospectors. Up to $200,000 is available for corporate projects and up to $25,000 for prospectors. In addition, Assessment Work Credits are incentivized at 1.5x on certain expenditures. NWT has established a geological library, prospector training program, and is establishing a core library. Mining is a key component to the north and is supported by the population. In 2016, a survey revealed that 88% believe a strong mining sector is vital to the long-term health of the NWT economy. In an attempt to further open up the north, the NWT Government has commenced a four-year action plan aimed at providing year-round access across the north.

Figure 1. NWT’s Transportation Strategy and Four-Year Action Plan

 Source: Investing in the NWT’s Exploration and Mining Industry, Department of Industry, Tourism and Investment, June 2017.

Development of the roads would lead to improved, less expensive access to existing projects, more rock exposure and access to new areas increasing the chances for new mineral discoveries.

In addition, the NWT Government is working with the indigenous communities in the decentralization or devolution of lands and powers. This model is designed to provide exploration and development companies clear guidance for advancement and ownership of their projects.

The Territorial Government recognizes the significance of mining for future growth and sustainability. Currently, mining revenue is from the diamond mines and diversification is needed. The government acknowledges this and is willing to assist companies to do business in NWT.

Geology and Mineralization model:

Exploration in the NWT historically focussed on gold and base metals due to the presence of the thick sequences of volcanics and sediments, but over the past 20 years diamonds have moved to the forefront. With a rise in metal prices, the search has recommenced and has focussed in the eastern portion of the Slave craton.

NWT is underlain by the Archean Slave Craton.  The overlying greenstone belts have many similar characteristics to major gold mining camps in the world including Timmins in Ontario, Val d’Or in Quebec, Kirkland Lake in Ontario and Kalgoorlie in Australia. Gold mineralization is hosted in quartz and/or quartz-carbonate veins in structurally prepared competent rocks, usually basalts, quartz diorites or felsic intrusives. The deposits lie in splays or off-shoots along major, deep-seated fault zones in extensional environments. In Timmins, this is along the Destor-Porcupine Fault Zone and in Kirkland Lake and Val d’Or, the Cadillac-Larder Lake Break.

Favourable geological settings were established within large-scale extensional zones (similar to the Great African Rift Valley). Large swaths of tholeiitic basalt were deposited contributing to the development of basins and subsequent deposition of sediments, often with conglomerates deposited along basin margins. Commonly, granitic stocks or plugs intrude in a line near the margins of the basin. Within all of these camps, competent rocks, whether due to more silica initially or secondary alteration, fracture in a brittle manner while adjacent rocks, generally the sediments, react in a ductile manner when subjected to repeated movement along the long-lived, deep-seated fault zones.

Gold production from the Giant Yellowknife and Con Mines was hosted in structurally controlled, quartz-carbonate vein systems within the Kam Group of basalts near the Yellowknife River Fault Zone. Other Slave craton gold deposits related to shear zones in NWT and Nunavut include Seabridge’s (SEA-TSX) Courageous Lake, Nighthawk’s Indin Lake and TMAC ‘s (TMR-TSX) Hope Bay Belts (see map below for location). Substantial production was also achieved from banded iron formation (BIF) deposits including the Lupin Mine (3-4 mln oz) located in Nunavut.

Figure 2. Regional Geology illustrating Mineral Deposit Type and Location.

 

Source: Bleeker, W. and Hall, B., 2007. The Slave Craton: Geological and Metallogenic Evolution in Mineral Deposits of Canada, Edited by W.D. Goodfellow. Geological Association of Canada, Mineral Deposits Division, Special Publication 5. pp 849-879.

The properties we visited, Nighthawk Gold and TerraX Minerals, share many of the characteristics associated with the major gold deposits/camps. Nighthawk’s Indin Lake Property hosts the past producing Colomac Mine and Damoti banded iron formation deposit as well as a number of smaller gold deposits/showings.

TerraX controls a large property package proximal to the Yellowknife Fault Zone and near the Con and Giant Yellowknife Mines. Numerous gold-bearing quartz veins were noted, often cross-cutting the main shear directions indicative of latter, brittle deformation.

Both properties have favourable geological settings, good gold grades from surface and drill samples plus ample opportunity for the extensions to the known zones and discovery of new mineralization.

 

PearTree Spotlight

Agnico Eagle’s Meadowbank Mine

PearTree is proud to feature the Agnico Eagle METC Meadowbank case study video. The Meadowbank open-pit gold mine in the Kivalliq region of Nunavut – approximately 300 km west of Hudson Bay and 110 km by road north of Baker Lake – is Agnico Eagle’s first Low Arctic mine. This Canadian success story originated as a result of METC / flow through financing.

