Share Price: C$0.24 | Market Cap: C$18.6M |Shares Outstanding: 81.00M | Free Float: 63.59M
52W High-Low: 0.31 / 0.07 | YTD Price Return: 119.05% (Market data as of 1st December 2020.)
Q3/20: Gold Discoveries Warrant Further Exploration
Event: Drilling resumes in location of latest gold discovery [POSITIVE]
Company & Property Overview
Taiga Gold was formed from the spin-out of assets of Eagle Plains Resources in April 2018 (At a 2:1 stock split basis, i.e. two shares of Eagle Plains gave 1 share of Taiga). Taiga Gold is engaged in the acquisition and exploration of gold resource properties in the province of Saskatchewan. Its flagship project is the Fisher property where, as of today, 4 separate high-grade gold discoveries have been made.
The 34,000-hectare Fisher property is contiguous with SSR Mining’s Seabee Gold Operation property and is located ~1.5km from the Santoy Mine, which is currently producing high-grade gold from a structure common to both properties, the Santoy Shear. Both Fisher and the Seabee Gold Operation are located within the Trans Hudson Corridor, specifically within the Pine Lake Greenstone Belt. The Fisher property is under option to SSR Mining where they are undertaking significant exploration including drilling with the intent of locating gold deposits for development into potential reserves.
The below map lays out the Fisher Project location.
Taiga Gold – SSR Mining JV Overview
In May 2016, Silver Standard Resources, now known as SSR Mining (TSX & NASDAQ listed under the ticker “SSRM”) acquired Claude Resources and with it, its Seabee gold operation in Saskatchewan for a consideration of C$337 million in cash and shares. In October 2016, the Fisher project was optioned and as part of the option deal, SSR Mining paid C$100,000 cash up-front and agreed to spend at a minimum of C$4 million for exploration over a 4-year period. This amount would be in addition to annual cash payments of $75,000 over the option period. On November 12th, 2020 they notified Taiga Gold of their intention to exercise its option to earn 60% of the Fisher property after spending nearly $12 million in exploration.
By doing so, SSRM triggered a one-year window in which they can decide whether they would want to purchase another 20% of the property by making a one-time payment of C$3 million to Taiga Gold. After this deadline of November 2021, both companies will advance the Fisher by investing proportionately based on their respective interest. SSRM will make additional annual payments of C$100,000 to Taiga Gold as an advance royalty until commercial production begins.
Since 2016, SSR Mining has completed extensive systematic exploration including prospecting, soil geochemical sampling, detailed geological mapping, and geophysical surveys. It has completed a total of 33,251m (109,091’) of drilling across 86 holes at a total expenditure of nearly $12 million. (3x the required amount). This sizeable investment has paid off for SSR Mining with 3 new discoveries made in Q1 2020, 2 near the border with the Santoy Mine (Yin & Abel Lake zones), and the other, ~6km south at the Mac North Zone. Another high-grade discovery was made in Q1 2019 at the Mac Zone.
SGO (Seabee Gold Operation) Overview
SSR Mining acquired the Seabee Gold Operation, a high-grade underground mine on May 31, 2016 as a result of its acquisition of Claude Resources. Commercial production at the Seabee underground mine commenced in 1991 and exhausted Mineral Resources in 2018. Since 1991, the Seabee Gold Operation has produced over 1.57 million ounces of gold from the Seabee and Santoy deposits. In 2019, the Seabee Gold Operation produced 112,137 ounces of gold at cash costs of US$464 per ounce.
Below are some of the salient highlights of this operation
- Mineral Reserves: Proven and Probable Mineral Reserves of 500,000 ounces of gold at an average grade of 10.17 g/t as at December 31, 2019
- Potential for mine life extension: Measured and Indicated Mineral Resources of 1,050,000 ounces of gold at an average grade of 10.61 g/t
- Exploration potential: 2020 Exploration programs focused on expansion of the Santoy Gap Hanging Wall, as well as surface drill programs at the Seabee and Fisher properties
- Fisher Property Exploration: To Dec 2020, 4 high-grade gold discoveries have been made during drilling at four separate zones of the Fisher. In the fall of 2020, a 3800m drill program was carried-out to follow-up one of these at the Mac North Zone. SSRM’s methodical approach to exploration has resulted in an impressive trajectory of discovery along the Santoy Shear during the last two drill programs. Assays are pending for the most recent 3800m program at the Mac North zone.
