With the recent announcement that Egyptian billionaire,Naguib Sawiris is moving half of his $5.7 billion fortune into gold, many investors are taking a fresh look at this sector. The price of gold is well off of previous highs and much of the gold mining industry remains in a depressed state.
The continuous under-pricing of gold is taking its toll. Mine production is now falling for the first time in a decade. An industry report predicts that Australia (the world’s #2 producer) could see its gold production fall by 50% over the next 25 years.
Meanwhile, gold demand is strong. Central banks (the largest holders of gold) continue to be significant net buyers. On the national level, gold demand remains very robust across most of the planet, especially in China and India.
These supply/demand fundamentals are unequivocal. The price of gold must rise substantially to restore sustainability to the gold mining industry. As investors wait for the price of gold to normalize, there are a substantial number of mining companies that can provide investors with compelling investment opportunities – even at the current, lukewarm price for gold.
A case in point is Western Atlas Resources Inc. (TSX: V.WA, Forum). This will be a new name to most gold mining investors because this is a newly-listed company. This Company is acquiring its listing via a reverse take-over (RTO). Western Atlas is scheduled to commence trading on June 20, 2018, under the ticker symbol “WA”. This is a management team with an abundance of field experience in mining exploration, as well as a track record of success in company-building and accessing capital markets.
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WA’s operations are in Nunavut. Investors not familiar with the gold mining industry may still view this jurisdiction with a certain amount of skepticism. In fact, Canada’s Far North has produced one of the hottest new districts for gold exploration and mining.
A Financial Post article from 2017 paints the picture here:
… In that moment nearly a decade ago, Agnico Eagle chief executive officer Sean Boyd said he knew the people of Nunavut welcomed development, as long as it respected their land and provided Inuit with economic opportunities.
“We returned from that first visit and concluded quite quickly that this was a place we could do business,” he said during an interview in his Toronto office, fresh off a trip to the territory some 2,500 kilometres north.
“They weren’t anti-mining and we just felt that was refreshing.”
Agnico Eagle is betting that the future of development in Canada’s least populated territory is bright. Last month it announced a US$1.2 billion investment to develop the recently-approved Amaruq and Meliadine projects in Nunavut. The Toronto-based miner is already a big player in the territory’s small economy, comprising some 20 per cent of its GDP and employing more than 400 Inuit.
Agnico Eagle Mines Limited (TSX: AEM) is a senior gold producer well-known to mining investors. AEM already has one producing mine in Nunavut. Its Meadowbank Gold Mine is a highly-profitable, open pit operation that produced 352,000 ounces of gold in 2017, at a cash cost of US$614/oz.
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With 12 million ounces of gold in known reserves, 14 million ounces Au in Measured & Indicated resources, and another 9 million ounces in the Inferred category, Nunavut is not a new gold camp. It is a new gold district – and many established mining companies are already operating here.
As noted in the previous excerpt, Agnico Eagle is also moving its multi-million ounce Amaruq and Meliadine Projects into production as well. By 2020, Amaruq alone is expected to add another 265,000 ounces of annual gold production. In AEM’s first quarter 2018 results, its press release describes Nunavut in glowing terms.
Agnico Eagle has identified Nunavut as a politically attractive and stable jurisdiction with enormous geological potential. With the Company's Meadowbank mine and two significant development assets (Meliadine and the Amaruq satellite deposit at Meadowbank) and other exploration projects, Nunavut has the potential to be a strategic operating platform with the ability to generate strong production and cash flows over several decades. [emphasis mine]
This will all be of considerable interest to gold mining investors. However, readers may be asking themselves: what does this have to do with Western Atlas Resources? A quick look at a regional map will answer this question.
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In 2016; WA’s President and CEO, Fabio Capponi, was looking for a focal point of operations for a new mining entity he had created: Western Atlas Resources. Capponi knows a thing or two about gold mining, having just completed the successful sale of another gold mining company – CB Gold Inc – at around that time (December 2015).
