THE CRITICAL INVESTOR

After  a relatively quiet winter season with no drilling news, hybrid prospect generator Alianza Minerals (ANZ.V, TARSF.US) is gearing up to getting ready for potentially up to 5 drill programs this year at their various projects. The optioned out (Allied Copper) Klondike and Stateline copper projects in Colorado, operated by Alianza, are both in the targeting phase now, with exploration permits expected in a few weeks. Coeur Mining, which has optioned the Tim Silver project in the Yukon, has already notified Alianza Minerals that it intends to do a drill program this year, and Alianza expects to hear more about budget and meters very soon.

The Twin Canyon gold project in Colorado also has seen its fair share of prioritizing drill targets, and a drill permit for a 10 hole RC drill program is also expected soon here. Alianza has the intention to seek a partner for this drill program. Last but not least is their fully owned Haldane Silver project, located in the Yukon. Alianza is looking to conduct a minimum program of 2,000m of drilling, with a priority on the West Fault target, which returned results like 3.14m @ 1,351g/t Ag, 2.91% Zn and 2.43% Pb last year. The company needs fresh cash for this intended program, and is looking to raise approximately C$2M soon, which will likely not be any problem, with Pacific Opportunity Capital backing them as always.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

2. The company

Alianza Minerals is a prospect generator with a hybrid business model of joint venture funding and self-funded projects to maximize opportunity for exploration success. The company currently has silver, gold and copper/zinc projects in Yukon Territory, British Columbia, Nevada and Peru, and several royalties in Mexico. The flagship project of Alianza is the 100% owned Haldane project in the Yukon, and other important projects are Tim Silver (Yukon), Klondike and Stateline (Colorado), and Twin Canyon and Horsethief in Nevada. Besides this the company owns or options more projects, like White River and Mor in the Yukon, KRL in BC, and Ashby, East Walker, BP and Bellview in Nevada.

These are all well-known jurisdictions for mining projects as all are home to many mines, deposits and exploration, although most (except Nevada) slipped through the rankings lately according to the Policy Perception Index (PPI) of the most recent Fraser Institute Survey of Mining Companies. The Yukon can be found at position 39 out of 77, Colorado at 33/77, Nevada at 5/77, BC at 41/77, Peru at 42/77 and Mexico for the royalties at 61/77. As a reminder, the PPI is the most important figure of this survey, as it indicates the mining friendliness of a jurisdiction, which encompasses corruption, permitting, speed of administrative processing, politics, local sentiment, etc. The Survey is usually published in the last week of February, so as a new version still hasn’t been announced, it is overdue but likely coming soon, probably adjusting the positions and scores somewhat, so if interested you can check this here.

The management team is led by prospect generator veteran President and CEO Jason Weber. Despite his relatively young age (51) he has been a President and CEO since 2007 of various prospect generators (Rimfire Minerals, Estrella Gold) and a developer (Kiska Metals, Whistler Gold project in Alaska, US). With Rimfire, he managed to reel in over $30M for exploration from JV partners like Newmont, Barrick, Anglogold, First Quantum and Xtrata. On the exploration side of things, Alianza is in the capable hands of Rob Duncan, who is the VP of Exploration. He has over 30 years of experience, ranging from juniors like Rimfire Minerals, Evrim Resources and Kutcho Copper, to majors like Rio Tinto and Inmet Mining.

On the financial front the most important figure is Executive Chairman Mark T. Brown, who merged predecessor Tarsis Resources with Estrella Gold in order to form Alianza Minerals, as President of Pacific Opportunity Capital, his family fund which is basically an incubator for many junior mining companies. Their most successful exit was Rare Element Resources, where he entered the rare earth space in 1999, well before almost anyone else, based on watching China cornering the rare earth market at an early stage. He had to wait until 2011 for the exit, but it was worth the wait many times over. Brown was the CFO of Miramar Mining and Eldorado Gold before he joined his father John Brown to build out Pacific Opportunity Capital. Alianza also has a real mining veteran on the Board of Directors, in Marc Blythe (Almaden Minerals, Nevsun, Placer Dome, WMC). Furthermore, Alianza recently added another financial director, Sven Gollan who is a former investment banker. Mr. Gollan represents FruchtExpress Grabher, a prolific investor in the junior mining space and one of Alianza’s largest shareholders.

