More consolidation expected as Atlantic Canada's gold rush gathers steam

Atlantic Canada-focused gold juniors are driving an exploration boom in provinces not previously noted for their gold production. The increasing sentiment has one analyst calling for caution as the market froths up.

"Beware the arm wavers as momentum sweeps the provinces," Joe Mazumdar, editor and analyst at Exploration Insights, says in an interview. "Many of the juniors that had made discoveries recently are trading at very high market caps while they still have no resource statements underpinning anything. That's where we're at right now. Newfoundland landholders are suddenly getting a premium for just having ground near prospective areas. Anyone who has got ground has the ability to raise capital due to their location and, in addition, Eric Sprott and the retail market are very keen on the area."

Mazumdar says the region could play host to more consolidation. "Companies like New Found Gold with a market cap of $1.77 billion would probably look to consolidate. So that might be a good use of paper," he says.

For comparison, it is interesting that Great Bear Resources (TSX: GBR; US-OTC: GTBAF) is about three years in from discovering Dixie, and choosing to continue drilling before releasing a mineral resource estimate continues to see it attract a market capitalization of $830 million.

"So, the question becomes how do you add value in this market? Do companies continue drilling for grade or move the projects further along the Lassonde Curve? That is important to watch," says Mazumdar. "The current valuations suggest that you can get signifcant value at this stage in the exploration-development-production cycle by just drilling and returning high grade results."

Perceptions have changed dramatically over the past few years over the likelihood for significant gold deposits to occur along the North American east coast. For the most part, there were small pockets of gold mineralization to be found, just not on any significant scale.

The region shares a common geological heritage from South Carolina to Newfoundland, stretching northeast across the Atlantic Ocean to Ireland and Scandinavia. The trend is known for hosting various mineral resources, including gold, copper, iron ore, and zinc. Currently, there are about 30 exploration companies active in Atlantic Canada alone.

The discovery and sale of substantial high-grade gold deposits along the Appalachian Trend in recent years have given the fortunes of many junior explorers a shot in the arm, says Mazumdar.

Credit: Galway Metals

The Appalachian Mountain range was formed by the collision of continents over 250 million years ago. During this period, the geologic (tectonic) forces that caused the Earth to buckle, fold, and be uplifted, caused cracks and faults, allowing mineral-bearing fluids to ascend towards Earth's surface.

Most gold deposits and showings occur along boundaries between tectonic zones, and continued exploration efforts by various actors have spurred renewed interest in the different gold-bearing regions. Current gold production comes from large, commercial mines in South Carolina, Nova Scotia, and Newfoundland and Labrador.

Recent high-grade (read bonanza-grade) discoveries by New Found Gold (TSXV: NFG; US-OTC: NFGFF) and Sokoman Minerals (TSXV: SIC; US-OTC: SICNF) in Newfoundland, and Aston Bay Holdings (TSXV: BAY; US-OTC: ATBHF) in Virginia have renewed investor interest and exploration activities in the region.

In recent years, the eastern seaboard saw several notable mergers and acquisitions activity with OceanaGold's (TSX: OGC; ASX: OGC) $856 million (US$650 million) acquisition in 2015 of Romarco Minerals to gain control of the four million oz.-plus Haile mine in South Carolina, U.S. kicking off the action.

More recently, St Barbara's (ASX: SBM) Atlantic Gold acquisition for US$550 million in cash for control of the low-cost Moose River Consolidated open pit operation in Nova Scotia, Canada, confirmed the region was indeed host to large economic gold deposits.

"The general issue with these deposits is they are very structurally controlled, and continuity is an issue," says Mazumdar. "There are legitimate deposits in Newfoundland and Labrador and Nova Scotia, but historically on the gold side, they haven't been big enough for anybody actually to go in and do anything," he says. "St Barbara was the first basically of a mid-tier, but they came from Australia."

Besides the newsmakers mentioned above, several junior explorers continue to add value through the drill bit at assets across the Eastern Seaboard of North America, especially in Atlantic Canada. The Northern Miner spoke to a handful of these movers and shakers in the past week.

One of the companies making waves in central Newfoundland and Labrador is Marathon Gold (TSX: MOZ), which recently released a feasibility study on a two-pit milling operation at its Valentine project. CEO Matt Manson tells The Northern Miner he sees potential to pour first gold by October 2023.

