Platinex Acquires W2 Copper-Nickel-PGE Project Near Ring Of Fire In Ontario


Platinex Inc (PTX:CSE)(9PX:FRA) is developing quite an attractive asset portfolio in Ontario, Canada. The company already owns the highly prospective and strategically located district-scale Shining Tree gold project and very recently acquired the W2 Copper-Nickel-PGE project. Additionally, Platinex holds numerous net smelter return (NSR) royalties in its portfolio. In the last year, management and board were strengthened, and a high-quality core investor base came in following these changes, providing additional value and support. The stock is coming off long time lows, and remains at an attractive entry point for new investors. Backed by their new investor base, the company is looking to raise money soon. It is anticipated that strong drill results, positive metal price movements, and renewed enthusiasm in the Ring of Fire after the recently finalized acquisition of Noront by Wyloo Metals could provide substantial catalysts for share price appreciation in 2022. Potential new and complimentary asset acquisitions could provide an additional boost. In addition, in the 1st half of 2022 the company will be looking at other strategic transactions to potentially enhance shareholder value without significant dilution.

Investors are encouraged to review the Key Points at the end of this article for a quick snapshot of the company.

All pictures are company material, unless stated otherwise.


Platinex is a junior mining company exploring mineral properties in Ontario, Canada. The company has adopted a dual strategy: it will continue its gold exploration activities at the Shining Tree gold project in South-West Timmins, and is also entering the battery metals space now through the acquisition of the W2 Copper-Nickel-PGE project in the Ring of Fire Region. Demand for battery metals such as copper, nickel and PGEs (platinum group elements including platinum and palladium), is at historical highs, with future growth expected due to the unstoppable electrification and durable energy paradigm shift.

The Shining Tree gold project has been the company’s main focus for a long time, as it has been in the company since 2008. After a quiet period during the 2013-2015 bear market, the company approached Shining Tree with renewed vigor in 2017, expanding the project over 5 times, and completing reconnaissance exploration programs including channel sampling, mapping, and gold in till sampling, with strong results. More recently an airborne magnetics survey was completed, and a LIDAR survey will be done soon. After this, drill targets will be selected, with the company aiming to begin the next drill program at Shining Tree in the near term, pending the closing of an upcoming capital raise. The Shining Tree asset is viewed as a strategic asset for the company. With a large land package in an active camp including Alamos Gold (AGI.TO), IAMGold (IMG.TO), Aris Gold (ARIS.TO) and many quality juniors, there is an real opportunity for the Shining Tree camp to contain another Coté Gold deposit which located to the West.

On January 17, 2022, the company expanded its horizon, and acquired the large W2 Copper-Nickel-PGE project from a private owner, returning the company to its historical roots and in keeping with the name Platinex. As copper and nickel are both very important to the ongoing paradigm shift towards electrification, the W2 project fits perfectly with the new strategy. The next step for Platinex at W2 will be to complete a comprehensive data compilation and obtain an exploration permit. Following this, the company will be able to commence drilling of targets that have already been identified but remain untested, and carry out prospecting and geophysical surveys to identify and refine new targets.

W2 project

It seems Platinex Inc. has timed their acquisition of a 100% interest in the W2 project well, as Wyloo acquired nearby Noront (NOT.V) for C$616.9M after a bidding war with a formidable competitor: BHP. As BHP is known for doing extremely thorough due diligence on their transactions, it seems certain they saw compelling reasons to bypass the usual Ring of Fire objections, as this area still has been underdeveloped due to lack of infrastructure. The Ring of Fire is viewed as one of the most promising mining opportunities in Ontario for more than a century.

After a total of C$278M in exploration has been carried out in the Ring of Fire so far, numerous significant discoveries involving chromite, copper, nickel, zinc, gold and PGE’s are waiting for the first initiatives on building mining projects and accompanying infrastructure, potentially with the help of Ontario, the province with the most revenues coming from mining across Canada.

In the meantime, Platinex will be exploring their new project as soon as possible, to potentially prove up a significant deposit. The W2 project has seen significant exploration so far, ranging from sampling to airborne surveys to 8,772m of drilling. Drill results for the property were impressive:

Most results were intercepted close to surface, indicating substantial open pit potential. Numerous targets have been identified, and the T5 target appears to have the same geophysical signature as Eagle’s Nest (Noront/Wyloo).

Therefore it is likely the company will start drilling at these targets soon after permits are granted.

Shining Tree

Besides the W2 project, Platinex has also assembled another impressive property: the 100% owned Shining Tree gold project in the Abitibi Greenstone Belt in Ontario, home to some of the richest gold mineralization worldwide, with total production surpassing a staggering 180 Moz. The company has expanded this asset into an impressive 21,720 ha land package, located strategically in between adjacent projects owned by IAMGold (the aforementioned Coté Gold > 6.5 Moz Au, going into production in 2023, and Gosselin), Aris Gold (Juby, 2.3 Moz Au) and Orefinders (ORX.V) (Knight).

As can be seen, the property encompasses over 20 km of the prospective Ridout-Tyrell Deformation Zone, which is also host to the aforementioned Coté Gold and Juby deposits. The Shining Tree project is located at the crossing of the Larder Lake Fault, which is home to some of the largest gold deposits in Canada, and the Michiwakenda Lake Fault. Platinex has completed gold in till sampling in the past, outlining significant anomalies:

Platinex also completed a 51 drill hole program a while ago at the Herrick target, and hit gold at almost every hole, with highlights accounting for 7.15m @2.76g/t Au, 46.3m @0.65g/t Au, 7.2m @2.38g/t Au, 14.1m @1.2g/t Au and 12.2m @1.47g/t Au, all within open pit depths.

Mineralization at the Herrick target is open at depth, and management hopes to find more mineralization at depth, as lots of deposits in the Abitibi show these characteristics. Besides Herrick there are many more targets to be drill-tested, and management is currently outlining plans for this at the moment as mentioned.

Royalty portfolio

Platinex also holds an interesting portfolio of royalties on projects located in Ontario, with for example a 2.5% NSR on Big Trout Lake (PGM-Ni-Cu-Cr, a 1% NSR on a claim block in the Ring of Fire (Au-Ni-Cu-PGM-Cr) and a 1% NSR on a part of the Shining Tree project. The company also holds a 2% NSR from Newmont (NGT.TO) on the Sonia-Puma Au-Cu property in Chile. The current strategy of Platinex for their royalty portfolio encompasses the creation of interesting royalties on both Shining Tree and the new W2 property, in turn creating a substantial royalty portfolio which in the future could be monetized by selling or spinning out.

Share structure

There are 161.65 M shares outstanding (fully diluted 214.65 M), 38.1 M warrants (average strike price of C$0.095) and incentive stock options issued to the tune of 15M options. Platinex has a current market capitalization of C$7.2 M based on the January 18, 2022 share price of C$0.045.

Platinex Inc, 1 year timeframe (Source:

The current cash position of Platinex is approx. C$0.5 M, and the company will be looking to raise additional funds soon. Shares are tightly held, as management holds no less than 12% of the current shares outstanding (CEO Greg Ferron holds 2%), Treasury Metals (TML.TO) holds 10%, Alamos Gold 3.5%, European HNW’s with strong ties to management hold 25.5%, and the company also enjoys approx. 7% institutional ownership.


CEO Greg Ferron: Mr. Ferron has 20 years of mining industry and capital markets experience.  He has held various senior level roles in mining, corporate finance, corporate development, and investor relations – including at Laramide Resources Ltd. (LAM.TO), Treasury Metals Inc., TMX Group and Scotiabank. Mr. Ferron has significant diverse merger and acquisitions experience, including Laramide’s Westwater ISR project acquisition, and more recently the Goldlund project acquisition as CEO of Treasury Metals, creating one of Canada’s largest gold developers. Mr. Ferron is also a director of Fancamp Exploration Inc (FNC.V).

Non-Executive Chairman James Trusler: Chairman of the Board of the company, 1998 to present; CEO and President of the company 1998-2018, 2019 to 2021; President, J. R. Trusler & Associates (mineral consultant), 1995 to present. Geological Engineer with over 45 years of exploration experience with a history of discovery (multiple Ni-Cu-PGM deposits at the Raglan Nickel mine, owned by Glencore) and strategic acquisitions of world class scale gold, uranium and Ni-Cu-PGE deposits.

Director Felix Lee: Mr. Lee is an economic geologist and Senior Executive with over 30 years of business and project management experience in the minerals industry both in Canada and internationally. Mr. Lee completed his tenure as Director and Principal Consultant to CSA Global Canada in 2019 and was previously owner and President of the predecessor Toronto-based geological consultancy ACA Howe International Limited. Felix Lee is currently the President of Prospectors and Developers Association of Canada (“PDAC”) the largest such mining industry organization in the world.

Finance Committee: Frank Hoegel: His background includes more than 20 years of direct experience in the mining industry, and a successful track record as an international financier / investor. He currently manages a natural resource fund, sits on the advisory board of Concept Capital Management, and sits on the board of several TSX Venture listed companies.

Finance Committee: Olivier Crottaz: Independent asset manager who founded Crottaz Finance. 30 years in the Swiss banking business as senior portfolio manager and tactical asset allocator at UBS and Credit Suisse as managing director.

Technical Committee: Lorne Burden: Senior Manager with over 30 years experience, recently Manager Corporate Development and Senior Geologist Logistics at Royal Nickel Corporation. Former Director of PDAC.

Technical Committee: Blaine Webster: Experienced Geophysicist, Discovered 4M oz Au property, Completed 1500 geophysical surveys in 35 countries as President of JVX Ltd. Former President Goldeye Exploration Ltd. President Golden Mallard Corp.

Key points

With their recent acquisition of the W2 Copper-Nickel-PGE project just completed as part of their new dual strategy, a new CEO and new strategic backers coming in, and the large, prospective Shining Tree gold project ready to explore, Platinex seems to be shifting gears now. After the upcoming raise is closed, the company will be ready to execute on new exploration programs for both W2 and Shining Tree, which already have seen strong results in the past and have lots of mineralized potential. It will be interesting to see how far Platinex management can take these two large, very intriguing land packages.

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The author is not a registered investment advisor, and currently has a long position in this stock. Platinex Inc. is a sponsoring company. All facts are to be checked by the reader. For more information go to and read the company’s profile and official documents on, 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.

Drilling Underway For Blue Sky Uranium; Drill Results Ivana Targets Expected Soon, Lawsuit Dismissed

Where the Federal Reserve has been spooking the markets by more aggressive interest rates than expected lately, leading to a temporary consolidation, general sentiment seems to be picking up again after digesting the Fed scare, despite the new omicron COVID-19 variant developing around the globe, seemingly creating the new pandemic normal now. Blue Sky Uranium (TSXV: BSK; US-OTC: BKUCF) hasn’t been fazed, as the company diligently continues to advance their flagship Amarillo Grande uranium project in Argentina.

As most metals are experiencing shortages now, partly caused by COVID-19 based supply chain disruptions, the Sprott Physical Uranium Trust, with their investment mandate to buy more than US$1.3B in uranium oxide on the spot markets and other sources, seems to be determined to let the spot price hover in a trading range of US$42-48/lb U3O8 at the moment, probably awaiting the moment utilities start buying long term contracts:

On a sidenote, all moves of the uranium oxide spot price are represented nicely on this up to date chart provided by Tradingview, taken from my website. The Sprott Trust seems to have the power to corner the uranium spot market singlehandedly, but Sprott denies this, as he points at lots of uranium mines currently on care and maintenance, for example the McArthur River Mine from Cameco. What he fails to mention is that most of these mines aren’t switched on in days, as Cameco estimates a 12-18 months ramp-up period for McArthur River. Besides this, it seems the McArthur River Mine probably could encounter difficulties when trying to reopen again, as the mine is technically challenging according to fund manager Warren Irwin. Of course he has his own agenda, but I have heard these views from others as well.

Notwithstanding this, there are many other mines waiting to open who could fill the void of a McArthur River Mine, especially the Kazakh ISR mines, which already provide a substantial part of annual uranium oxide production globally, and could reportedly bolt on new production fairly easily. The best undeveloped deposit of the moment, Arrow, owned by NexGen Energy, will not be able to step in, as it probably is at least 3 years from production as they are in the midst of permitting, and construction of their project plus ramp-up takes at least 2 years in my view. As nuclear energy as a way to provide baselode power isn’t going anywhere soon, as solar and wind are simply not sufficient, and the development of new utilities is ongoing, even supported by the development of smaller type reactors now, fundamentals look robust for the short, middle and long term. For now, the entire industry is waiting when utilities start buying again, and viewing Sprott’s actions, this could be in the cards soon. Blue Sky Uranium is working hard to be ready for this bull market, with one drill program at its Ivana deposit underway now, and winning a law suit against them. In this update the current state of affairs will be discussed with CEO Cacos.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

As can be seen below, the share price of Blue Sky Uranium follows more or less the movements of the uranium spot price:

Share price Blue Sky Uranium, 1 year timeframe (Source

When comparing Blue Sky’s chart with peers, it is interesting to see that a more advanced stage and larger resource is able to generate more leverage and strength (grey chart is BSK.V):


As Blue Sky Uranium is working on expanding their resource at Ivana, this is exactly the reason the stock could rise more than its competitors, as it has considerable catching up to do. As a reminder, the 2019 PEA, based on the current 22.7M lbs U3O8 resource, shows a decent but relatively small post-tax NPV8 of US$135.2M, with a robust IRR of 29.3%, at US$50/lb U3O8. Management aims at expanding the resource from 22.7M lbs to 100Mlbs, and it is likely that such an increase will probably significantly improve economics and likely re-rate the stock.

In order to achieve this, Blue Sky Uranium has one drill RC program underway at the moment, a 3,500 drill program to expand and infill the flagship Ivana deposit. The 4,500m program at the Ivana North and Ivana Central targets plus two other nearby targets was delayed because of slow permitting, but these drill permits were finally granted in October of last year. A map from the October news release shows the North and Central drilling (red is completed drill holes, green planned):

At the time, 46 holes (1,870m) were completed, and according to VP Exploration Guillermo Pensado no more holes were completed at the time of writing. He also stated: “The drilling program was set into standby after that October press release, and it is expected to be resumed at Ivana Central after concluding the actual 3500m RC drilling program at the Ivana deposit.”

As results were reported for these first 46 holes, I was curious about the U3O8 intercepts. The resource has an average grade of 0.037% U3O8, which equals to 370ppm U3O8, so as the Ivana deposit is a thin mineralized layer stretched out over a large surface, economic intercepts should be in the 250-400ppm range, 1-10m long. Let’s have a look at the table of results:

All holes completed at Ivana North were assayed and presented in the table above, accompanied by a few results of Ivana Central. As can be seen, the drillers hit uranium oxide and vanadium oxide, but no intercepts came close to the necessary U3O8 grade range to be included in a potential Inferred resource unfortunately. Not all is lost for the Ivana North target, as CEO Cacos had this to say:

The discovery of a new deposit is the result of an exploration process that begins with prospecting holes as well as those already drilled, which may confirm or not the presence of a system and vectorize more exploration efforts. As an example, the initial drilling program at Ivana deposit hit its first potentially economic uranium grade intercept at hole 100; where all the previous lower grade intercepts had been used as the vectorizing tool along the exploration process.

It was interesting to read in the news release about the explanation of low uranium oxide mineralization, as primary mineralization seemed to have remobilized:

“Intervals with anomalous uranium range from 1 to 9 metres in thickness and display variable uranium/vanadium ratios, as observed for the Ivana deposit. This is interpreted to be a result of remobilization of primary mineralization with low vanadium into the near surface environment, where uranium precipitates as carnotite, a uranium vanadate mineral. This interpretation is supported by the results of the downhole radiometric probe survey. Radiometric response from the probe did not show direct correlation in all cases with analytical uranium content, a phenomena known as “disequilibrium”. Disequilibrium is known to occur where uranium has been remobilized geologically recently and, for example, precipitated as carnotite resulting in a weak, or no, radiometric response. It had previously been detected at Amarillo Grande in surface sampling work.”

At the question where the potential uranium mineralization might have been remobilized to, if there would be an attempt to chase it down by follow-up drilling, and if such remobilization could be explored by surface trenching before any drilling takes place, CEO Cacos answered as follows:

“This is a new area where mineralization was observed at different depths, in some cases at the same hole; for that reason we developed a drilling program with the capacity to prospect down to 50 metres in depth. The superficial uranium is a good indicator of a potential buried mineralization system, which may locate hundreds of metres of that uranium on surface. This was the case at Ivana deposit, where the initial holes were located based on superficial mineralization and finally the core of the deposit was located  one hundred metres to the east.”