Alianza Minerals has its main listing on the TSX Venture, where it’s trading with ANZ.V as its ticker symbol. With an average volume of about 54,339 shares per day, the company’s trading pattern is not very liquid at the moment, but I expect this to improve when drilling results will start to come in during late Q2, early Q3 of this year.

The company currently has 148.95M shares outstanding (fully diluted 195.61M), 34M warrants (with a weighted average exercise price of C$0.11 and a weighted average life of 1.5 years) and several option series to the tune of 4.5M options in total, with a weighted average exercise price of C$0.12 and a weighted average life of 2.3 years. Alianza sports a tiny market capitalization of C$11.17M based on the April 11, 2022 share price of C$0.075. Management has sufficient skin in the game, as it holds 11% of outstanding shares. Chairman Mark Brown is the largest shareholder with 11.6M shares (7.8%). Institutional funds hold 36%, several high net worths another 19%, so 67% is in tight hands. Alianza has an estimated low working capital position of about C$150K at the moment, but a financing is in the works right now.

Share price; 5 year time frame (Source: tmxmoney.com)

As can be seen in the chart, Alianza Minerals has been side ranging for many years between 5-15c, except the spike in January 2021, when a strong drill intercept of 1.78m @ 818g/t Ag was announced. As the July 2021 assay returned an even better 1.26m @ 3,267g/t Ag, it was a bit puzzling to witness no reaction whatsoever in the share price, although we were experiencing some summer doldrums, but not much. According to CEO Weber, a possible explanation was the weakness in the silver market from January onwards, which muted the response to these excellent results. As always, I view lows at a story which hasn’t fundamentally changed as a buying opportunity, and this is no other occasion.

As a reminder: the hybrid prospect generator model is a model for exploration companies that seem to have relatively good chances of success. The main characteristic is that such a company forms JVs with other, larger companies who finance the joint exploration efforts for the majority of the project in return. The hybrid part consists of the junior self-financing (by raising money in the markets or selling royalties on their projects) exploration on one or more of their fully owned projects, but also not having to hand over large parts of their projects.

Advantages of a prospect generator are limited dilution of share structures, strong partners and spread out risks as usually more than one project is explored at the same time, with different partners. These advantages are obviously not for free, and as such this less risky exploration model is also a double-edged sword. Disadvantages are that the value proposition for investors isn’t always clear, the junior loses the majority of project ownership so most upside as well, and the agenda of the JV partners isn’t always the same as those of the junior. Especially when large majors are involved, investors need to beware of how the JV deal is structured, regularly resulting in the major running away after first drill holes don’t immediately indicate Tier I potential, despite still being a pretty good prospect for an intermediate producer. As can be concluded, all junior explorer concepts have their pro’s and con’s.

3. Projects

Since Alianza Minerals is involved in quite a few projects, I will focus on the aforementioned ones that will most likely see exploration activities this year.  First up are the Yukon projects, including Haldane.

The Haldane Silver project is the flagship project as mentioned, and is still considered an under-explored high-grade silver property (considering the ongoing exploration activities at the central/eastern part of Keno Hill) in a historic silver mining region. The 8,579 hectare Haldane Silver Property is located 25 km west of Keno City, Yukon Territory in the western portion of the Keno Hill Silver District, where companies like Alexco Resource Corp. and Metallic Minerals Corporation are currently exploring.

