Buying Tickets on Big Lotteries
A few weeks ago I wrote a piece about buying Canadian Juniors (the penny dreadfuls) thinking about them in terms of lottery tickets. I left out something fairly important by mistake. When you buy lottery tickets of any kind, spend some time thinking about just how big the lottery prize is. It makes sense to spend more on tickets for really big lotteries.
Another thought occurred to me that I often mention to mining executives on these mining tours but I don't think I have ever put into print. For the past ten years, everyone in the mining business has been moaning and groaning about how Bre-X destroyed the industry. Someday soon I suspect that a switch will be thrown and those in the mining business will realize Bre-X gave the industry a good flush which is what it really needed. I've seen some wonderful projects, post Bre-X, which could never have been assembled had Bre-X not taken place. Many projects have been rationalized for the first time ever. Projects which really only made sense when joined. I saw one in the Yukon just two weeks ago.
I've spent about three weeks this summer and early autumn going around the Yukon and into Alaska looking at projects. I can't really explain it, I've made three trips and seen maybe a dozen projects, all in the Tintina Gold Belt running from Donlin Creek in Alaska almost to Whitehorse in the Yukon. There are a dozen or more copper-gold or gold porphyry deposits already identified. They range in size from Donlin Creek at 111 Mt @2.9 g/t Au and Fort Knox at 169 Mt @ .93 g/t Au to Pogo with 9.1 Mt @ 17.8 g/t Au.
Porphyry systems mean large tonnage in general. They form deeper in the earth so generally are lower grade but higher tonnage. I saw two potentially large deposits with Copper Ridge in a trip I made in September and another monster size project just two weeks ago at Northern Freegold. I'll cover Northern Freegold first because I remember it better.
If Northern Freegold doesn't ring a bell, it could be because the company is brand new. It only began trading on September 7, 2006 even though the land package has exploration and production going back to about 1930.
Bill Harris, President and CEO of Northern Freegold Resources has been assembling a monster size land package in the Mt Freegold area of the Yukon about 25 miles west of Carmacks. His family began consolidating the property in the 1950's and it now consists of 64 square miles or 166 square km. The project includes dozens of creeks which have been producing some of the richest placer gold in the Yukon for over 50 years. It is the theory of Bill Harris and his father before him that the hills overlooking the placer claims are the mother lode.
I'm going to interject a theory of mine which I have developed over the course of visiting dozens of these gold porphyry systems located next to placer workings. One comment is that most Canadian and US mining juniors tend to ignore the experience of the artisan miners everywhere from Chile to Tanzania to the Yukon. Hard rock mining companies tend to look down on placer operations although all placer miners make money (with the glaring exception of Silverado which spent $5 million producing 500 ounces of gold) and almost no hard rock juniors make money. When artisan miners can't make money, they stop mining. Try suggesting that to Hecla.
In any case, I've seen project after project where a junior controls the hills overlooking the creeks and mostly mom and pop placer operations work the gold rich creeks. In the creeks you have visible gold in the form of nuggets and flakes down to flour size gold. In the drill core done by the hard rock junior, you have no VG (visible gold) but various forms of sulfides, pyrites, arsenopyrites, chalcopyrites, tetrahedrites often containing gold mineralization. So fool's gold isn't. Often iron pyrite is associated with gold mineralization. But somehow the gold chemically linked to the sulfides has to be converted to the visible gold collected in the sluice boxes of the artisan placer miners.
I hold that a tiny organism similar to the first life on earth is converting the iron rich sulfides to colonies of VG similar to that of coral colonies. If my theory is valid, nuggets would be larger at the discharge of a creek rather than at the head of the same creek and that seems to be true. Nuggets literally are grown by the chemical action of tiny bacteria. Most VG is some combination of gold/silver and I also would suggest that gold gets more pure as it travels and ages as the silver leaches out and that also seems to be true.