The news release also described the importance of certain pathfinder elements, especially molybdenum, selenium, lanthanum and yttrium. For example, the following map showed the relation between selenium and uranium:

The analogy with the Ivana deposit itself worked out beautifully, the only issue was that the encountered uranium oxide grades were much lower. I wondered how the geologists measured the pathfinder minerals, was this soil sampling? And as the selenium presence seemed to extend well beyond the target boundaries, why not enlarging the target? CEO Cacos answered:

“The use of pathfinder elements for exploration is very well-known tool used by all the explorationist at any commodity. Geo´s need to reduce their targeting areas from large potential zones using indirect or direct studies, as the definition of subtle pathfinder geochemistry anomalies. In our case every sample has a 45 elements assay associated, for those elements recognized as related to the geological model under exploration. The pathfinder tool is used with geological interpretation, geophysical data and the experience gained in the district as a batch of information to vectorize the follow up exploration.”

The company’s strategy has been to deploy an initial 1,500 metres of drilling at each of the Ivana North and Ivana Central targets, followed by 1,500 metres of follow-up detailed drilling to better define areas with the best results at both targets. As Ivana North has already seen 1,500m of drilling, and as the maps of the Ivana deposit seem to indicate a width varying from roughly 500m to 1500m, I wondered why a grid spacing of just 1,000m was done at Ivana North, but also a fencing with even much smaller spacing of 200-500m at Ivana Central, as the size of the property could probably warrant a larger grid spacing for step-outs of even 1,500-2,000m first before further finetuning, considering Blue Sky is hunting large scale REDOX front deposits, and potential mineralization is usually stretched out a few meters under the surface, potentially for many kilometers on end like at Ivana. CEO Cacos had this to comment:

“The area is huge, but the surface area that deposits occupy is relatively small. Using the Ivana deposit as our best local model for exploration, the deposit width actually ranges from 200 to 500 metres; therefore, drilling patterns over that 500m may pass over a deposit without been detected. The exploration programs need to be understood as the construction, where all the information gathered since the beginning will represent part of the exploration puzzle. Exploration requires strategies based on comprehensive work based on good quality data, high professional assessment, patience, and systematic work; and some luck.”

As a reminder, on September 28, 2021, the company announced the launch of a 3,500m reverse circulation (RC) drill program, in order to expand and upgrade the Ivana Deposit. The program includes about 260 shallow holes, as the mineralization is situated near surface (at -1m to -25m depth so far):

The goal is to test the zone west of the current Ivana deposit where 2018 sampling returned strong results. Some infill drilling of this deposit will also be completed, in order to upgrade categories of the mineral resource estimate, necessary for engineering work for the PFS. According to CEO Cacos, he expects the first drill results to be announced very soon, within the next couple of weeks.

Besides the mentioned three target zones for the ongoing drill programs, there are several other targets at the Amarillo Grande project, which is substantial with an almost 60km strike length:

Right now, the focus on their exploration programs is on the Ivana Deposit(1), Central (2) and North (3). After these targets this will change towards the immediately surrounding targets: Ivana Cateo Cuatro (4), and, Ivana East (5). This is depending on drill results at each target, warranting potential follow up drilling or not, and market/uranium sentiment.

I also wondered what the status of the second phase testwork program was, targeting further process design tests for the Ivana deposit. As a reminder, based on 2018 testwork, the overall process plant recovery was already very solid at 85% for uranium and 53% for vanadium. Blue Sky shipped a bulk sample to the Saskatchewan Research Council where Chuck Edwards, a world-renown metallurgist and processing engineer, is carrying out advanced studies to improve recovery and cost. CEO Cacos had this to say about the progress of this testwork program:

“The test-work is properly advancing under the close supervision of our key person Chuck Edwards. The assessment is expected to be finished by Q2-2022.”

Besides exploration, resources and studies, permits are also part of every mining project, and can attract significant opposition of protesters. In this case, some environmentalists launched a lawsuit against Blue Sky Uranium and the Government of Rio Negro, in order to “assert environmental protection rights”, among other arguments, targeting their exploration efforts. As management already indicated in my last article about the company, they had nothing to fear, as the judge already dismissed the case. Fortunately, the Supreme Court also dismissed the subsequent appeal, making the ruling final as there were no further appeals filed. CEO Cacos was happy with the verdict:

“We are pleased to have this matter behind us and give our full attention to our ongoing exploration programs in accordance with all applicable laws and regulations. On behalf of the board, I thank our legal team and the support of our shareholders.”

The treasury currently stands at an estimated C$1.2M, which should be sufficient to continue with the two ongoing drill programs, part of permitting, met work and engineering, and commence working on the PFS. The company expects to go back to the markets to raise approximately C$3M in the next month or so. These funds will allow to complete the exploration work (and any follow up drilling), as well as pay for the baseline environmental studies that will be required for the upcoming Pre-Feasibility Study.


It was good to see that the appeal against Blue Sky Uranium and the Government of Rio Negro was dismissed, as the lawsuit was completely without merit. Although ESG is a good thing for mining as the environment needs to be protected from toxic waste spills, noise etc, such badly prepared cases only seem to function as self-serving delaying tactics for environmentalists, damaging their own cause more than it helps. In the meantime, the company finally got the first drill results from the 4,500m program back from the labs, and the Ivana North target didn’t generate economic results unfortunately. Notwithstanding this, management still sees potential for this target as the Ivana deposit took a lot of drilling before it was discovered, and there are many more targets to test in a very large area that hasn’t seen much exploration, so next up is the Ivana deposit itself that is drilled now, followed by the balance of the 4,500m program at Ivana Central. Let’s see what the next batch of drill results will bring us, as uranium oxide prices keep hovering over US$40/lb U3O8, levels we haven’t seen since 2014.

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 on in order to get an email notice of my new articles soon after they are published.


The author is not a registered investment advisor, and has a long position in this stock. Blue Sky Uranium is a sponsoring company. All facts are to be checked by the reader. For more information go to and read the company’s profile and official documents on, 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.


Argentina Lithium Expands Lithium Asset Portfolio After Closing Oversubscribed C$5.97M Financing

As lithium product prices keep rising, and recently reached not too long ago unimaginable heights of US$34,000/t lithium carbonate at battery grade, Argentina Lithium & Energy Corp. (TSX-V: LIT, FSE: OAY1, OTC: PNXLF) hasn’t been sitting on their hands, raised almost C$6M in an oversubscribed financing last month, and announced further acquisitions of lithium projects in Argentina, in the heart of the Lithium Triangle, hotspot of brine deposits and operations in Latin America. The company already owns four early stage lithium projects in Argentina, one of them called Rincon West. This is of interest, as recently Rincon Mining, a private company constructing an adjacent brine project at the same salar, and owned by Sentient Equity Partners, was acquired for C$825M by Rio Tinto.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

It was good to see Argentina Lithium raising decent cash, utilizing current positive lithium sentiment, as it announced the non-brokered private placement for up to C$4.95M @ C$0.45 with a full C$0.70 3 year warrant on November 1, 2021. A first tranche of C$2.75M was closed on November 10, 2021, a second tranche was closed on November 26, 2021 for another C$2.25M, and a third and last tranche was closed on December 10, 2021 for another C$970k, so gross proceeds came in at C$5,97M. Total finder’s fees for the three tranches of C$253.8k and 564k warrants were paid to arm’s length parties of the company after closing.

The C$0.45 PP price is a decent one, as the share price sideranged at C$0.48-0.55 and has been sideranging around this price since the last month, after enjoying a huge spike up on October 18 & 19 on massive volumes, going as high as C$0.96:

Share price 1 year timeframe (Source:

Although lithium product prices keep printing all time highs on a weekly basis, which in my view could use a healthy correction anytime now, share prices of many stocks were under a bit of pressure as the Fed announced a more hawkish policy regarding interest rates than expected by the markets, which don’t particularly like surprises. As most lithium stocks enjoyed substantial runs the last months, a consolidation was inevitable, although Argentina Lithium seems to weather the storm nicely around the 40c levels.

Back to the deal now. Argentina Lithium signed option agreements to acquire 3 properties which are all part of the Pocitos Basin, one of the largest salars of the Lithium Triangle. The three properties are called El Pidio GIII, Aquamarga 11 and 16, and Ramos. The terms are as follows, according to the January 10, 2022 news release:

  1. Argentina Lithium can acquire a 100% interest in the 1,602 hectare “El Pidio GIII” property in the southeast of the Pocitos Basin pursuant to an option agreement dated January 3, 2022. The option terms include US$165,000 in cash payments over three years, including a mandatory total of US$30,000 over the first 18 months. In addition, 25,000 shares of the Company are to be issued to the vendor on signing, with additional share issuances valued at CAD$70,000 over the subsequent three years, including mandatory issuances valued at CAD$25,000 over the first 18 months.
  2. Argentina Lithium can acquire a 100% interest in the Aguamarga 11 and Aguamarga 16 properties, totalling 7000 hectares in the east flank of the Pocitos Basin pursuant to an option agreement dated January 3, 2022. The option terms include US$1,890,000 in cash payments over three years, including a mandatory total of US$105,000 over the first 12 months. In addition, 168,000 shares of the Company are to be issued to the vendor on signing, with additional share issuances valued at CAD$651,000 over the subsequent three years, including a mandatory issuance valued at CAD$126,000 after twelve months.
  3. The third agreement dated January 6, 2022, gives Argentina Lithium the option to earn a 100% interest in five properties totalling approximately 1,762 hectares at the Pocitos Salar (“the Ramos Properties” see Figure 1). The option terms include mandatory payments totalling US$150,000 in the first year, followed by US$550,000 2 years after signing.

This would cost the company US$285k in mandatory payments for the first year. Argentina Lithium already owned 15,857ha of properties on the west side of the Pocitos Salar, and acquired 10,364ha of new properties. Infrastructure around the salar is sufficient, with a Provincial Route at 17km, local roads nearby and a rail line crossing the Pocitos West property. The new properties have seen little exploration and no drilling, and exploration plans will be planned in the next few weeks. The newly acquired properties and the existing property (ALE) can be seen below (ALE in green, the others in various other colors):

According to CEO Cacos, the new properties have/haven’t been permitted for exploration yet, so this will be priority work for management. Comparing this to the permitting timelines of other projects, Cacos expects to have the new properties at Pocitos permitted around Q2, 2022. As a reminder, Rincon West and Pocitos were acquired in October 2021. The terms for the two properties, with a combined footprint of 18,227 hectares, weren’t cheap, as the company already issued 750,000 shares to the local vendor on signing plus C$500,000 worth of shares over a 12-month period; and cash payments totaling US$4,200,000 over 36 months, but limited to only US$1,050,000 in the first 18 months, US$800,000 of which are firm commitments over the first year. Therefore, total commitments for the first year for Rincon West and Pocitos increase to US1.085M.

Argentina Lithium is planning on completing 40 line kilometers at Rincon West of deep seeing Transient Electromagnetics (TEM) soundings on the Rincon West property, followed by 5 diamond drill holes after targeting. The neighbouring project of Argosy has an average grade of 321mg/L Li, and the grade of the part of the salar de Rincon from also neighbouring and recently sold Rincon Mining is 397Mg/L Li, which means both are already economic at lithium carbonate prices over US$10,000/t, so I expect the potentially encountered grades at Rincon West to be over 300mg/L Li here.

The project is already permitted for exploration. Exploration plans for Pocitos involve 50 line kilometers of TEM soundings in H2, 2022, and as such is a second priority target for Argentina Lithium. According to CEO Cacos, these exploration plans will be adjusted after the new acquisition, and the definitive plans will be announced over the coming weeks. Another first priority target is the Antofalla project. The current exploration plan involves 35 line kilometers of TEM soundings, followed by an estimated 3 diamond drill holes. The exploration permitting process is almost finalized, as the company expects to receive them around Q2, 2022. Finally, the company is planning on doing 50 line kilometers of TEM soundings on their Incahuasi Project in the second half of next year, making this a second priority target like Pocitos.

It seems Argentina Lithium has acquired all the lithium properties they can possibly need, and they are ready to start exploration with the first TEM soundings at the Rincon West project in 3-4 weeks from now. Results are expected by the end of February.


Argentina Lithium expanded their portfolio of lithium projects further, by acquiring more Pocitos properties. After raising C$5.97M, the company is able to come up with the annual payments, and have sufficient money for exploration programs on all projects, with the focus on Rincon West and Antofalla. The company starts out with TEM soundings at Rincon West for target definition, and hopes to start drilling there at the end of the first quarter. Any results over 300Mg/L Li are comparable to the 2 neighbouring projects, so when Argentina Lithium manages to come up with such grades at solid lengths (50-100m), a fifth discovery might be in the cards for the Grosso Group, and with strong lithium sentiment and COVID-19 and the Fed not interfering too much, investors could be looking at multiples from current levels.

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 on in order to get an email notice of my new articles soon after they are published.


The author is not a registered investment advisor, and has a long position in this stock. Argentina Lithium and Energy is a sponsoring company. All facts are to be checked by the reader. For more information go to and read the company’s profile and official documents on, 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.



A Critical Q & A With Zach Flood, CEO Of Kenorland Minerals

After completing their latest 17,792m 2021 summer drill program at their Regnault target, part of their Frotet project in Quebec, Kenorland Minerals (KLD.V)(3WQO.FSE) announced a large batch late December last year with the results of the first 32 holes (9,824m), with assays from the last 25 holes remaining once received back from the labs and interpreted properly. As almost all holes hit mineralization, and highlights were impressive once more, CEO Zach Flood and VP Exploration Francis McDonald were very pleased with the outcomes so far, as the results confirmed their exploration strategy. As trends and gold structures are shaping up now more clearly, it seemed the right moment to do an in-depth interview with Flood about Regnault, whereas progress at their other projects will be discussed as well.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

Let’s have a quick look at the latest results first. The absolute highlight was hole 21RDD056A, drilled along the R1 Trend which intercepted 15.4m @ 17.96g/t Au (276.6g*m, including 7.2m @ 36.29g/t Au). Other strong R1 results were provided by hole 21RDD060 (3m @ 32.21g/t Au) and hole 21RDD074 (3.45m @ 17.53g/t Au incl. 0.5m @ 114.6g/t Au).

Drilling along the R2 Trend more to the south also returned solid results, for example at R2 West, hole 21RDD077 resulted in 2.73m @ 15.34g/t and 7.5m @ 3.06g/t Au. Hole 21RDD082A returned 1.6m @ 28.34g/t Au, 1.23m @13.9 g/t Au, 1.19m @14.12 g/t Au and 2.81m @ 5.81g/t Au. At R2 East, hole 21RDD054 generated 1m @ 26.33g/t Au, and hole 21RDD063 returned 22m @ 0.73g/t Au. These are nice highlights, as the dip of most holes is about -45 degrees, so most intercepts would have to be divided at most by 1.4, assuming almost vertical gold structures at least. VP Ex Francis McDonald had this to comment on this assumption: “R1 is dipping approximately 70* to the north and R2 is dipping shallowly to the north at approximately 15* or so.” So likely the intercepts don’t have to be divided by 1.4 but much less, which is positive for potential mineralization of course.

The goal of this program was to not only systematically step-out along strike and down dip of the already identified gold structures R1, R2 West and R2 East, to better understand the controls on mineralization, but also look for potential new structures. As the map above and the section below reveal, they have been successful in finding higher grade intercepts now in areas of R1 where they only hit low graded, short intercepts before (see red vs. yellow dots):

This obviously means the structures, which probably can be described as lenses, of which mineralization starts at surface (in this case the bottom of a shallow lake most of the time) have a tendency to pinch and swell, as vein systems often do. The good news is the average grade increases with these higher grade intercepts, and as most holes hit mineralization anyway, the R1 structure appears to be pretty continuous. In my view most recently reported holes for R1 actually seem to be infill holes as they fill in the blanks between holes already drilled, just a few holes like 065, 074 and 078 look like careful 50m stepouts. Lots of R1 holes which are assayed at the moment (see black dots on the section above) appear to be stepout holes to the west and a few at depth, and R2 drilling saw relatively more stepout drilling along strike and at depth, and more aggressively.

In general, the geologists of Kenorland have concluded so far that gold mineralization for R1 is characterized by shear-hosted, laminated quartz-carbonate-pyrite veins, often haloed by variably deformed extensional stockwork quartz veining. For R2, mineralization is found in stacked, shallow north-dipping extensional type quartz veins  (R2 West) and steeply north-dipping shear hosted quartz-carbonate veins (R2 East). As can be seen in the extensive table of the December 20, 2021 news release with the latest 32 drill results, most holes had at least 2 different intercepts, indicating the laminated character of veins. The table also indicates that R1 is by far the most important mineralized trend for now, but management believes R2 East and R2 West could have the potential to add significant ounces. A few important step out holes to the most eastern and western boundaries of both trends will indicate strike length potential.

This sums up a summary of the latest drill results, so now it is time to discuss things further with CEO Zach Flood.

The Critical Investor (TCI): Thank you for your time. Let’s talk about a few general themes first. As you know, the world isn’t liberated from COVID-19 yet, and the Omicron variant is again increasing numbers of infections, intensive care patients, etc and halting events. Even the VRIC has been cancelled a week ago and moved to May, as too many exhibitors and speakers viewed such a large scale event as too risky, and the organization had no other option but to reschedule unfortunately. At the same time the Fed is becoming wary of the current, multi-decade high inflation, and seems to signal to the markets that series of rate hikes are not out of the question as inflation could be here to stay. Usually inflation is good for gold, and real interest rates will be negative for a long time as inflation outruns rate hikes for a long time as well, which is also good for gold. But markets don’t particularly like the latest actions of the Fed, and a COVID-19 hampered economy could put the brakes on further. What do you think of all this, and more specifically what could be the outcome for gold and junior mining stocks?

