Northern Gold takes it small to go big


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Greg Gibson likes to do things big, even if he has to take small steps to get there.

His most recent big deal involved guiding Trelawney Mining as it outlined 6.87 million ounces of gold at the Cote Lake deposit halfway between Timmins and Sudbury. The project drew interest from a suite of producers and was eventually sold to Iamgold (IMG-T, IAG-N) in the spring of last year for over $600 million.

His latest role has him thinking on an even bigger scale.

Gibson took the reins at Northern Gold Mining (NGM-V) last summer, and his arrival marked what could be a new era for both the company and the eastern flank of the Timmins gold camp.

“Everything in this area is too small for a major, hence the consolidation work we’ve started. We’re starting to build mass,” he says “It’s highly unlikely that a number of projects will get off the ground on their own. Consolidated together, however, with satellite deposits feeding into a central mill, you’d get the capex reduction you need to make it work.”

While the scale of consolidation Gibson envisions will take a good deal more work on the mergers and acquisitions front, Northern Gold has been doing its part by consolidating as much ground as it can while at the same time driving an exploration program that is worthy of this gold fertile ground.

Running parallel to its consolidation ambition is the evolution of the name of the its flagship project. Before Gibson arrived Northern Gold was synonymous with the Garrison project and the big-tonnage, low-grade Garrcon deposit that sits within it.

Now however, the project has grown in scale and has been re-dubbed the Golden Bear project to reflect its increased size. Golden Bear encompasses not only Garrison, but also the recent acquisitions of Golden Pike, Buffonta and Harker-Holloway, amongst others.

The project lies in the eastern flank of the Abitibi, roughly 150-km east of Timmins and 65-km north of Kirkland Lake — an area whose mineral wealth is well established. Indeed its rich history has resulted in a number of company's staking claims, which has in turn left Northern Gold to assemble a bit of patch work of properties — taking what it can as they become available.

“We’re tying up ground that is strategic to our overall consolidation plan,” Gibson says. “Each acquisition helps us to get there. We try to get properties that are contiguous with each other when we can and that allows us to unlock some synergies.”

As Golden Bear is currently configured, the project holds the aforementioned Garrison project, then roughly 4-km to the south, on the other side of ground held by Barrick Gold (ABX-T, ABX-N) lies Buffonta. Contiguous to Buffonta and to the east is Harker Holloway and then roughly 25-km to the west lies Golden Pike, which is surrounded by claims held by Brigus Gold (BRD-T, BRD-N), St. Andrews Goldfields (SAS-T) and Lake Shore Gold (LSG-T). All told Northern Gold now has claims that cover over 216 sq. km of ground.

Gibson was appointed to the board in June of last year and was named president and CEO roughly a month and a half later. His arrival coincided with two successful equity raises. The first was for $5 million, and closed in late July, the second was for $13 million and closed in late August of last year.

With the balance sheet strengthened Gibson turned his sites on the surrounding scenery.

“Part of the reason for this consolidation is because it’s the best place in the world to do it,” Gibson says. “We’re extremely positive that more consolidation will happen but at the end of the day it all comes down to valuations. I can go and make a deal with an individual property owner to pick-up ground, however when you’re looking at consolidating it becomes a matter of valuation and every one agreeing on a price that allows us to move forward.”

When it comes do doing those higher level negotiations with other mining companies cash is king. And with that in mind, Gibson’s arrival at Northern Gold also brought a shift in focus to near term gold production.

Prior to his taking the reins the large tonnage, low grade Garrcon deposit soaked up the bulk of the company’s capital. But developing a deposit of Garrcon's heft into a cash flow positive mine would take years and significant outlays of capital. Plus there is all the development and operational risks that go with any large scale open pit operation — as can be seen with the experiences of Detour Gold (DGC-T) with its Detour Lake mine and Osisko Mining’s (OSK-T) Canadian Malartic mine.

Gibson says any serious advancement of Garrcon will be on hold until companies like Osisko and Detour get their mines humming along and market sentiment comes back around.

"Big capex projects are scaring the investment community right now,” he says. “That will change at some point but we won’t do Garrcon until that happens."

So Garrcon, despite having measured and indicated resources totaling 1.27 million oz. of gold with an average grade of roughly 1.03 grams gold per tonne, goes to the backburner. In its place comes the high-grade Jonpol deposit.

