The Telegraph Technical Forum is now set for May 30 at UBC. The various experts who have been working on the Telegraph project will come together to pool their expertise and perspectives. The forum will include the MTB geological team and technical advisors together with various other consultants and advisors who are familiar with the project. The expertise represented at the forum will include porphyry geology, geophysics and geochemistry, with an emphasis on alteration geochemistry.
One of the end products of the forum will be to finalize the plans for the coming field program, including identification of drill targets.
The Telegraph project has attracted a great deal of interest in the mining community. It is located in the midst of several world-class porphyry deposits. Extensive work has been conducted on the present property, but that work was conducted by numerous companies each focused on small target areas. For the first time the property has been consolidated and the extensive data base assembled and reviewed on a comprehensive basis. The results point to a vast and robust mineralizing system.
The present work is intended to better understand the nature of the system and the distribution of metals within that vast mineralized system in order to vector toward the heart of the system. The classic porphyry model of alteration halos is complicated by the presence of multiple phases of mineralization, with each phase partially overprinting the earlier phases. The flip side of that complexity is that multiple phases of mineralization are often associated with large and high-grade deposits.
The logistical aspects of the field program are taking shape, with arrangements for a field camp, pad builders, drillers, helicopters and the field crew all coming together. The first phase of the field program will be further IP geophysics over the main target area and including the newly discovered extensions of that area. The final details will be set after the Technical Forum.
Lawrence Roulston, CEO, May 13, 2022
Fraser: Last time we spoke, you described the enormous amount of geological information that has already been collected for many regions and how that information could be “data-mined” as a starting point for exploration.
Tell us how you would conduct an exploration program that goes beyond evaluating the existing information and take us through to the discovery stage.
Lawrence: The most important thing is to start with a region that has the right geology to host large deposits. Remember, as we discussed earlier, the best exit strategy is to sell a discovery to a major. That means the discovery must have scale. The best indicator that a region might host large deposits is that the region has already turned up big discoveries. Once you decide where to focus, the first step is to learn everything you can about the geology of that region. You look carefully at the known deposits, then search for similar geological settings elsewhere in the region.
Let’s look at an example. The Golden Triangle of BC has some of the biggest and some of the highest-grade deposits on the planet. Those deposits are directly related to a series of intrusions, that is, masses of molten rock that came up from deep in the crust. There are many intrusions in this region, but the metal deposits are related to intrusions of a particular age, roughly 180 to 220 million years ago. The deposits are found where there is the right combination of intrusions of that age, particular host rocks and specific structural orientations. We identified an area that had exactly the right setting. It had been explored for decades. At least 50 companies had explored small areas within what we now recognize as being one big geological system. We compiled and re-evaluated all that historic information. We liked what we saw, so we consolidated the property through multiple agreements and staking. Our geological team has now spent a year data-mining, with one field season to verify and expand on the existing data set.
Fraser: That sounds like a good starting point. How do you move it forward?
Lawrence: The ground covers what we call a fertile geological system. There are copper and gold values at surface extending over several square kilometers: multiple g/t gold; up to 17% copper. There is clearly a porphyry system on the western part of the property. The geological evidence suggests this is all peripheral to the core of the system. Seeing values as high as that on surface, and over such a broad area, tells us that there is something there of real significance. The task now is to find the heart of the system, where we expect to find consistent values over extensive intervals.
To put this task into perspective: The area of the Telegraph property is equivalent to the area of Manhattan plus the Bronx. The Eskay deposit, also in the Golden Triangle, was mined by Barrick for 13 years. It produced gold and silver, which at today’s prices was worth $10 billion. The volume of rock mined at Eskay is equivalent to the volume of the Empire State Building. A billion-tonne porphyry deposit, which would rank as a large deposit, would fit into a strip along the south of Central Park for the first six blocks.
Fraser: That’s a vivid and compelling comparison. And, of course, the deposits are buried, making them hard to find.
Lawrence: Yes. Fortunately, these types of deposits leave clues that extend well beyond the deposits. The next step involves geological science which is as sophisticated as in any branch of science. Porphyry deposits and vein deposits are created kilometers beneath the paleo-surface by super-heated water with metals dissolved. Those “hydro-thermal fluids” originated with the intruding magma and travel kilometers away from the intrusion. The metals are dropped out of solution in favorable locations, but the fluids travel much further and alter the rocks that they travel through. In a typical porphyry system, most of the copper and some of the gold is deposited, or more accurately – precipitated, on and around the upper margin of the intrusion. Some of the gold, as well as silver and other metals is carried further out, as the fluids travel along faults. This creates epithermal vein deposits.