Zach Flood (ZF): Regardless of the gold price there is no greater way to create value than making an economic discovery. That said, I’m quite optimistic of future metal prices, gold included, but then again, my time horizons are likely longer than most speculators. At Kenorland we take a similar long-term approach and are committed to finding new mineral deposits for future generations.

TCI: Let’s shift a bit more towards Kenorland now with regard to the pandemic. You told me recently that Sumitomo will decide somewhere in January about the next drill program at Frotet, which could be larger than all programs so far. Could extensive pandemic measures be of influence here? Could Kenorland in other ways feel the impact of such measures, for example at other projects or at assay labs?

ZF: Throughout the pandemic we have taken extraordinary measures to protect our personnel and other stakeholders in the field. This year will be no different. In terms of our operations, we have not yet experienced any major issues other than long delays at analytical labs. I don’t expect the lab issues to be resolved this year either, however, if everyone makes it home safe at the end of the day, then we are satisfied.

TCI: Before we delve into the Regnault project, I would like to ask you a few questions about your exploration strategy in general. I watched a video of Francis McDonald on your website, and I must say I was impressed. It seems as if Francis and yourself are doing things differently, based on your mindsets crafted at Newmont and Ivanhoe. The systematic approach and analysis is fascinating, you guys leave no stone unturned. Among other things, he said in an interview that he believes too much attention goes to outcrops and mineral occurences in Canada, whereas in Australia there are no outcrops etc, so you have to come up with systematic exploration and geological models. It seems logical that most significant near surface deposits have been discovered by now, at least in prospective areas that have seen exploration, so pushing the boundaries and shifting focus on potential mineralization under cover, or till sample large, under-explored but prospective areas seems like a sound strategy in my view. Exploring large properties to increase the odds seems logical too. Why isn’t everybody doing this?

ZF: Great question. Grassroots exploration is viewed as very high risk with long lead times to discovery. Most companies and shareholders do not have the appetite for it. At Kenorland, we founded the company and started building the portfolio in 2016, as well as forming partnerships with other major mining companies to advance these projects. We listed the company in 2020, after we had made one major discovery in Quebec. We have already undertaken many years and multiple campaigns of early-stage exploration and target generation on many of the projects in the exploration pipeline which covers a vast amount of ground, over 500,000 hectares. This is the type of company that you can’t form overnight, it takes time, dedication, lots of exploration to make new discoveries. There are not many juniors out there executing early-stage exploration at the scale which Kenorland is operating, and that is key. The more ground you cover in a diligent manner, the higher your odds of exploration success are, so we scaled up and we keep adding to that portfolio. Eventually we will make more discoveries as long as we keep moving forward in this manner.

TCI: I agree, you have set the bar high. I am also fascinated by the data analysis that is part of your exploration strategy. You and Francis analyzed lots of other projects, drill results and exploration programs, and reached all sorts of conclusions, all apparently tailored to optimize your own exploration programs. For example, the average number of exploration programs to discover greenfields deposits is about 3 including early stage programs.

Other metrics are 5Moz Au deposits are on average discovered after an initial drill program produced an intercept of over 134g*m, or as you call it GT (grade x thickness), with an intercept length of over 10m. For 2Moz Au deposits the numbers are >50 GT and >5m. Another set of metrics: the median drill program on a successful discovery program is 4,218m, and if a company drills less than 4,000m on an intial drill program but still produces an intercept being > 50 GT, this could be very significant. On the upper side, a program larger than 10,000m that doesn’t produce a >100 GT intercept, is likely unsuccessful. I love this type of statistics, and it likely adds to your chances of effectively sampling, drilling and killing projects. Do you also normalize historic drilling/discoveries towards current practices, and do you for example separate quality exploration from lifestyle exploration, filtering out further?

ZF: We completed this internal study to understand how many meters we should put into a grassroots target for an effective ‘test’ to reach a go or no go decision.  That number is somewhere between 4,000 and 10,000 meters which is likely more than most people would guess. There are of-course outliers on both sides but this is the size of program we need to plan for in order to test and confidently walk away from a target if we don’t achieve the results, for example, 100 ‘gram-meters’, or if we do, proceed to the next phase of exploration.

TCI: I was also impressed by your knowledge of the mechanics of till sampling, and the kind of work that goes into till sampling under cover, looking for very small amounts of mineralization, plus having to determine where it all came from, taking into account glacier movements etc. This has been the central strategy for the Frotet project, are you applying this knowledge for most of the other projects of Kenorland at the moment as well?

ZF: Absolutely, most of our projects are located in areas covered by glacial till. There is widespread glacial cover over vast parts of Canada that are also highly prospective for mineral deposits and this is where we focus. The easiest way to conceal a deposit is to bury it under glacial till and therefore the most likely place to make a new discovery is in areas covered by till, like Regnault for example. All of the projects we operating in Quebec are similar – Chebistuan, Chicobi, O’Sullivan, Hunter, Frotet – we are using very similar techniques on all of these projects to search for new mineral deposits under cover.

TCI: Interesting, to almost intentionally define the next exploration frontier, and turn it into your advantage. Could you explain a bit further for the audience why geochemistry and alteration are the best exploration tools? I assume geochemistry and alteration can only be identified by drilling, and I see drilling as the most advanced exploration method, and geophysics for example as more early stage. Personally I don’t feel these methods can be compared in a sense of one being superior to the other, every method is applied at a different stage with a different purpose, for example till sampling and airborne surveys cover huge areas to select targets, trenching and drilling work these targets to find mineralization. No meaningful drilling without targeting.

ZF: Normally the actual deposit footprint is quite small relative to the geochemical or alteration footprint. So you are really looking for the smoke first that will lead you to the fire. Back to till sampling for example – the gold dispersion plume at Regnault is over five kilometers long. It was much easier to find the plume first and then narrow in on the veins which are orders of magnitude smaller in terms of their own footprints. Alteration is similar around a big hydrothermal system, like a porphyry copper deposit, it can extend kilometers from the actual orebody, so the alteration is the first thing you look for.

TCI: It is probably all semantics. Something else: I noticed you focus on understanding major deposits, does this mean you are exclusively interested in exploring for Tier I deposits with Kenorland? If so, why is this? They are extremely difficult to find and very rare, and become more rare over time. Do you aim at specializing for major deposits, so the majors could see Kenorland as the go to shop for their exploration ideas?

ZF: We do a lot of work analyzing Tier 1 deposits to understand their footprints, so we can recognize what a Tier 1 deposit looks like in terms of the exploration data, for example surface geochemistry, geophysical expression, deposit outline, initial drilling, etc. This allows us to make more informed decisions when analyzing our own exploration data. We prefer to start looking in areas that have real potential to host those types of deposits. We may find deposits of many shapes and sizes by carrying out large scale systematic exploration.

TCI: Let’s talk about the Regnault project now. In my view most reported results on R1 are infill drill results, although in the news release they are described mostly as step-outs? I feel this is only warranted for the upcoming assays. Where do I go wrong here, if so?

ZF: We are reporting on both broad infill and step-out drilling. The terms are bit subjective at this stage because if you have two holes a few hundred meters apart, a hole in between could be considered infill but also could be considered a step-out from one of the other holes, its more exploration than resource definition. Infill drilling should really describe more advanced exploration to resource definition.  At this stage, most of our drilling is still very exploratory in nature, and we are still looking to define the geometry and orientation of higher-grade shoots within the vein system itself, as well as prove up additional veins.

TCI: Good to see the difference between exploration and resource definition drilling terms. Most drilling appears to be done on ice, as most of the R1 structure is located under a shallow lake. Do you plan to step-out aggressively on land with the next program?

ZF: We will continue to step-out along strike but our focus is really more on deeper step-outs down plunge of potential high grade shoots.

TCI: As the nearby Troilus deposit has mineralization that runs much deeper, do you plan on drilling much deeper at Regnault as well?

ZF: Absolutely, the next program will see more aggressive step-outs down dip.

Troilus deposits (Source: Troilus Gold presentation)

TCI: The long section shows mineralization at almost every hole which indicates good continuity, although the GT numbers vary a lot. Could this imply a complex geologic structure, or multiple fault lines, or else? Or just pinching and swelling of gold mineralization?

ZF: Yes, the vein system is quite complex although it is consistently present along strike and at depth. This is typical in orogenic gold systems. The first step for us early last year was to define the orientation of the vein, which we achieved, R1 for instance is oriented roughly East-West. The next program during last summer was to drill along the vein and find the blow-outs, shoots, higher-grade sections, etc. We believe we have defined a few of these areas as well so now the objective going forward will be to extend those at depth. Most high-grade structurally controlled gold systems are complex and they take a lot of drilling and effort to work out.  Suprisingly, Regnault is not as complex as most, the veins are relatively consistent in terms of strike and dip.

TCI: Yes the consistency is a good thing to have. You told me the R1 structure is dipping steeply to the north, do you also expect this for the R2 structures, of any other, new structure found on the property, as part of some overall geological concept? What kind of structural controls are defined yet? Are you looking for feeder systems?

ZF: R2 is a different beast than R1. R1 veins are hosted in a shear through the intrusive complex while R2 West veins are very shallow dipping extentional veins sitting between two shears. R2 East is more steeply dipping and controlled by shearing, similar to R1. We have found other shears in the intrusive complex as well, some dipping north, some to the south.  We are just beginning to understand the structural controls on high-grade mineralization but still have a long ways to go. In general we are looking at the intersection between NNE steeply dipping D1 deformation and D2 shearing such as we see along R1.

TCI: I did some very global back-of-the-envelope estimates on the Regnault structures, and arrive for R1 at 1000 x 200 x 5 x 2.75 = 2.75Mt, at an average guesstimated grade of 5g/t Au this would mean a hypothetical 440koz Au. For R2 this could be 400 x 250 x 2 x 2.75 = 550kt, at an average guesstimated grade of 7.5g/t Au is a hypothetical 133koz Au. So the total estimated gold mineralization could be closing in on a hypothetical 600koz Au. Do you feel this is a ball park number in the right direction? I believe you once told me there is considerable low grade disseminated gold in the R1 structure, could this make a difference?

ZF: It’s too early for me to comment on a resource at Regnault unfortunately.

TCI: No problem. As we briefly discussed your preferences for large deposits, do you have a resource target in mind for Regnault?

ZF: In order for most major mining companies to proceed with development, they likely need to see greater than 3-5moz Au potential. I do not actually know what Sumitomo’s threshold is but I could guess it is somewhere within or north of that range. It’s still early days at Regnault but the next few programs should shed more light on what the potential is there. As I said, we are just beginning to understand the controls on mineralization.

TCI: Are you looking at targets further away from the direct vicinity of Regnault?

ZF: Yes, we have multiple targets we will be following up on within the Frotet Project, some of these will see drilling next winter.

TCI: Your staff is building a Leapfrog 3D model now of Regnault, it will be very interesting to see the mineralized envelope and sections of geology and mineralization. When will this be finished you think?

Z: We will likely begin to see the geologic model once all of the data from the last program is taken into account. Stay tuned.

TCI: You told me earlier the upcoming 10,000m drill program for Regnault will consist of 60% focus on R1, 25% on R2 and 15% on new targets, so heavily geared towards R1.

Update: A news release came out today (January 12, 2022) confirming this and announcing the commencing of drilling as well, with additional info here:

“Approximately 60% of the proposed drilling will be allocated to step-outs along the R1 structure, targeting down plunge extensions of higher-grade mineralisation along the vein corridor. Twelve drill holes are planned to significantly expand the R1 vein system at depth to approximately 500m below surface beyond the current known extent of approximately 275m vertical depth. Along the R2 Trend, up to 25% of the proposed program will be allocated towards broad-spaced infill drilling to determine the structural framework linking R2 West and R2 East. The remaining 15% of the proposed drill program is designed to expand on known mineralisation and test additional gold-bearing structures north of the R1 corridor.”

You are planning to drill much deeper down dip at R1, could you tell us how much deeper?

Z: We are looking to approximately double the vertical extend of the R1 vein system from ~250m to ~500m.

The map of the planned drilling of this program can be seen below:

The Q1 2022 program follows the recently completed 17,792 meter drill program, of which 9,824m have been reported. The company expects assays for the remaining 7,968m to be announced in the coming weeks, but this is all depending on the assay labs of course which have seen lots of delays.

TCI: I believe that concludes Regnault for now. A different subject that might be frustrating for you and shareholders is the share price of Kenorland. After lots of exploration success, a solid treasury, top notch exploration management and with a gold price still hovering around US$1800/oz, the stock is sideranging close to its lows since listing. Do you have an explanation for this, and what is your plan to get things moving again? What could be a catalyst?

Share price 1 year period; Source:

ZF: 2021 was a difficult year for gold equities in general. Kenorland actually held up surprisingly well, although I do understand we are far below our all-time highs as well as the last two financings which were both completed at C$1/share. I see a huge amount of upside in the stock, we are in a much stronger position today than we were last year at higher prices. We are entering 2022 with over C$9 million in working capital, projects which are more advanced, and a number of deals we completed last year that have significantly added to our bottom line on the financial statements. We also have an incredible amount of exploration which we will undertake this year, the results from which will be the real driving catalyst in the shareprice.

TCI: Large scale exploration remains a high risk/high reward game, but if any team could be successful at it, it seems to be Kenorland Minerals in my view. Talking about large scale, as you optioned out the South Uchi Project to Barrick Gold on September 20, 2021, we contemplated Barrick could do a move for Great Bear. Instead, Kinross stepped in and Barrick doesn’t make a sound. If Barrick doesn’t surpass Kinross with a better bid, could this have implications for the strategy of Barrick, and more specific for South Uchi?

ZF: I do not believe this will change Barrick’s strategy in the Red Lake district. I think the speculation around the potential suitor for GBR was exactly that, speculation. Barrick is committed to this part of the Canadian shield in terms of its exploration strategy for good reason - it’s a highly prospective region and still very underexplored as demonstrated by GBR along the LP Fault. We’re very excited to see what Barrick comes up with after last fall’s large-scale regional till sampling program they carried out at South Uchi.

TCI: It sure would be interesting to see a major like Barrick venturing into substantial drill programs for example. What is the current status of the Healy Project, Alaska (optioned from Newmont Corporation), as a 5,000m maiden diamond drill program has been completed, plus several surveys, all results were expected in January 2022?

ZF: We are still awaiting complete assays from the labs but expect results to be announced in Q1. We are all of course eager to see the results ourselves as we encounter widespread mineralization and alteration in much of the drilling there.

Healy Project; proposed drilling/sampling results

TCI: After Healy, another important project for Kenorland is Tanacross (Alaska). Extensive soil sampling program has been done, a 5km IP and MT survey was completed, and an airborne magnetics survey was flown over several targets.

The assays were expected over a month ago. Analysis, interpretation and targeting were planned for January. As several of the surveys were delayed, previously announced drilling has been put on hold, and the assigned budget was reallocated for additional drilling at Healy. What is the status here?

ZF: Similar to Healy, we are still waiting for complete assays from the geochemical surveys we completed at Tanacross. And again, the team is eager to see the numbers as we have some very compelling targets already that could be prioritized for drilling this year if warranted.

TCI: Kenorland also completed a VTEM survey at the Hunter project in Quebec (fully owned), a LiDAR survey and mapping at South Uchi (optioned to Barrick), completed a soil sampling program at Chebistuan in Quebec (optioned to Newmont), and completed a sonic drill-for-till geochemical program at their Chicobi project, also in Quebec. A map with the sampling results for Chebistuan looks like this:

TCI: What is the status of a magnetic survey, radiometrics and induced polarization (IP) which will all take place at the Deux Orignaux AOI target zone in January, in preparation for drill targeting?

ZF: Till sampling, boulder prospecting, and airborn magnetics has been completed at Deux Orignaux and currently there are crews there line cutting in preparation for the IP survey.

TCI: What is the current state of affairs at Chicobi, as drone magnetics, IP and electromagnetics (EM) have been completed, and diamond drilling was scheduled for Q1, 2022?

ZF: We have now received the geophysics data including IP, Magnetics, and EM and have began the drill targeting exercise. We have also began permitting for a drill program which is expected to commence in March.

TCI: This concludes our Q & A, do you have anything to add for the audience?

ZF: I think we covered a lot here already, thanks for the interesting questions and the opportunity to add more colour to the Kenorland story.


After another batch of strong drill results, Kenorland Minerals is waiting for JV partner Sumitomo to approve their budget for another extensive drill program at Regnault. The remaining batch of the last completed program is expected to be announced in the coming weeks if the labs don’t face too many delays. In the mean time the company commenced an already approved 10,000m program at Regnault, and is exploring at 5 other projects, and expects a stream of results from now on. As all projects are of considerable size, any new discovery or substantial step-out result at Regnault (for example >200GT) could cause the long-awaited re-rating now for this textbook example of a large scale exploration junior, alongside a cooperating price of gold. Stay tuned!