As per SSRM’s preliminary economic assessment of the operation, it expects gold production to average 100,000 ounces per year over the period from 2018 to 2023, a 29% increase from 2016 production levels. It also expects to reduce capital investments (C$90 million to date) given the ongoing development near existing infrastructure.
The Fisher property is bisected by the Santoy Shear zone, the same structure that hosts SSRM’s Santoy Mine approximately 1.5km to the north, hence the huge exploration potential along this structure given the success seen a short distance away at the Santoy Mine.
Taiga Gold Investment Thesis
Restart of drilling operations: This year’s exploration plan for the Fisher property was partially derailed by the global pandemic. The 2020 Q1 drill program was suspended in March after completing most of the planned footage while the summer surface exploration program was cancelled. Drilling operations restarted in September 2020 with a 3800m drill program at the Mac North discovery area, assays are pending. The Fisher exploration camp has been expanded to host up to 42 people from an earlier capacity of 24).
Underdeveloped region: The area of Saskatchewan where all of Taiga’s properties are located is underexplored relative to other greenstone belts in Canada. This area holds extremely high geological potential and meaningful discoveries at any of Taiga’s other properties can greatly enhance shareholder value. Taiga has conducted fieldwork at its SAM property focusing on structurally hosted gold mineralization and has an option partner (SSKR Exploration) for its Leland Project, where a 1,500m winter diamond drilling program is being planned. Taiga is also planning exploration programs for its other two properties, the Orchid & the Mari Lake Property.
Eagle Plain’s lineage of rewarding shareholders: Eagle Plains is a project generator and once it identifies a strong project, it spins-out the project into a separate company directly benefitting shareholders. It has done this in the past with Copper Canyon Resources, a one for one spin-out which was subsequently taken out in a hostile turned friendly acquisition. Copper Canyon shareholders benefitting about $65 million on the transaction. This resulted in a multi-bagger for the Company’s shareholders.
SSR Mining’s aggressive exploration activity: SSR Mining has committed approximately 3x more ($12 million) than the required exploration capex ($4 million) that formed part of the option agreement. This tells us they’re extremely bullish on Taiga’s prospects, and in particular, the Fisher Project. Investors can take some relief in the fact that Taiga’s intent is to be acquired, thus monetizing the company’s assets for the shareholder. This strategy, in essence, provides for a replacement share of a larger, more liquid, company at a premium based on exploration success and negotiation. The intent is to repeat the success of the sale of Copper Canyon Resources.
Exploration guarantee: As is the case with all mineral companies, investors should be aware that there is no guarantee that Taiga will continue to expand on discoveries or commence production at any of its properties. Therefore, though the Company is quite comfortable for the time-being with sufficient capital, inability to raise further funding in the future may limit its ability to continue exploration activities in the longer term
Reserve and resource calculations: There is a degree of uncertainty attributable to the calculation of reserves and resources and the corresponding grades. Reserve and resource estimates are dependent partially on statistical inferences drawn from drilling, sampling, and other data. There is no certainty that the mineral deposits would yield the production of metals indicated by reserve and resource estimates.
Price volatility: Market prices of precious metals such as gold are extremely volatile. There is no assurance that if commercial quantities of gold, copper and other metals are discovered, a profitable market may exist or continue to exist.
2020/2021 could prove to be the turning point for Taiga Gold. SSR Mining now has till November 2021 to decide whether it wants to shell out C$3 million for an additional 20% stake. If it does decide to acquire, Taiga will retain a Net Smelter Royalty of 2.5%, which can be reduced at any time by 1% with a C$1 million payment by the joint venture. With a manageable cash-burn rate and strong treasury, Taiga Gold is well positioned to capitalize.
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