If the adage in the mining business is "that the best place to find a mine is next to an old mine," then by extension, the best place to explore for gold is next to a successful exploration play, and GoldON Resources Ltd. (GLD:TSX.V) is a company that we believe deserves a closer look.
In our first Great Bear Resources Ltd. (GBR:TSX.V; GTBDF:OTCQX) article, linked here, we saw a company that checked a lot of the boxes when looking at potentially investing in a gold exploration company. Great historical gold-producing district, where discoveries have been turned into mines for the past century. Great management and geologists. It is also helpful to have tight share structure, with management owning shares so that their goals were aligned with the other shareholders.
When we first started following Great Bear Resources, like most juniors it was hard to raise money. The shares bounced around with the volatility that comes with sector, the company did not have any big investors championing the story, and while we researched the story, we had no idea that everything was about to change.
The now-famous drill results came out, and the famed Red Lake investor and former Goldcorp chairman and founder stepped in and bought ~10%, coupled and with continuous better results, and the rest as they say is history. Great Bear’s share price went from $0.50 to over $9/per share in less than 18 months.
So, we are motivated to look for other companies that could also mirror that kind of success, while recognizing that mineral exploration is a high-risk business, and replicating Great Bears success is a mighty tall order. However, it is also true that it has been success in the discovery phase of a mining project’s lifespan that has created the greatest shareholder wealth in the resource sector. We look for those companies for a part of our portfolio on mining companies, knowing the odds are 1 in 1,000. Our research led us to GoldON Resources Ltd., and we decided to have a closer look.
Who is GoldON?
GoldON Resources Ltd. is a mineral exploration company with a project generator business model. GoldON, as the name reflects, is a company focused on exploration in Ontario, Canada. It is focused on discovery-stage properties with a goal of adding value by defining, or redefining, using new exploration methods and exploration opportunities, and then sourcing a well-financed partner to advance the project by way of option or joint venture participation.
The company has, and continues to, seek and acquire properties by staking or [acquiring an] option in mining-friendly jurisdictions, and is geographically focused on some of the prolific gold mining districts of Ontario, Canada, notably the famous and prolific Red Lake camp.
The Red Lake Camp
Excerpt from the Red Lake Regional Heritage Foundation Web page:
The Legend of Red Lake
According to Ojibway legend, thousands of years ago two warriors of the Chippeway nation came upon a very large moose beside a lake. They believed the beast was Matchee Manitou (evil spirit) and tried to kill it. Wounded, the animal escaped by diving deep into the lake. A large pool of blood colored the water red, and the hunters named the body of water Misque Sakigon, or Color of Blood Lake. Over the years it became known as Red Lake.
While Canada has had many prolific gold- and silver-producing areas discovered over the past 100 years, and many famous gold rushes, few rival the prolific Red Lake District, where some of the richest grades of gold have been found. Gold was first discovered in 1925, and as the word got out it quickly grew. Since 1925 there have been 28 operating mines producing in excess of 25 million ounces with an average grade of 0.5 ounce of gold per ton. Much of the gold deposits are discovered in a greenstone formation that has come from structurally controlled vein-type gold deposits near regional mafic volcanic sediment contacts. Gold will generally occur where the greenstone rocks come together with the sedimentary rocks. At that point, the rocks have been stretched and folded, creating the cracks and openings that can fill with gold.
GoldON is led by Michael Romanik, who is CEO, president and a director, and has assembled a great management team, geological team, drilling/exploration crew and advisory board. Mr. Romanik has demonstrated the ability to raise capital with strategic investors and leading industry executives, while using the funds on careful, well-researched drill targets, on ground that offers great discovery potential.
GoldON has three main properties we will cover in this market awareness report, Slate Falls, West Madsen and Bruce Lake. The other properties are likely going to wait until next year to see any meaningful work done.
The company has a good share structure, with a focus on discovery-stage projects, with over $1 million in the treasury to complete the upcoming drilling at Slate Falls and the next phase of exploration at West Madsen.