Please note the continuing Robert Service Thrust, which runs south of the entire Keno Hill District, and most importantly the Basal Quartzite (in blue grey), which is the host unit to the majority of deposits. The Haldane property is well situated approximately 25 km west of the main Keno Hill deposits. Mineralization in the district consists of structurally-controlled, silver-bearing veins. The Keno Hill silver deposits produced over 200Moz of silver in a long history of mining from 1913 to 1989, with production recommencing briefly from 2011-2013. Alexco recently started producing again, and continues to hit high grade silver in drilling to add to their existing reserves. The Keno Hill District ranks as one of the highest grade silver districts in the world, as in the past 4.87Mt were mined at an average grade of a very high 1,389g/t silver, 5.62% lead and 3.14% zinc. For comparison, the highest mined silver grade at the moment in Mexico, the world’s number one silver producing country, is coming from the relatively small Platosa Mine of Excellon, sporting a grade of 549g/t silver.

Haldane itself has seen some high grade silver/lead mining of its own as well in the distant past. One underground development produced 24.7 tonnes of hand-sorted ore that graded at 3,102 g/t Ag and 59% Pb. Another one produced a total of 2.1 tonnes at 4,602 g/t Ag and 57.9% Pb. Over 65 deposits and prospects have been identified in the district. Most occur within the Keno Hill quartizite as structurally-controlled veins in proximity to the Robert Service Thrust. This is exactly the case with the Haldane project (quartzite in greyish blue). Haldane shares lots of aspects with the Keno Hill mining camp:

-Quartzite (Keno Hill) host.

-Proximity to the Robert Service Thrust

-Vein and breccia mineralization hosted by complex fault systems

- Galena, sphalerite, plus tetrahedrite and possibly pyrargyrite

- quartz and manganiferous-carbonate gangue are prevalent

- better grade commonly in proximity to northwest cross-faults

Considering the historic high grade already sampled and produced and the recent veins already hit, Alianza Minerals could be circling around some very interesting mineralization. Recent exploration of the past few years has focused on the Mount Haldane Vein System (MHVS), and considering the aforementioned high grade results (HLD20-19: 1.78m @ 818g/t Ag and HLD21-24: 1.26m @ 3,267g/t Ag) at the West Fault target, management is narrowing its focus at this specific target even more:

These two best holes can be observed in some more detail here:

As can be observed, the West Fault Complex seems to be a parallel structure, offset to the Ewing North Fault and the Main Fault. Mineralization in the West Fault Complex appears at greater depth compared to the mineralization hit at the second highest priority Middlecoff target, which also had some historic, very high grade near surface drill results (2000-3000g/t Ag), located 2km to the south:

According to CEO Weber, their insights on Haldane mineralization are improving, and they are looking to delineate a deposit here. He regularly talks to nearby exploring Alexco geologists, and they have confirmed to him that they are on the right track, as Alianza has hit the right type of geology, veins and structures. Weber expects to drill further stepouts at the West Fault and Middlecoff targets around June, depending on the availability of drill rigs, and targeting for the Bighorn and Ross targets will be finalized in the spring, and drilling will probably commence later in summer. CEO Weber elaborated a bit more on Haldane exploration: “The knowledge gained at West Fault as Alianza delineates that target may be valuable in its application to targets such as Middlecoff and Bighorn. Alianza now understands silver-bearing veins can exist in multiple levels within the host structures, and can migrate from one level to another. This knowledge may help in targeting drilling and unravelling the structural geology in real time and prioritizing follow up holes as drilling tests these targets.”

The second most important project is the Tim Silver project in the Yukon, which has been optioned to Coeur Mining. They can earn a 80% interest by completing C$3.55M in exploration expenditures over 5 years, making C$575k in cash payments, and by completing a Feasibility Study (FS) in year 8. The Tim Silver project has seen sampling and trenching in the eighties and confirmation sampling in 2013, and generated very interesting results: historic trench chip samples from 1988 returned 352.4 g/t silver and 9.12% lead over 4 m, and two grab samples taken from another trench returned assays of 1248.1 g/t silver and 49.5% lead, and 978.7 g/t silver and 32% lead. The 2013 confirmation sampling returned 6.4 meters grading 220 g/t silver and 4.74% lead. Within this interval, 3.7 meters assayed 365 g/t silver and 7.54% lead, so it sure looks interesting.