Capponi’s own backyard is Latin America, so that was where he began his search for some especially prospective opportunity. While doing this sleuthing, the CEO had already been reading about some of the impressive gold discoveries that were taking place in Nunavut.
When Capponi shifted his research to Canada’s Far North, he immediately liked what he saw. In a boardroom meeting with Stockhouse Editorial, CEO Capponi laid out why Nunavut was too good an opportunity to resist.
The importance of the Nunavut Region, from a Geological perspective, can be easily summarized by what I call the Three Es: Elephant Region, Populated by Elephant Companies with Elephant Projects. To this let’s add that although already a hotbed for multi-million ounce gold deposit discoveries, in my opinion the Companies operating in Nunavut have just started scratching the surface of this challenging Region. An opportunity simply too big to pass up.
Once the CEO had made up his mind on Nunavut, he got busy – staking new claims for the Company. Here is where the timing of this story becomes particularly interesting. When Western Atlas was staking out its Meadowbank claims, Agnico Eagle was still in the process of making a production decision on the Amaruq deposit.
Within just a couple of months of WA registering its Meadowbank mining claims, all of the prospective land around the Meadowbank Mine and Amaruq deposit had been claimed. This indicates that there is already considerable interest in the Company’s Meadowbank land package – from multiple sources.
Meanwhile, Agnico Eagle was busy again. AEM has optioned Aura Silver’s Greyhound property, currently sitting with a 51% interest with the option to increase this to 70%.
Within six months of registering these claims, the Company had obtained all necessary permitting for exploration activities. Western Atlas has now completed several rounds of geological and structural mapping, honing its level of detail on the local geology.
Along with this has been rock and till sampling, channel and chip sampling, and ground geophysics (magnetics, IP). More than 3,800 kilometers of airborne magnetic surveying has also been completed. Assays of samples to date range up to 13.30 g/t Au. A NI 43-101 Technical Report provides further analysis of this early work.
Block A is the northernmost of WA’s three land parcels, comprising 10,046 hectares. Through its previous exploration, Western Atlas has already identified several anomalous targets that merit further exploration work.
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Block B is the largest Meadowbank claim block: 39,127 hectares. Previous exploration has also produced several prospective targets. Of note, the Block B land package is located roughly 50 km north of Baker Lake.
The community of Baker Lake is a major access point for mining and exploration activity in this region. Not only does the town boast an airstrip providing year-round access, there is also shipping access for several months of the year (via Hudson Bay). From Baker Lake, a 110-kilometer gravel road (constructed by Agnico Eagle) connects Baker Lake to the Meadowbank Mine – passing directly through Block B.
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This reflects a reality for exploration in remote areas by any junior mining company. Exploring virgin wilderness can be prohibitively expensive, precisely because of access issues and transportation costs. Conversely, where there is the option to utilize already-existing infrastructure (as is the case in Nunavut), even early exploration in the Far North can be conducted in a cost-effective manner.
Last but not least, Meadowbank Block C is an 8,671-hectare parcel. Situated directly south of the Greyhound target (now being worked by Agnico Eagle), Block C is only 34 kilometers northwest of Baker Lake.
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With preliminary work out of the way, the Meadowbank claim blocks are now drill-ready. While the Company will be continuing its mapping and sampling programs to acquire even more data, management is also planning to bring in a drill rig later this year.
The Meadowbank claim blocks are the current focus of operations, simply because of the extensive level of development that has already taken place in this region.
Management has also acquired (by staking) large mineral claims in the Committee Bay area.
Exhibiting similar geology to the Meadowbank region, the potential exists for similar gold discoveries in this area. Auryn Resources has engaged in the most advanced development to date. Its Three Bluffs gold deposit reports total gold resources (in all categories) in excess of 1 million ounces.
Better days are ahead for the gold mining industry when prices correct higher to more rational (and sustainable) levels. For gold mining investors wanting to position themselves now for this coming bull market, Western Atlas Resources provides a ground-floor opportunity – in a hot, new gold district that can generate robust operating profits even at current prices.
westernar.com
FULL DISCLOSURE: Western Atlas Resources Inc. is a paid client of Stockhouse Publishing.