The latest study presents a development scenario with two open pits at the Marathon and Leprechaun deposits and a central mill. This concept remains unchanged from the April 2020 prefeasibility study.

The Valentine gold project is projected to become one of the largest gold mines in Atlantic Canada. Credit: Marathon Gold

With a $305 million capital outlay, the feasibility proposes a staged milling operation. The initial 6,800 tonnes per day mill option includes gravity concentration and cyanidation of the concentrates and tails. In the fourth year, a $44 million expansion would increase the mill throughput to 11,000 tonnes per day and add flotation and regrinding of the flotation concentrates to the circuit; the concentrates and tailings would then be leached with cyanide.

Ore above the 0.7 gram gold per tonne cut-off grade would be prioritized for milling; lower-grade material between 0.3 gram and 0.7 gram gold would be stockpiled for processing at the end of mine life.

The higher-grade feed suggests a 10-year production period that would generate an average of 173,000 gold oz. annually with the low-grade stockpile adding three years of gold production that would add an average of 56,000 gold oz. annually. Life-of-mine all-in sustaining costs are estimated at US$833 per ounce. The mine has a high strip ratio of 7.1 tonnes of waste rock for every tonne of ore.

With a 22-month construction and start-up period that would kick off in January 2022, the project would bring in an after-tax net present value of $600 million, at a 5% discount rate and using US$1,500 per oz. gold with a 31.5% internal rate of return and 1.9-year payback.

"The feasibility study confirms a compelling mine development opportunity with strong margins, high rate of return and low capital intensity," says Manson. "The Valentine gold project is projected to be the largest gold mine in Atlantic Canada and a major contributor to the socio-economic well-being of the central Newfoundland."

Manson underlines that the feasibility cost and schedule estimates are on the conservative side, given challenges around the Covid-19 pandemic and recent inflation to materials prices and labour costs.

Importantly, Manson says the feasibility does not account for any Sprite or Victory deposits' resources or potential for additional mill feed from the Berry zone. An initial Berry resource was released in April. In addition, a revised site layout allows for a potential future pit at Berry.

Four existing deposits host updated total measured and indicated resources of 56.7 million tonnes at 1.72 grams gold per tonne and inferred resources of 18.3 million tonnes grading 1.7 grams gold.

Valentine is subject to both federal and provincial-level environmental regulation. At the end of September, Marathon filed an Environmental Impact Statement with the federal and provincial agencies; the EIS is now under the two levels of review.

Marathon recently announced a raising of $50 million (US$41.27 million) in a private placement to support exploration and development activities at Valentine. Marathon said a single institutional investor, Pierre Lassonde and Trinity Capital Partners Corporation and Affiliates, participated in the offering.

Another junior making headlines in Nova Scotia is Anaconda Mining (TSX: ANX; US-OTC: ANXGF), which recently released a preliminary economic assessment (PEA) for its 100%-owned Goldboro gold project in Nova Scotia, about 175 km northeast of Halifax.

The study envisions a 17.6-year open-pit and underground mining operation producing 1.95 million oz. of gold over its lifetime, with an average production of 89,500 oz. per year over the first seven years from surface mining, increasing to an average annual production of 120,000 oz. in years eight to 18.

All-in sustaining costs are expected to be US$799 per oz. of gold over the life of the mine (life of mine operating costs of US$68.92 per tonne milled).

Initial capital costs are estimated at $286 million, and can be paid back in just over three years. Sustaining capital costs over the mine life are pegged at US$269.2 million. At a gold price of US$1,550 per oz., the after-tax net present value (at a 5% discount rate) is estimated at $547 million, and the internal rate of return at 24.4%.

The PEA was based on an updated resource estimate of 16 million measured and indicated tonnes grading 3.78 grams gold per tonne for 2.1 million oz. contained gold and inferred resources of 5.3 million tonnes grading 4.68 grams gold for 875,630 gold ounces.

"A feasibility study on the surface mining portion of the project will be completed in the fourth quarter of this year," president and CEO Kevin Bullock tells The Northern Miner.

He says Anaconda is undertaking a phased development approach that will initially focus on the surface mining phase of the mine plan.

Should a production decision on a surface mine be made, Anaconda will then commence the next phase of planning for underground mining, including infill and expansion drilling from drifts off benches in the open pit. This approach will allow for more effective and less expensive diamond drilling. Pending those results would then consider a supplementary study focused on adding the underground mining phase to the project.