The first form of life on earth was a single cell organism which fed off iron rich sulfides found around "black smokers" deep in the ocean. Those creatures eventually would hand down to humans the need for iron in the blood to help move oxygen from the lungs to cells. And I suspect, grow gold nuggets after converting sulfide ore to oxide ore and creating VG.
In any case, my one day trip to the Freegold project was an incredible eye opener. Bill Harris has negotiated literally dozens of agreements with property owners to combine their small and unwieldy properties into one giant 64 square mile project. If anything he has also created a project so large that he has to rethink the standard mode of exploration. If he even tried soil samples across the entire property, he would go broke far sooner than he would have all his samples. It's a property which could eat money in a hell of a hurry.
There has been tens of millions dollars of exploration work already completed by prior owners. Bill plans on having his staff compile all the data they have now into one understandable package over the winter. They have their work cut out for them, no one has ever come to grips with just how the area was mineralized in the first place. That's what I mean by rationalization, when 50 small miners are working in an area, none of them spend any time thinking about how the entire package was mineralized, all they are concerned with is their own land. For the first time, regional scale thinking is taking place.
The project does have the advantage of having a historical and not yet 43-101 resource of 700,000 ounces of gold. It isn't grass roots exploration by any means. Hundreds of thousands of known ounces have been mined and perhaps an ounce or two which didn't make it into the books. There is gold there. And we did see drilling and core from one of the most prospective areas, the Nucleus Zone, product of a 50/50 JV with ATAC.
It's just my opinion but Bill and his crew are doing the right thing, trying to zoom in on a highly potential zone to increase the value of the company enough that they aren't going to issue a zillion shares at pennies for more exploration. That is a giant risk with projects of these dimensions.
I even ran into an old friend from a project I visited in Vietnam earlier this year, Henry Castillo. He came into their project map room to brief us and I knew I recognized him but couldn't figure out from where. Bill mentioned that he had worked in Vietnam and the Philippines and I asked him where. And naturally we ran into each other in March at the Olympus Pacific project in Vietnam. It was good to see him, he knows these sorts of systems and will be a giant benefit to Bill Harris.
Since there are so many agreements covering the 64 square miles of Northern Freegold, it would behoove prospective shareholders to go to their website and look through their new releases. I can't cover the agreements in a paragraph or two. But it's a giant copper/gold porphyry system which could consume a lot of money just on basic exploration but President Bill Harris has wisely selected a great area of the project to focus his initial efforts. I would expect some sort of 43-101 by next summer based on this year's drill results.
On an earlier trip to the Yukon in August I also visited two major projects of Copper Ridge Explorations, the copper/gold porphyry system called the Lucky Joe project just south of Dawson and the Tintina gold belt project located at Scheelite Dome which is an analog to NovaGold's Donlin Creek deposit in Alaska (215 million tons of 2.4 g/t Au measured and indicated and 227 million tons of 2.34 g/t Au inferred). At Donlin Creek the mineralization is definitely associated with a Cretaceous intrusive but some of it is actually hosted in the surrounding sedimentary rocks. That seems to be what Copper Ridge is finding at Scheelite Dome.
I like the analogy of buying Canadian Juniors as lottery tickets. You don't put all your money on any one. You don't expect them all to pay off. But when you enter a big lottery and win, you win big. I saw two giant lottery tickets owned by Copper Ridge and they have more in the stable which I didn't even see.
The Lucky Joe property 40 km south of Dawson is an advanced stage project ready to be drilled. This year's program includes 2000 meters of diamond core drilling which has commenced. Expect results to be delayed because of the high demand from other busy juniors.
Greg Dawson, VP for Exploration for Copper Ridge, and I flew over the property. The drilling is going to target the highest copper-gold soil anomalies determined by the geochemical survey already completed. It's the basic ground work, the mapping and geochemical surveys, and the IP surveys which consume so much time and money. Juniors have to earn their spurs like anyone else and it must be done but to an investor, it's as interesting as watching paint dry. But drill core they understand. I won't say they are going to hit a home run at Lucky Joe but they have done their homework and drill results can do wonderful things for a stock.