In essence, the fluids create alteration halos around the deposits. So, we examine the rocks in the field. We take samples which are tested with sophisticated techniques to determine subtle differences that can tell us, for example, the temperature of formation. The chemistry of the fluids changes with temperature and pressure as the fluids migrate away from the intrusion. So, there are subtle differences in minerals across the system. Minerals which appear identical, even with hand lenses or microscopes, have subtle differences in chemistry that can tell us a lot about where they formed within the hydrothermal system. So, techniques like SWIR (short-wave infrared) analysis are used to detect those subtle differences.
Fraser: So, you look at all those variables and vector toward the heart of the system?
Lawrence: Yes, exactly. But it’s not quite that simple. Often, there has been multiple pulses of intrusion and hydro-thermal activity. Often, the fault that was the pathway for the first pulse of intrusion is sealed by the crystalized magma. Subsequent pulses might re-open that first fault. Or, it might force its way up a separate path. So, the various pulses are not always aligned.
Each successive pulse over-prints the pervious phase. It makes it complicated to interpret. The reality on and under the ground is very different than the neatly coloured cross-sections of idealized alteration halos that some investors have seen.
The good news is that the complex, multi-phase systems generate the best deposits, both in grade and size. Each successive mineralizing pulse adds more metal and moves the earlier metal around, sometimes further concentrating the metal. If conditions are right, you get deposits that are large and high grade. That is certainly the case in the Golden Triangle. The hydrothermal systems were active for exceptionally long periods of time, with multiple pulses. There are other geological factors that created the incredible metal endowment in the Golden Triangle. I would love to talk about that, but we should do that another time.
Fraser: Yes, that would be an interesting topic. Are there other exploration technologies that you use?
Lawrence: Oh yes. There are numerous other approaches. For example, there is a wide range of geophysical techniques. Differences in the magnetic properties or electrical conductivity or capacitance of rocks can be very helpful in understanding the nature of a geological system. Geophysics, in conjunction with geology and other techniques can be very valuable.
Fraser: Are these scientific approaches that you mentioned well established?
Lawrence: Some of the techniques have been around for a long time and are standard practice. At the same time, the science is constantly evolving. For example, we are working with the Geological Survey of Canada on what they call a Targeted Geoscience Initiative. This one, TGI-6, started with a mandate that efforts should be made to source certain “critical metals” within Canada. That research soon recognized that porphyry deposits in the Golden Triangle host several of the critical metals, including rhenium, bismuth, tellurium and the platinum group metals. Conceptually, if you wanted to find a rhenium-rich porphyry, for example, you would look for trace amounts of rhenium in the alteration halo surrounding the main deposit. However, the concentrations of critical metals outside of the deposits are typically below detection levels of conventional analytical methods.
So, the researchers developed advanced analytical methods and detailed microanalysis techniques to detect these elements. One of the findings is that trace concentrations of platinum group elements within different magmatic suites can be used to assess magmatic fertility and they can serve as an exploration vector. The provincial government and the Mineral Deposit Research Unit at the University of British Columbia are also working in a collaborative way with several industry partners, including Mountain Boy.
The point is: this sort of leading-edge science can be extraordinarily valuable in interpreting the results from field work. The cost of one or two drill holes will fund a lot of science. This type of science can really accelerate a project on the path to discovery and enhance the prospects of being successful with the early drilling.
Fraser: Do all the explorers use this level of sophisticated science?
Lawrence: The old-timers “chased the veins”. They started mining where the vein sticks out of the ground and followed it underground. Some exploration companies use a similar approach: simply stepping out from a known occurrence with drill holes. Drilling is expensive. You want to learn everything you possibly can before you start drilling. Some investors find that approach frustrating. They just want to see drilling. Its like rolling the dice to see what happens. Sometimes, management goes along with that approach and they pop holes in the ground and hope for the best. The problem is that if they miss, which has been known to happen once or twice in this business, they have to go back and raise more money from investors. That causes dilution, making it ever harder to get a big gain in the share price.
