One of the best junior mining stories of the last few years is a junior mining company that has gone about its business advancing a greenfield exploration project to a multi-million ounce gold resource amid little fanfare.
In early 2019, Yukon gold explorer Banyan Gold (TSX-V:BYN, OTC:BYAGF) issued a press release highlighting new targets at what was then called the “Aurex-McQuesten Gold Project” (now known as the Airstrip Zone). Banyan would soon raise nearly C$1 million and launch a summer exploration/drilling program in June 2019. Results from Summer 2019 drilling included the discovery of the Powerline Zone with impressive intercepts like hole MQ-19-44 (.94 g/t gold over 71.4 meters) and hole MQ-19-52 (.63 g/t gold over 106.7 meters).
The rest is history.
Banyan went from having barely touched the AurMac Project to aggressively drilling out a 2 kilometer by 2 kilometer gold mineralized area at the Powerline Zone, in addition to being on the brink of delivering a multi-million ounce 43-101 compliant resource estimate with multiple mineralized zones in close proximity to one another (Airstrip, Aurex Hill, and Powerline).
In recent CEO interviews, Banyan Gold CEO Tara Christie has sounded increasingly confident that the Powerline Zone hosts a multi-million ounce gold deposit. Recent drill results (here and here) from Powerline certainly add further proof that Powerline hosts broad continuous zones of gold mineralization.
Banyan still hasn’t found the ‘edges’ of the mineralization at Powerline. However, if we use the 1,800 meters x 2,000 meters mineralized zone that is known today, as well as an average grade of .61 g/t gold and an average mineralized width of 60 meters, the potential number of gold ounces at Powerline is mind boggling.
1,800 meters (north-south drill defined extent of Powerline Zone) x 2,000 meters (east-west drill defined extent of Powerline Zone) x 60 meters x 2.70 (specific gravity) x .61 g/t Au (average grade) = 11,475,000 ounces of gold
The above calculation helps to understand Banyan’s increasing confidence in being able to use the 5,000,000 ounce number in company presentations. The reality is that 5,000,000 ounces could prove to be a conservative estimate of the amount of gold in the ground at AurMac.
Tara Christie has always been one to focus on putting shareholder money into the ground with good exploration work and cost-effective drill programs. In fact, since Tara Christie became Banyan Gold CEO in 2016, the company has spent 82% of its money on exploration expenses.
In an industry that has seen soaring budgets over the last few years, Banyan still manages to achieve a less than US$200 per meter all-in cost of drilling. In addition, Tara Christie has been a regular purchaser of Banyan shares on the open market and she has participated in every financing since becoming CEO.
Christie’s stewardship and commitment to maximizing shareholder dollars has served Banyan well during lean years (2017 and 2018), enabling the company to be in the position it is today. Banyan shares have risen nearly 1000% from where they were trading three years ago and the company has C$10 million in its treasury after completing a C$16 million financing in August. Banyan is fully funded for 2022 and there are a slew of potential catalysts and key milestones ahead:
- Drill results from 2021 drilling (63 holes pending assays)
- Resumption of drilling (begin with 3 rigs eventually scaling up to 5-6 drill rigs across the AurMac Property)
- Updated resource estimate (Q2 2022)
- Maiden PEA (early 2023)
Banyan will continue to release drill results from the 2021 drill program (63 holes still with assays pending) and a fully-funded 30,000 meter 2022 drill program will begin in the next week. The big milestone for Banyan shareholders in the first half of the year will be the updated resource estimate which is planned for June. The June updated resource will include most of the 2021 drilling (roughly 40 holes from 2021 won’t make it into the Q2 2022 resource update), but none of the drilling in 2022. I estimate that this next resource update will be near the middle of the 3-5 million ounce range that Banyan is using in its recent presentations. However, when Banyan publishes the resource update it will be stale due to the fact that ongoing drilling continues to expand the gold mineralized footprints at AurMac.
Banyan Gold CEO Tara Christie (right) inspecting drill core at Banyan’s AurMac Project in the Yukon Territory
A new slide in Banyan’s most recent presentation offers an illustration of a conceptual mine plan with multiple pits (Airstrip, Aurex Hill, and Powerline) surrounding a heap leach facility at AurMac:
This is the first time I have seen Banyan openly discussing a mine plan. This demonstrates that Banyan management is thinking ahead towards a maiden PEA (preliminary economic assessment) and the economics of a mining operation at AurMac.
The combination of a multi-million resource estimate due to be released in the middle of this year, followed by a maiden PEA roughly six months later offers a compelling series of catalysts that could propel Banyan shares closer to the C$200 million market cap. A valuation that I believe is fair for a PEA-stage company with a 5,000,000 ounce resource in a favorable jurisdiction/location (a $500 million government funded “Roads to Resources” program in the Yukon continues to improve infrastructure surrounding AurMac) for building a gold mine.
5,000,000 mineable ounces x C$40 per ounce (conservative value per inferred ounce in the ground) = C$200 million market cap
C$200,000,000/244,391,728 shares fully-diluted = C$.82 per share
Allowing for a little bit more dilution in order for Banyan to get to a feasibility study, I place a C$.75 per share price target on BYN shares. If gold prices increase appreciably over the coming years, then the C$40 per ounce estimate (a conservative value I use for earlier stage projects with inferred resources) would go up substantially (due to the scale of AurMac, Banyan will offer excellent operating leverage to a rising gold price). In addition, as Banyan de-risks the project (advanced metallurgy work, advances permitting, etc.) and upgrades ounces to the measured and indicated category, the value per ounce in the ground is likely to increase to closer to C$100 per ounce (proven and probable reserves at fully permitted mines can be worth as much as US$250 per ounce in the ground). A higher average grade of ore mined in the early years of the mine life would also significantly increase Banyan’s average value per ounce of gold in the ground.
Management’s near flawless execution and powerful trend of drill results at Powerline have me very bullish on Banyan Gold’s prospects, I view it as one of the most attractive risk vs. reward propositions in the junior gold mining sector today. I have purchased shares on the open market in the last week and BYN is a top 5 holding in my portfolio.
Disclosure: Author owns BYN.V shares at the time of publishing and may choose to buy or sell at any time without notice.
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