Fortunately for the company it didn’t have to go far to find it as Jonpol, a historic underground operation, sits just a few hundred metres north of Garrcon.

“Jonpol was forgotten about,” Gibson explains. “They hit low grade at Garrcon in the heat of the low grade frenzy and ran with it. But now the market has changed and I’m more of an underground guy anyway, so we’ll focus on Jonpol.”

With over 30-years of experience in the mining industry, Gibson has been a mine manager at mines from Australia to BC to right here in Timmins.

Jonpol sits on the Munro Fault, which is a west striking splay off the north side of the Destor-Porcupine Fault Zone. Mineralization occurs in a shear zone that is tens of meters across in places and is composed of altered mafic volcanic rocks. Gold mineralization is hosted in quartz carbonate narrow veins in mafic and ultramafic host rocks.

The deposit is made up of what are currently four zones that run from west to east: the JD zone, the JP zone, the RP zone and the East zone. The zones line up along a strike length of 1.7 km.

Back in 1997 Hillsboro Mining took a 50,000 tonne bulk sample of high sulphide ore from the center of the JP zone. The average grade of the sample was 6.7 grams gold and it yielded 9,476 oz. of gold. The rock was processed at the Horne, a smelter and mill currently owned by Xstrata (XTA-L), that is just over an hour’s drive from the property. The Horne remains a possibility for milling ore from a future operation at Jonpol.

 Then between 1985 and 2007, over 117,000 metres of diamond drilling in 419 surface holes was drilled by Jonpol Exploration, Cominco, Lac Minerals and Val Gold Resources. Amidst the drilling development work was also done, specifically on the JP zone where a 184 metre shaft was sunk and a ramp to the 150 metre level was constructed with mining on six sublevels — all of which remain intact.

Northern Gold used some of the historical drilling and put together a compliant resource estimate for the deposit that outlined indicated resources of 253,100 tonnes grading 7.77 grams gold for 63,000 oz. and inferred resources of 1.56 million tonnes grading 4.93 grams gold for 247,000 oz.

While the total ounces pale in comparison to Garrcon, an aggressive drill program and redevelopment plan could change things soon. Northern Gold expects to have the underground workings at Jonpol de-watered by May and drill ready for the end of August.

Once underground the plan is to go down to the 485 metre level of the RP zone and drive eastward towards the East zone, drifting along a vein that has an average width of 1.8 metres. Drilling will also test for continuity of mineralization along the western flank of Jonpol, in the area between the JP and JD zones.

Of course dealing with high grade narrow vein zones presents challenges that weren’t as prevalent with Garrcon.

“We think we can develop a nice mine plan but if you miss it by an inch, you miss it by a mile,” Gibson says of the exploration work ahead. “But if we can join up these zones we will turn it into a much more interesting deposit."

While the area between the RP and East zone is just a few hundred metres, it has never been drilled because of the swampy constitution of the surface and because the two zones were controlled by different companies with Cominco holding the East zone and Hillsboro holding RP.

Hillsboro was known to have been more interested in following the vein and taking the easy ounces, so little was done on RP in terms of serious exploration work.

Northern Gold plans to make up for the neglect of the past with 45 holes in the East zone for 12,000 metres, 10,000 metre for the zone between the East and RP

The company also expects to spend $5 million to de-water and rehab the old mine, “a stupidly low number” Gibson says, thanks in part to the deal struck with Trelawney, now a subsidiary of Iamgold.

Leveraging Gibson's strong ties with Trelawney Northern Gold was able to get equipment including surface and underground electrical distribution systems, ventilation and mine air heat systems, compressors, generators, long-hole drills, a Jumbo drill, water treatment equipment, various pieces of mobile equipment including scoop trams and excavators and even a Gekko Mill — all for just 6 million shares. The company currently has 247 million shares issued.

The development of Jonpol will also benefit from the site still having its underground permits from the late 1990s intact — a contributing factor to Gibson's belief that Jonpol could be the source of a high-grade operation producing 30-40,000 oz. of gold per year in a reasonable time frame and at a reasonable cost.

Further Down the Road

Due to the recent spate of acquisitions the Northern Gold story isn't just about Jonpol.

One of the most interesting deals, at least in terms of near term production, was the all-share acquisition of Victory Gold. The transaction netted Northern Gold the Golden Pike property, which is adjacent to Brigus Gold’s Black Fox Mine and St. Andrew Goldfields Hislop mine.