So, absolutely, you need to drill. But first learn what you can to maximize the prospects for success.
Fraser: What’s next in this fascinating story of mineral exploration?
Lawrence: So, your favorite exploration company has done the science and then they drilled some holes. When they get the results, what do they mean?
Fraser: Sounds great. Look forward to it.
April 19th, 2022
Fraser: Okay, let’s talk about the process of exploration and how it has evolved over the years. Some investors still have this image of prospectors wandering through the mountains with gold pans.
Lawrence: Yes, don’t forget the mules and pickaxes. In decades long past that was how it was done. Today, geological science is as sophisticated as any branch of science. Today’s geologists have the ideal situation: There are mountains of data collected over years or even decades. That existing data provides a great starting point to apply advanced scientific tools and techniques to extract information that was not available to the old timers.
Fraser: Data mining, literally.
Geologists today have the benefit of those many decades of work that has already been done. In British Columbia, and many other jurisdictions, one of the conditions of holding a mineral tenure, or a “claim”, is that the claim holder must do a certain amount of work on the claim each year, and they must file a report documenting the results of that work. Those reports are available to the public. Way back, prospectors and geologists were attracted to places where the minerals stuck out of the ground. It was common for a claim holder to look at his small piece of the geological picture and not recognize the significance. Maybe it’s a vein that doesn’t go very far on surface. Or, maybe it was a bigger occurrence, but too low grade to be interesting. For each of those explorers, it was like looking at one piece of a jigsaw puzzle. The picture only begins to make sense when you put a few pieces together. Today, we have the benefit of all those individual pieces that evolved over many years. And, we have a much better understanding of the science underlying the geological systems that created those deposits.
Fraser: How have metal prices impacted exploration?
Lawrence: Higher metal prices are having an enormous impact. For example, Teck, in the 1970s, drilled off a big porphyry copper deposit called Schaft Creek, located in the Golden Triangle. They assayed for copper but ignored the gold, which was common at that time, with a low gold price. A junior optioned the property and re-assayed the old drill core for gold. They found 5 million ounces of gold that the major had overlooked. That gold, added to the copper value, makes it an attractive deposit. Not surprisingly, Teck bought back into the project and is now advancing it.
Another really important factor is that, in many areas, the infrastructure has improved. That can have a huge impact on the value of a metal deposit.
Another big change is with grade. A few decades ago, nobody would think about developing a 1 gram per tonne gold occurrence. They were mining multi-gram deposits, so the low-grade prospects were ignored. Today, the average grade of a gold mine is less than 1 g/t. Those cast-off deposits are now becoming mines.
When you put all those factors together, that wealth of historic information is extremely valuable as a starting point for modern exploration.
Fraser: Interesting. So, someone else has already carried out an exploration program before you start.
Lawrence: In fact, typically several companies have carried out exploration, each with different focus. For example, in the Golden Triangle, the first exploration, in the 1960s and 1970s, was directed at base metals. They ignored gold and silver. In the 1980s, they started looking for gold. There were different waves of explorers, each chasing a particular geological model. There were a lot of discoveries. The BC government has a database of literally thousands of these showings and occurrences right across the province. Known as MinFile, that database is available to the public. Each MinFile data point is referenced back to assessment reports and other documents. One fascinating source of information is the set of reports prepared by teams of mines inspectors in BC in the early 1900s. There were literally hundreds of small mines across the province and each was documented an on annual basis. One passage stands out in my mind: Some guys north of Stewart were chasing a vein that they found at surface, which is how all the discoveries were made in that era. The mines inspector noted that the vein was 20 feet wide, but low grade, only $10 a ton, so the miners focused on a narrow high-grade shoot within the wider vein. In the 1920’s, that $10 represented a half ounce of gold per ton. Today, at that grade, it would rank as one of the highest grade gold mines anywhere.
Fraser: Next time we get together, it would be great to hear how you use all the information you derive from the existing data.
Lawrence: That’s where it really gets fun! I look forward to it.
April 11th, 2022
Discussion #2 – Evaluating Junior Explorers
Fraser: In our last Discussion, you made it clear that junior mining companies are essential to the world economy. But there are so many juniors and they won’t all be successful. Let’s talk about how an investor can determine which junior explorers have the best prospects for success.