To learn more about the Meadowbank mine, click here.

Equity Research

By Gary Baschuk, VP Senior Mining Analyst

Nighthawk Gold Corp. NHK-TSX

Site Visit to Indin Lake Gold Project

We recently attended a site visit to Nighthawk’s 100%-owned Indin Lake Gold Project, NWT, Canada. We were impressed by the nature of mineralization in the recently discovered higher-grade “shoots” and the discovery of new targets near the previous Colomac open pit. In addition, the large property (89,933 ha) hosts a number of advanced projects with encouraging results in need of follow-up.

Growth Potential

  • Colomac has a base NI 43-101 Compliant Inferred Resource of over 2.1 mln ounces grading 1.64 g/t gold. Nighthawk plans to update the resource in late 2017/early 2018 to include the drilling completed from 2013 through 2017 (approximately 50,000 meters of additional drilling).
  • We expect the grade to increase with the inclusion of newer, wide intervals of higher grade gold mineralization intersected in Zone 1.5.
  • Preliminary Metallurgical results have achieved recoveries of up to 96.5% (gravity and leach) versus the 90% used in the ACA Howe Technical Report and Resource Estimate (2013) and the 88.1% historical recovery. Final Metallurgical Results are expected by Q4/17.
  • Numerous mineralized zones on the large property warrant additional work that could further augment the resources.

Near-Term Catalysts

  • Results from ongoing Drill Program – three rigs currently active.
    • Testing the lateral and down plunge continuity of Zone 1.5 and intervening Zone 2.0
    • Testing New Targets on the proximal Goldcrest and Nice Lake quartz diorites
  • Potential new discoveries from detailed mapping and sampling on the Nice Lake Sill
  • Approximately $36 mln in cash to fund the 2017/18 exploration program

Solid Supporters

  • Kinross Gold Corp. (K-TSX) : > 9%
  • Osisko Royalties (OR-TSX) : 9%
  • Northfield Capital (NFD.A-TSX) : 14%
  • McEwen Mining Inc. (MUX-TSX, NYSE) : 3%

View Full Report

 

 

TerraX Minerals Inc. (TXR-TSX.V)

Site Visit to the Yellowknife City Gold Project

Lurking in the Shadow of Headframes

We recently conducted a 1-day site visit to TerraX’s large property package just outside of Yellowknife, NWT, Canada. TerraX owns a large land package consisting of 418 sq km covering the extensions of past multi-million-ounce gold producers in a mining friendly jurisdiction. Numerous high-grade gold deposits and showings occur on the property and TerraX has discovered and delineated additional mineralization, most recently a 65.7 g/t gold grab sample from Angel, Eastbelt Property.  We believe the extensive network of shears and related gold mineralization, currently only tested to relatively shallow depths, is highly conducive for additional discoveries. The company is taking a strategic and thorough approach to exploration by conducting detailed mapping and sampling to better understand controls on mineralization followed by geophysics and finally drilling to test the concepts. Mispickel, a recent discovery is showing excellent promise with high-grade gold intercepts with expansion potential in all directions. In addition to high-grade zones, large, shallow, potentially bulk mineable mineralization has been discovered and partially delineated eg. Sam Otto on the Northbelt.

Upside for New Discoveries

  • Large, under-explored land package yielding new, high-grade gold discoveries during current field program (recent 65.7 g/t gold from surface grab sample on Eastbelt)
  • High-grade drill results obtained from Mispickel Zone where new structural trends discovered
  • Discovery of Con Shear extension onto Southbelt and “New Vein” discovery add new potential
  • Potential for underground high-grade deposit(s) and shallow, open-pit operations

Location, Location, Location

  • Property is on-strike to multi-million ounce, high-grade (avg 16 g/t) past producing Con (6.1 mln oz) and Giant Yellowknife (8.1 mln oz) Mines.
  • Geologic setting is similar to world-class Archean, shear-hosted Gold Districts
  • Easy, year-round access, close to work force, supplies and power
  • Close proximity of deposits expected to lead to mining and processing synergies

Experienced Team with Aggressive 2017 Exploration

  • Conducting detailed mapping and geophysics on all properties with emphasis on more recent acquisitions.
  • Focussed drill program planned in late summer after mapping, sampling and geophysical compilation
  • Experienced Management and Technical Team led by Joseph Campbell, P.Geo, Chairman and CEO – Open Pit and Underground Mines
  • Team discovered and advanced Meliadine Project to Pre-feasibility (acquired by Agnico Eagle Mines (AEM-TSX) in 2010 for $739 mln)

View Full Report

 

 

Important Information and Legal Disclaimers

This report has been prepared for general information purposes only and should not be considered either a solicitation for the purchase or an offer of securities. This research report does not constitute a recommendation. The securities mentioned in this report may not be suitable for all types of investors. The information contained in this report is not intended as individual investment advice and is not designed to meet any particular investment objectives, financial situations, or needs. Nothing in this report constitutes legal, accounting or tax advice.