- Issued and outstanding: 15,152,282
- Warrants: 3,625,350
- Stock options: 1,561,150
- Fully diluted: 20,338,782
- Insider holdings: ~24%
- Insiders & close associates: ~50%
- Goldcorp. founder and head of McEwen Mining (MUX) (Rob McEwen): ~5%
GoldON is currently preparing to drill its flagship, 100%-owned Slate Falls property. The 5,687-hectare Slate Falls property is in the Meen-Dempster Greenstone Belt between the Red Lake and Pickle Lake Gold Camps (see location map below).
The Fry Lake-Bamaji Lake Deformation Zone passes through the property, representing first- and second-order crustal-scale structures that cut stratigraphy that is similar to and contemporaneous with the stratigraphy that hosts the past-producing Golden Patricia gold mine, which produced 620,000 ounces of gold at 15 g/t Au between 1988–1997 and lies 30 kilometers to the northeast. Also, the almost 5 million-ounce Springpole project being run by First Mining Gold Corp. (FF:TSX) (news release on Springpole) is ~30 kilometers to the northwest, so we know we are in gold country.
This news release, dated June 25, 2019, strengthens our belief that GoldON is in the right rock type. News release: Selected Rock Grab Samples Assay up to 331.76 g/t Au and 3,025 g/t Ag at GoldON's Slate Falls Project.
Just as being in the right neighborhood for finding gold gives confidence. So too does good prospecting and fieldwork, sampling, reconnaissance mapping—all are vital to identify quality drill targets while saving time and money, before the drills start turning. Fieldwork in 2019 returned the highest-grade surface sample results to date and turned up priority targets, which include the Trail Zone, where high-grade values up to 861 g/t Au in drill core and 3,025 g/t Ag in surface samples will be included in the current drill program getting underway.
It is also worth mentioning that Mr. Bob Singh did the detailed review and compilation of all historical exploration data on the Slate Falls property, and was the Qualified Person (QP) on the project in 2017. Then his lead role on Great Bear's Dixie Lake Project required his full attention, and the Slate Falls QP role was handed over to Mr. Mike Kilbourne, P.Geo.
Michael Romanik, president of GoldON states it best:
"We are early in the project life cycle at Slate Falls and the results from our 2019 prospecting and sampling program will be instrumental in guiding our drill plan. We have clearly defined our initial high-grade targets and look forward to commencing our maiden drill program on the Property."
Sometimes you're smart or lucky in mining, and whichever it is in GoldON's case, we'll take it. With Great Bear Resources very busy with their new, ever-expanding discovery at their 100%-owned Dixie Lake Project, only 20 kilometers away, Great Bear optioned off its other 100%-owned, royalty-free West Madsen properties to GoldON, whereby GoldON has the option to earn a 100% interest in Great Bear's West Madsen gold property (see GoldON's news release from May 28.)
The West Madsen property is on strike to the historical, past-producing Madsen and Starratt Olsen mine, which is directly contiguous to Pure Gold Mining Inc.'s (PGM:TSX.V; PUR:LSE)'s Madsen property, which is Canada's highest-grade development gold project, currently being developed. Pure Gold is fully funded, with planned production for late 2020.
West Madsen is composed of two contiguous claim blocks (Blocks A and B; see slide below), each roughly 6 kilometers (6 km) by 3 km in size, for a total area of 3,860 hectares. GoldON has hired the Red Lake specialists Rimini Exploration as project manager for West Madison. Their work is so respected at the now-famous Dixie Lake Project of Great Bear that the company had the Bear-Rimini zone named after them.
Also, the multitalented VP Exploration, Mr. Bob Singh, from Great Bear Resources, will act as a technical advisor, along with Mr. Perry English, often referred to as a one-man prospect generator in the Red Lake District, who will join as a strategic advisor.