Lawrence: You are absolutely right that not all explorers will be successful. You will never know ahead of time which exploration projects will turn into discoveries. But there is a lot that investors can do to put the odds on their side. Its worth the effort. The rewards can be huge: not just percentage gains but gains of several times your investment. Share prices that go from pennies to multi-dollars.
Fraser: You’ve got my attention. What are the criteria that investors should be looking for?
Lawrence: First off, look for management and technical teams that are serious about exploration. There are a lot of companies that bill themselves as a play on whichever commodity happens to be the flavour of the month. First off, for some of those companies, the only connection to the commodity is in the name of the company. Even for those companies that actually have some metal in the ground, nobody can tell you whether a particular metal price is going up, down or sideways at any point in time. It’s pure speculation. What I can tell you with certainty is that when an explorer makes a significant discovery, shareholders will be rewarded. They get a bonus from a gain in the commodity price; but the real win comes from the company successfully executing a business plan.
Don’t speculate on commodities. You should look for companies with a sensible business plan and a team that has the appropriate breadth and depth of skills and experience to execute on that plan. Invest with people who stay focused and are committed to creating shareholder value.
Fraser: That makes a lot of sense. Next, talk to us about jurisdiction.
Lawrence: Jurisdiction is getting more important by the day. Kinross just shut down their mine and development project in Russia and then sold them for fire sale prices. Who knows if they will ever recover any value? Chile is considering a boost in its copper royalty rate from 3% to effectively 21%. Barrick finally settled a 2017 Tanzanian tax bill of $190 billion, a large multiple of their profits. Indonesia and Mongolia and several other are more direct, simply decreeing that the government should own a piece. Last year, Kyrgyzstan seized the whole of the Kumtor mine from Centerra. They finally settled for a compensation described as “a fraction of what it was once worth.” And on and on around the world. Its not easy to move a mine out of the country, and governments take advantage of that. In the 1970s and 1980s, the mining industry spread out around the world. Canada is now looking a lot more comfortable than most places in the world.
Fraser: What else should investors be looking for?
Lawrence: The most effective exit strategy for an explorer is to sell their discovery to a well-established mining company. That means a discovery must have the scale to attract the big players. And, it has to have a clear path to production. By that I mean: Can they develop infrastructure? Can it get permitted? With sufficient scale, all of the other factors can be brought into alignment. That means working in areas with the right geological environment to deliver large deposits.
Fraser: What should investors expect in terms of time frame?
Lawrence: You would have to be extraordinarily lucky to buy shares in a company moments before they announce a big discovery. Exploration is a process. It might take a couple of years or more. Along the way, the share price should notch up as the projects advance. Some people buy on dips and sell on spikes and in that way, they get some near-term action and build their position over time.
Fraser: Some investors focus on people who have been successful in the past.
Lawrence: That’s a good approach. A couple of things to consider: You will pay a premium price for the people who have built a reputation. And, they aren’t always successful. Even the most successful players have losers as well as winners. Another thing is that people working toward their first fortune may be hungrier than the guys who already have a big house and all the trappings of wealth.
Fraser: That’s an interesting perspective. You may be better off backing the next big success story than the last one. How do you determine who might be next?
Lawrence: Look for commitment, enthusiasm, the willingness to do whatever it takes to be successful; people who take risks and who apply the latest science and technology to advance their projects. Reach out to the companies. Make an effort to engage directly with management.
Fraser: That sounds like a good plan. You can meet these people at conferences, now that we’re getting back to in-person conferences. And, of course, on-line discussions and presentations.
Fraser: The next area that I would like to explore is how do you carry out exploration. That could be the topic of our next discussion.
Lawrence: I look forward to talking about my passion: the treasure hunt.
April 6, 2022
Fraser: Lawrence, you’ve spent the majority of your career in mineral exploration. Perhaps you could give us an overview of why investors should pay attention to mineral exploration companies. And, for anyone who doesn’t know you, a little about your background.
Lawrence: I’ve seen the mining industry from all sides. After a geology degree, I worked in the head office of one of the majors for 4 years. I then went to a mid-tier producer and then got into exploration. For 15 years, I wrote an independent investment newsletter focused on exploration. As a result of that newsletter, I was recruited by a big US private investment firm as President of their mining investment group. I left that to get back to what I love, which is mineral exploration. In the course of all that, I’ve walked all over literally hundreds of mines and exploration projects in more than 40 countries.
