The metals rally took a breather this week, with gold, silver and copper all showing five-day declines as of this writing on Friday, May 24.
The pullback was expected given what happened on Monday.
Gold futures set a new record of $2,450 an ounce, with silver at its highest point in 12 years, trading just above $32/oz.
The waning of gold and silver corresponded to Federal Reserve minutes showing that interest rates could move higher if inflation rebounds.
However one pundit, who I happen to agree with, believes the trend remains firmly up, and that investors would be wise to “buy the dip”.
“Gold has either already bottomed out or it has one more lower low to come around $2340. A break and close above $2400-$2410 would confirm the bottom is in and we are on our way to at least $2500 next, imho,” Sprott Money wrote, Thursday.
1-year spot gold. Source: Kitco
As gold continues to climb — the safe-haven metal is up 13.6% year to date — more money is flowing into the gold sector, a welcome change.
Gold producers have lagged the price for months, and explorers have struggled to get financing, which has weighed on their share prices.
That, however, is beginning to change.
The mood among gold company CEOs is decidedly positive, and they can point to three events this week which prove that major mining companies are hungry for cash.
Hudbay Minerals, IAMGOLD, and uranium producer Cameco are among those seeking an injection of capital.
Hudbay is raising more than USD$300 million through a bought-deal financing underwritten by RBC Capital Markets and BMO Capital Markets, who will buy 31.6 million Hudbay shares. The company plans to use part of the money to complete pre-stripping and mill optimization work at its Copper Mountain project in British Columbia.
Hudbay bought Copper Mountain in 2023 for USD$321 million.
IAMGOLD is also seeking $300m in a bought-deal arrangement underwritten by BMO, RBC and National Bank Financial Markets. IAG will use the funds to buy back a 9.7% interest in the Cote gold mine in Ontario from Sumitomo Metal Mining, returning its ownership to 70%.
Cote poured its first gold this year.
World number two uranium producer Cameco is raising funds in the form of a $500m private placement of senior unsecured debentures.
Green shoots are also appearing in the heretofore barren junior mining space, which has been starved of capital and liquidity.
At the recent Energy Transition Metals Summit in Washington, DC, John Feneck of Feneck Consulting said that since March, junior gold and silver CEOs report they’re having an easier time raising funds.
“That turned the corner last year, with gold’s breakout right now and then silver’s follow through,” he said via Northern Miner. “Where it would take them maybe a month to raise three or four million, now they’re doing it in two or three days, which is really exciting to see.”
One example is Kenorland Minerals, which recently brought on Centerra Gold as a new shareholder, after the Canadian gold producer purchased a 9.9% stake in the company.
Kenorland’s shares surged to a 52-week high of CAD$0.90 on Wednesday’s financing announcement.
EGR Exploration (TSXV:EGR)
Another company looking to raise funds in a hot gold market is EGR Exploration (TSXV:EGR).
EGR and Kenorland are both working near Detour Lake, Ontario, Canada’s largest gold operation, within a region hosting multiple multi-million-ounce deposits.
EGR’s flagship Detour West property is about 300 km north of Timmins, ON, while Kenorland’s Chebistuan gold project is east of Detour West. Chief geoscientist Dave Stevenson is an EGR director.
The project is under joint venture with Newmont Mining, which can earn a 51% stake within three years if it completes exploration expenditures and cash payments to Kenorland.
EGR’s property covers 40,255 hectares of the Abitibi Greenstone Belt, one of the most prospective regions for gold on the planet. Many gold deposits found in the Abitibi region are considered world-class; the average gold deposit grade is higher than the global average.
The Abitibi now hosts several key players in the gold mining and exploration space, including Canada’s Kirkland Lake Gold and Agnico Eagle, which merged into one company in 2022, as well as Newmont Mining, the world’s leading gold miner.
The newly consolidated Agnico portfolio includes Detour Lake, which has a mine life of approximately 22 years with expected average gold production of 659,000 ounces per year.
Newmont maintains a significant presence in this prolific greenstone belt with three projects: Éléonore, Porcupine and Musselwhite.
Located in the northern part of the Abitibi, the Detour-Fenelon Gold Trend spans over 200 km of prospective strike length potential along the Sunday Lake and Lower Detour deformation zones. EGR’s property is located 20 km west of the Detour Lake open-pit (hence the name “Detour West”), and also directly adjoins Agnico Eagle’s holdings along the trend. The eastern portion of the trend is being explored by Wallbridge Mining in Quebec. The trend continues to deliver new gold ounces with the recent Chebistuan discovery east of Fenelon and resource expansion at Detour Lake, Fenelon and Martiniere.
In July 2020, EGR entered the Detour West project after signing an option agreement on the property, which at the time was less than half the current size.