Tim Silver has a lot of similarities (geological setting, style of mineralization) with the Silver Tip Mine 20 km away, bought in October 2017 by Coeur from JDS for C$250M. Currently Coeur is working on the Silver Tip mill, to improve production figures. The story goes, that  when the original discovery was made at Silvertip, the owners were evaluating both Tim and Silvertip and had to chose which property to drill first, and basically on rolling the dice picked Silver Tip. So maybe Alianza could get lucky and might have Silver Tip potential on their hands here, who knows.

Coeur Mining, the operator of the Tim Silver JV, has completed a reconaissance exploration program, which included a SkyTEM airborne geophysical survey that was followed up by mapping, trenching and soil geochemical surveys. According to CEO Weber, Alianza should be in a position to announce the 2021 results and the details of the 2022 program this month.

Next up are the projects Alianza Minerals is jointly optioning out with Cloudbreak, a private exploration company, called the Klondike project and the Stateline project, both focused on copper. Both projects are optioned out to Allied Copper towards a 100% ownership, and both projects have drill permits being granted soon.

As a reminder, the strategy of the alliance with Cloudbreak is to acquire and explore copper deposits in the United States, more precisely in Arizona, Colorado, New Mexico and Utah. Under the terms, either company can introduce projects to the Strategic Alliance. Projects accepted will be held 50/50 but funding of the initial acquisition and any preliminary work programs will be funded 40% by the introducing partner and 60% by the other party.

The Klondike copper project lies within the Paradox Copper Belt, which includes the producing Lisbon Valley Copper Mine. There are numerous historical copper occurrences that have been identified throughout the district, however, many of these have not been explored using modern exploration techniques.

At Klondike, documented copper exploration ceased in the 1960s with subsequent exploration targeting uranium during the 1970s. Previous workers reported high-grade copper mineralization highlighted by results of 6.3% copper and 23.3 g/t silver in outcrop. In addition to its high-grade potential, disseminated copper-silver mineralization has been observed which may be amenable to modern open pit mining with Solvent Extraction Electro Winning (SXEW) processing similar to the Lisbon Valley Mine. Sedimentary-hosted copper deposits are an important contributor to world copper production, accounting for more than 20% of the world’s copper supply annually.

Alianza and Cloudbreak paid just C$20,000 and an additional $40,000 in cash /share payments for the Klondike property, keep this in mind. Besides this, the Alliance spent C$52,000 for a reconnaisance program consisting of mapping, stream sediment sampling and rock sampling. This program further defined existing drill targets at the West Graben Fault and East Graben Fault targets, and rock sampling and mapping successfully expanded the footprint of both targets and identified a new target named the Northeast Fault.

Sampling at the Northeast Fault returned 1.56% Cu and 1.4 g/t Ag over a 4.6m chip sample of altered Jurassic sandstones of the Saltwash member of the Morrison Formation:

As can be seen, the scale of the zones of interest are of significant size. All costs combined for the Alliance were C$105,000 I wondered why Allied Copper was so interested, as some samples are indeed very high grade for copper samples, but usually you see entire grids of sampling results before drilling is undertaken. CEO Weber had this to say about this: “One of the prime targets at Klondike is the copper mineralization hosted in the fault structures. While the mineralization sampled on surface is interesting, we want to jointly test these structures and prospective sandstones at depth for their potential to host high grade copper. Allied is focused on copper in the US and not afraid to test earlier stage targets so the concept at Klondike was appealing to them. Strong copper mineralization at surface suggests a compelling subsurface target. ”

Allied Copper obviously agreed with Weber, and optioned the property on generous terms:

