ALPHA EXPLORATION INC.
Premier junior mineral exploration & development
North American Uranium and Gold
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Volume 17 | Number 1 | Spring 2014 Vancouver, British Columbia www.ReportOnMining.com Planning for Profits - Report on Mining edition is published four times a year by Fusion Publishing Inc. All rights reserved. Any reproduction or duplication without prior written consent of Fusion Publishing Inc. is strictly prohibited. Published by Fusion Publishing Inc. Canadian Office Fusion Publishing Inc. #317 – 1489 Marine Dr. West Vancouver, BC Canada V7T 1B8 1.888.925.0313 (Toll Free) Group Publisher Terry Tremaine Group Editor Connie Ekelund
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onsidering how difficult the times have been for the mining sector, the optimism with which 2014 has begun can basically be viewed as “about time.” There has been a lot of activity on the merger and acquisition front as companies look for a way to move forward at a time when raising capital has been remarkably difficult. Currently, the events unfolding around Goldcorp and Osisko have been particularly attention getting. Our cover story, Alpha Exploration, is a ‘story’ that stands out because of how remarkably well things progressed during the difficult times. Kudos to all involved. What will be very interesting to see is the outcome of this year’s PDAC. There will be a lot of people coming together who are looking for ways to move forward. In the weeks following, we’re likely to learn of a few solutions that will draw attention.
Production Manager Christie Smith Senior Editor Robert Setter Contributing Editors Elvis Picardo PDAC Account Managers 1.888.925.0313 Terry Tremaine Maureen O’Brien Marie Richards Ann Hawley
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Cover Story Alpha Exploration Inc. 4 North America PDAC 2014 Convention 10 12
Orefinders Resources Inc.
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Fission Uranium Corp.
South America Atacama Pacific Gold Corporation 16 18 Commodities Outlook by Elvis Picardo
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lpha Exploration, (AEX) on the TSX Venture exchange, is a highly focussed junior mineral exploration and development company committed to delivering shareholder value through the advancement of select uranium and gold properties located in mining friendly jurisdictions throughout North America. An overriding differentiating factor for Alpha is the proven results oriented award-winning team that embraces the challenge of analyzing prospective properties, laying out the best possible plan then executing flawlessly to consistently enhance shareholder value. Garrett Ainsworth in trench with “off-scale” scintillometer reading from boulder.
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Alpha Exploration emerged from the aftermath of Fission Uranium’s friendly takeover of Alpha Minerals in December 2013. Alpha Exploration’s President and CEO Mr. Benjamin Ainsworth admitted they had one key lesson from that episode which was not having enough “skin in the game” as Fission engineered the takeover of Alpha which Mr. Ainsworth would have preferred be the other way round. This is not the case with Alpha Exploration as Mr. Ainsworth explained, “Company principals and friends own and control more than half the outstanding shares leaving little left for retail trading. If positive drill results emerge, I would not be surprised to see continued upward momentum in the share price.”
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Left to right: partial boulders from PLS, Helium Survey at Middle Lake.
Properties Alpha Exploration boasts five prospective properties in both the uranium and gold space including Cluff Lake, located next to AREVA’s former producing Cluff Lake Mine, Hook Lake, (100% owned in the Athabasca basin) and Carpenter Lake, (60% interest with Noka Resources). Alpha also controls the previously explored Mikwam Gold Property, (on trend with the Gold producing Casa Berardi mine) and the Donna Gold Property where previous work returned impressive gold grades including 29.66 g/t gold over 2.5 metres in historical trenches. Both gold properties are 100% owned by Alpha Exploration. Focus The near-term focus is on the three properties that comprise the Cluff Lake Project, Bridle, Gorilla, and Middle Lake(s). The adjacent Cluff Lake Mine produced 63 million pounds of U308 grading 0.93% through four underground and three open-pit mine operations with grades very much in line with the 0.85% uranium grades encountered in the 2006 drill program at Gorilla Lake. Drilling has just begun at the Middle Lake Uranium Property where exploration will centre on the three known uraniferous boulder and radon trains as based on historical geochemical surveys and glacial studies. The anticipated bedrock source of the trains is covered by a relatively shallow overburden ranging from five to 20 metres in thickness. The 20-hole 2,000-metre drill program will test gravity, radon and geo-chemical anomalies with results being released as they become available. www.ReportOnMining.com
Vice President of Exploration Mr. Garrett Ainsworth on drilling this area, “I have been wanting to get at the Middle Lake Property since 2009. I can’t wait to see what we are going to find.” Garrett’s high level of enthusiasm to work the property is both apparent and refreshing for a junior exploration company and exemplifies the prevailing positive and expectant culture throughout the company. This optimism is not unfounded with the Alpha’s Athabasca Basin projects totalling over 100,000 acres all located in the middle of a key global uranium district responsible for production of over 15% of the entire U308 global supply in recent years. In fact the region already hosts two thirds of the world’s known highgrade uranium deposits. The Cluff Lake Project is a series of partnerships with Bridle Lake a 50/50 joint venture with Rio Tinto, Gorilla Lake, a joint venture with Logan Resources having a 20% stake plus the Middle Lake joint venture with Acme Resources also with a 20% interest. Management The analysts and experts that study junior miners tend to agree that investors should try to identify companies with low floats, proven management, safe jurisdictional locations, higher grade properties and ample cash on hand but can differ on which of these is the most critical factor in predicting future success. Alpha Exploration has a check mark beside each of these key factors, however, perhaps the most outstanding feature of this compelling company is the stellar track record of management.