Information, opinions and statistical data contained in this report were obtained or derived from sources believed to be reliable, but its accuracy cannot be guaranteed. PearTree Securities Inc. (“PT Securities”) and/or its affiliates and/or any of their respective officers, directors, and representatives (collectively “PearTree”) does not represent that any such information, opinion or statistical data is accurate or complete (with the exception of information contained in the Important Disclosures section of this report provided by PearTree or individual research analysts). Any opinions or analysis herein reflect the views of the Analyst as at the date appearing above, and are subject to change without notice. The Analyst writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in this report.

PearTree may, in exchange for remuneration, participate in the financing of companies mentioned in this report. PearTree analysts are salaried employees who may receive a performance bonus that may be derived, in part, from corporate finance income. PearTree and members of their families may hold positions in the companies mentioned in this report and may buy and/or sell these stocks on the market or otherwise.

PearTree shall not be held liable for any loss or damage resulting from the use or the implementation of the information contained herein, except to the extent that liability may arise under specific statutes or regulations applicable to PearTree. The investments to which this report relates can fluctuate in value.

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Research reports are disseminated through electronic medium or in printed copy. Clients may access reports on our website, or receive publications directly via email. PearTree strives to ensure all recipients receive research in a timely manner and at the same time.

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Analyst Certification

I, Gary Baschuk, hereby certify that the views expressed in this report accurately reflect my personal views about the subject and the issuer.

 

Important Disclosures

Of the companies included in the report the following Important Disclosures apply:

Ticker Company 1 2 3 4 5
AEM-TSX Agnico Eagle Mines Ltd.
AUG-TSX Auryn Resources Inc.
DDC-TSX Dominion Diamond Corp.
FT-TSX Fortune Minerals Ltd.
K-TSX Kinross Gold Corp.
MPVD-TSX Mountain Province Diamonds Inc.
NHK-TSX.V Nighthawk Gold Corp. x x
NFD.A-TSX Northfield Capital
OR-TSX Osisko Gold Royalties Ltd.
RIO-LSE Rio Tinto
RGLD-Nasdaq Royal Gold Inc.
SEA-TSX Seabridge Gold Inc. x
TXR-TSX.V TerraX Minerals Inc. x
TMR-TSX TMAC Resources Inc.
TIG-TSX.V Triumph Gold Corp.
1 The Analyst(s) preparing this report (or a member of the Analyst’s household) have a financial interest in this company.
2 PearTree has managed or co-managed or participated as selling group in a private placement for the issuer’s in the past 12 months.
3 As of the end of the month immediately preceding the date of issuance of this research report or the end of the second most recent month if the issue date is less than 10 calendar days after the end of the most recent month, PearTree collectively beneficially owned 1% or more of a class of the issuer’s equity securities.
4 PearTree has visited projects of the issuer and a portion of the expenses for this travel may have been reimbursed by the issuer.
5 PearTree, the analyst or an associate of the analyst responsible for this report or any individuals directly involved in the preparation of this report hold or are short the issuer’s securities directly or through derivatives.
The research analyst is not aware of any other material conflict at the time of publication.

This newsletter is dedicated to providing insight and analysis on Canadian mineral exploration and development stories. We welcome your feedback.

PearTree Securities is the largest provider of mining flow through capital in Canada. As an exempt market dealer and portfolio manager, PearTree Securities has approximately $250 million available for investments annually.

Upcoming Conferences & Events

Diggers and Dealers in Kalgoorlie, Australia – August 7-9, 2017

Precious Metals Summit in Beaver Creek, CO – September 18-20, 2017

Denver Gold Forum in Colorado Springs, CO – September 24-27, 2017

Mines and Money Toronto – October 2-4, 2017

Contact Us

David Donato
President, Head of Banking
Email David
416.322.2296

Lisa Davis
CEO
Email Lisa
416.322.2299

Gary Baschuk
VP, Senior Mining Analyst
Email Gary
416.322.2297

Ricky Chan
Vice President
Email Ricky
416.322.2298

Danny Mah
Managing Director, Oil & Gas
Email Danny
C: 403.615.4917

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