What happened? StrikePoint Gold plans to buy the Porter Idaho from Skeena.
So what? The 2018 field season looks very different for StrikePoint with Porter Idaho than without it.
What next? Secure the deal and get to work on a hugely prospective silver deposit that is very different from StrikePoint's other assets!
There’s always lots of things to check out with a property deal like this, but everything I've seen with this new one for StrikePoint Gold (TSXV:SKP) looks good.
To start, notice that StrikePoint is getting the Porter Idaho for $3.5M whereas Skeena bought it in 2016 for approximately $4.8M. The merits of the proprety haven't been disqualified since then and the relevant commodity prices are still strong, so what's with the discount?
StrikePoint is paying half the sum in cash, which might warrant some discount to Skeena's all-share price. Or maybe Skeena has a full plate after getting Eskay Creek from Barrick in December 2017 and sees this as an opportunity to seed another quality, Vancouver-based junior mining company with a great asset. Whatever the reason, it's good to see everybody playing nice because the Porter Idaho is just begging for attention.
I think the terms are fair, although the cash component might be a sticking point for some. $1.75M is a lot of money for StrikePoint to spend on a new property, but they've shown that they spend their cash carefully since announcing Shawn Khunkhun as CEO in 2013. This new acquisition of Porter Idaho requires StrikePoint to raise an additional $2.5M equity financing, which may be the biggest thing to watch here and now.
One thing I like about StrikePoint is that they've stayed cashed-up. In our interview last year, they talked about how they wanted to pace their work in the Yukon to survive a couple seasons. They accomplished that goal and currently have more than $5M in treasury.
"Not only do we have this year's budget, but we have next year's as well. We don't need to go back to market until 2019. We have $8M in the treasury with under 60M shares issued. And if you look at the shareholders, 60% of the shares are held by institutional shareholders like Gold2000, US Global, Delbrook Opportunity Funds, Rousseau Asset Management. Recently, Eric Sprott has come in and he owns 16.5% of the company. IDM owns 18%. These strategic partners have a multi-year investment plan. They appreciate where we are, overall, with respect to the gold price, the markets, and the stages of our projects." -- Shawn Khunkhun
It's tough for StrikePoint to issue shares at $0.225 to Skeena with financings done at higher prices last year, but the shares are going to good hands. I expect Skeena won't sell the shares to finance their own activities elsewhere in the near-term because they have access to capital and have some sense of the kind of exploration results the Porter Idaho could produce from an aggressive program. The terms don't include any work commitments, but I'd be surprised if StrikePoint didn't punch a bunch of holes into the thing this summer. I suspect Andy Randell, VP of Exploration for StrikePoint, feels the same way.
Andy's spent time in Stewart when working with IDM Mining and I'm sure he's looked up at Mt. Rainey from Conway Street. I look forward to hearing what he has to say about Porter Idaho and this idea that the high-grade silver veins seen on either side of the mountain could be connected all the way through. It's probably the best properties with the least work done since 2016 that I'm aware of.
The production numbers that came out of the Silverado and Prosperity-Porter Idaho veins in the 1920s are something else. They tell the tale of a different era of mining – hundreds of ounces of silver per tonne ore and an 8-kilometer long aerial tramway to move rock from the mountain down to the water's edge. I'd expect things would prove simpler for an operation in the 2020s.
Before we get there, the Porter Idaho will require more exploration. It's already had a bunch work done, including an exploration program by Teck Explorations in 1985 that included +5,000 meters of diamond drilling and more, but that's over 30 years years ago now. From what I can tell, it's had very little work done since – not because it didn't deserve it.
Just look at this map showing the Silverado fault as a splay off the Bear River Fault below the Portland Canal. See the big bend in the Silverado fault right around the mountain and the old mine workings? I'm not a geologist, but that's a good thing.