Pure Gold's Madsen Project includes the Madsen deposit and the Fork, Russett South, and Wedge deposits. Pure Gold announced bonanza-grade gold results from the Wedge deposit on July 30, 2019, and the expansion of their 2019 exploration drilling program (from 12,000 to 20,000 meters) on October 9, with the aim of making new discoveries and continuing to grow the resource base.
This high-grade discovery is less than two kilometers away from GoldON's Madsen's Block A, with the best grades at the southwest end of the strike. Pure Gold's exciting discovery and continued drilling success appears to be getting closer to GoldON's property boundary.
More evidence that a major crustal break between Balmer Assemblage rocks and Confederation Assemblage rocks is interpreted to trend from the Pure Gold land package onto the West Madsen property.
Within the Red Lake Greenstone Belt, these major crustal breaks are associated with extensive gold mineralization, hosted both in the Balmer Assemblage and within the felsic to intermediate volcanic rocks adjacent to the interpreted fault zones, as recently identified by GoldON's option partner, Great Bear Resources at their Dixie Project (see Great Bear's press release from May 28, 2019).
GoldON's phase I fieldwork on the West Madsen property in summer 2019 included a property-scale, grassroots prospecting and a 3D spatiotemporal gas hydrocarbon (SGH) soil survey. SGH is an extractive procedure that releases organic compounds absorbed on B-horizon soil samples. The SGH procedure provides a highly focused and sensitive method that measures compounds in the C5–C17 range down to the low parts-per-trillion (ppt), which has been effectively used at Great Bear's Dixie Lake discovery. A drilling program to follow up on the gold zones identified from the SGH surveys is planned after further prospecting and mapping work.
As Pure Gold's new discovery, and continued and expanded drilling success, continue to find more high-grade gold, it seems likely that the rich gold-bearing zone could continue across the property line to include both the historic and current work that has returned gold at West Madsen. GoldON appears to be in the right rocks and getting the right evidence, which could lead to a significant discovery at West Madsen.
GoldON recently signed an option agreement to acquire a 100% interest in the Bruce Lake property (news release of March 28, 2019). This road-accessible property with hydro lines running through it sits in between Great Bear's major Dixie Lake discovery and Great Bear's 3,100-hectare Pakwash property.
GoldON's Bruce Lake property consists of seven claims covering 2,490 hectares in a structurally active area spatially associated with east-west trending deformation zones and northeast-trending faults. These faults have been central for gold mineralization to occur. This ground is unexplored, with gold anomalies yet to be explored; however, lake sediment results along with MMI (mobile metal ions) is especially well suited for deeply buried mineral deposits. MMI measures metal ions that travel upward from mineralization to unconsolidated surface materials such soil, till, sand and so on. Using careful soil sampling strategies, sophisticated chemical ligands and ultra-sensitive instrumentation, work suggests the property could be a source of gold.
After a sharp run up in the price in early to mid-2019, GoldON has pulled back ~60% from the initial move off the 2018 lows. This could represent a good entry point in the company as it ramps up exploration on at least two significant exploration properties this year and next.
The chart of Great Bear, below, is a reminder that the path to higher is sometimes volatile and ~60% corrections are not uncommon before a move higher.
While the company's exploration efforts are still early days, GoldON has assembled at least three high-priority properties that after preliminary and advanced geological work, are drill ready. GoldON has assembled a technical team with deep experience in the Red Lake area, a tight share structure with much of the shares owned by management, friends and family who believe in these projects. The company can run cost-effective exploration on all their road-accessible projects with a ready, experienced workforce and infrastructure including power and roads nearby.
GoldON has positioned itself in a mining region that has been turning discoveries into mines for a century. Given the recent drop in the share price, this area could be a good time for patient investors, with some risk tolerance, to look at GoldON Resources Ltd.
John Newell is a portfolio manager at Fieldhouse Capital Management. He has 38 years of experience in the investment industry acting as an officer, director, portfolio manager and investment advisor with some of the largest investment firms in Canada. Newell is a specialist in precious metal equities and related commodities and is a registered portfolio manager in Canada (advising representative).
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