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.


The author is not a registered investment advisor, and currently has a long position in this stock. Kenorland Minerals is a sponsoring company. All facts are to be checked by the reader. For more information go to and read the company’s profile and official documents on, 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.


The Critical Investor Shares His Top Picks For 2022

At a point where the COVID-19 pandemic is playing out the Omicron variant, inflation is reaching levels not seen in decades, the Fed surprising the markets with a more hawkish stance than anticipated, with metal prices at very high levels although gold and silver seem to be consolidating and setting up for a breakout, The Critical Investor was asked again by Streetwise Reports to provide his top picks for the new year.

Since my portfolio usually consists of a mix of commodities, themes and stages, this year is no different. I expect a strong run for 2022 in uranium related equities, as I view the Sprott Uranium Trust efforts to kickstart utility contract buying by cornering a significant part of the spot market not without merit, since I expect Sprott to have done their homework before they intend to spend US$1.3B on uranium oxides. My uranium play of choice is an explorer, with in my opinion the single best uranium geologist at the helm, who among other discoveries found the Arrow deposit (owned by NexGen Energy): James Sykes.

Another interesting theme is the EV market, and its related metals like copper and lithium. Although lithium product prices are trending extremely high right now (US$34,000/t battery grade carbonate), and could correct soon, I expect them to remain well above US$20,000-25,000/t for the foreseeable future, still rendering lots of lithium projects extremely economic.

After watching the explosive run-up and crashing down of the iron ore price, it seems the bottom is in, and I selected the primary pure play on this metal to follow an eventual recovery.

The cornerstone of my holdings consists of a number of precious metals plays in various stages, although I must express some preference for advanced plays here, after running into a fair share of failures with binary, early stage exploration narratives. So no swing-for-the-fences 20-50 baggers here for this year, but several (at least in my view) solid chances for 3-5 baggers.

Without further ado, here are my top picks for 2022:

World Copper (WCU.V, market cap C$44.68M, share price C$0.74, cash position C$5M)

We kick off with World Copper, a copper developer, who owns 2 advanced copper projects, Escalones (oxides/sulfides) in Chile and Zonia (oxides) in Arizona, and a greenfields copper project, Cristal, also in Chile. Management and Board of Directors contain some heavyweights, like Executive Director Marcelo Awad (18 years with Codelco, 8 years CEO of Antofagasta), Roberto Fréraut (just retired early as Exploration Manager for Codelco Chile), and Patrick Burns (directly involved in the discovery of Escondida and Zaldivar). A 2018 PEA was completed on the Zonia oxide project, where a M&I resource of 77M short tons (@0.33% Cu) and Inferred resource of 27M short tonnes (@0.28%) result in an after-tax NPV8 of US$192M and IRR of 29% based on a copper price of US$3.00/lb Cu. At a US$4.00/lb Cu copper price the after-tax NPV8 increases to US$447M. The Escalones project contains an Inferred 426Mt @0.47% Cu oxide resource, and when benchmarking this to the Marimaca oxide project (owned by Marimaca Copper > MARI.TO), a back-of-the-envelope NPV8 estimate of US$1B based on $4.00/lb Cu doesn’t seem unrealistic at all. The Escalones PEA is expected soon, at the end of January. There is also lots of exploration potential to expand the Escalones deposit. On top of this, World Copper is planning a small drill program at their Cristal project of 4-6 holes of 500-1,000m each, to test large porphyry potential.

Aztec Minerals (AZT.V, market cap C$14.29M, share price C$0.22, cash position C$2M)

An interesting advanced explorer in the Americas is Aztec Minerals, founded by Chairman Bradford Cooke, who also founded (and is Executive Chairman of) Endeavour Silver (EDR.TO, C$835M market cap). Aztec is operating two JV-ed projects, Tombstone (65/35) in Arizona, and Cervantes (75/25) in Sonora, Mexico. Both projects have already seen enough drilling to calculate some back-of-the-envelope estimates, and for both projects potential estimates come in at 600-800koz Au. The mineralization for both projects is hosted in heap leachable oxides, and intercepted grades so far for both projects indicate pretty economic potential. The wildcard for both projects is large scale exploration potential at depth: at Tombstone the company is focusing on CRD style mineralization, at Cervantes drilling is ongoing at porphyry gold-copper targets. Drill results for Cervantes are expected in the second half of February, another drill program for Tombstone is being planned.

Baselode Energy (FIND.V, market cap C$74,79M, share price C$0.91, cash position C$20M)

When people talk about uranium exploration in the Athabasca Basin, there is basically one name to rule them all: James Sykes. The CEO of Baselode Energy singlehandedly discovered the Tier I Arrow deposit of NexGen Energy (currently at a market cap of C$2.8B, just based on developing Arrow) against orders from management who told him to drill elsewhere, before this he expanded the Roughrider deposit of Hathor Exploration (sold to Rio Tinto for C$654M) by remodeling their data and showing a completely different strike direction of mineralization, and in turn caused Fission Energy to “discover” the high grade J-Zone directly adjacent to and on strike with this new strike direction of Roughrider, and this J-Zone was bought by Denison a few years later for C$70M. A long story short: Sykes knows how to find uranium like no other, and he is now running his own show over at Baselode. Their flagship project is called Hook, with the current focus on the Ackio-GMX target, and they already made a near surface high grade discovery in a basement-hosted host rock environment, comparable to Arrow and Roughrider. The only difference is that Sykes is looking just outside the traditional boundaries of the Athabasca Basin, to see if he can avoid the technical challenges that a lot of the current Basin mines and deposits are facing. The company has strong institutional support, as 50% is owned by them, an equally strong cash position, and drilling is ongoing.

Argentina Lithium and Energy (LIT.V, market cap C$29.38M, share price C$0.40, cash position C$6.5M)

As a member of the Grosso Group, Argentina Lithium is firmly focused on Argentina for doing business. Joe Grosso and his people have been conducting exploration and development for decades in the LatAm country, and as such know exactly how to successfully navigate the sometimes complex processes in Argentina. After a period of relative inactivity due to lowering lithium sentiment, Argentina Lithium acquired several prospective brine lithium properties in the socalled Lithium Triangle, raised almost C$6M, and is completing surveys and exploration permitting at the moment, as preparation for drill programs at 2 of their projects later this year. One of these projects is the Rincon West project, and interestingly the next door Rincon project (owned by Rincon Mining, a private company owned by Sentient Equity Partners) was recently acquired by Rio Tinto for $825M. With lithium product prices at all time highs and over 4 times the levels needed to render 300-400Mg/L Li grades for brines economic, there seems to be a pretty good chance at exploration success this summer.

Champion Iron (CIA.TO, market cap C$2.72B, share price C$5.38, cash position net positive C$182.9M)

Champion Iron is the largest listed pure play iron ore producer in the world and also managed very well, and as such for me the best possible proxy for the iron ore price. The company is looking to meaningfully expand their production (from 7.4Mt to 15Mt per annum), while the iron ore price is recovering again. Flagship project Bloom Lake is projected to double production after the ongoing Phase II expansion is completed. Over fiscal year 2021 Champion Ore realized C$819.5M in EBITDA, but already C$605.8M in EBITDA over the first 6 months of fiscal year 2022 (ending Sept 30, 2021). Champion Iron has some of the best quality iron ore at Bloom Lake, and is one of the lowest cost producers in the world. The company also owns the nearby 7.8Mtpa Kami project (once explored and developed by Alderon Iron Ore, which defaulted on debt repayments, seeing creditor Sprott seizing the asset, followed by the acquisition by Champion in 2021), planning to update the FS by the end of 2022. Fun part is Champion also acquired Bloom Lake out of bankruptcy protection years ago. Another large project is their former flagship 9.3Mtpa Fire Lake North project.

Dolly Varden Silver (DV.V, market cap C$82.46M, share price C$0.63, cash position C$15M)

After acquiring the Homestake Ridge project from Fury Gold Mines for C$50M (C$5M in cash and C$45M in equity, causing the pro forma market cap to increase by 58% after closing of the transaction), Dolly Varden Silver gained almost 1Moz high grade Au, and 20Moz Ag, next door to their namesake Dolly Varden project which already contained 32.9Moz Ag Ind and 11.4Moz Ag Inf. The combined project will be called Kitsault Valley project, and will benefit from synergies when developed into a mine. The Homestake Ridge project had a PEA completed in 2020, providing already sound economics at an after-tax NPV5 of US$173M at conservative metal prices. At current spot prices I estimate the NPV5 to increase to over US$300M. When combining the two projects, a back-of-the-envelope estimate of economics generated a hypothetical NPV5 of US$500M. Dolly Varden management is looking at a season of exploration first, in order to unlock the size and potential of the deposits, providing a solid base for the combined PEA. Eric Sprott owns 11% of the company.

Goldshore Resources (GSHR.V, market cap C$72.74M, share price C$0.63, cash position C$16M)

Goldshore Resources is a relatively new explorer/developer which listed in the summer of last year. Their Moss Lake project was acquired from Wesdome for about C$52M in staged payments, of which C$32M has been completed now, and the balance is due in shares only. The Moss Lake deposit has a 2013 historic resource of 4Moz Au, with most of it being open pit potential, at an average historic grade of 1.1g/t. The 2013 PEA resulted in an after-tax NPV5 of US$444M based on a gold price of US$1700/oz Au. Management aims at proving up 6-8 Moz Au, which would mean a Tier I deposit. As it is a large project, this means a lot of drilling, and management doesn’t shy away from the task, and initiated a 100,000m drill program, planned to be completed at the end of Q2, 2022, and is looking to go on full force with 4-5 drill rigs after this, of course depending on drill results and market conditions which will determine pricing and timing of capital raises. Management is looking to prove up and meaningfully expand the resource and as a consequence the open pit size and depth as well, and is looking at lots of other parameters to improve. For example recoveries in the 2013 PEA were just 80-85%, management thinks it could improve them to maybe even as high as 95%. Other items are strip ratio, average grade, processing and mine production.

This concludes my article about my top picks for 2022, I hope you found some interesting starting points for doing your own due diligence, as always.

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 at, in order to get an email notice of my new articles soon after they are published.


The author is not a registered investment advisor, and currently has a position in all discussed stocks. Dolly Varden, Argentina Lithium and Aztec Minerals are sponsoring companies at the time of publishing. All facts are to be checked by the reader. For more information go to, and, and read the company’s profiles and official documents on, 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.

Avrupa Minerals Signs Binding Agreement For Exploration Properties In Finland

After a year of slow progress for Avrupa Minerals (TSXV:AVU)(OTC:AVPMF) and JV partner MATSA at the Sesmarias target, part of their flagship Alvalade project in Portugal, it is refreshing to see Avrupa somewhat diversifying away by acquiring four exploration properties in Finland, with some of them even having a historic resource. Since Finland has become something of a hotspot lately, with Aurion Resources (AU.V), Rupert Resources (RUP.V), Firefox Gold (FFOX.V) and Mawson Gold (MAW.TO) being in the news on and off the last few years, it could very well be possible for Avrupa to enjoy some free Finland enthusiasm from investors. On the other hand, more attention means more scrutiny, so it will be interesting to see when they will be able to raise cash, and start exploring.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

Avrupa Minerals announced on December 20, 2021 the signing of a binding letter agreement with Akkerman Exploration BV, to acquire 100% ownership of Akkerman Finland OY (AFOY). This is nothing less than a Dutch company, and it is quite rare to see countrymen of mine engaging in trading mining properties, since The Netherlands does not have any active mine or mining projects anymore, and I only know a handful of Dutch players in the mining industry. But enough about my amazement. The acquisition handles 4 properties, 3 of them are base metal projects, located in the past-producing and highly prospective Vihanti-Pyhäsalmi VMS district in central Finland, where deposits have the same geological makeup as the ones found in the Iberian Pyrite Belt, where Avrupa has been exploring for many years now. The fourth project is a gold project in a greenstone-hosted shear zone, which is located along strike with the Oijärvi gold project, which Gold Line Resources acquired from Agnico Eagle for $10M, and has a historic (2013 so pretty recent) inferred resource of 250koz @ 4.11g/t Au and 1.9Moz @ 31.11g/t Ag. Maps of this project can be seen here (Source Gold Line Resources website):

Gold Line Resources has set targets of >1Moz Au and >7Moz Ag, so there seems to be quite a bit of potential. As per their website:

“The main Kylmäkangas deposit hosts massive quartz-veins containing gold, silver and base metals along the mineralized shear zone, with gold anomalous sedimentary rocks present in the area.  The geological structures of the area, along with the thick shear zones and high-grade intercepts and faults, characterize a deposit of potentially multimillion ounces.”

The highlights of the acquisition terms looked like this:

At a current share price of C$0.070, this means an acquisition price of C$210k in equity, C$175k in cash, and C$400k in exploration expenditures, so a total compensation of C$785k. For this amount it is Avrupa that will be the operator, although AFOY still has the deciding voice during the first stage of the earn-in to 49% ownership for Avrupa. Before we look into the properties, it is good to mention that the four projects need to be upgraded to licences first. For this, the company has until the end of January 2022 to decide upon what areas within the Kolima Project to extract for license application. The review and application process is already underway for Kolima, and the company expects to present the application to the Finnish mining bureau by mid-January. License areas in the other three projects need to be defined later in 2022 and 2023. Once license areas are defined and the application process is underway, Avrupa will oversee detailed systematic data compilation and review, historic drill core review, basic surface geochemical exploration, and new drill targeting in preparation for drilling when the license applications are approved. According to CEO Paul Kuhn, this work will continue throughout 2022. Basic exploration in the project areas is permitted throughout the licensing process, and the company will take advantage of this allowance to better define priority areas of interest that can be upgraded to license applications.. I do know Finland has quite a reputation of being very thorough on permitting, with long turnaround times, so let’s hope this is not getting in the way of quick exploration.

This is an overview of the locations of the 4 properties:

The first project is called the Pielavesi Reservation, and includes the Säviä target. The project covers about 213km2, contains a small historic resource, and has been drilled quite extensively at certain targets, although a number of these targets didn’t return economic mineralization. However, the property is very large and underexplored, and hasn’t seen any modern exploration techniques in the last 30 years.

Two historic resource estimates were completed in the distant past: a 1968 resource of 4Mt @ 1.1% Cu and a separate resource of 1Mt @ 2% Zn, and a 1986 resource of 1.8Mt @ 1.52% Cu. These numbers are obviously too small in order to form the base for an economic operation, but it is a nice start, as a relatively small high grade copper operation would need at least 20-25Mt nowadays. As the region harbours three other deposits, the potential is certainly there. According to Kuhn, this is a typical VMS district where they will probably find clusters of mineralization, though size is not predictable of course. However the deposits are very old and there has been substantial deformation and geological change in these old Pre-Cambrian rocks. Exploration will be challenging, but this is Avrupa’s specialty.

The second project is the 187km2 Kolima Property. Historic exploration efforts defined a 2000 x 200-400m zone with zinc mineralization, but also numerous boulders containing gold and copper are present, in typical VMS fashion and geology. A resource wasn’t defined despite 70 drill holes completed. I asked Kuhn if he could disclose more information on this project, and he stated: “Mineralization occurs in thin layers and laminations of sphalerite, which are normally indicative of distal portions of a massive sulfide body. The mass has not yet been located. The 70 holes are not all drilled in one area, but spread around the district. No economic resource was discovered, and vectoring has not yet been defined. This will be one of our first projects: review all the old work and see if we can find potential vectoring information. The airborne geophysics will undoubtedly help us here.”

The 3D survey map shows the two most important electromagnetic (EM) targets.

The third project is the Kangasjärvi Property. This 203km2 claim set covers the tiny but high grade Kangasjärvi zinc deposit, which was exposed to surface and mined partially. The latest known historic resource was reported at about 300kt @ 5.4% Zn. The grade is extremely good for open pit zinc, but 300kt isn’t economic. 3 more mineral occurrences have been identified, but not followed up since, and can be seen here:

AFOY did complete airborne SkyTEM surveys on the Pielavesi and Kangasjärvi projects, and both companies are reviewing and analyzing the data together, attempting to define drill targets. According to CEO Kuhn, this work will continue during the first year of the exploration program with targets on the Kolima Project worked first as it is the oldest of the project areas.

The fourth and last property is the Yli-li Gold property. The 332 km2 Yli-li gold reservation covers 30 kilometers strike length of the southern extension of the aforementioned Oijärvi greenstone belt, major shear zone and project.

Initial studies over a period of 13 years (2001 to 2014) turned up gold-in-till anomalies over intensely sheared and altered rocks.  Limited drilling resulted in one intercept of 3 g/t gold over two meters at the Kupsusselkä prospect.