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The Alpha team is lead by CEO and President Mr. Benjamin Ainsworth. Mr. Ainsworth secured an honours degree in Geology from Oxford University prior to embarking on his distinguished career earmarked by numerous economic discoveries and recently highlighted by the receipt of the 2013 AME BC Colin Spence Award for Excellence in Global Mineral Exploration. This honour was given for his work in the discovery of the high-grade uranium system at the Patterson Lake South project in the Athabasca Basin in northern Saskatchewan. Following closely in his father’s footsteps, Benjamin’s son, Garrett Ainsworth, Vice President of Exploration, also received the Colin Spence Award for Excellence for his role in the Patterson Lake discovery. Garrett completed a Bachelor of Science in Geology (honours) from the University of London, a diploma of Technology in Mining and a Bachelor of Technology in Environmental Engineering with honours from BCIT.
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Mr. Benjamin Ainsworth was quick to note the strengths of all team members, “Alpha is leveraging the advantage of having a very strong group of officers.” Among the key individuals is Alpha Chairman Dr. Michael Gunning, whom according to Benjamin is an academic standout with a very solid track record that includes his role as CEO of Hathor Exploration, a company which was also a grass-roots explorer through development success story, that was eventually sold to world leader Rio Tinto. Like the father-son team, Dr. Gunning was also recognized with the prestigious Colin Spence Award for Excellence in 2012 for his contributions to the development of Hathor’s Roughrider deposit.
Photos: top: Panoramic lake view; below, left to right:2014 Roundup Award; Ainsworths with Mrs. Spence, and AMEBC Executives; Ben Ainsworth speaking at the Awards. At right: Garrett Ainsworth showing PLS discovery hole PLS12022.
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PDAC 2014 | Planning for Profits | Report on Mining 7
Garrett Ainsworth at the Awards; at the site; the team; Alpha tour.
Another standout on the Alpha team is Director Charles Roy who brings 30-plus years experience with Cameco where he managed and supervised exploration programs in the Athabasca Basin controlling annual budgets of $35 million. From 1988 to 1993 Mr. Roy transferred to Cameco Gold and established a successful exploration base in Reno, Nevada before returning to the uranium side in 1994.
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Mr. Benjamin Ainsworth also stated how important it was to have Alan Graham as an advisor to the Alpha Board given Mr. Graham’s previous positions as Minister of Natural Resources and Energy, a member of the Atomic Energy Control Board and as commissioner of the Canadian Nuclear Safety Commission for 12 years. Mr. Ainsworth explained, “Having Alan as a strategic advisor gives Alpha not only a strategic link to Ottawa but also a very strong connection with key global participants and world leaders in uranium and nuclear energy development.”