"Importantly, the Goldboro deposit is open in all directions, and the company is initiating exploration to the west of the deposit towards the past-producing Dolliver Mountain gold mine," says Bullock.

"Goldboro has potential to be a multi-generational gold mine, which can create significant value for our shareholders and project stakeholders, including the community of Guysborough and the Mi'kmaq of Nova Scotia."

Anaconda Mining continues to fund its Goldboro project with cash flow from the Point Rousse Complex in Newfoundland. Credit: Anaconda Mining

Meanwhile, Galway Metals (TSX-V: GWM), another junior, is working to prove up what looks to be an emerging gold district at Clarence Stream in New Brunswick. It continues to report a steady stream of exploration results with six drills turning. In addition, the company is aggressively drilling a multitude of targets.

Earlier this month, Galway reported new results from holes in the George Murphy Zone (GMZ) and the western and northern extensions and intercepting high grades from the new Adrian Zone, first discovered in August last year.

Galway has a 100% interest in the Clarence Stream gold project, located 70 km south-southwest of Fredericton in southwestern New Brunswick. The company's land position includes 60,465 hectares with 65 km of strike length (and a width of up to 28 km) along the Sawyer Brook Fault System. In addition, Galway holds the Estrades property, a former producing, high-grade VMS mine in Quebec.

The Clarence Stream deposits appear to be intrusion-related, quartz-vein hosted gold systems with elevated bismuth, arsenic, antimony and locally tungsten.

"Clarence Stream has become a classic 'drill baby, drill' project," says company director Larry Strauss. "The more we drill, the more we will find, I can almost assure you of that," he says.

The GMZ discovery was initially reported in December 2017, but drilling stopped a year later after discovering the Richard Zone, first reported in January 2019. Drilling at the GMZ resumed in November 2019.

Six drills are currently advancing the project, with a seventh being sourced.

Another junior company The Northern Miner recently spoke to is Aurelius Minerals (TSXV: AUL; US-OTC: AURQF), which is making solid progress with its Phase 1 drill program at the Aureus East project in Nova Scotia.

CEO Mark Ashcroft says the company's recent exploration efforts are paying off in delineating a gold system much more extensive than previously thought.

Ashcroft says the company began drilling at the project last August, and the latest assays come from a nine-hole surface program in which all holes hit gold. The final two drill holes for part of an underground program, which confirmed higher grade mineralization.

The gold explorer is advancing its flagship Aureus gold properties comprising four assets in Nova Scotia. These assets include the Aureus East mine, which has a 300 tonne per day mine and mill that requires permitting. The company also has the Aureus West, Tangier and Forest Hill properties.

Across all four assets, Aurelius believes there is extensive resource growth potential, reserve conversion and exploration upside.

Ashcroft says the company is following the #DefineRefineReEngineer strategy to advance its assets, namely to define (resources), refine resources (into reserves) and re-engineer (the extraction method) into economic and mine studies to maximize efficiency and operations.

Phase one drilling, comprising ten holes, has now been completed at Aureus West, and more assays are awaited before a second phase of drilling begins.

Notably, in January this year, the company said that three holes at Aureus West had hit 'significant' gold mineralization and new gold horizons to a depth of 500 metres below the surface, which is well below the current resource depth of around 150 metres. Results included an intercept of 2.5 metres grading 13.2 grams gold per tonne, including 0.5 metres grading 46.4 grams gold per tonne.

On March 1, Aurelius published underground assays from two holes at Aureus East, which had expanded a high-grade gold zone called Zone 9. With the results, which included 10.5 metres at a grade of 11.7 grams gold per tonne from a depth of 63 to 73.5 metres, the company said it had "laterally expanded the width of the Zone 9 high-grade gold zone."

"The Aureus East system is larger than thought, and the potential is even more exciting, as we have tripled the depth extent and doubled the width in the core of the system in Phase 1, and the gold mineralization continues over 1.5 km to the east," says Ashcroft in an interview.

"This unloved, misunderstood, and underappreciated asset base very much reminds me of the original FNX Mining model, which acquired brownfield and exhausted assets, put much-needed exploration and technical work into them, and made them a significant success, eventually taking those assets back into production."