When glossing over all projects, the first impression is one of size: all projects are large. I have learned from Zach Flood (CEO from client Kenorland Minerals) that large packages in prospective areas are good as you increase the odds. I do wonder if this wouldn’t take up too much resources to drill permit, sample, define targets, pay holding costs etc. CEO Kuhn answered, “These projects, or reservations, are large areas, indeed. From the reservations we pick out the best areas of interest, as defined by geology, airborne geophysics, historic drilling and mining, etc. We then select the most interesting areas within the reservation and make license applications for these areas.  We will whittle down 300 km2 to 30 km2 in this process, which obviously lowers the monetary risk factors and much better defines the areas of potential success, where we obviously want to work!”

What I do like here is the extensive Yli-li greenstone project which captures a long stretch of greenstone to the south. Another project I like a lot is the Pielavesi project, with several known deposits nearby. I asked CEO Kuhn about his opinion on which projects he thinks are the most prospective for economic mineralization, and what kind of targets he is looking for. He answered that both project areas have obvious first-pass excitement. Our priority, of course, is to define areas where we expect to find mineralization, whether it be VMS or shear-hosted gold mineralization. Once we have a better idea of what is possible, we will decide whether to move it ahead ourselves, or engage a joint venture partner, as is our business model. There are other companies already working in both areas, so we know of the interest in these projects.

For now, there still is exploration going on at Sesmarias, a high priority target of the Alvalade project. The historic Lousal mine also forms a substantial element of this project.

Lousal Mine

I wondered about the status of the reconstruction of old Lousal data, in order for Avrupa and MATSA to construct a 3D model, which in turn could guide their drilling nearby. CEO Kuhn stated that, “The acquisition of the data is now complete and will be entered into a 3-D modelling program during January/February.  We found a lot of historic information in several old storage areas at the mine and in the government geological survey.  This is quite exciting and we look forward to putting the model together.”

As MATSA was looking to deploy a second rig at the Alvalade project a few months ago, depending on mobilization and landowner authorization of particular drillsites, it was time to get an update on this as well. According to Kuhn, “We had a second drill rig for a single hole in the Caveira Mine area, but the contractor vacated the site after one hole for a better, longer job.  We expect to report results from this hole and from Sesmarias in early January 2022.


Since drilling at Sesmarias progresses pretty slowly, and the geology is very complex and folded, Avrupa management decided to take matters in their own hand a bit more, and acquired 4 Finnish properties. These properties aren’t just a nice mix of prospective greenstone (gold) and VMS projects (base metals), but also quite substantial, and sometimes already have a small historic resource at good grades. The company is now pretty cash strapped, but will probably have to raise in the near future, so they could start exploration as soon as the licenses are approved and the exploration permits are received. In my view this seems a refreshing, new start for Avrupa Minerals, and with current enthusiastic Finnish gold sentiment and gold recovering during days of high inflation, this could be a smart move.

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 on my website, in order to get an email notice of my new articles soon after they are published.


The author is not a registered investment advisor, and currently has a long position in this stock. Avrupa Minerals is a sponsoring company. All facts are to be checked by the reader. For more information go to and read the company’s profile and official documents on, 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.



Gold Terra Restructures Senior Management: Mining Legend Gerald Panneton stepping in as Chairman and CEO

As inflation grows rampant across many sectors, to levels not seen in decades, it only seems a matter of time before gold leaves its side ranging pattern of late. Gold Terra Resource (TSXV:YGT)(OTCQX:YGTFF) (FRA:TXO) aims at making the most of it, as the current President and CEO David Suda is stepping down on December 31, 2021 to pursue other opportunities.  Gerald Panneton will be switching from being Executive Chairman to Chairman and Chief Executive Officer (CEO), and David Suda will remain close to Gold Terra as he will be a part time advisor to the company going forward. This restructuring came right at the heels of signing the important option agreement with Newmont to buy the Con Mine late November, and wasn’t a big surprise for those who followed the company closely.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

Panneton will assume the role of Chairman and CEO effective January 1, 2022, although he was already been dominant during his tenure as Executive Chairman. When briefly discussing the switch with him, it appeared that he was leading already all the major developments for Gold Terra, from property acquisitions to financings, and was effectively a mentor to David Suda. When you have a mining legend joining the company, not planning on semi-retirement anytime soon, you would be foolish not to exploit all experience, knowledge and network for the greater good. I felt it was the right thing for Suda after a while to give Panneton the keys of the house, taking on a 1 year advisor role himself and pursue other opportunities. It is good to keep in mind Suda effectively restructured Gold Terra two years ago, and Panneton was quickly to acknowledge this:

"I sincerely thank Mr. Suda for his significant contributions to the Company and I look forward to be working with him in his new role. The Gold Terra team remains intact and very committed to increasing value for our shareholders by accelerating our exploration strategy with the aim of delineating additional high-grade ounces along the Campbell Shear extension south of the Con Mine, and adding to our current inferred mineral resource estimate, which stands at 1.21 M oz (March 16, 2021 News Release)."

As a reminder, Panneton isn’t your everyday mining executive according to his bio:

“Mr. Panneton is a geologist with over 35 years of experience and has played a key role in the discovery and advancement of several gold deposits worldwide. Mr. Panneton was the founder, President and CEO of Detour Gold Corporation (2006-13), where under his leadership, the Detour Lake project grew over tenfold from 1.5 million ounces in mineral resources to over 16 million ounces in mineral reserves and brought into production in just over six years. Mr. Panneton raised approximately $2.6 billion in capital while at Detour Gold. Mr. Panneton and his team were the recipients of the PDAC 2011 Bill Dennis Award for Canadian mineral discoveries and prospecting success of the year. Earlier in his career, Mr. Panneton spent 12 years at Barrick Gold Corporation (1994-2006), where he was instrumental in advancing the Tulawaka and Buzwagi gold projects in Tanzania towards production. Prior to Barrick Gold, he worked for Lac Minerals Ltd., Placer Dome Inc. and Vior-Mazarin Group. Mr. Panneton received his Bachelor of Science in Geology from the University of Montreal and his Master of Science in Geology from McGill University.”

Panneton joined Gold Terra in 2019, after Suda asked him many times, and he finally joined for the exceptional potential of the Campbell Shear south of the Con Mine, and also, north of the Giant Mine. Panneton believes there could be at least 2M+ oz Au at a gold grade exceeding 10 grams per ton (g/t) present in the underexplored areas. After the last acquisition, the company has consolidated all ground at and around the Con Mine, including the anticipated trajectory of the southern part of the Campbell Shear:

Again as a reminder, the part of the Campbell Shear north of the Con Mine and near the Giant Mine is off limits anyway, as this former mine currently is a reclamation nightmare, so Gold Terra isn’t planning on going anywhere near it.

With the recent acquisition came a historic resource of 651koz @ 10.2g/t Au located below 1000m depth, and according to Panneton there could be about 1 Moz Au down there. It will probably take at least 10-20% verification drilling to convert this into a NI43-101 compliant resource, and this probably has to be done from surface as it is too early to start dewatering the Con Mine.

Speaking of drilling, Gold Terra announced the delayed assays of 5 more holes of the current 2021 program, on the Yellorex Zone on December 8, 2021. Although the intercepts weren’t spectacular, every hole managed to hit the Campbell Shear, and have extended gold mineralization on both the northern and southern limits of the Yellorex Zone for over two kilometers. Here is a table with the results, with the economic results highlighted in green:

The following map shows the locations of the latest drill collars:

A description of the mineralization and geology encountered in the five holes looks like this:

Holes GTCM21-017 and GTCM21-018 both intersected a strong sericite alteration and some pyrite and arsenopyrite. Hole GTCM21-017 intersected a 22cm-thick smoky quartz vein which is typical of the Yellorex zone. Hole GTCM21-018 intersected the outer limit of the alteration halo around the main Yellorex deposit, which also includes low-grade gold values.

Hole GTCM21-019 was also collared on the south limit of the Yellorex deposit but tested the zone deeper than hole GTCM21-018. Although the hole was collared on the south limit of the Yellorex deposit, it still intersected a significant alteration halo which included a series of small, mineralized smoky quartz veins.

Hole GTCM21-020 was drilled about 60m underneath one of the best holes so far, GTCM21-014, which returned 5.22g/t Au over 17.86m including 11.22g/t Au over 4.57m. Two main gold zones were intersected with two minor zones in between from 401.60 to 455.15m. The mineralized zones consist of intense sericite alteration with arsenopyrite and pyrite stringers with local smoky quartz veinlets. The mineralization intersected in hole GTCM21-020 is typical, but just off the main shoot of hole 014.

The location of holes 17, 19 and 20 at the Yellowrex mineralized envelope can be observed here:

It can be observed that the colored zones aren’t as continuous as marked in their mineralization as per gram*meter, as for example infill holes 19 and 20 would show grey spots in the green and yellow zones. I don’t bother that much about this, as the main prize is anticipated to be located much deeper.

GTCM21-021 was drilled about 50 metres to the north-east of hole GTCM21-015 and 100 metres from hole GTCM21-020. To date, this hole is the furthest to the north-east limit of the known Yellorex deposit extending the gold-bearing lens by about 50 metres along strike. The sericite alteration in this hole is still strong and pervasive and limited to the mineralized intersections. Arsenopyrite and pyrite stringers are associated with the gold mineralization, with minor smoky quartz veinlets. This type of mineralization is exactly similar to the one found at the historic Con Mine. The section indicated at the last east-west view is shown below:

A quick estimate on tonnage results in an estimated 1.7Mt, if an average grade of 5g/t Au is assumed, almost 300koz Au could be present. According to the latest results, historic results like Y84 and Y90, and the old sections which were discussed in my last article, it seems at -500m to -750m there could be little mineralization, and it could get really interesting below these depths, as the main mineralization of the Campbell Shear at the adjacent Con Mine was located at depth as well.

Management estimates the timeline for drilling the deepest holes to happen around January-February 2022, with the results hopefully coming back from the lab at March-April. As the Phase 2 drill program will see 10,000m of drilling and just 4,430m is completed, there is still 5,570m to go.

Joe Campbell, COO and Qualified Person stated: "The current drill program in the Yellorex zone is focusing on testing the extension of the upper limits and southern limits of the zone while confirming some additional areas of intense mineralization. The Campbell Shear envelope is typical of Archean greenstone belt style with higher grade mineralization in structurally controlled shoots within large, altered envelopes, and more drilling is often required to define them. We have had 100% success rate intersecting altered envelopes in the Campbell shear similar to the Con Mine. Our drilling approach is defining the outlines of higher-grade shoots, to be followed down plunge in a very similar pattern to the 5.0 Moz mined at the neighbouring Con Mine.”

So the plan is to follow the mineralization down plunge, and over the next 24 months the strategy is to increase the current extent of drilling mainly south of the original Con Mine to a depth of 1,000 metres. Management is looking to use a step out drill spacing of 100 metres and with 50 metres of infill, with the objective of delineating at least a 1.0Moz high grade gold resource at the end of 2022, and eventually a minimum of 1.5Moz high-grade gold the year after, south of the Con Mine. Investors are waiting for the drill bit to deliver, and although a European trip of Panneton and Suda in November initiated a significant amount of buying, the share price has come down again, potentially still through some tax loss selling pressure as well:

Share price 1 year timeframe (Source:

The stock seems to be bottoming again, and if gold does pick up on inflation fears, and good results start piling in next year, this could prove to be an excellent entry point. The absolute low seems to be 17c, so there is support not to far from current levels. The treasury contains C$3.9M after the closing of the C$1.5M investment by Newmont, so Gold Terra is cashed up for at least completing the ongoing drill program, costing approximately C$1.5M, which will take them most likely into Q2, 2022 before they need to go back to the markets.


I must say I am really looking forward to what incoming CEO Gerald Panneton can do at Gold Terra, as he will undoubtedly make some changes, although he already strongly guided the direction of the company as the Executive Chairman. My guess is Panneton will aim at more aggressive drilling, and might be able to do just this as he will be in full control of proceedings after January 1st, 2022. In my view the markets probably like the somewhat changed narrative, as it really is becoming the next play of legend Gerald Panneton now, who is not in the business of running small juniors for years but thinks big. Gold Terra will announce the last assays of currently completed drill holes soon, and after that investors should be looking out for assays of deeper holes a bit further down the road in Q1, 2022. And remember, this exploration of the Campbell Shear is being backstopped by a solid 1.2Moz NI43-101 resource and a 0.65Moz historic resource at depth, with pretty good data available on it.

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 on my website, in order to get an email notice of my new articles soon after they are published.


The author is not a registered investment advisor, and currently has a long position in this stock. Gold Terra Resource is a sponsoring company. All facts are to be checked by the reader. For more information go to and read the company’s profile and official documents on, 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.

Tim Oliver: The Black Box of NI 43-101 Reports

This article is republished with permission of Exploration Insights. The original was published on August 14, 2015.

The Black Box of NI 43-101 Reports

POSTED ON August 14, 2015 BY Tim Oliver

Via Note to Readers: This is the July 26, 2015 Issue of Brent Cook’s Exploration Insights. “EI” is the premier newsletter devoted to early discovery, high-reward opportunities, primarily among junior mining and exploration companies. I occasionally contribute articles to Brent’s weekly newsletter. My articles focus on the engineering aspects of early stage mine development projects. I will post the entire EI newsletter issue when my pieces appear.

The article includes a description of a benchmarking exercise I use as a reality check on mine capital cost estimates. In the future I’ll offer similar tools for readers to use in their evaluation of investments in companies with early stage mine development projects in general and NI 43-101 reports in particular.

Exploration Insights by Brent Cook

Issue No. 335 July 26, 2015

An ugly, ugly week in which the gold price dropped 3.2% (now -15% for the year), silver ended marginally lower (-1.3%, now -28% for the year), copper -4% (now -25% for the year), and the Bloomberg Commodity Index fell to its lowest level in 13 years. The Gold Miners index (GDX) dropped 9%, the Junior Miners index (GDXJ) was down 7%, and our EI portfolio declined 5%, finally taking it into negative territory for the year (-3%). The major indices were also hit, with the S&P 500 off 2.2%, NASDAQ off 2.3%, and the Russell 2000 down 3.2%. Yep, ugly.

On Friday we did see an afternoon bounce; and although it’s just possible that we maybe, just might possibly, have seen the final capitulation (the bottom) early Friday, I am not convinced, nor am I adding any positions. I intend to hang on to my cash and see where all this leads. If it goes at all like the 1997-2001 mining rout, we should be able to buy real companies run by honest and competent people with solid properties for something close to cash in the bank. We are close, but not there yet.

I want to draw your attention to the independent rant below from our go-to engineer Tim Oliver. In it he discusses technical studies and two projects in Latin America. If there is a project/company whose technical report you particularly need an independent and serious opinion on, contact Tim—that is what he does for a living

The Rant

The Black Box of NI 43-101 Reports By Tim Oliver

“I’m just comparing numbers and have quite a bit of experience, reading Feasibility/Pre-feasibility Studies, etc., since a few years, but sure I have to trust the official numbers and I know how many will fail/are already failing; it’s for sure a black box in a few parts until they really reach production, hopefully on time and on budget.”

The preceding quote from a recent conversation with an experienced industry investor and advisor stuck in my mind. He asked my opinion of a single-project company developing an underground gold mine in South America.

I took a quick look at the project’s feasibility study and found significant problems. I suggested he dig a bit deeper here and there. Do some benchmarking and consider the unrealistic construction schedule. He made the statement quoted above, and went forward, happy with his investment and that of his clients.

Here at EI we tend to be a bit more circumspect and not inclined to “trust the official numbers”. We are usually more inclined to unlock the mysteries of the “black box” these studies often appear to be–hence the following discussion.

Opening the Black Box: A Primer on Reviewing Advanced NI 43-101 Reports

National Instrument 43-101 came to be in 2001 in the wake of the 1997 Bre-X scandal where unscrupulous promoters parlayed an imaginary Indonesian gold deposit into a blockbuster stock with a share price of CAD$286 and a market cap over CAD$6B. The scam collapsed and so did the Canadian mining stock market. In order to prevent a recurrence, the Canadian securities regulators issued NI 43-101, which requires public disclosure of mining data and studies; it also requires that the studies be sanctioned by a “qualified person” (QP), as defined in the instrument.

Overall, NI 43-101 has been a good thing for Canadian mining and investors. NI 43-101 compliant reports contain valuable information and, to the savvy reviewer, reveal important facts and other important, but less tangible, information about the deposit owner. The reports are easily accessible through

At the same time, the program has serious shortcomings, described in more detail below. The main takeaway for readers is: Do not take these studies at face value; there are a myriad of motivations behind these studies. Use this guide to peer into the black box, assess the motivation of the owners and engineers, and divine the truth between the lines.

NI 43-101 covers a variety of disclosures. Here we examine the sequence of three engineering studies used to assess, with increasing detail and accuracy, the potential value of a mineral property.

The three studies are:

As illustrated in the chart below, the studies are conducted in the sequence listed. No set scope exists for any of the study levels.