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On a more philosophical note, Mr. B. Ainsworth explained that all management personnel elected to take significant salary reductions in order to launch Alpha on the best possible footing, recognizing that these expenses to launch Alpha Exploration should be in-line with Alpha’s size and stage of development. This responsible business practice is consistent with prudent treasury resource allocation, which is not always the case with companies in the junior space. Share Price and Structure Since commencing to trade on December 12, 2013, the share prices have been trending higher since touching a low of $0.24 on December 18th last year. After reaching $0.80 earlier this year, recent trading has largely been in the $0.60 to $0.70 cent range, which is still well over double the short-lived low water mark. The Company is cashed up and well positioned to move forward and repeat past exploration successes with $1.25 million flow through dollars on top of $4.5 million hard dollars in the treasury as of February 2014. It is all the more impressive that the capital was raised in 2013 against the gloom and doom backdrop of the financing challenges the vast majority of similar stage companies were facing. To top it off, Mr. Benjamin Ainsworth injected a half million dollars of his own money into Alpha’s treasury in 2013 because he so strongly believes in the potential upside of the company. With just 26,046,971 shares issued, (37,213,638) fully diluted and over half in the strong hands of company principals and friends, any substantive news will likely push share prices higher. For more information on AEX-V, visit the company website at www.alpha-aex.com and for related documents visit www.sedar.com. www.ReportOnMining.com
Alpha Exploration Inc. 408-1199 West Pender St Vancouver, BC, Canada V6E 2R1 Phone: 866.629.8368 info@alpha-aex.com www.alpha-aex.com TSX.V: AEX OTCBB: ALPXF Year Hi/Low: $0.80/$0.24 PDAC 2014 | Planning for Profits | Report on Mining 9
PDAC 2014 Convention: Where the World’s Mineral Industry Meets
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t has been referred to as the Oscars®, or the Super Bowl of the mining and exploration sector, the Prospectors & Developers Association of Canada’s (PDAC) Convention, the mineral industry’s most popular networking and educational event. The PDAC Convention is actually a convention, trade show and investors exchange in one. It includes a Technical Program, variety of Short Courses and workshops, a Corporate Social Responsibility (CSR) Event Series, an Aboriginal Program, Student Program, along with numerous networking events. An annual highlight at the convention is the Awards Evening. The PDAC’s annual awards recognize and honour outstanding contributions and excellence in the mineral industry. Winners of the 2014 annual awards will be honoured at the association’s awards evening on Monday, March 3, 2014, at the Fairmont Royal York Hotel, Toronto. Bill Dennis Award for a Canadian mineral discovery or prospecting success This award honours (a) person(s) who has(ve) accomplished one or more of the following: made a significant mineral discovery; made an important contribution to the prospecting and/or exploration industry. The award may also be used to recognize an important mineral discovery in Canada. Ross McElroy, President and Chief Operating Officer, Fission Uranium Corp., is the recipient of this year’s Bill Dennis Award for a Canadian mineral discovery or prospecting success. Ross McElroy is receiving the award for leading Fission’s team of geologists in one of the most significant discoveries in the Athabasca Basin in recent years. The Patterson Lake South property is a highgrade, shallow-depth uranium discovery located on the southwestern margin of the Athabasca Basin in northern Saskatchewan. Ross McElroy has over 30 years experience as a professional geologist. Under the leadership of Ross McElroy, Fission’s uranium discovery has rejuvenated the entire exploration industry in the Athabasca Basin. 10 Planning for Profits | Report on Mining | PDAC 2014
Skookum Jim Award for Aboriginal achievement in the mineral industry Recipients of this award have demonstrated exceptional achievement and/or service in a Canadian Aboriginal-run service business for the Canadian mining industry or a Canadian aboriginal exploration or mining company, or have made a significant individual contribution to the mining industry. Jim MacLeod, President, J.A. MacLeod Exploration and EnviroCree Ltd., is the winner of this year’s Skookum Jim Award. Jim is receiving the award for his strong leadership on the environmental impact of the mining sector and his work advocating for more education and training programs for Aboriginal youth within the industry. He is a pioneer in mineral exploration and environmental impact and from the beginning recognized the link between mining and environment, and the importance of managing the relationship. Founder of the Mistissini Geological Resources Centre, Jim has worked closely with Aboriginal communities as a consultant on projects and training in mining exploration. He also serves on the Board of Directors of Cree Mineral Exploration Board, and Canadian Aboriginal Minerals Association. www.facebook.com/reportonmining
Viola R. MacMillan Award for company or mine development This award, which is named in honour of the PDAC’s longest serving president, is given to (a) person(s) who has/have demonstrated leadership in management and financing for the exploration and development of mineral resources. Capstone Mining Corp. is the recipient of this year’s Viola R. MacMillan Award for company or mine development. Capstone Mining Corp. is receiving the award for demonstrating leadership and management in the successful development of the Minto and Cozamin copper mines and in its acquisition of Pinto Valley Copper Mine, as well as transforming it into an intermediate copper producer. Located in the Globe-Miami mining district in Arizona, the Pinto Valley site is expected to produce 130 to 150 million pounds of copper in concentrate annually, projecting the annual copper production to increase by more than 160%, from 85 M lbs Cu to 235 M lbs Cu.
