Although it may not get the acclaim of some other areas in Canada - think Yukon or the Abitibi Gold Belt - mining in Newfoundland and Labrador has a rich history going back to the early 1800’s when the province was the sixth biggest copper producer in the world. The Buchans Mine put the province on the global mining map, producing for 58 years to 1984 from five ore bodies to the tune of 14.51% zinc, 1.33% copper, 7.56% lead, 1.26 g/t silver and 1.37 g/t gold, qualifying it as one of the highest grade base metal mining camps ever in Canada.
Arguably one of the most mineral-rich areas of the world, dozens of mines have operated historically, with several still operating today, including Vale’s (NYSE: VALE) Voisey Bay large nickel mine that has been producing since 2005. Interestingly, exploration in a prolific portion of Newfoundland was verboten for many years owing to an agreement between the province and the Reid family, which owned a company contracted to build a railway across part of the province. It wasn’t until the 1980’s that land ownership returned to Newfoundland that investment in mining re-opened.
To that point, investors are now presented with an exciting opportunity to investigate a resurgence of mining activity in prolific gold regions in Newfoundland.
Bringing in modern exploration and mining equipment, select juniors, namely Marathon Gold Corp. (TSX: MOZ)(OTC:MGDPF), New Found Gold Corp. (TSX-V: NFG)(OTC: NFGFF) and Sky Gold Corp. (TSX-V: SKYG)(OTC: SRKZF), are now writing the next chapter in Newfoundland gold mining history. Marathon Gold and New Found Gold have soared to valuations in the hundreds of millions of dollars, with smaller up-and-comer Sky Gold looking to follow in their footsteps.
Developing mineral-rich properties dovetails with the goals of the provincial government, which is looking to see five new mines in operation by 2030, likely to offset declining revenue from the struggling pulp and paper industry. Regardless of the motivation, having a government with aligned interests to shepherd projects to commercialization via a friendly regulatory pathway, certainly is a benefit.
MOZ and NFG Rising on Advancements Marathon Gold has been in an uptrend since late in 2018 as it advances its Valentine Lake project in the central region of Newfoundland and Labrador. Shares have climbed from a low of 65 cents to as high as $2.62 and, even with the recent drop in gold players, is still holding around $2.25. To that end, the company currently has a market capitalization around C$480 million.
The value has been underscored by fundamentals, particularly growing the resource 8-fold from about 500,000 gold ounces in 2010 to over 4 million ounces currently. A closer look at a resource estimate shows the mostly pit-shell constrained deposits host 3.09 million ounces of gold Measured and Indicated (54.9 million tonnes at 1.85 g/t Au) and 0.96 million ounces of gold Inferred at (16.8 million tonnes at 1.78 g/t Au).
New Found Gold completed its initial public offering on August 11, selling 21 million common shares at a price of $1.30 per share for total gross proceeds of $27,300,000. The subsequent response to the IPO was extremely positive as investors looked to get in ahead of the commencement of a 100,000 meter drill program at the company’s district scale land package in the Central Newfoundland Gold Belt.
Shares surged from the IPO price to as high as $2.56 on September 14 before some profit taking set in, retracing the stock to the area of $2.20. With approximately 142 million shares outstanding, the rise in share value equates to a market valuation of roughly $310 million.
The company is not wasting time drilling core holes in multiple zones along a lengthy strike at its Queensway Project, aiming to better define a historic resource from the 1980’s. The first phase of the new drill program is underway at the Keats “Discovery” Zone at New Found Gold’s Queensway Project, aiming to expand upon an initial drill hole last year that returned 92.9 g/t gold over 19.0 meters, including 285.2 g/t gold over 6.0 meters.
Sky Gold, New Found Gold’s Neighbor Adjacent to New Found Gold’s projects are
Sky Gold’s non-contiguous Mustang and Virginia properties. The Mustang property hosts the Outflow Prospect comprised of the Mustang and Piper mineralized zones, located adjacent to New Found Gold Corp's aforementioned intersect of 92.86 g/t Au over 19.0 meters.
Both projects are permitted for surface exploration and are being simultaneously explored with the assistance of Grassroots Prospecting, a local prospector-driven organization with deep experience in Newfoundland properties, particularly the Mustang project. Exploration includes prospecting, geological mapping, rock outcrop and subcrop sampling, soil geochemistry and hand trenching.
Sky Gold recently received the remaining approvals and diamond drilling operations are set to begin next week.
The mineralization at Mustang is the subject of two geological models: one an extensive gold-bearing epithermal model and the other a Carlin-style gold model. At this target, Sky Gold benefits from previous exploration work that sets the stage to begin better understanding multi-metal resources.
The well documented Outflow prospect, a 3+ kilometer trend, was discovered by Noranda Exploration Company Ltd. and drilled at shallow depth (87 meter average) by Altius Resources (TSX: ALS) along with Barrick Gold (NYSE: GOLD)(TSX: ABX) in the late 1990's and early 2000's. It was later investigated by the Newfoundland government geologist (C.G. Squires, 2005) and a 2006 Master Thesis (J.M. O'Driscoll).
Gold values up to 28 g/t gold over 0.8 meters were identified, while diamond drill assay results including discoveries including 1.27 g/t gold over 11.3 meters, 0.67 g/t gold over 18.3 meters and 0.92 g/t gold over 9.0 meters.
Notably, the geologic textures and style of brecciation, and associated minerals including arsenic, antimony, mercury and barite at Outflow are interpreted to be similar to the geologic model proposed for the Keats Zone that is of great interest at New Found Gold’s Keats target.
About 6 kilometers from New Found Gold’s impressive gold intersect, Grassroots is also working at Sky Gold’s 100-hectare Virginia property. Grassroots has prospected and sampled the property and have located and mapped the old trenches from the 1990s, with hand stripping and trenching ongoing to better expose a large mineralized zone characterized by bedrock outcrops over 80 meters.
Results to date support the work completed in the 1990's by Manor Resources Ltd. Documenting two areas of undrilled mineralization. The areas consist of a first showing comprised of quartz veining developed over a 35 metre wide zone within sheared gabbro and graphitic shale (main shear) returning up to 8.7 g/t gold and a second showing comprised of a sheared gabbro returning a grab sample up to 109.6 g/t gold.
While results from nearby mineralization or historic work at the properties by no means guarantees future results, it certainly provides reason to be optimistic to see what surface exploration, surveys and drilling can return going forward to build value in the Sky Gold portfolio.
The Prospects Caught a Billionaire’s Attention The earlier nature of these projects is reflected in Sky Gold’s market capitalization of approximately $8.0 million. Still, the prospective nature has not escaped the attention of billionaire gold investor Eric Sprott. Sprott famously made a savvy investment in Kirkland Lake Gold (NYSE: KL)(TSX: KL) in 2017, buying 20 million shares at less than $20 per share, which grew to be worth over $1.0 billion within three years. He remains active in investing in young gold plays where he likes the potential, which now includes a stake in Sky Gold.
In July, Sky Gold closed a non-brokered private placement in which a company beneficially owned by Sprott acquired 10.5 million shares and 5.25 million warrants to acquire more shares or SKYG. With the purchase, Sprott owns approximately 19.35% of the outstanding shares of Sky Gold on a non-diluted basis and 26.47% on a partially diluted basis assuming exercise of such warrants.
The investment is a win-win for SKYG as not only providing capital to move the projects forward, but also lending a great deal of validation with respect to the potential of Mustang and Virginia.