(Fig. 1: From “Minimum Engineering Study Requirements” by RungePincockMinarco [RPM])

These studies are not new. They have a long history as the engineering basis for the orderly development of mining and other capital intensive projects. The study series spans the gap between exploration and construction. Fundamental to the practice of mine development is the principle that rigorous engineering breeds project success. The corollary is true as well: weak or sloppy engineering leads to project failure.

NI 43-101 codified the traditional study contents and added requirements for public disclosure, plus oversight by a “Qualified Person.”

Generally the PEA (often termed “scoping study” outside the coverage of NI 43-101) takes less time and costs less than the PFS or the FS, mostly because less drilling, lab work, and engineering are required. A PEA might require from several weeks to a year to complete and cost from $100,000 to $2.5 million. A more detailed PEA might reduce or even, in very special circumstances, eliminate the need for a PFS. The findings are suitable for either rejecting the project or approving funding for the PFS. They are not adequate for full project approval. Estimate accuracy is no better than ±40%.

The purpose of the PFS is to evaluate all the available options for mining, processing, and infrastructure in order to fix the plan to be evaluated in the Feasibility Study. The Pre-feasibility study is the first stage with enough financial resolution to determine and declare mineral reserves. Like the PEA, the PFS provides sufficient information only for project rejection or approval of the next study phase—the FS. The PFS might take six months to two years to complete and will cost from about $500,000 up to $10 million or more for a major, multi-billion dollar capital project. Estimate accuracy is no better than ±25%.

The FS describes and evaluates the complete project to be built. The design work is sufficient to support cost estimates at ±15% accuracy and is the proper vehicle for approval to construct. The time required to complete the study will range from at least one year to as many as five years; and, it will cost between $1 million and $50 million for large capital projects in remote, inaccessible areas.

Some noteworthy aspects of NI 43-101 studies are:

The March 1 and 23, 2014, issues of EI contain a two-part series titled “Top Ten Signs of a Bogus NI 43-101 Report.” This is worth a read.

Why is the report being undertaken?

The March 1 piece described three types of owners and their motivations for performing the study. Discerning the motivation for the study is the first evaluation step. The three types of owners and their motivations are:

  1. Management is serious: The owner wishes to objectively assess the development potential of the deposit through a rigorous engineering analysis. Let’s use the term “real” here.
  2. Management seems lost: That is, the owner seems to desire only to comply with the NI 43-101 disclosure requirements. The study is superficial and meets minimum requirements. This will be referred to as “misdirected.”
  3. The owner wants to promote a marginal property: Put lipstick on a pig. This will be called “sham.”

This week we have a look at NI 43-101 in general, and then compare two studies. In upcoming issues, we may take a close look at each of the three study levels.

 The QP

The fundamental tenet of NI 43-101 is that an official, written sanction from a qualified, independent person will ensure the integrity of the study. Unfortunately the program, as implemented, often misses that mark widely.

First, any schmo can call him/her self a QP. NI 43-101 requires:

Second, recent (2011) amendments to NI 43-101 changed the requirements for QP independence so the QP need only be independent (no financial interest in the report findings) in the case of a PEA. PFS and FS may use employees and corporate officials as QPs.

So, NI 43-101 neutered the single provision that should give comfort to the poor investor: the sanction of a qualified and independent expert.

No successful operating company would put a scoping, prefeasibility, or feasibility study solely in the hands of a marginally qualified and compromised individual. A somewhat less genuine company may.

The point is, sham QPs are just as widespread as sham NI 43-101 reports. Don’t trust either without independent verification. The inverse is true as well. If the QP is credible, qualified, and independent, chances are the study findings are sound. This is the hallmark of a “real” study.

The most important quality in a QP is integrity. An honest, ethical QP will produce a credible NI 43-101 study.

Here are two examples.

The first is the December, 2014 PFS for Condor Gold’s La India Project. SRK authored the study with contributions from several specialty subcontractors. Each subject matter chapter was authored and vouched for by one of four QPs, with education, certification, and experience in each area for which the authors certify.

The second is the October, 2014 PEA for Troy Resources’ Karouni Project in Guyana authored by two full-time Troy employees, clearly at odds with NI 43-101 Part 5.3(1), which requires a maiden PEA be done by a completely independent QP. We review the project PFS later.

Cast of Characters

The Owner

Owners have strong incentives for positive study economics. The most obvious is the hoped-for bump in the stock price. Look what happened when Excelsior Mining released a very positive Pre-feasibility Study in January 2014 (Figure 2).

(Fig. 2: Excelsior chart) 

Investors are often told to demand “skin in the game” on the theory that it lends incentive to grow the project, not just draw a paycheck. Insider ownership can, however, also drive an intense desire for positive study results, often regardless of the project’s true value. One should consider the insider’s priorities—short-term gratification or long-term value.

The Engineer/consultant

Owners typically contract advanced NI 43-101 studies to a consulting or engineering firm with expertise in the key study areas such as mine design, metallurgy and mineral processing, environmental and social issues, hydrology and water resource management, geotechnical engineering, etc.

The consultant will serve as overall QP, manage the study, and provide specialty QPs as appropriate. Subcontractors fill subject matter specialty gaps (water resources, social impacts, etc.). Subcontractors supply specialty QPs and report either to the owner or the Consultant.

Engineering and Consulting firms also have potent incentive for positive study results.

Large Engineering and Construction (E&C) firms build mines. A study can earn the firm a few $MM in fees. Building the mine can earn several tens of $MM in fees.

Non-E&C consulting firms want the project to graduate to the next study level to keep the project alive. “Study mills” are firms with a reputation for producing positive studies, even for marginal projects. It’s a successful business model, if not a particularly ethical one.

Each type of firm is perfectly capable of delivering fully “NI 43-101 compliant” studies, signed by legitimate QPs, showing economically “robust” economics for perfectly worthless projects. It happens all the time.

No immediate incentive whatever exists to produce a study finding the project has little or no value. However, over the long run, a firm’s reputation is its calling card.

Provincial Securities Commissions

Provincial Securities Commissions implement and enforce regulations such as NI 43-101. The commissions are sparsely staffed and do not routinely review NI 43-101 reports. They will process complaints and will take action when violations are brought to their attention, but there is little active oversight. The regulators have little or no effect on the preparation or outcome of the studies—that is not their role.


Both institutional and retail investors rely on the NI 43-101 study financial results for investment decisions. Typically, a summary of the financial results appears in a news release published up to 45 days prior to posting the study itself on SEDAR.  Investors naturally want to buy in as early as possible. Consequently, the news release summary triggers many investment decisions well before the investor can critically review the study to determine if it supports the announced results.

The important lesson for investors is: do not believe that the phrase “NI 43-101 Compliant,” or the signature of a QP in any way guarantees the soundness of a study. You must dig deeper.

A Tale of Two Projects

This is a comparison/contrast of two different NI 43-101 studies for mining projects in Latin America.

Condor Gold is a London listed Junior (CNR.LON) with a single asset in development stage. The La India Project is a small-scale gold project at PFS level in Nicaragua. Condor management has strong incentive to produce a positive study. Competition for capital is so fierce that only the very few most outstanding projects will find funding.

SRK was selected to manage the study and is a well-established consulting firm with a long history of NI 43-101 study production. A positive PFS could lead to a full FS and more fees.

The stage is set.

Considering the highly charged circumstance, the Condor PFS shows restraint. The estimated initial capital cost of $110 million for a 2,200 tonne per day underground mine and mill is spot on the cost curve, compared to other small to mid-size open pit gold projects with mill recovery (not heap leach). See Figure 3. Had Condor Gold and/or SRK so desired, they could have trimmed the initial capital estimate and improved economic model results considerably, by using low equipment bids, adjusting productivity, squeezing installation cost factors, etc. It is quite possible to massage figures to attain the desired initial capex.

I worked on a project once where the owner declared, at the FS kickoff meeting, his expectation that the project would not work with an initial capex over $100 MM. It was clear he expected the team to achieve that number. Ultimately the project was built, but it exceeded the construction budget and struggles to make money.

EI looked at initial capital cost estimates from NI 43-101 studies for six small to medium size (<7000 tpd) open pit gold operations. Figure 3 shows a plot of the initial capex against the feed capacity for the six properties. The two properties being examined are shown in red.

(Fig. 3: Benchmark capex for open pit mines)

The benchmark model predicted initial capex for La India at $86 million– about 22% lower than the PFS estimate. Clearly, the study did not thumb the scale on the capex estimate. Likewise, the estimated operating cost of $58.50 per tonne milled is on the high side for open pit gold mines. We did not run a benchmark on opex.

The estimated financial performance is healthy, but not over the top. The study base case NPV5 at $1250 gold is $92 M over a mine life of eight years. Project IRR is 22%– moderately strong.

Condor Gold and SRK clearly fall into the motivation category “real.” They objectively assessed the economic potential of the deposit through a rigorous engineering analysis.

Troy Resources Ltd. (TRY.ASX) is an Australian Company, which up until last year maintained registration on the Toronto Stock Exchange. We reviewed the PFS for the Karouni Project in Guyana. Karouni is a 2750 tonne per day open pit gold mine project with milling recovery.

The PFS was nearly indistinguishable from the PEA. The same two employees wrote it; and it contained the same lack of engineering support and scarcity of information. A PFS should contain a great deal more engineering and information detail than a PEA. By all appearances, this PFS was no more than an update, covering the change to open-pit only operation and a slightly higher production rate.

Troy, like Condor, has ample incentive for a strongly positive FS.

Troy’s PFS shows lack of restraint. The study report states the capex is $73.3 million (Figure 3), not including $11.3 million for pre-production mining. The $11.3 million does not appear in the cash flow model either. We assume this cost is considered sunk and therefore not part of the project economics.

Our benchmark model (see Figure 3) calculates initial capital for a 2750 tonne per day open pit mine and mill would be $112 MM, over 50% higher than the PFS estimate.

In a mid-2014 report (dated June 30, 2014) Troy announced construction had commenced on the Karouni Project, predating the publication of the PFS.

One other item bears mentioning. Condor reasonably estimated a two-year construction period. Troy, on the other hand, unrealistically estimated only one year for construction. Troy issued a project update on July 10, 2015, noting that startup had been delayed from June 2015 until September 2015 due to a variety of fairly serious problems with mill installation and alignment. This type of problem and resulting delay are typical of poorly engineered and executed projects.

Troy’s economic model predicts an after-tax NPV6 of $72 MM with gold at $1250 over a mine life of just over three years. The predicted IRR is an eye-popping 50%. Troy presents a sensitivity analysis showing a 20% increase in capex drops the NPV6 from $72 million to $54 million. If we plug the modeled $112 million into a cash flow model, the NPV6 drops to about $30 million and the IRR goes to a quite modest 20%.

By our reckoning, the Troy effort falls into the motivation category “misdirected” with some elements of “sham.” The study is superficial and fails to meet minimum requirements. At the same time, it equips the company to promote the project based on unrealistic, though attractive, financial results.

Troy successfully raised the projected capital with this study. In April 2014 they received a revolving credit facility of $100 million from Investec Bank. Stand by to learn if the project can survive the mill problems and limited funds when faced with the current gold price crash.


We have two projects under study. Condor Gold’s PFS demonstrates a realistic, sound engineering evaluation resulting in a healthy economic forecast. The project has the hallmarks of success.

Troy Resources’ Karouni PFS demonstrates a lack of engineering rigor, resulting in an apparent underestimation of costs and an unrealistically rosy economic forecast. We can already see some results of the lack of engineering rigor with the mill installation problems. It’s reasonable to anticipate that these delays, coupled with unrealistic initial capex forecasts, will force Troy to find additional funding, weakening project economics and lessening or even wiping out investment returns.

Brent here again…

Tim put this rant together with very little input from me. I think it is a useful, albeit cursory, look at the technical and economic studies upon which most of the folks in the mining sector base their investment decisions. His points are very legitimate– one must really consider the objectives and competence of the people behind any technical study.

The foundation of these studies is of course the resource estimate, and you will note that Tim’s commentary focused on the mine and costs that are meant to exploit said resource. It has been assumed by SRK that their estimate of Condor’s resource is a fact. The PFS only exploits the probable 675,000 ounces grading 3 grams per tonne gold out of a total resource of 2.3 million ounces grading 4.0 grams per tonne gold indicated and inferred (Fig. 4).

(Fig. 4: Mineral resource estimate by SRK, Sept 2014)

Although Condor’s market capitalization is £24 million (US$37 mil), the PFS NPV5% is US$92 million (@ $1250 gold), and there are another 1.7 million ounces in the resource, you will note we do not own it in our EI portfolio.

Why not?

It’s simple. Without belaboring the point, I have issues with the resource estimate, particularly the indicated and inferred. The deposit is comprised of epithermal veins of variable width and grade. Much of the resource is attributed to single and isolated high-grade drill intersections that are often pretty far below the surface. The life of mine strip ratio (tonnes of waste moved per tonne of ore) for both the FS and PFS is ~13:1—pretty high. If that 1 tonne of expected ore is not as expected, the operation suddenly becomes uneconomic. Given what I saw when parsing through the deposit, cross section by cross section, I will hesitantly concede that the probable reserve (675,000 oz) may work, but am unwilling to bet that the remaining ~1.7 million ounces will be economically recoverable.

This discussion brings home a much broader point, one we have made numerous times here at EI (see Nov. 16, 2014): the interpretations and economic projections in 43-101 studies are only as good as the initial data upon which the resource is based. If the sampling is bad, the geology wrong, the interpretation flawed or disingenuous, then everything that comes after is illusory. The follow-on economic studies are essentially worthless and it is usually the resource estimate that got it wrong.

That’s the way I see it.

Brent Cook



This letter/article is not intended to meet your specific individual investment needs and it is not tailored to your personal financial situation. Nothing contained herein constitutes, is intended, or deemed to be — either implied or otherwise — investment advice. This letter/article reflects the personal views and opinions of Brent Cook and that is all it purports to be. While the information herein is believed to be accurate and reliable it is not guaranteed or implied to be so. The information herein may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. Research that was commissioned and paid for by private, institutional clients are deemed to be outside the scope of the newsletter and certain companies that may be discussed in the newsletter could have been the subject of such private research projects done on behalf of private institutional clients. Neither Brent Cook, nor anyone else, accepts any responsibility, or assumes any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information in this letter/article. The information contained herein is subject to change without notice, may become outdated and my not be updated. The opinions are both time and market sensitive. Brent Cook, entities that he controls, family, friends, employees, associates, and others may have positions in securities mentioned, or discussed, in this letter/article. While every attempt is made to avoid conflicts of interest, such conflicts do arise from time to time. Whenever a conflict of interest arises, every attempt is made to resolve such conflict in the best possible interest of all parties, but you should not assume that your interest would be placed ahead of anyone else’s interest in the event of a conflict of interest. No part of this letter/article may be reproduced, copied, emailed, faxed, or distributed (in any form) without the express written permission of Brent Cook. Everything contained herein is subject to international copyright protection.



Tim Oliver: Nearly half of development-stage NI 43-101 studies surveyed lack engineering rigor

This article was republished with permission from Exploration Insights.

Exploration Insights
by Brent Cook

Issue No. 342
September 13, 2015

This week our go-to mining engineer, Tim Oliver, discusses the results of his investigation into 34 recently published National Instrument 43-101 technical reports. These reports are mining disclosure standards implemented by the Ontario Securities Commission for Canadian-listed companies. As Tim points out, an NI 43-101 compliant report does not guarantee the results are accurate or correct, it only means the report is in accordance with the regulations regarding what is included and how it is presented in the document by a Qualified Person (QP). To be compliant, these reports must be filed with a Canadian securities regulator and are posted on It’s a long rant, but worthwhile for anyone not familiar with the positives and pitfalls of NI 43-101.

I also want to draw your attention to an excellent interview posted by The Energy Report, here, in which Blair Way (President Flinders Graphite) provides some very useful insights into the graphite market. As you may recall, graphite was the metal du jour a couple of years back, but it has since run smack into the realities of mining and marketing specialty metals. To its credit, Flinders actually has a functioning plant with a marketable product, and is ready to go when graphite prices increase.

A reminder, the annual New Orleans Investment Conference runs from October 28 to 31 this year. In my opinion it is one of the best, if not the best, hard asset-big picture investment conferences in the world for those interested in an alternative view to mainstream economic views with a bit of conservative-nut job politics thrown in. I will also be chairing the Insights into Exploration panel Wednesday afternoon. Detailshere.

Analysis of 34 Technical Studies

By Tim Oliver
First published in Exploration Insights on September 13, 2015.


In March 2014 I wrote a two-part series for Exploration Insights titled “Top 10 Signs of a Bogus NI 43-101 Study”. I presented a slide show on the subject to the crew at Sprott Global Resource Investments Ltd. in Carlsbad, California. The presentation went well until the end. Steve Todoruk asked me what percentage of posted studies is actually bogus. I made what I thought was a reasonable guess. It was pretty high, and I could feel the room drifting away. Most didn’t believe me, and I felt I lost credibility.

The subject haunted me from that day. So, having some time on my hands, and looking for a way to promote my services, I decided to find out.