Thayer Lindsley Award for international mineral discoveries This award recognizes an individual or a team of explorationists credited with a recent significant mineral discovery anywhere in the world. Goldrush Discovery Team, Barrick Gold Corporation is the recipient of this year’s Thayer Lindsley Award for international mineral discoveries. The team is receiving the award for discovery of the 14.1 million ounce Goldrush deposit in Cortez District, Nevada, U.S. The deposit, located in the eastern portion of the Cortez mining district, six kilometres southeast of Cortez Hills, potentially represents the largest Carlin-style discovery in Nevada since Cortez Hills over 10 years ago. The Goldrush deposit has the third highest grade and is one of the few or the only plus 10 million ounce gold discoveries since 2001. The 25-person Goldrush Discovery Team was led by Rob Krcmarov, Senior Vice President, Global Exploration (Toronto), François Robert, Vice President and Chief Geologist (Toronto), Ed Cope, Vice President, Exploration North America (Elko, Nevada), Kevin Creel (Chief Exploration Geologist), Mark Bradley (District Geologist) and Alejandro Ly (Project Geologist).
Distinguished Service Award This award recognizes an individual who has achieved one or more of the following: made a substantial contribution to mineral exploration and mining development over a number of years; given considerable time and effort to the PDAC; made outstanding contributions to the mineral industry in the field of finance, geology, geophysics, geochemistry research, or a related activity. Roger Wallis is the recipient of this year’s Distinguished Service Award. Roger is receiving the award for his outstanding contribution and dedication to the PDAC over the past 47 years. He joined the PDAC in 1967, and has been an active PDAC committee member since 1993. Roger has been a proponent of the PDAC taking a leadership role in becoming more proactive about industry issues, particularly around environmental and corporate responsibility issues. He has been an integral member of the Convention Planning Committee. A natural leader, Roger has worked hard with the committee raising the convention standard year after year. Environmental & Social Responsibility Award This award honours an individual or organization who/which has demonstrated outstanding initiative, leadership and/or accomplishment in protecting and preserving the natural environment and/or in establishing good community relations during an exploration program or operation of a mine. Teck Resources Limited is the recipient of this year’s Environmental & Social Responsibility Award. Teck Resources Limited is receiving the award for its outstanding accomplishments and commitment to sustainability, environmental and social initiatives. In 2011, Teck developed a comprehensive sustainability strategy, focusing on long- and short-term goals that will achieve the company’s vision for sustainability. The sustainability strategy supports six key areas that represent the biggest challenges and opportunities for the mining sector: community, people, water, biodiversity, energy, and materials stewardship. Dedicated to building value through partnerships, Teck aims to address local and global sustainability issues. www.ReportOnMining.com
PDAC 2014 | Planning for Profits | Report on Mining 11
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uring cyclical lows in the gold industry, junior mining The Mirado deposit is situated near the top of the Skead companies can maximize cost effective exploration Volcanic Assemblage, which marks the termination of a programs by targeting Canadian gold camps with major calc-alkaline volcanic cycle. The age and geological minimum socio-political risk and excellent local mining environment of the Mirado deposit is consistent with several infrastructure. Vancouver-based junior Orefinders Resources well-known deposits such as the Doyon-Bousquet-Laronde (ORX-V) set its sights on the mature gold camps in Ontario’s mining camp. Until recently, the Skead Formation has Red Lake and Kirkland Lake districts in a bid to identify historic remained under-explored by modern techniques. Orefinders projects that could quickly generate a resource. Attractive has identified over 10 historic and new gold occurrences deal structures and land packages allowed Orefinders on its 3,440 acre land package which warrant follow-up to successfully close a 5 million dollar financing through exploration in 2014. Further drilling is also warranted, since Macquarie Capital Markets Canada Ltd. in December 2012. the current Mineral Resource is only constrained by available Drilling commenced immediately in January 2013 on the drill data. advanced stage Mirado gold project, located 35 kilometers Bill Yeomans, President of Orefinders comments that “SRK southeast of Kirkland Lake, which lies in the prolific Abitibi considers the gold mineralization at the Mirado project as gold district of northeastern Ontario. The Mirado project is a primarily amenable to