Fraser: You’ve certainly earned a reputation for knowing the mining industry. So, why are you interested in junior explorers and why should people invest in this sector?
Lawrence: Well, for one thing, investors have made – and will make – huge returns investing in exploration companies. Furthermore, these apparently insignificant little companies are vital to the world economy.
Fraser: That’s a bold statement. Can you give us a little color?
Lawrence: Everything in our modern world depends on metals. Metals are either part of the finished product or they are essential to the process of making and delivering every product on the planet. Metals come from mines. Mines have finite lives so there is a continual need to develop new mines. Those new mines are built on mineral deposits. The majority of those deposits are discovered by junior exploration companies.
Fraser: You’re right. A lot of investors lose track of that basic reality. Can you give us some context here? How many new mines are needed?
Lawrence: If the average life of a mine is, roughly, 20 years on average, that implies that 5% of the global mining industry needs to be replaced each year… just to keep even. On top of that, demand for metals is continually increasing. For example, demand for copper has been increasing at about 2% a year over the last couple of decades. With the growing electrification, that rate of growth will accelerate. To replace depleting mines and keep up to demand growth, the mining industry needs to replace 7% of the total installed capacity each year to keep demand and supply in balance. It is getting harder for the industry to keep up with demand. That’s why we have seen big gains in the price of copper, nickel, lithium and numerous other metals.
Fraser: What are the impediments to the industry developing new mines?
Lawrence: When Elon Musk decided to build a giga factory, all he had to do was shop around for the jurisdiction that offered the best incentives. Manufacturing plants can be built pretty much anywhere. Not so for mines. Mines need to be built on mineral deposits.
Fraser: Okay I can understand the need for new mines, but where do the juniors fit into this? Don’t the big mining companies have exploration teams?
Lawrence: Yes, they do, and they spend a lot of money, but most of that is on “near-mine” exploration. That is, looking to prove up and extend known deposits. Even when they go looking for new discoveries, they often do it in partnership with juniors. Plain and simple, most of the new discoveries are made by juniors. It’s the same in many fields, where the small, entrepreneurial companies are the innovators, the ones that come up with new discoveries. Think of the huge tech companies. A lot of their innovations came from buying smaller companies that developed something new.
Fraser: You would think that the majors, with big budgets, would be miles ahead of poorly funded juniors.
Lawrence: There are several reasons why the juniors are far more successful than the majors. One is that the majors are risk-averse. Newmont, last year, spent $420 million to buy GT Gold after that junior discovered the Saddle deposit. Like all the majors, they would rather spend hundreds of millions for a known deposit than risk spending a few million where they might come up with nothing.
Fraser: Yes, we have seen that over and over again, where the majors spent hundreds of millions or even billions to buy juniors that invested a tiny fraction of that amount to make a discovery.
Lawrence: Another very important aspect is that geologists lay their lives on the line when they go to work. For example, a lot of exploration is helicopter supported. Geologists climb into helicopters on a daily basis to be dropped high in rugged mountains for their day’s work. There is no assurance on any given day that the helicopter will be able to get back to pick them up. In that sort of terrain, if the weather closes in, helicopters simply don’t fly. It is standard procedure for a geological team, when they are dropped off in the morning, to take survival kits in case the helicopter doesn’t make it back. In addition to the risk of falling off cliffs and wrestling with the infamous devil’s club, the geos share that terrain with mountain lions and grizzly bears. Rational people don’t lay their lives on the line for a salary. Geologists with the junior companies are owners of the company. They stand to get rich if they are successful, alongside the other shareholders. Over the years, many geos have become very rich indeed.
Fraser: That’s a very interesting insight. I doubt that many investors really appreciate the level of commitment required to make a mineral discovery.
Lawrence: Another contributor to the success of the juniors has to do with the decision-making process in the juniors compared to the majors. I spent the first four years of my career in the mining industry as an analyst in the head office of one of the majors. My reports disappeared into a nebulous cloud where nobody would take a stance or make a decision. I left that bureaucratic morass to join a small mining company. I cannot begin to describe the joy of seeing people making decisions and taking action. And then I discovered exploration: the excitement of a treasure hunt backed by sophisticated science.