To maximize its chance of success, EGR has since increased its landholding and consolidated the entire 40,255-hectare Detour West project area, which is now 35 km long by 15 km wide.
It then carried out an airborne magnetic survey covering approximately two-thirds of the property to investigate the extensions of various deformation zones known to be associated with gold mineralization along the Detour-Fenelon trend.
Gold mineralization is associated with the structural contact between mafic and ultramafic volcanic rocks of the Deloro Assemblage and younger Caopatina Assemblage sediments. This structural contact is a regional-scale thrust zone, the Sunday Lake Deformation Zone (SLDZ).
A key task for EGR, as it goes about exploring Detour West, is testing the extension of the SLDZ, trying to prove that Detour West is on trend with Agnico-Eagle’s Detour Lake mine and its 20.7Moz of reserves.
A regional geology map from Agnico Eagle shows three deformation zones running east-west, right to the edge of Agnico’s Detour Lake property. The deformation zones are labeled Sunday Lake, Massicote and Lower Detour. Notice the Sunday Lake Deformation Zone runs through the Detour Lake mine’s Main Pit, West Pit, and the West Pit Extension.
About a year ago, Agnico-Eagle was conducting exploration 12 kilometers away from EGR’s Detour West, drilling out the West Pit in an effort to go underground to add resources.
This below image reflects an important change to Agnico Eagle’s interpretation of the geological structures crossing its Detour Lake property.
If the Detour Lake – Regional Geology Map is correct in its interpretation, it would mean that, rather than ending abruptly at the western edge of the Detour Lake property, the Sunday Lake Deformation Zone, and potentially the other two deformation zones, Massicote and Lower Detour, continue in a westerly direction, possibly right onto EGR’s Detour West.
The red box on the map below shows EGR’s Detour West property; it’s just west of the Detour Lake open pit, which used to be operated by Kirkland Lake Gold but is now merged with Agnico Eagle. While the property looks small on the map, it’s actually large — 35 km long by 15 km wide. As explained above, there are three deformation zones running east-west, right to the edge of Agnico’s Detour Lake property, possibly extending onto EGR’s Detour West.
Taking a closer look at the map below, notice the shaded-gray east-west trending feature, that is the zone — actually a collection of zones — of faulting and mineral deposition. The red dots are gold deposits.
What makes EGR’s ground depicted in yellow so intriguing?
According to respected geologist Quinton Hennigh, it’s when deformation belts like the Sunday Lake Deformation Zone become constricted, or “squeezed”. The map shows a narrowing of the gray, snake-shaped band at the east end, and a similar narrowing at the west end.
“One of the things I like to see is where you get into these deformational belts you see them become constricted or compacted,” Hennigh said in a 2021 video presentation. “There’s a lot of granites that were coming up out of the ground at the time of this deformation and they start to squeeze the rocks around them called greenstones and when they do that you can get higher grades.”
“As you go westward, Detour Lake is where the structural zone is wider and in those areas you can still form gold deposits, but they tend to be bigger, low-grade deposits and that’s exactly what Detour is, but guess what? As we go further west over onto [EGR]’s ground, notice that deformational zone starts to grow skinnier and skinnier, tighter and tighter. What that tells me is that there’s good potential for high-grade discovery in that region.”
EGR’s exploration plan is simple: replicate the same methods that have been successful for Agnico Eagle at the Detour Lake mine. The company wants to test the extension of the Sunday Lake Deformation Zone, trying to prove that Detour West is on trend with Agnico Eagle’s Detour Lake mine and its 20.7Moz of reserves.
An airborne magnetic survey has been flown on the property, located 20 km west of the Detour Lake pit. That survey, plus historical data, a Lidar interpretation, and limited outcrop prospecting, indicate there are possible gold-bearing structures running onto Detour West.
The next step is to drill it.
This summer’s drill program envisions at least 35 reverse-circulation (RC) holes, that will target where the gold structures cross onto Detour West, including the “squeezed” deformation zone mentioned by geologist Quinton Hennigh.
The drills will puncture an average 40 meters of glacial till before entering the bedrock. “It’s poking multiple shallow holes to find the gold dispersal train and then testing the bedrock to get a sample of what rocks we’re getting into,” CEO Daniel Rodriguez said.
Once EGR can show enough gold-in-till from the fenced RC holes it can vector into the source of the mineralization.
“I see the potential of this Detour West project as being very, very interesting,” said Hennigh. “It’s very early stage, there’s no question, but it is the kind of play that I see can catalyze a company and generate huge returns if they make a discovery.”
EGR Exploration Ltd.
TSXV:EGR
Cdn$0.06, 2024.05.24
Shares Outstanding 40.2m
Market cap Cdn$2.4m
EGR website
Richard (Rick) Mills
aheadoftheherd.com
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