As the precious metals mining bull market evolves investors are likely to begin to pay particular interest to developers who have the ability to quickly move to positive free cash flow by aggressively advancing a project to production. While we all love a sexy exploration story, the fact is that the odds of exploration success are low and oftentimes the best investment opportunities in the mining sector often arise from companies that are at the “trough” of the development stage of the mining life cycle, just before they embark into being producers:
We saw this phenomenon brilliantly demonstrated by Victoria Gold’s meteoric ascent in the last year as the company transitioned from being a developer in the mine construction phase to being Canada’s newest gold producer:
Victoria Gold Corp. (June 2019 - July 2020)
What if I told you that you could buy a junior explorer/developer with several million ounces of near-surface open-pittable gold located near Timmins, Ontario? And the best part is the market is pricing these ounces at between C$10 and C$15 an ounce depending upon how big you think this resource could ultimately be.
This is also a fast-track to production story with the goal of having a maiden PEA complete by the end of 2020 with a clear path to a production decision in the first half of 2022.
Galleon Gold (TSX-V:GGO) is a newly formed gold exploration company that came about as the result of a merger between Pure Nickel Inc. and Explor Resources Inc. in December 2019. The resulting company owns a 100% interest in the West Cache Gold Project in Timmins, Ontario and upon completion of its option on the high-grade, near-surface lode gold vein system at the Neal Gold Project in Idaho, United States Galleon will have an 80% interest and Eric Sprott will have 20%.
While Neal is an intriguing project with considerable potential, this article will focus on West Cache because that is where the company is carrying out a substantial summer drill program and where the fastest path to unlocking shareholder value can be achieved.
The Timmins Gold Camp needs little introduction to mining investors. West Cache’s location is ideal; it offers excellent access to infrastructure (highway, power, skilled labour) and it is located within 7 kilometers of Pan American Silver’s Timmins West underground mines.
West Cache boasts a pit constrained and underground mineable NI 43-101 resource totaling over 1,000,000 ounces of gold. This is a good base to start from, however, the real Galleon story involves greatly expanding this existing resource base with a 15,000+ meter infill and step-out drill program that is already well underway.
There is excellent potential to expand the open pit resource at West Cache along strike and define new, higher-grade zones at depth. Past deep drill results include 7.8 meters at 114.76 grams/tonne gold and 3.3 meters at 28.46 grams/tonne gold. These are extraordinary drill results that could only come from a very rich mineralized system.
West Cache is located in the heart of the West Timmins Gold Camp and closely resembles the Hollinger and McIntyre Gold Mines that are located 15 kilometers to the east:
The combined Hollinger-McIntyre mines have produced roughly 30 million ounces since the early 1900s. Perhaps what is most impressive about West Cache is that the Quartz-Feldspar Porphyry veins extend for roughly 2,000 meters along strike, whereas, the Porphyry veins at Hollinger were only traced for ~400 meters. This means that West Cache has substantially more size potential than Hollinger, a mine that produced more than 10 million ounces of gold over its operating history.
West Cache is mesothermal lode gold deposit in the western portion of the Archean Abitibi Greenstone Belt. Mineralization is characterized by chalcopyrite-pyrite stringers and veins and quartz-tourmaline veins hosted by altered and sheared Quartz-Feldspar Porphyry (QFP). Drilling indicates that the mineralized shear zones in the QFP extend for 1,975 meters along strike and to depths of up to 900 meters.It’s important to note that the Hollinger Mine was located on the south side of the Pearl Lake Porphyry and the McIntyre Mine was on the North Side. There was a synclinal structure similar to the one that exists at West Cache. Galleon has the Bristol Porphyry with a synclinal structure but Galleon has both limbs of the Porphyry on its property package at West Cache, i.e. the north and the south limb of the syncline.
It’s important to note that the Hollinger Mine was located on the south side of the Pearl Lake Porphyry and the McIntyre Mine was on the North Side. There was a synclinal structure similar to the one that exists at West Cache. Galleon has the Bristol Porphyry with a synclinal structure but Galleon has both limbs of the Porphyry on its property package at West Cache, i.e. the north and the south limb of the syncline.