Another aspect of geologists being owners is that they know it is effectively their money being spent on exploration. They won’t push a project unless they have a high level of confidence. They have put in the time and effort to get to a level where they truly believe it will be a success. I’m working, or at least on call, nearly 24/7. That’s just my nature. None of the people I work with have a 9 to 5 mentality. That is very different than the majors. We are owners and we work like we are owners.
Of course, the juniors aren’t always successful. But, they take a stance. They make decisions. They move forward. They give it everything they have. And, on that basis the juniors have come up with the majority of important new mineral discoveries over the past few decades. Those discoveries are the basis for the mines that are now providing the copper, silver, lithium and all the other metals that we rely on.
Fraser: Yes. I see now that junior mining companies really are essential to the world economy. But, there are so many juniors and it’s difficult to know which ones will be successful. In our next discussion, maybe you can give us some insights into picking the winning companies.
April 4th, 2022
Hello Fellow Investors:
We are excited to launch a new investor website that we believe will be informative and entertaining. This site provides investors with objective news and commentary about one of the most richly mineralized regions on the planet.
Every investor in the mining space knows about the Golden Triangle – that incredibly well-endowed corner of Canada’s western province. Yet, few people – investors or industry professionals – really know the Golden Triangle. This region is plagued by out-of-date information, by inaccuracies and misperceptions.
One group that does understand the Golden Triangle is Newcrest Mining. Australia’s largest gold producer just completed their second acquisition, which boosts their total investment in the Golden Triangle to $4 billion, equivalent to 20% of the market value of that gold major.
What does Newcrest see in the Golden Triangle that others in the mining industry are missing?
There are some very good reasons for Newcrest moving into this region so much more aggressively than other miners. It is that sort of insight that Eye on the Triangle will share with the investing public and the mining industry.
Why are we doing this?
All of the exploration companies operating in this incredibly rich mineral belt face a wall of investor misinformation. Each of us, on our own, finds it difficult to repeatedly attempt to set the record straight. We believe that speaking with one voice will benefit all of us by creating better informed investors.
Misperceptions keep investors out of companies like Pretium, a junior explorer that evolved into a $3 billion takeover target; or GT Gold, which was bought last year by Newmont; or Seabridge, an exploration company with a $2 billion market value and holder of one of the largest gold resources on the planet.
The creation of this website is spearheaded by one of the exploration companies operating in the region and is supported by several other explorers. While we all want to pitch our own companies, on this website:
We simply want investors to have objective information on which to make informed decisions.
We want investors to take advantage of the enormous wealth creation opportunities in one of the top mineral regions of the world.
The inaugural “issue” of this new website will:
Very shortly, we will provide further insights and discuss current and future activity in the Golden Triangle, with a close eye on which of the majors are active in the Triangle and what their plans may be.
Have a look:
Eye On The Triangle – Uncovering the treasures of a world-renowned jurisdiction
Tell us what you think.
President & CEO
March 11, 2022
Australia’s largest gold producer entered the Golden Triangle two years ago by paying U$800 million for a controlling stake in the Red Chris copper-gold mine. After getting to know the region, Newcrest just invested another C$3 billion to buy Pretium Resources. Newcrest now owns both of the operating mines in the region.
There is a lot more to the Newcrest strategy than just adding ounces in the ground and bulking up its annual gold production figures, even though those figures are impressive: Newcrest will produce more than 300,000 ounces annually from its Golden Triangle mines immediately and that will go to 600,000 ounces annually with the first phase expansion at Red Chris.
A look at the geology will explain the strategy. The Golden Triangle geology is similar to Newcrest’s Cadia mine complex in Australia. That cluster of underground mines, in the fiscal year through June 2021, produced 765,000 ounces of gold and generated $1.8 billion of operating cash flow or $1.2 billion of free cash flow, that is operating cash flow less capital expenditures.
That huge cash flow was generated by underground mines with a grade of just 0.95 g/t gold and a recovery rate of only 77%, figures that would not normally generate huge profits. The key to success at Cadia is the fact that it is based on a porphyry copper-gold deposit… and a particular variety known as an alkalic porphyry. In this type of deposit, the ratio of gold and copper is skewed heavily toward gold. While Newcrest doesn’t report the copper grade in its production figures, the average resource grade is 0.13%. That grade is about one third of a low-grade porphyry mine. For example, Teck’s Highland Valley operation in BC processed 0.37% copper in the latest quarter.