This article describes the results of an analysis of 34 advanced NI 43-101 studies, Preliminary Economic Assessments (PEA), Pre-feasibility Studies (PFS) and Feasibility Studies (FS) that were posted on SEDAR during the period May 1 to August 31, 2015.

The purpose of the study was to:


According to the methodology discussed below,


This paper evaluates development-stage studies. It does not address the deposit/the resource.

In my experience, investors focus most closely on the geology and resource statements, and that is proper. It’s impossible to engineer a profitable mine without a good deposit. Unfortunately, I find investors take a leap of faith on the project development engineering, assuming the signoff by a QP engineer guarantees the soundness of the engineering.

I first set out to show how QP signoff doesn’t guarantee engineering rigor, and to offer some tools for investors to peer into the “black box” of engineering studies.

This paper ventures further, by actually evaluating a selection of studies based on standards by which I judge the reports as objectively as I can. Those judgments are the subject of the report.

Ironically, since I don’t evaluate the geology and resources, I must make my own leap in assuming geology and resources were adequately addressed in the resource reports prior to the owner launching the development study.

It’s a catch 22. Perhaps a reader will offer a remedy.


The first task was to figure out a methodology. Well, I already had the “top ten” list. Here it is:

  1. QP Conflict of Interest  (10)
  2. QP Qualifications (10)
  3. Commodity Price Deck (5)
  4. Unrealistic Metallurgical Recoveries (6)
  5. Signs of Desperation (5)
  6. Lack of Engineering Documentation  (10)
  7. Unrealistically Low Contingency (7)
  8. Cost Basis Discussion (10)
  9. Missing or Unrealistic Project Schedule (10)
  10. New or Exotic Technology (5)

I decided to use these ten criteria as the basis for a grading system. The numbers in parentheses are weighting factors, or relative importance, for each item. For example, a good cost basis discussion is worth 10 points, while using new or exotic technology costs five points.

I then went onto SEDAR and began the tedious process of downloading studies. The system is set up for search by various means. You can enter the company, or leave it blank, which I did; I specified “Technical Report” and started with May 1.

The query results included all the PEAs, PFSs and FSs posted during the specified period. The query also included every Resource Report, Property Assessment and all QP Consent Forms for the reports caught in the search net.

By various means I streamlined the process and eventually settled on a sample universe of all the reports spanning the period from May 1 to August 31, 2015. That gave me about 39 reports. I culled out some that were irrelevant such as the slick FS produced by non-Junior companies to fulfill the regulatory requirements and to justify their budgets to Management. They are interesting but not relevant to my survey. I also discarded a report on a sand and gravel operation, and some studies designed only to report on a specific aspect or change to an ongoing project or operation: for instance, adding a flotation stage to a Mother Lode district mine to improve recovery. I wanted studies by Juniors for greenfields projects.

I reviewed each report in considerable detail. Sometimes I could get through a good PEA in just a few hours. Many FSs require more than a full day. Good quality studies are easier to review than poor-quality studies, as it’s easier to find information. With a lousy study I would waste a good deal of time making sure what I was looking for wasn’t there. Did they call it a schedule, timeline, execution plan, what? Is it there or not? Usually if you need to search hard, it isn’t there.

I gave each study a 1 or a 0 for the ten items: pass/fail.

Each item received a weighting factor. Those are the numbers in parentheses next to each top ten item in the list above. The weighting factors are based on how important I think the criteria is and how well I am able to assess it. For example, I know when a metallurgical recovery is comically high, but I can’t distinguish between 96.8% or 97.8% gold flotation/CIL recovery. I might look through the testing and find a flaw, but unless the stated recovery is obviously wrong, I score a 1.

I use a different standard for each level of study. PEAs don’t require much engineering or detailed infrastructure plans. FS require specific engineering drawings, criteria and specifications.

RugePincockMinorco (RPM) published an excellent guide (click on title) to the differences between the study levels in their June 2015 Newsletter: “Minimum Engineering Study Requirements Update.”

My guide and the source of my checklists is, “Project Management for Mining-Handbook for Delivering Project Success, Robin J. Hickson and Terry L. Owen, 2015, SME.” (“Project Success Handbook” hereafter) I swear by this resource and have hardcover and electronic editions so I’m never without it. The book succinctly lists nearly everything required for each level of study and explains why.

As it turned out, the maximum score possible is 78. Two of the 34 studies achieved perfect scores.

Anything lower that 50 flunks the test. If the score is between 50 and 60, be cautious. Four studies scored 51. Be very cautious.


Figure 1 shows a frequency distribution for the score ranges in increments of 10 points.

Figure 1

Scoring Summary

Weak Areas

The points shown are the total number of studies, out of 34, that pass the test question.

Project Schedule

Fewer than half (14 of 34) the studies presented acceptable and believable project schedules. Not only is this the weakest area, but it is also, in my opinion, the most crucial criteria.

Schedule trumps all. Frequent readers know my belief that a project on schedule will likely be successful and on budget, and a project off schedule almost certainly won’t make budget and has a poor chance of success.

All projects, even PEAs, should be considered in terms of what it will take to make them successful—a project execution plan. The first thing in the plan is a schedule. It’s very rare to see a Project Execution Plan in a PEA, but even the PEA needs a coherent project schedule.

To fail in this category, a study must either have no schedule at all, or have an unrealistic schedule. A PEA need only have a narrative describing estimated time lines for permitting, design, procurement, construction and commissioning. This is not difficult. In my opinion, no seasoned study engineer should release a study without a clear project schedule.

Some of the PEAs received credit only because the economic model table showed two years for construction. After some debate with myself, I decided, at PEA level, allotting construction time on the economic model spreadsheet is the bare minimum amount of scheduling to pass. If the economic model shows one year for construction, I usually give no credit. Ordinarily a mine can’t be built in a year. There is one small heap leach with less than a year of construction shown on a well-presented schedule for a FS. It is really small, has a CEO with solid credentials in building mines, and has no real infrastructure challenges. So it passed.

Cost Basis Discussion

Just half of the studies included an acceptable cost basis discussion. Some studies simply list costs in a table. In my opinion, even a PEA needs a narrative description of the origin of the cost numbers. For example, PEA-level capital costs for a simple heap leach project in Nevada with no major infrastructure challenges can be estimated by benchmarking similar projects. If the PEA says, “Project x, y and z are very similar to the subject project. We used the as-built cost for Projects x, y and z, escalated for inflation, and scaled for the difference in project size, as the basis for a $/tonne processed factor to calculate the likely cost for the subject project.” That’s fine. Benchmarking is a legitimate cost estimating tool and is accurate enough for a PEA. The reader will know exactly where the cost numbers came from.

A more obscure commodity might require more work. For example niobium is the sought-after commodity in one of the projects studied. The PEA for that project required a bottom-up approach with extensive test work, process design, equipment specification and price quotes; a similar procedure as required for advanced studies (PFS, FS) of more common commodities.

A PFS or FS should declare what percentage of the total equipment cost was derived from vendor quotes. That isn’t difficult to do. A few pieces of major equipment easily make up the majority of the equipment cost. Vendor quotes are the best source of up-to-date equipment costs.  In a PFS or FS, at least 90% of the total mechanical equipment cost should come from vendor quotes.

The vendor will also provide the lead time for the equipment. A PFS or FS Project Schedule should indicate lead times for major equipment. As of today, the lead time for a large SAG mill gearless motor, the longest lead time item for most large projects, is about 18 months.

The point is, there is no set formula or template for the cost estimates, and that is why a clear, detailed explanation is essential. The explanation narrative is typically called the “Basis of Capital [Operating] Cost Estimate.”

Engineering Documentation

It should be obvious that an engineering study needs to show a little engineering. Yet only half of the studies showed adequate engineering support. Even a PEA needs a site plan, including plant layout with locations for major buildings, equipment installations, infrastructure features, mine facilities including shafts, adits and other openings. The engineer must demonstrate that the facilities required to exploit the deposit can actually fit and function on and in the surface topography.

PFS and FS should show detailed annual pit plans and cross sections along with General Arrangements and select cross sections for process plants.

A PEA can assume a pit slope angle. A PFS may refine the estimate by evaluating the rock type. A FS must conduct geotechnical studies including cell mapping and oriented core drilling to calculate expected actual slope angles.

PFS and FS should show road alignments and cross sections. The FS should show storm water best management practices (BMPs).

A simple block diagram is sufficient for a PEA Process Flow Diagram, but a PFS or FS requires separate flow diagrams for each process stage such as crushing, grinding, flotation, etc.

PFS and FS require a detailed equipment list. What equipment will be used, what size, how many, what size motors? The FS should include a Quote Log showing which vendors submitted which quotes, which were selected and why.

PFS and FS require design criteria including mass balance numbers, specific gravity, pulp densities, residence times, etc.

PFS and FS need electrical one-line diagrams and load studies.

These are just a few examples, not a full list.

Some documentation might be too large (in terms of bytes) for posting on SEDAR. The posted study should list all appendices so the reviewer knows the work was done and can access the documents if necessary. That said, with a bit of care the posted study and all appendices can be made to fit within SEDAR document size guidelines.

Odds and Ends

Here are some fun facts reflecting on the current status of the business.


I once jokingly characterized Canadian Juniors as three geologists with a mail drop in Vancouver. One is too old to travel, one is drilling in the jungle and the third is somewhere raising money.

If that was ever correct, it is not correct today. Of the 34 companies whose project studies were reviewed, nine CEOs were engineers, ten were geologists, 13 were financial types and two were either professional administrators or mine operations professionals not otherwise specified.


21 of the 34 studies were gold projects. Two were primarily silver, two were primarily copper, two were frac sand, and two were rare earths. Lead/zinc, phosphate, niobium, alumina, and scandium, added one each.


Surprisingly, the USA hosted the most projects, with eight. Ghana and Canada tied for second with three each, Mexico and Ghana had two, and the hot bed of mining, Peru, only had one.

Continent              Count

North America        16

Africa                     8

South America       4

Europe                  3

Oceana                 1

Greenland             1

Australia               1



This semi-qualitative analysis showed nearly half of the development stage NI 43-101 studies lack engineering rigor. A Qualified Person’s signature does not guarantee reliable results. Investors can avoid losses if they undertake an independent engineering review of a project’s NI 43-101 study before handing over their money.

If and when investors demand more rigor in these studies, the owners and engineers will need to step up their game. Everyone will benefit.

My next move will be to prepare a detailed report including names of companies and projects, and the raw scores. If I can generate enough interest, the report will become a regular, quarterly, service available for a cost to be determined.

Tim Oliver


A Mine is a Terrible Thing to Waste

In the preceding discussion Tim makes the point early on that, ironically, “I must make my own leap in assuming geology and resources were adequately addressed in the resource reports prior to the owner launching the development study.”

The geology and resource estimate form the basis of any mining study. If there is a mistake there, it is highly unlikely the mining and cost sides of a technical study will be right.

By coincidence, Goldcorp published a presentation on its Eleonore gold deposit in advance of an analyst tour that revealed a few surprises related to its resource modeling.

Eleonore is a high-grade underground mine with proven and probable reserves of 4.97 million ounces grading 6.30 grams per tonne gold (plus inferred 2.8mil oz @ 7.19g/t Au) that reached commercial production in April. Development and construction were supported by an in-house, 43-101 compliant technical report that ran 246 pages plus supporting documentation. Initial capex came to about US$2.04 billion and Goldcorp paid US$420 million for the deposit.

In the deeper portion of the orebody, Goldcorp is encountering more structural complexity than was modeled in the resource estimate. Specifically, the ore zones that were interpreted as relatively planar are, in fact, ductilely folded (Figures 2 and 3). The folding affects about 20% of the deeper reserves (~10% of total reserves).

(Fig. 2: Modeled vein shape vs. developed vein shape)

(Fig. 3: Complexly folded vein and drill hole traces)

Note how the three drill holes each seem to demonstrate a different vein character. These are spaced about 25 meters apart.)

The net affect of this newly recognized structural complexity is that in these zones the mine dilution increases, which means head grade drops and mining costs increase on a per ounce basis. In figure 2, Goldcorp estimates the grade drops by 25% and tonnes mined increases by 60% because of the additional rock that has to be mined to extract the ore.

A word on dilution:

The prime objective of any mining operation is to mine as much ore and little waste as possible–ore makes money, waste costs money. When mining an ore body there is almost always uneconomic rock that has to be extracted in order to efficiently mine the deposit. When mined it is called dilution because it is processed with the ore and lowers (dilutes) the grade going to the processing plant. For instance, if your ore zone is a 1-meter wide vein that grades 30 g/t Au but the mining width is 2 meters, that extra meter of rock dilutes the grade going to the mill. For simplicity, if the additional meter grades 0 g/t Au then the mined grade is diluted to 15 g/t Au.

I find it instructional that even a top group of estimators and engineers in one of the largest and most successful gold companies did not recognize the structural complexity until they were in it. It seems that, more often than not, when a problem arises in a resource estimate or engineering aspect of a mine it has a negative effect on the mine’s economics. That is just how Earth works and why one has to be especially diligent when assessing marginal or technically difficult deposits. If Eleonore were a marginal deposit owned by a junior miner (it’s not), it could go the way of: Adanac Moly, Mercator, Midway, Jaguar, Carpathain, Great Basin Gold, Orvana, San Gold, Allied Nevada, Colossus, Royal Oak, Aurcana, Equitorial, South Deep, Tabakota, Twin Buttes, Lisbon Valley, Oracle ridge, Silver Lake. . .you get the point.

There are of course, many many more mines that work than don’t but we still must be very diligent when reviewing a resource estimate, folks.


Sprott’s Thoughts: How to ask Sprott Global’s Rick Rule for money

This article is republished with the permission of Sprott Global. The original was posted on December 1, 2015, by Tekoa Da Silva.


“What would you like to talk about this time?” I asked my boss, after walking into his office.

“Well, I’d like to have a conversation for the issuers,” replied Rick Rule, Chairman of Sprott US Holdings, “in terms of what we look for, before giving a company our client’s money. What do you think?”

“I like it,” I said. And we chatted about it for a few more minutes. Later that day, I liked it even more for the following reason.

Over the last few years I’ve attended investment conferences with my boss. At these shows, we meet with clients of Sprott Global. You might be one of them.

If so, you probably remember the moment we sat down, and you explained to me (or my boss) how much trust you’ve given our group to protect (and in some cases) grow a portion of your family’s wealth.

What makes the experience more meaningful is when a person or management team sits at the other end of a negotiating table with us — and asks Sprott Global for those same client dollars.

In the following interview, Rick shares the process he disciplined our team to follow, before allocating client funds into a company seeking development capital.

If you are part of a team looking for development funds — listen up, because the following interview shares the key to opening Sprott Global’s client investment box.

Here’s how to ask Sprott Global for money.

Tekoa Da Silva: Rick, if the reader is learning about Sprott Global or you for the first time, how many years now has it been that you’ve been financing businesses directly? And how many company presentations do you think you’ve sat through throughout the years?

Rick Rule: I have been investing in natural-resource-based companies and originating and participating in financings for 38 years now if my memory serves me correctly. My partner Eric Sprott whose name is on our door was doing it a couple of years before I.

So I think it’s fair to say the Sprott organization in total has been doing this in many ways, shapes, or form, for four decades.

Tekoa Da Silva: Rick, a few years ago, you published a document called A Guide to Natural Resource Investing.

In that document, you laid out the most important questions you felt need to be asked by the investor to a company management team. For the person reading, could you give us a summary of that document?

Rick Rule: The document came about as a consequence of me watching many of our clients make mistakes investing. I watched our clients interviewing issuers (companies) at investment conferences and saw that the process they were going through in terms of accessing information to make investment decisions was faulty. What I tried to do was put together a guide that somebody could understand in an hour or less that would simplify and codify the process.

An issuer or an issuer’s agent who reads that same guide will be able to understand what is important to Sprott in 20 minutes or less. They will also be able to understand how to answer our questions efficiently.

If they don’t have the ability to answer those questions efficiently, they’ll know not to begin the process because it would be a waste of their time and ours.

Tekoa Da Silva: What would you say has been the most common mistake you’ve seen throughout the probably thousands of corporate presentations you’ve sat through?

Rick Rule: Well, 90% of the people that have come to pitch me, if that’s the right phrase, haven’t been prepared at all. What was important in their framework was raising the money and they paid no attention whatsoever as to what was important to me.

I would say the second critical mistake issuers have made coming to Sprott is they operate in the mistake and belief that we’re investment bankers, that we raise money for them. That is not the case.

An investment banker has the issuer as a client. We don’t have issuers as clients. We have investors. Our investors are our clients.

What that means is that we will never raise money for an issuer but we will allocate capital to an issuer. Our interests become aligned after our check cashes, and we’re shareholders of theirs.

But until the check cashes, we’re potential investors. They aren’t clients of ours. We’re representing clients in a discussion with them. It’s a very important difference.

Many financial services businesses operate under what I think is the illusion that they can simultaneously represent in good conscience, both the issuer and the investor — the issuer as investment banker and the investor as broker.