Golden Pike is situated along the Destor-Porcupine Fault Zone and recent drilling at the site by Victory returned highlight results of 2.02 grams gold over 71.5 metres, 3.35 grams gold over 31.5 metres while an exploration hole from 2011 returned a highlight intercept of 65.4 metres grading 7.13 grams gold.

Much of the early exploration work done at Golden Pike was carried out by Noranda in the 1980’s and that work was followed up on by Royal Oak Mines doing a bulk sample in the early 1990’s. Royal Oak shipped 100,000 tonnes of with a recovered grade of 3.4 grams per tonne.

“It gives us an area of confirmed mineralization with some production from a bulk sample and that gets us closer to our plan of producing," Gibson says.

While Golden Pike represents a solid get for Northern Gold, the project still ranks third in terms of priority after Jonpol and another recent acquisition: Buffonta.

Buffonta was one of the first acquisitions overseen by Gibson as the 15.6 sq. km of ground was acquired in September of last year.

Sitting roughly 4-km southwest of Garrison on the southwest side of a large granite diorite known as the Garrison Stock, Buffonta hosts three known gold zones: the Kerr Pit zone, the Number 5 zone and the Number 6 zone.

At Kerr Pit mineralization occurs in amphibolite grade meta-volcanic rocks which form part of the contact metamorphic aureole around the Garrison Stock. Gold occurs in quartz veins and vein breccias around which are prominent grey to brown colored pyritic alteration halos.

Visible native gold is known to occur within quartz breccia veins and within carbonate veins while microscopic native gold occurs with pyrite within and marginal to the quartz veins.

Heavy exploration of Buffonta is set to get underway in the spring but there has been historical work done here as well with production of 9,000 oz. of gold from 64,000 tonnes milled at the Kerr-Addison Mill.

The site also comes with a historical resource of 544,000 tonnes averaging 4.8 grams gold per tonnes for roughly 105,000 oz.

Zones 5 and 6 lie to the southeast of Kerr and Zone 6 also has a open pit dug into it. The pits at both Kerr and Zone 6 go down roughly 30 metres, but mineralization has been encountered down to 215 metres. Initial drilling will focus on an area beneath the Kerr pit.

“Both pits were like glory holes,” Gibson explains, “They got the best ore and then got out.”

There is also similarities with Cote Lake in terms of the zones proximity the large granite diorite intrusion.

“No one paid attention to granite diorites in the break before. They are good targets,” he says. “Cote Lake was one big granite diorite and there is some of that here.”

Beyond Buffonta’s boundary, to the east, lies another recent acquisition: the Harker-Holloway property. The claims there cover an expanse of 130 sq. km and contain the prospective Iris gold and tungsten zone. Iris has historic, non-compliant, resources of 1.18 million tonne grading 2.05 grams gold.

The zone also has an 150 metre decline that reduce costs and speed up development of a compliant resource.

“It’s a deposit with a small resource because it was explored hand to mouth,” Gibson says. “It never had the $10 to15 million exploration budget, but it is some of the most prospective and least explored ground on the fault.”

The geology at Iris is comprised of variably magnetic tholeiitic basalt. Intercalated with the basalt are locally important siliceous horizons thought to be Rhyolite. In the area of the deposit there is an intrusive outcrop that is divided into an early pyroxenitic fraction, and a later, more extensive syenitic phase. All the rocks are cross-cut by north to north-easterly striking shears.

Together they are strong, divided....

It is no secret that junior miners are finding it harder than ever to raise capital. The fear is that the situation could mean that even projects with abundant potential in low risk jurisdictions simply won't get mined due to a scarcity of funds. And if companies continue along in self-contained, isolated spheres, that fear may sadly become a reality.

Collectively, however, with one central mill the mineral wealth of not only Garrcon, Golden Pike, Jonpol, Buffonta and Iris could be tapped but also that of Lake Shore Gold’s Fenn-Gib project and possibly Moneta Porcupine’s (ME-T) Windjammer, 55 Zone and Southwest zone.

“You’ve got another Sudbury on your hands if you did it," Gibson enthuses. "One central mill with trolley lines bringing the ore in. The guys at the other companies want it to happen too. They realize it has to be done.”

Time will tell if the will to get it done follows on the heels of the realization.