Galleon’s model indicates that the mineralization extends to 1,800 meters of vertical depth. Galleon has only drilled to about 900 meters of vertical depth. There are a few holes on the North Limb of the Syncline which has mineralization, but to date Galleon has concentrated all of its efforts on the South Limb. The structure may extend another 1,000 meters on both ends which would still be on Galleon’s claims. The Porphyry at West Cache is the largest undeveloped porphyry in the Timmins Camp with over 2,000 meters of strike length. The Pearl Lake Porphyry (Hollinger Porphyry) has only 400 meters of strike length. And the Hollinger- McIntyre system produced over 30,000,000 ounces of gold (20,000,000 oz from the Hollinger Mine and 10,000,000 oz from the McIntyre Mine).
Galleon is committed to expanding and proving up the gold resources at West Cache through a three phase program this summer:
- The phase one program is projected to consist of approximately 4,000 meters of infill diamond core drilling. This initial drilling is designed to provide better definition and confirm geological continuity of mineralized gold zones in contemplated open pit areas, while providing a nominal 50-meter drill spacing. Approximately 30 holes with an average depth of 130 meters will be completed.
- The second phase of core drilling will explore known zones of deeper, high grade gold mineralization for underground exploration and mine planning, and follow up on any newly identified targets from phase one.
- The third phase of core drilling will include step-out holes and wildcat holes on Galleon’s newly acquired Dwyer Property directly to the east of West Cache.
In total, Galleon will drill at least 15,000 meters at West Cache this year. Galleon Chairman and CEO David Russell offered the following comments on the three-phase drill program:
"We are very pleased to start this next phase in the development of the West Cache Gold Project. Building upon the existing extensive drillhole database we have been able to design a program that will lead to the completion of a Preliminary Economic Assessment (PEA). We believe the PEA when completed should set the parameters for the next open pit and underground gold mine to be built in the West Timmins gold camp."
Galleon currently has C$4 million in the treasury and a very clear three-phase plan for advancing West Cache to a production decision in 2022:
One of the most important aspects of Galleon is an experienced management team with a proven track record of building mines and generating shareholder value. It should also be noted that management has a lot of skin in the game and recently participated in a private placement in May to the tune of roughly C$500,000.
Two of the key members of Galleon management are CEO & Chairman R. David Russell and COO and VP of exploration Chris Dupont.
Mr. Russell has over three decades of executive experience in the mineral exploration and development industry. From 2002 to June 2010, he founded and was the President and CEO of Apollo Gold Corporation, within this public company he developed the Black Fox Mine which is still in production today (Apollo Gold was acquired by Primero Mining is now owned by First Majestic Silver). Previous positions include VP and COO of Getchell Gold Company/Placer Dome Gold; General Manager, US Operations at LAC Minerals Ltd. (now owned by Barrick); Manager, Underground Mining at Independence Mining Company; Project Manager at Hecla Mining Company; and Manager, Lincoln Project at FMC/Meridian Gold. Mr. Russell Graduated from the University of Montana, School of Minerals Science and Technology with a Bachelor of Science Degree in Mining Engineering
Chris Dupont, P.Eng. is a mining engineer and has been involved with junior public companies for more than 25 years. Mr. Dupont’s previous roles include Senior Mining Engineer for Noranda, Chief Engineer for Exall Resources, President and Director of Kayorum Gold Mines 1992 to 1997), Director of Fieldex Exploration (1997 to 1998) and Director of TOM Exploration (2000 to 2006).
Both Chris and David are extremely passionate and committed to advancing West Cache to production. Galleon isn’t just looking to cash out to the first bidder, this is a team of mine builders who are committed to building a mine and generating maximum value for shareholders in the process.
The #1 knock on Galleon is the share structure and large number of shares outstanding. After all, one doesn’t get the chance to buy gold ounces in a tier-1 mining jurisdiction at pennies on the dollar without some minor blemishes to polish up. Anchoring this shareholder base is mining investor Eric Sprott who holds approximately 22% of the outstanding shares. Mr. Sprott has been an early investor in Galleon and in the past year has invested C$4 million.
The Galleon gold chart is in a textbook bullish consolidation and I believe the time to get in is now. The next leg higher could reach a minimum upside objective of C$.30 in my opinion:
Disclosure: Author owns shares of GGO.V at time of publishing and may choose to buy or sell at any time without notice. Author has been compensated for marketing services by Galleon Gold Corp.
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