From my point of view that conflict is irresolvable. So we have decided at Sprott (and we decided before we were bought by Sprott) some 30 years ago that we would never raise money for companies, but we would happily allocate capital to companies.

Tekoa Da Silva: So Rick, there are about nine or ten important questions listed in A Guide to Natural Resource Investing. Let’s get into it.

I walk through the doors here at Sprott Global to ask you for development money. What do I need to tell you about my business in order to attract your client’s capital?

Rick Rule: The first thing I want to know Tekoa is what is my downside. Everybody has a wonderful upside story. So I always begin the question by asking the issuer, “What is the relationship between market capitalization and value?”

I say, “Tekoa, you would like to raise money on a $5 million pre-money valuation. Explain to me why your company is worth $5 million or explain to me what it is worth. Talk to me about my downside.”

I’m not trying to say that I need to buy $15 million worth of value for a $5 million pre-money market capitalization, but I am saying that I have to understand what my downside is before we begin to talk about my upside.

Too often when people talk about value, they’re talking about relative value, not absolute value. Somebody might say to me, “Well, I have 24,000 acres of caribou pasture in the northwest Yukon. Another caribou pasture incorporated as Consolidated Pasture Mines is valued at $1000 per acre. Therefore I have $24 million worth of value.”

I have to say, “No, that’s not the number I’m looking for. What I’m looking for is the amount of money that you could sell those assets for to a private buyer in a rational market.”

Again, I’m not trying to say that I have to get everything for dimes on the dollar. But I need to establish what my downside is before I talk about what my upside is.

Assuming a satisfactory answer in those discussions, the next thing I want to know about is my upside.

Now, Tekoa, if I were talking to an investor, I would say at this juncture that you have to let the issuer go through his or her presentation. They’re programmed to do and trying to stop them in fact is a waste of time. I will often let an issuer go through a canned presentation just to get it out of their system, so that we can get down to the parts of the presentation that I’m interested in.

But making money in natural resource venture capital (exploration) activities, really involves the process of answering an unanswered question. Many people don’t realize this but the natural resource exploration business is very much a research and development business. Answering a series of unanswered questions is what adds value.

So assuming that ‘Tekoa Da Silva’ the issuer, survived the downside question — “What is your company’s worth?” I would then say, “Tekoa in the asset that you’re talking to me about, what is the transformative unanswered question? What is the value proposition? How is it that you’re going to take this $.50-cent piece of paper and to make it into $5? How are you going to add a zero?”

So tell me what the unanswered question is. Give me the facts that support your thesis and also tell me how you propose to answer the unanswered question in an efficacious manner.

Now the way that you fail this Tekoa, is if you come to me with an unanswered question that doesn’t have very large upside. One of the things I’ve seen in the business over 40 years is that many entrepreneurs fall into what I call the “bootstrap fallacy”.

They go out to look for a small mine, figuring that small mines are easier to find than big mines. They hope that cash flow from a small mine will allow themselves to build bigger opportunities without share dilution.

It’s a wonderful fantasy but a fantasy is what it is. All the risks inherent in a big mine are present in a small mine but a small mine can never make you big money. It’s in effect “reward-free risk” which is not a particularly attractive option to me.

The second thing, Tekoa, is that the skill sets involved in finding a mine are very different than the skill sets involved in building a mine, and the skill sets involved in operating a mine.

So what happens often unfortunately is that people are successful. They find a small deposit. They build it (or try) and they do generate cash flow — negative cash flow. Losses. Cash flow in brackets. When that happens, a skilled explorationist spends four or five years of his or her time correcting a problem they don’t have the experience to correct.

So that’s a long-winded answer of saying,

  1. Explain to me what the unanswered question is,
  2. Explain to me what the upside associated with the question is,
  3. Explain to me how you arrived at that question, and
  4. Tell me the facts on the ground that led you to propose the thesis and tell me why the methodology by which you propose to test the thesis is the best available method.

The other thing you have to tell me Tekoa, is what exactly will constitute failure. Too often, somebody raises $10 million for an exploration program and they explore until the $10 million is gone.

I often have said to them in the aftermath, “Now tell me, did you drill your worst idea first? Is that what you tried to do?”

It’s important that you acknowledge defeat in the course of a $10 million program. If you do, shut the $10 million program down and save $7 million for a pivot.

But many people don’t have any idea what will constitute failure in the context of this drive for success. It’s important to know, and it’s also important to know that the chief executive officer of the issuer has firmly in mind what will constitute a yes answer and what will constitute a no answer. It’s important that they be able to articulate both of those to me.

The third thing you need to convince me of Tekoa, is a rational financial plan.

Let’s say you have convinced me as to the appropriate valuation you’re proposing, and let’s say you have convinced me that the unanswered question you’re asking is worth answering.

Now what I need to know is — “Do you have a rational financing scheme to get from here to a yes or no answer?”

Let’s assume the exploration program you envision will cost $3 million and it will take two field seasons (or 18 months) to complete. Let’s also assume it costs you $1 million a year in general and administrative expense (separate and apart from exploration expenses) to operate the company.

That means you have a $4.5 million ‘need’ if everything goes right, to get me through the 18 months, to get me a yes answer. And let’s say you have $1.98 in the treasury (ie. no money whatsoever), and you’re proposing to raise $2 million from me or the market at large.

The problem with this thesis Tekoa is that you have raised $2 million of the $4.5 million, which means your company won’t survive until I get a yes or no answer.

The most important problem associated with that outcome is the naiveté on the part of the CEO. Failure to plan is an absolute plan for failure.

So I need to know you have the means to get me to a yes or no decision point, and that you already worked out a plan. Both a technical plan, with regards to how you propose to answer the unanswered question, but also a financial plan that lets me know you are a rational investor yourself.

Tekoa Da Silva: Would that suggest you need to know where the remainder of the development funds would come from, on the hypothetical $4+ million?

Do you need the funds identified, and do you need commitment from the other financing parties before you write an initial check?

Rick Rule: Well, we might be willing to write the whole check, but I need to know the associated risks in writing that check. We are happy to be partners with other parties. But if you tell me you’re going to find $5 million, and you’re proposing I give you $1 million of it, and the other $4 million is identified—you better be ready to identify it to me.

Let’s call it a “preemptive truth.” Too many times in my career, people have believed they could raise the money and so they told me they had the money raised. That’s not good enough.

If you say to me, “Well, Dundee is going to give me $2 million.” I will say, “Tell me who at Dundee. I will have their phone number, you don’t have to have that handy.”

If Scotiabank is going to give you their money, I say, “Oh, that’s a good name. Who at Scotiabank?”

You need to be fairly specific because in this business (and particularly in this market condition) it’s very easy to find yourself undercapitalized. If you’re undercapitalized, the market will recognize it and your share price will go down. That means your cost of capital will go up very rapidly. You may be willing to expose yourself to that, but I’m not willing to expose my investors to that.

The other thing you need to tell me Tekoa (assuming you are still the issuer) is how much stock you own, because I don’t like doing business with managers. I like doing business with partners.

If you don’t have a substantial investment in your company, and if you aren’t going to get really rich if this works (or really hurt if it doesn’t), then I don’t have any interest in doing business with you.

I had the good fortune in my career of doing business with people like Lukas Lundin. The Lundin family characteristically owns 30% or 35% of their companies. I do lots of business with guys like Ross Beaty and Bob Quartermain, who have had substantial economic interests in their companies.

This has been wonderful because I’ve grown rich with these people. They have also gotten rich by making very large bets on their own capabilities, and being right and taking me along with them.

That aspect is a very important part of my methodology, of shepherding my client’s capital going forward. We want to do business with partners, not managers.

Tekoa Da Silva: Rick, outside of having mentioned those individuals, are there any corporate presentations that come to mind where you had the people, the asset, the plan, the supporting financial partners—all satisfying your concerns preemptively?

Rick Rule: Many times. The guy who (mercifully) always had phone my number was the late Adolf Lundin, father of Lukas Lundin.

First of all, Adolf and I thought in similar fashion. He obviously thought better than I because he became a billionaire.

But Adolf was predisposed to telling a story which would appeal to me because he and I had the same preferences. Adolf always understood the value proposition.

He would always come in and say something like, “The market cap of this thing is $30 million. We have $10 million cash, and the rest of it is truly speculative. The rest of it is optionality based on this deposit.”

Adolf would continue by saying, “What we’re intending to do is the following (abc), and what we’re trying to establish is that this idea (xyz) that I have, is true.”

“Now here’s why I think it’s true,” he would add. “And here’s how I propose to address that thesis. By the way Rick—it will be worth (X) if I’m right.”

Do you understand me?

In other words, he had the whole thing laid out, geared precisely for my thinking as an investor.

Now it also helped that Adolf was right many times and that he made my clients made literally hundreds of millions of dollars. So I was predisposed to listen to him.

One of the things that will amuse you about Adolf, is that he used to call me up and say, “Rick, I have an idea I would like to run past you.” He was always the consummate gentleman. He would continue by saying, “I would prefer to discuss over dinner. We’ve had so much fun together in the past.”

Then I would show up, and there would be Adolf smiling. I would sit down at the table and say, “All right, Adolf. Let’s get the business part out of the way very quickly, because we both know how it’s going to end—you’re going to get my check. Then we can enjoy dinner.”

He was superb.

Other examples of great presenters would of course include Robert Friedland. I think you’ve had the pleasure of watching him present. Ross Beaty who we’ve talked about and Bob Quartermain—again very competent, very mature speculators.

When Bob Quartermain started Pretium, he articulated the Pretium value proposition so well. You will recall that he bought the Sulphurets deposit from his former company Silver Standard. He bought it because it was a very large low-grade deposit, and it was the “other half” of the Seabridge deposit.

He bought it from Silver Standard for $250 million (if my memory serves me correctly), and the market capitalization of the other half of the deposit was a $1 billion. He said maybe Seabridge was selling for more than they’re worth, but the best way to establish the market value was by looking at the other half of the deposit.

So that was how he answered the value proposition. But importantly he said, “From my point of view this deposit doesn’t work at the current gold price. It has great optionality. But I believe that somewhere in the deposit, the gold had the ‘concentrate’, and there is a very long structural corridor which we call the Valley of the Kings (or the Brucejack fault).”

“I believe that that fault,” he continued, “could have generated the rock preparation necessary for all the gold that was in solution to concentrate and create a high grade deposit. My evidence of that thesis are these old Homestake Mining drill holes.”

“Look at this,” he added. “In this whole series of low grade gold holes, all of a sudden right along this fault, there are half ounce hits and one-ounce hits. Do you notice how it would appear that these hits occur at the conjunction of the Brucejack fault and crossing faults? We’ve identified nine places in the corridor so far where there are these coincident anomalies, and my exploration thesis is that by drilling these coincident anomalies, we will find ‘carrots’ if you will, in other words, ‘lenses’ of very high grade mineralization,”

Boy, was he right. That’s the type of presentation I love.

Tekoa Da Silva: Rick, at the time we’re having this conversation, the marketplace is in a pretty vicious bear market. For the person reading—if they are an entrepreneur or a management team that wants to make the most of it—what would you suggest?

Rick Rule: Well the truth is now is the best possible time to grow a company. Your cost of capital is high, but all of your competitors’ costs of capital are high too. This is a time when you can acquire properties that other people have spent $60 million or $70 million on. You can acquire them for $1-$2 million because the other guy can’t advance them.

To the extent that you can raise money, articulate a vision, and build a community around your company—you can attract attention in the market because most people aren’t doing it.

You weren’t with us yet, Tekoa, but the 1998-2002 bear market was really instrumental from this point of view. In the middle of that market in 2000, the very best issuers in the market came to realize that they couldn’t save their way to prosperity, because they had no cash flow.

They could only save their way to solvency. So they chose to raise equity any way they could at the bottom of the bear market. The cost of capital at least in historic terms was very high, but the opportunity to allocate the capital was higher.

When the best of the best issuers raised capital at the bottom of the bear market, one objection to buying the stock was gone. Many people wouldn’t buy the stock because they said, “Well, these guys are going to have to raise money.” When they raised money, that objection was gone. They didn’t have to raise money anymore.

The second thing, was they began to employ that capital in the absence of any competition whatsoever. They advanced their projects and generated news into a news vacuum. And the truth was, Tekoa, that at the bottom of that bear market, those stocks doubled and doubled again.

They doubled in 2000. They doubled again in 2001, and it was the success of those issuers I believe that was partially responsible for kicking off the recovery of the market in 2002. We’re in the same situation as we speak right now in 2015.

The best of the best are starting to raise money. It’s painful at current prices, but they’re advancing their projects. In the last three or four months in the market, we’ve seen a real bifurcation. The best of the best are up 20%, 30%, 40% while the rest languish. It’s an important lesson.

Tekoa Da Silva: Rick, before we wind down—are there any final thoughts you have on the discussion of raising exploration or development capital from the Sprott Global?

Rick Rule: Well, one thing I would add is that we look for management expertise that’s specific to the task at hand. If someone is coming to us and they are proposing to look for copper-gold porphyries in tertiary terrain, in the cordilleran, in the western part of the western hemisphere, I want them to have been a success previously at precisely that activity.

It’s OK with me if they were exploring for porphyries in Arizona and Northern Mexico and now they’re exploring for porphyries in Chile. I understand those rock packages are the same.

But if the success they claim is operating a gold mine in Archean ancient rocks in French-speaking Quebec, and they suggest to me that that experience is relevant to exploring for copper-gold projects in young rocks, in Spanish-speaking Peru — I’m going to have to say, “I don’t think so.”

When somebody proposes the value of an unanswered question and the methodology to answer that question, I want to know that the information I’m getting from that person is valuable.

In other words, I want to know, “Are you qualified to identify that question? And are you qualified to find the answer?”

So, specific expertise is important. Not just specific expertise in the context of the CEO or the person that tells me the story. I want to know what other kinds of expertise are available to me on the board of directors and management team and how that expertise relates to the task at hand.

Tekoa Da Silva: So does a mismatch of expertise—does that immediately disqualify a team?

Rick Rule: I asked nine or ten questions in the paper we discussed, A Guide to Natural Resource Investing, but the truth is that nobody gets an ‘A’ on all 10. Nobody gets ten out of ten or at least ten points for each item. It doesn’t happen. Believing in that is the equivalent of believing in the tooth fairy. But it’s important as I suggested, that an entrepreneur have a plan with regards to prosecuting their business strategy.

I have to have a plan too, in terms of managing the investment and knowing the strong suits and weak suits of the investment. Knowing where to expect success and where to watch for failure is very important to me.

So having an answer to all these questions, even if some of the answers are suboptimal, is something I have to do. At age 62, I understand perfectly well that not everybody is going to fulfill all my needs in every deal. Not going to happen.

Tekoa Da Silva: Rick, as a final question—if the reader wants to submit a deal or an opportunity, or get involved in some way, how can they do so?

Rick Rule: Probably the easiest way is to email me directly. Sprott is a pretty flat organization. My email address is It’s likely that the submittal will be passed around to various people at Sprott but the right way into Sprott is anybody that you happen to know at Sprott. We don’t make money saying no. We only save money saying no.

We are interested in seeing deals, but we are very tough. We probably do one deal in 40 submittals Sprott-wide. But for the right entrepreneur who has the right project, the right vision and wants to be our partner—we’re all ears. That’s how we’ve grown.

I think it’s fair to say the Sprott Organization was built to last and we’re here to help. We for 40 years have thrived by backing the very best junior resource issuers across their balance sheet in trying times just like these, and with young people like you in the organization, I suspect we will be doing the same thing for the next 30 years.

Tekoa Da Silva: Rick Rule, Chairman of Sprott US Holdings, thanks for sharing your comments with us.

Rick Rule: Thanks Tekoa.

For questions or comments regarding this article, or on investing in the precious metals & resource space, you can reach the author, Tekoa Da Silva, by phone 760-444-5262 or email

This information is for information purposes only and is not intended to be an offer or solicitation for the sale of any financial product or service or a recommendation or determination by Sprott Global Resource Investments Ltd. that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the objectives of the investor, financial situation, investment horizon, and their particular needs. This information is not intended to provide financial, tax, legal, accounting or other professional advice since such advice always requires consideration of individual circumstances. The products discussed herein are not insured by the FDIC or any other governmental agency, are subject to risks, including a possible loss of the principal amount invested.

Generally, natural resources investments are more volatile on a daily basis and have higher headline risk than other sectors as they tend to be more sensitive to economic data, political and regulatory events as well as underlying commodity prices. Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc.; several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and nowadays also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S. Low priced securities can be very risky and may result in the loss of part or all of your investment. Because of significant volatility, large dealer spreads and very limited market liquidity, typically you will not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. Investing in foreign markets may entail greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks. You should carefully consider whether trading in low priced and international securities is suitable for you in light of your circumstances and financial resources. Past performance is no guarantee of future returns. Sprott Global, entities that it controls, family, friends, employees, associates, and others may hold positions in the securities it recommends to clients, and may sell the same at any time.