By Marc Davis
What’s a reliable recipe for success in Canada’s gold mining business?
Here’s a great example.
Start with a growing gold inventory. Add a nearby mill and up-to-date mining permits.
Finally, add to the mix a CDN $5.2 million financing.
Now you have a turnkey, money-making business venture – one that offers near-term cash flow. And it’s also a business model that’s perfectly-primed to capitalize on resurgent gold prices.
That’s what investors want to see.
And that’s exactly what they’re getting with Vancouver-based Golden Dawn Minerals (TSX.V: GOM, Frankfurt: 3G8A).
The company is strategically amassing a portfolio of small past-producing gold/silver mines, undeveloped deposits, and mineral prospects in an historic gold district in southern British Columbia.
Now Golden Dawn has the necessary finances to virtually triple its land holdings in the gold-rich Greenwood gold fields near the city of Grand Forks. It recently completed a CDN $5.2 million financing arrangement with a San Francisco-based private equity firm, RIVI Capital LLC.
This development unlocks the opportunity to explore and develop the best prospects for significant new gold discoveries within an additional 11,000-plus hectares of the Greenwood gold fields. (These new mineral claims, which are being acquired from Nadina Resources, can be seen in purple shading below.)
Most significantly, this expansive land package includes a network of small historic artisanal mines that are far from mined-out or even systematically developed by former small-scale, cash-constrained operators.
Golden Dawn’s head geologist, Dr. Matthew Ball, thinks that his company is really onto a company-maker opportunity here. He believes that the surface of these historic gold fields has barely been scratched.
“The land package covers an exceptional abundance of mineral prospects, including 29 past mines and 78 mineral showings,” he says. “All of the historic mines are less than 150 metres in depth with the majority being less than 50 metres deep.”
“Therefore, the potential for extensions of known deposits is exceptionally high. Additionally, large areas of the property package remain unexplored.”
The Phoenix Mine: Untapped Potential for Many More Ounces of Gold
Among Golden Dawn’s new assets are several historic gold mines. They include the past-producing Phoenix mine, which yielded in excess of one million ounces of gold, nearly 18 million ounces of silver and 518,523,951 pounds of copper before the mine closed in 1978.
Now here’s where things get really interesting. Just south of the border, the Greenwood gold fields also encompass a number of high-grade gold mines in Washington State. Collectively, they have produced in excess of 7.5 million ounces of gold. This includes several mines that were discovered as recently as the 1990s in what is known as the Boundary District.
Much of this gold production -- particularly in the Republic Graben and Rossland localities -- comes from high-grade epithermal vein systems with “bonanza” grades averaging at least 16 grams per tonne (g/t).
These mines have similar geological characteristics to many of the well-mineralized exploration prospects among Golden Dawn’s new land holdings. Yet the fact that gold in the Boundary District is structurally-controlled by fault zones has only been recognized by geologists in recent years.
The solving of this geological puzzle now empowers Golden Dawn to apply the same proven geological model to finding more gold in previously under-explored areas of the Greenwood gold fields.
In particular, none of the past exploration at the Phoenix mine site and surrounding property had targeted a structurally-controlled style of mineralization. This helps explain the limited success of the mine’s past operators.
Yet untapped vein “shoots” with bonanza grades as high as 55 g/t (virtually two ounces per tonne) are known to still exist in this area. However, many more may yet be waiting to be discovered.
This is why Golden Dawn intends to make the Phoenix property a top priority with a view to proving up additional high-grade ounces. With this in mind, the prospective re-commissioning of this mine represents a rich vein of opportunity for Golden Dawn.
Additionally, the Phoenix mine acquisition comes with a sizeable and prospectively very valuable tailings inventory that can be reprocessed at Golden Dawn’s proximal mill to recover residual gold and copper resources.
What’s Golden Dawn’s near-term strategy for a district-scale exploration program to determine where best to look first for significant new gold finds?
Dr. Ball explains how he hopes to narrow down the search on an expedited timeline: “Deep penetrating geophysics might be key to exploring beneath the known deposits for new sulphide deposits.”
“The aim of this work is to identify extensions to known deposits and new targets, and initial testing of these targets.”
A Commitment to Success via the Drill Bit
A successful exploration and development program at Phoenix and elsewhere on the new land package has a key strategic objective: It will build upon Golden Dawn’s existing gold inventory, which consists of three small past-producing gold mines -- namely Lexington, May Mac and Golden Crown.
This is where the company is initiating pilot-scale production, beginning with a 10,000-tonne bulk sample from certain high-grade veins at the May Mac mine.
To date, drilling has discovered high-grade mineralization as reported on December 12, 2006. It includes such highlights as 7.95 g/t gold and 135 g/t of silver over a 1.2-metre intercept, as well as 0.5% copper.
This finding suggests that mineralization similar to what was mined much nearer the surface is present at least as deep as the mine’s “No. 7” level and that the mineralization continues along a lateral plane, too. In other words, gold and silver of unknown quantities is still dispersed throughout this historic mine.
Of equal importance, the Lexington mine is already permitted, meaning that no regulatory roadblocks stand in the way of it also becoming a turnkey-solution money-maker.
Plans are also underway to re-commission the Lexington mine in Q2 of 2017. Most importantly, the mine is already permitted, meaning that no regulatory roadblocks stand in its way.
In the near term, a minimum 500,000 ounces of high-grade gold and “gold equivalent” (the combined value of the gold, silver and copper) has been targeted at Lexington, May Mac and Golden Crown. The company hopes to achieve this goal by way of exploratory drilling and in-fill drilling, especially in known high-grade gold zones.
An On-Site Mill Makes for a Turnkey Gold Mining Business
It’s also important to note that virtually all the necessary mining infrastructure is already in-place to service all three deposits and any additional mining operations in the area. This includes a modern mill and a tailings storage facility.
Even the Phoenix mine and all the other new prospects are within a 15-kilometre radius of Golden Dawn’s mill.
All of these mines, deposits, and other prospects also benefit from ready access to a power grid, a water supply and a nearby highway. They are also close to the city of Greenwood, where a skilled labour force and mining supplies can be easily sourced.
Once the company’s first three mines are up-and-running, this will also allow Golden Dawn to benefit from cost-cutting economies of scale. Such a reality promises to lower overall mining costs further and boost the company’s future projected profits.
Furthermore, the prospect of bringing additional mines and deposits on-stream at Golden Dawn’s significantly expanded land holdings will lower overall mining costs even more and further benefit the company’s balance sheet.
Golden Dawn’s share price promises to be a strong performer in 2017. This is due to an increasingly attractive risk/reward profile that is underpinned by the prospect of meaningful near-term, low-cost gold production.
Furthermore, the advent of steady cash flow also significantly limits the downside risk for the company’s share price. In essence, it’s an ideal insurance policy for investors.
At the same time, the opportunity to breathe new life into the prolific, high-grade Phoenix gold mine and several other smaller proximal mines offers plenty of so-called “blue sky” potential.
So too does the prospect of discovering other structurally-controlled, high-grade gold deposits in one of the world’s safest mining jurisdictions.
All of these key dynamics are destined to give Golden Dawn a break-out year in 2017. In fact, the advent of a steady stream of positive drilling news promises to reward patient investors with an ascending share price that’s poised to go from strength to strength.