Dig deeper in the story and you will find all kinds of nuggets of valuable info. A 1981 report mentions a waste dump with over 10,000 tonnes at almost 400 grams per tonne silver, which sounds like 150,000 ounces of silver sitting there underground from back when they were mining with a 785 gram per tonne silver cutoff grade. Not bad!
One of my favourite paragraphs from this same report is as follows,
"Limited geophysical tests have shown little response over mineralized outcrops, and to date, diamond drilling has been limited to three holes cored in 1975. The most effective technique for surface exploration in this area has been intensive prospecting. The snowfields and glaciers on Mount Rainey have retreated substantially in recent years, exposing extensions of known veins, thus reinforcing the concept that the shear structures are continous through the mountain other areas on the mountain for prospecting. Discovery of new mineralized outcrops has increased the between the Prosperity-Porter Idaho and the Silverado workings. Icefield retreat has also exposed mineralized strike length to a horizontal distance of 750 metres with a vertical relief of 335 metres." THE PROSPERITY/PORTER IDAHO SILVER DEPOSITS, D. J. Alldrick and J. M. Kenyon 1983.
The most detailed historical report is probably J.M. Kenyon's 1982 Assessment Report 10-119, which mentions that the grades and style of mineralization is largely similar across the known extent of the veins. He writes, "While it remains possible that the silver mineralogy is supergene enriched, the vein composition and more importantly the silver content is entirely consistent from the highest to lowest vein exposures." If StrikePoint can drill into these high-grade silver veins across the mountain from top-bottom and east-west, then this asset could be a company maker.
The same assessment report has a very detailed map of an underground working that is the kind of thing only a miner could love. Look closely at percussion hole 16, for example. It hit a vein with 25 ounces silver per tonne 25 feet out from the old working. I suspect that was a bit of a surprise and I can't wait to hear more about the work history of this property. There's nothing like old underground workings!
Allow me to quote one more paragraph from the conclusion of that assessment report here,
"A re-interpretation of the vein geology and structure had suggested that rather than narrow and higrade, the vein was a much wider, stranded shear zone. Subsequent mapping confirmed this theory and a drill program to test vein width and silver content was carried out. 114 meters of vein was drilled in the 305 S. drift with holes a maximum of 12 meters in length. This section of the vein proved to be an average 4.7 meters wide with a silver content of 31.6 ounces per ton with approximately 4.5% combined lead and zinc." Assessment Report 10-119 by J.M. Kenyon in 1982.
And that is just one section of one of the veins!
The Porter Idaho is now permitted for a 15 man camp, which is enough for a comprehensive work program with drilling and surveying at surface and underground. Drilling from surface is probably the most important thing for the markets right now as continued retreat of the glaciers up there has opened up better access than ever before.
If the first summer goes well, then maybe StrikePoint can revisit that wild idea of building an underground working from one side of the mountain through to the other! I still remember when I first heard about that idea – it's infectious.
The StrikePoint team was busy in the 2017 field season running around in the Yukon hitting different targets they acquired from IDM Mining and I'm sure that all the mobilization and re-mobilization efforts required to visit the different properties made for some logistical challenges. The idea of setting up a 15 man camp in one spot and drilling all season must appeal to the exploration team in a way. Shareholders are surely keen to see what kind of numbers StrikePoint could produce with a powerhouse exploration program going on this year alongside the continued work on the Yukon portfolio.
This Porter Idaho property was looking for a good home and I think it's found it in StrikePoint. My biggest concern might be that they only have a non-binding letter of intent for the property – lock it up!
This asset is almost the opposite of StrikePoint's Yukon portfolio, which makes it a great diversifier for them. Just imagine if StrikePoint could generate a series of meaningful results at their Yukon portfolio (again) with reconnaissance drilling and surveying, all while stacking boxes of core in a shed in Stewart from Mt. Rainey!
Find out more on StrikePoint on their website: https://StrikePointgold.com
This is not investment advice. I have not been compensated to prepare and distribute this material.