When we had finished touring the Lucky Joe, Greg and I drove to what I think will be the home run out of the park at Copper Ridge's 100% owned Scheelite Dome project. I told him it would be nice if it could be drilled this year. While drills are available, often they are running only one shift due to a complete lack of experienced drillers. I don't expect Scheelite Dome to be drilled but we did spend a day exploring the project.
The bedrock is covered with soil and talus, so it's necessary to do mechanical trenching to see what is just below the surface. Copper Ridge completed 1430 meters of trenching this year in 8 separate trenches, uncovering broad areas of silicification, quartz stockwork and quartz veining in the newly defined Toby zone. We could see arsenopyrite and pyrite mineralization which seemed to correlate with the gold-arsenic-antimony-bismuth soil geochemical anomalies.
The Scheelite Dome project is located near Mayo and has road access. It consists of 12,000 hectares and features one of the highest and largest gold soil geochemical anomalies in the Tintina Gold Belt. Geologically it's similar to the Donlin Creek project and bears some similarity to the Pogo deposit in Alaska. Previous drilling has included a high of 6.4 meters of 7.09 gpt Au in 2920 meters of core drilling in 25 holes.
As an aside, when I was in Alaska on the International Tower Hill tour earlier in the summer, ITH President and CEO Jeffrey Pontius told us that his experience in the Tintina gold belt suggested that the mineral most closely associated with high gold grades was bismuth. Since both the Scheelite Dome property of Copper Ridge and the Freegold property of NFR are in the same Tintina Gold Belt, I recommended they look at bismuth mineralization closely.
Again, it's a little premature to suggest Copper Ridge has a home run on their hands but all the local creeks have placer gold and they are not far from drilling which could come up with a home run. If you are fishing for whales, use a big rod and lots of bait and fish where the whales are. The Tintina Gold Belt has made a lot of companies rich lately.
I didn't visit the Ironman IOCG project of Copper Ridge but they have an option to earn a 100% interest subject to a 2% NSR. This work season they completed an Induced Polarization (IP) survey and a magnetic survey. That ground work has defined a conductive and moderately magnetic body which correlates with the high gravity anomaly defined by last year's work. The company is finishing a final interpretation of the results before planning drill targets.
And Copper Ridge just announced entering into a JV with Lomiko Resources where Lomiko may earn up to a 60% interest in Copper Ridge's 100% owned Joss'alun copper project located 75 km south of Atlin in British Columbia. The mineralization consists of a series of lenses of semi-massive chalcopyrite and pyrite. Previous drilling has come up with copper values of 17.75 meters of .94% copper and 6.92 meters of 1.15% copper.
Gerry Carlson, President and CEO of Copper Ridge was recently interviewed by Stanlie Hunt of the Smartstox Talk Show. The interview can be found here. It's an interesting interview and will give any prospective investor some greater feel for the direction they are moving in.
We participated in an early private placement in Northern Freegold and while they are not an advertiser on 321gold, we have a vested interest in the success of the company. Likewise with Copper Ridge, they are advertisers although we are not yet share owners. We are biased and before you invest in any company, you should do your own due diligence.
With a total market cap of just over $9 million, I consider Northern Freegold pretty much a slam dunk 5-bagger. There is an historic resource of about 700,000 ounces spread between just two areas of the giant project and the massive drilling program this year may well deliver some whopping values. There isn't a lot of downside to NFR.
Likewise with Copper Ridge, the company is selling for just over $7 million. Success in any one of several projects would value the market cap higher in a New York minute. I'm anxious to see drill results from the Toby zone, the bismuth numbers are very attractive and I suspect they will come up with some nice gold numbers. The company has lots of upside and little downside and when you are buying lottery tickets for $.14 for a giant lottery, who knows? You might just come up a winner. It too is an easy 5-bagger with any good drill results and maybe higher. It's easy to go up from $.14.
Freegold Resources Ltd