• Allied will incur an aggregate of C$4.75M in exploration expenditures on the property, with at least C$500K to be spent prior to the first anniversary of the closing date.
• Allied will issue 7M common shares and make an aggregate of C$400k in cash payments to the Alliance over a three-year period.
• Upon completion of these option agreement obligations, the Alliance will transfer 100% interest in the Klondike Property to Allied. Allied will also issue 3M warrants exercisable for a three year term at a price equal to the 10-day VWAP of Allied’s common shares at the time of the issuance.
• The Alliance will retain a 2% net smelter royalty which is subject to a buy down provision where Allied may, at its discretion, repurchase half of the royalty for C$1.5M within 30 days of commercial production.

Allied Copper traded today (April 11, 2022) at C$0.18 per share, so 7M shares would be C$1.26M of payments in equity at the same share price over 3 years, which is pretty impressive considering the extremely cheap buying price. On top of that there are also 3M warrants, of which the 10d VWAP is very close to C$0.24. If Allied files on SEDAR an NI 43-101 technical report establishing the existence of a resource on any portion of the Klondike Property of at least 50Mt of either copper or copper equivalent at a minimum cut-off grade of 0.50% copper or copper equivalent and categorized as a combination of inferred resources, indicated resources and measured resources, then Allied will also issue a further 3M warrants exercisable for a three year term at a price equal to the 10-day VWAP of Allied’s common shares at the time of the issuance.

Looking at the total price Allied has to pay over 3 years (closing in on C$2.6M excluding the royalty), it seems Alianza has found a new way of much more aggressively adding value to properties. Some early stage exploration is being completed, as a magnetic survey will be finalized in a week. When the snow is gone, a remote sensing program will be done to detect alterations with satellite imagery. Drill targets have already been defined, as there are lots of copper exposures, and the geologic structure that includes the Lisbon Mine is known very well.

So far for the Klondike project. The Stateline project was purchased from the underlying vendors for an equally very small US$20k cash payment and a further US$40k payment in the form of cash and/or shares. The project is road accessible year-round, via a network of roads through the valley, including those supporting access to the Lisbon Valley Mining Complex (LVMC). The project is comprised of 22 mining claims on Federal mineral rights managed by the BLM. Ground covered by the current claims was at one time part of the LVMC claim package.

View from the Stateline Project to the NW with Lisbon Valley Copper Mine infrastructure on horizon  centre  and right of centre.

The highlights of the Stateline Copper project are:

• 148 ha property covering Paradox Basin sedimentary package in San Miguel County, Colorado and San Juan County, Utah
• Favourable stratigraphy known to host sediment-hosted copper deposits in the Paradox Copper Belt including the producing Lisbon Valley Mining Complex (LVMC), 8 km to the northwest
• Exposed copper oxide mineralization at surface within host sandstone units bearing strong similarities to copper deposits along trend at the LVMC
• Mineralized outcrops have yielded assay results up to 1.6% copper and 1.7 grams per tonne (g/t) silver and 0.45% copper and 2.1 g/t silver.

The Stateline project is located approximately 40 kilometres southwest of Naturita, Colorado, covering the state boundary between Utah and Colorado at the southeast end of the Lisbon Valley. This property lies within the Paradox Copper Belt, which includes the producing LVMC. There are numerous historical copper occurrences that have been identified throughout the belt, however, many of these have not been explored using modern exploration techniques.

At Stateline, historical exploration was conducted as part of the regional programs associated with the LVMC. Previous explorers reported copper mineralization highlighted by results of 1.6% copper and 1.7 g/t silver in outcrop. Mineralization visible in outcrop occurs as disseminated malachite, which may be amenable to modern open pit mining with Solvent Extraction Electro Winning (SXEW) processing similar to the LVMC. The mineralization noted to date is interpreted to be the southeast extension of the Flying Diamond mineralization, which is a current target of interest associated with the Lisbon Valley Mining Complex.

