The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Unexpected move; Royal Gold acquires stake in Contango ORE North of 60 Mining News – May 1, 2018
Road access from the Alaska Highway provides Contango ORE and Royal Gold with the ability to begin exploration early in the season at the Peak Gold project near Tok, Alaska.
This core is from a 4.5-meter section of skarn mineralization drilled at Peak Gold in 2012 that averaged 68 grams per metric ton gold, 10 g/t silver and 0.36 percent copper.
There has never been anything ordinary about the Peak Gold (formerly Tetlin) project, or the companies that are exploring the high-grade gold skarn deposits found there. In a move that continues this tradition of extraordinary, Royal Gold Inc. has acquired a 13.6 percent stake in Contango ORE Inc.
Neither of these companies are your prototypical mineral explorer and their involvement in the Peak Gold project continues to defy the norms for the industry and their own operating procedures.
Contango ORE started off as a Texas-based petroleum explorer that came to Alaska seeking natural gas and transformed into a mineral exploration company upon discovering promising copper and gold just off the Alaska Highway.
Denver-based Royal Gold usually opts to fund mining ventures through royalty purchases and stays away from becoming directly involved in exploration.
"(I)n my tenure here, we haven't been attracted to do any exploration ourselves," Royal Gold Vice President of Development and Operations Bill Heissenbuttel said in 2016.
This unlikely duo, however, came together at the end of 2014 to form Peak Gold, a limited liability joint venture company operated by Royal Gold to explore the equally enigmatic high-grade gold-copper-silver skarn deposits Contango ORE had been outlining at this Interior Alaska project over the previous six years.
Despite not usually getting directly involved in mineral exploration, Royal Gold has invested US$30 million to earn a 40 percent JV interest in Peak Gold and is continuing to manage further exploration on the property this year.
While this direct interest in an exploration project is atypical for the company that steadfastly sticks to acquiring precious metal royalties, purchasing a significant stake in a gold exploration company is well outside Royal Gold's modus operandi.
In an April 16 filing to the U.S. Securities Exchange Commission, however, the royalty company reported that it is buying 809,744 shares of Contango ORE at US$26 per share, roughly a 40 percent premium to the price of the exploration companies shares at the time.
Bought on the open market from a substantial Contango ORE shareholder, this acquisition gives Royal Gold a 13.6 percent stake in Contango ORE and further consolidates the already limited number of shares available.
In light of Royal Gold's acquisition, Contango ORE said it "has engaged advisors to assist it in determining the strategic direction of the company and its alternatives."
While neither company is talking about the reasons for this large share purchase, the fact that Royal Gold is willing to pay US$21 million to buy an equity position in its Peak Gold partner – coupled with its continued active and uncharacteristic exploration role – says a lot about the potential the royalty company sees in the high-grade gold project located just east of the crossroads town of Tok in Alaska's Interior.
Peak Gold PEA coming
A US$9.1 million budget for an initial phase of 2018 exploration at Peak Gold further supports the idea that Royal Gold is excited about the potential of the known high-grade gold deposits identified so far at Peak Gold and the prospectivity of the roughly 850,000-acre land package – 675,000 acres of land leased from Tetlin Village, an Alaska Native council, and approximately 174,900 acres of state mining claims – assembled by the JV.
Contango ORE discovered the metals potential of Peak Gold while company CEO Brad Juneau was investigating Tetlin Village land for natural gas in 2008. By the time Royal Gold joined the project, more than 1 million gold-equivalent ounces, which includes the value of the copper and silver, had been outlined in the Peak deposit.
Since formation of the partnership, Royal Gold and Contango ORE have expanded Peak; outlined North Peak, a parallel deposit of gold-rich skarn mineralization; and identified the potential for a larger porphyry copper-gold deposit in the area.
Together, the Peak and adjacent North Peak deposits host a global resource – measured, indicated and inferred – of 15.65 million metric tons averaging 2.98 grams per metric ton (1.5 million ounces) gold, 14.68 g/t (7.39 million oz) silver and 0.16 percent (55 million pounds) copper, according to a calculation published last June.
"We are very pleased with the progress made by the joint venture team both on the exploration front and in the effort to assess the economic viability of our known resource base," said Contango ORE CEO Brad Juneau.
This progress will continue with the first phase of 2018 exploration, a program slated to include roughly 6,900 meters of exploration drilling and geophysical surveys.
This work has three primary objectives:
• define a path to commercialization of Peak and North Peak;
• explore for a third skarn orebody close to these deposits; and
• acquire data that would help evaluate the potential for porphyry or epithermal deposits across the wider joint venture property.
"This 2018 phase I budget will provide the funds necessary to explore for new skarn mineralization on four separate defined targets, as well as an evaluation of the potential for porphyry type deposits in three prospect areas which have not been explored to date," Juneau said. "We are expecting results from the program in late summer/fall of this year, which will determine the next steps in the joint venture's activity."
In the meantime, the Peak Gold JV is working on a preliminary economic assessment, which will provide a first glimpse of what a mine might look like at this enigmatic property in eastern Alaska.
"(W)e will be speaking more about our Peak Gold joint venture in the coming quarters as we work through the preliminary economic analysis," Royal Gold CEO Tony Jensen informed shareholders in January.
The PEA is slated for completion by the end of September.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
Reader Comments(0)