At Cadia, even though the copper grade is low, the value of the copper covers more than the entire operating cost of the mine. That means that 765,000 ounces of gold were produced for free. The AISC (All-In Sustaining Cost) at Cadia was negative $109 per ounce for FY 2021. Newcrest’s overall AISC was $911 per ounce for that period.
Cadia’s $1.8 billion of operating cash flow compares to a total of $0.5 billion of operating cash flow from its other five operations, which produced twice as many ounces as Cadia.
It is not surprising that Newcrest management would go out of their way to get their hands on another Cadia.
What is an Alkalic Porphyry
Alkalic porphyrys are essentially the same as other porphyrys: magma derived from subducting tectonic plates rises through the crust. Metals such as copper, gold, silver, and molybdenum that are not incorporated into the normal rock forming minerals are expelled from the crystalizing magma to form mineralized halos around the edge of the intrusive rock.
Under certain circumstances, the porphyry magma carries extra doses of potassium and sodium (hence “alkalic”). That alkalic condition is correlated with a higher ratio of gold to copper. The diagram is from Alan Wilson, who worked for years at Cadia.
All types of porphyrys are worth going after: The majority of the world’s copper is produced from porphyrys. They are typically large, creating the basis for long-lived mining operations. For the gold producers, the alkalic porphyrys are particularly appealing due to the promise of a favorable gold content.
There are a few places where alkalic porphyrys have been identified: the most notable are the Lachlan Fold Belt of eastern Australia (home to Cadia) and the Golden Triangle of BC (where Newcrest is investing heavily.)
The other big mining companies are paying attention to the Golden Triangle, even if they aren’t moving as aggressively: The world’s number one gold producer – Newmont – last year paid C$420 million for GT Gold to get their hands on the Saddle porphyry deposit. They had previously bought a half interest in the Galore porphyry. Seabridge and Tudor both describe their porphyrys as gold deposits, barely mentioning the copper content.
Strictly speaking, neither of Newcrest’s projects in the Golden Triangle is an alkalic porphyry: Red Chris is on the border between alkalic and calc-alkalic; Brucejack is an epi-thermal occurrence related to a calc-alkalic porphyry. Both of those deposits are far enough along the spectrum to host gold contents much higher than most porphyrys. Beyond controlling two large gold deposits, Newcrest now has the dominant position in one of the great alkalic porphyry clusters, putting them in an ideal position to make further acquisitions in this exceptionally gold-rich region.
Exploration companies that find alkalic porphyrys will become very popular among the big gold producers.
Mountain Boy was well received at Roundup, the Vancouver version of PDAC. This four-day geo-to-geo mining conference featured real rocks, real maps and real people. This was a real treat after two years of virtual reality.
Lucia Theny, three of our top geos, myself and directors Dusty Nicol and Ben Whiting learned about the latest advances in geoscience, caught up on what other companies are doing and updated our industry colleagues on the impressive advances underway on Mountain Boy’s various projects. There was a constant group of people at the Mountain Boy booth as industry people wanted details on our emerging porphyry copper-gold story at Telegraph.
The major mining companies were well represented at Roundup, keen to meet with companies exploring in British Columbia and the Golden Triangle in particular. Newcrest was there in force. Australia’s largest gold producer recently became a prominent force in the BC mining scene with their $3 billion takeover of Pretium, their second major acquisition in the Golden Triangle. Newcrest is clearly following through on their CEO’s stated objective after the announcement on Pretium of further increasing their presence in this mineral rich part of the world. The other majors clearly don’t want to miss out on the enormous potential in this part of the world.
There was a great deal of interest from the majors in MTB’s Telegraph project. We are not interested in a joint venture at this time and so we will try to parlay that interest into some other form of involvement that leaves us with a full interest in the project and completely independent. Having seen the maps and the rocks, many more companies will now be keeping a close eye on this project.
Overall, it was fun and exciting to get facemask-to-facemask with other human beings, to peer at rocks through hand lenses and wave arms over full-sized maps. It’s not quite normal yet, but things are certainly moving in the right direction.
The high level of interest in the Telegraph project from so many people in the mining industry was extremely gratifying and further confirmation that we are onto something very substantial with that project.
Feb 9, 2022