The deal terms between Alianza/Cloudbreak and Allied Copper are equally attractive: Allied has to spend US$2.7M in exploration expenditures in 4 years, issue 4M shares and US$315k in cash in the same period, and on top of this Allied has to issue a still to be determined amount of warrants, depending on the size of additional claims that could be added to the Stateline project.

Besides Klondike and Stateline, Alianza Minerals is also working at Twin Canyon in Colorado. This is a gold project with several old developments underground, and placer mining produced grades of 9 g/t Au. Management is targeting a sandstone horizon, for a grade of about 2-3g/t Au.

Historic sampling has also indicated potential for gold mineralization, reinforced by historic rotary drilling which confirmed the presence of a gold grade over 0.5 g/t over a 500 by 500 metres area, indicating disseminated gold mineralization with low and high grade areas. Alianza completed several detailed prospecting and geological mapping programs within areas of gold soil anomalies, including expansion of the first soil sampling campaign, and detailed structural mapping to determine the primary controls focusing on gold mineralization.

For your information: regarding soil sampling, grades of 20 Au ppb are generally regarded as interesting by geologists, so there appear to be several zones exceeding this at Twin Canyon.

Alianza Minerals is working on a drill permit for Twin Canyon, which is expected within weeks, and are looking for a JV partner, with discussions ongoing.

Alianza is involved in two projects in Peru as well, Yanac and Pucarana. Of the two, their interest in Pucarana has been converted into a 1.08% NSR royalty. Yanac is a drill-ready, large copper-moly porphyry target, and the result of a former JV with Cliffs Natural Resources, and now 100% owned by Alianza, as Cliffs decided to discontinue with all exploration initiatives in 2014. Despite new president Pedro Castillo being anti-mining which already caused some run-ins with major producers, which in turn caused Castillo to backtrack earlier ideas for reforms, Alianza management is actively talking to potential partners in order to drill test the copper porphyry target here, discussions are still ongoing.

Lastly, Alianza holds three Net Smelter Royalties (NSRs) on projects in Mexico. All three projects, Yago, San Pedro and Mesquites are owned by Almadex Minerals (TSX.V: AMZ).  Alianza holds a 1% NSR on each (capped at $1 million per property). Yago has seen recent small scale production of 28.8koz gold. The other 2 royalties are very early stage and many years from production.

On a closing note, it will be clear that Alianza Minerals has lots of opportunities to find a company making discovery. With 100% owned flagship Haldane, the good thing is they could be at the brink of making such a discovery, as earlier drill results already indicate economic mineralization. If this will lead to an Alexco-type high grade deposit is by no means a guarantee of course, but all indicators are green. Besides Haldane, there are many other, optioned out opportunities to strike it big, and as every prospect generator should do, Alianza Minerals is going for as many opportunities as they can.

Conclusion

Alianza Minerals seems to have taken a slightly different road with Alliance partner Cloudbreak Discovery, by flipping very cheap quality assets in a 50/50 setting to partners that are willing to invest substantially into exploration. This could provide a substantial income stream for Alianza, when the number of optioned out projects would increase further. A solid start has been made with the Klondike and Stateline copper projects in Colorado, with drilling coming up for both projects this year. The Tim Silver project will very likely also see drilling this year by JV partner Coeur Mining. Although Haldane is the flagship project of Alianza, I view the Alliance with Cloudbreak as an interesting and profitable diversification into copper, which is literally red hot at the moment and trading close to all time highs. After the intended C$2M could be raised this quarter, drilling at Haldane could begin, and I am curious if Alianza can expand the known mineralization into something significant.

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter, in order to get an email notice of my new articles soon after they are published.

Disclaimer:

The author is not a registered investment advisor, and currently has a long position in this stock. Alianza Minerals is a sponsoring company. All facts are to be checked by the reader. For more information go to www.alianzaminerals.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

Mt Haldane