open pit extraction. A three-year earn brownfield project that was initially in production during the in with regard to work commitments and cash payments was 1930s, and came complete with 40,000 meters of historic fast-tracked and completed in less than 9 months, resulting drill holes, underground workings, and three stockpiles of with 100% ownership of the project subject to an NSR with gold mineralization extracted from a previous open pit bulk favorable capped buy-out terms. Orefinders can buy back sampling program. the entire 3% net smelter returns royalty (NSR), for a total of In July of 2013, Orefinders commissioned SRK Consulting $6 million. Orefinders staked additional ground in 2013 and (Canada) Inc. (“SRK”) to conduct a maiden NI-43-101 now controls more than 7 kilometers of favorable stratigraphy resource estimate at Mirado. This decision was made based surrounding the deposit.” on excellent drill results generated by Orefinders from their initial 12,000 meter drilling program. Over 90% of the 40 drill holes completed in 2013 reported significant results, with drill intercept highlights including 31.5 meters @ 10.9 gpt Au (uncut) in hole MD-13-28, starting at a depth of 18.5 meters. Orefinders outlined 442,000 ounces of gold in an inferred mineral resource of 10,618,000 tonnes with an average grade of 1.29 grams per tonne gold (gpt Au) in open pit, underground and three separate stockpiles at an average discovery cost of CDN $6 dollars per ounce. Environmental base line studies and metallurgical test-work commenced in early September. All work commitments and cash payments to earn in 100% ownership of the patented Mirado property were completed at this time, three years ahead of schedule. Cost-effective exploration programs were successfully completed at Mirado by hiring local skilled professionals and contractors from nearby gold mining communities. The company has also actively communicated and provided updates to First Nations groups throughout the area. Red Lake land position 12 Planning for Profits | Report on Mining | PDAC 2014
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During the late fall of 2013, a major trenching and channel sampling program tested favorable volcanic stratigraphy 200 meters west and along strike from the current Mirado NI 43-101 Mineral Resource. Gold mineralization similar in style to the mineralization contained in the current resource was identified in the trenches. Trenching highlights included 11.35 g/t Au (21.8 g/t Au uncut) over 4.80 meters and 2.43 g/t Au over 9.20 meters. Permits recently obtained by Georgia-Pacific will allow upgrading of existing roads throughout the property to commence in July 2014 and will be completed within a 6 week time frame. Trees will be harvested from the area underlain by the conceptual Whittle-open pit model for the current resource. A network of new all-season logging roads will provide access for haul trucks to transport material from three stockpiles containing 20,742 tonnes at an average grade of 4.41 gpt Au. In the Red Lake camp, Orefinders is well positioned with patented ground located 1800 meters along strike from the Madsen gold deposit on the Derlak gold project. The Derlak patented claims represent prospective land holdings covering more than 2 kilometers of the favorable unconformity known to host major gold deposits in the Red Lake district. In 2013, Orefinders completed preliminary work including a deep penetrating Titan survey and a preliminary diamond drill program which confirmed the location of the gold bearing Austin Tuff horizon which hosts the gold deposit at the adjacent Madsen Mine. In order to obtain a 100% interest in this property, Orefinders needs to complete an additional Cdn $500,000 in exploration expenditures on or before January 19, 2016, subject to a 3% NSR, of which 1% can be purchased for $1 million. The vendor will retain a 2% NSR on this property. www.ReportOnMining.com
Top left: Trench locations; above: Property geology; left: Mirado regional geology; bottom left: ORX property locations.
On December 19, 2013, Laurentian Goldfields Ltd. (“Laurentian�) entered into a definitive agreement to purchase a 100% interest in the Madsen Gold Project from Claude Resources Inc. Additionally, on January 14, 2014, Laurentian entered into a letter of intent to purchase a 100% interest in the Newman-Madsen Gold property from Sabina Gold & Silver Corp. These two acquisitions completely surround the Orefinders Derlak patent claims. Orefinders is currently well financed for its 2014 program with CDN $1.6 million in cash as of January 2014.
Orefinders Resources Inc. 110-2300 Carrington Road West Kelowna, BC, Canada V4T 2N6 Phone: 416.644.1749 info@orefinders.ca www.orefinders.ca TSX.V: ORX Year Hi/Low: $0.75/$0.10
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Canada’s Award-Winning, High-Grade Uranium Discovery
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e believe the Patterson Lake South discovery is very significant, probably the largest since Hathor’s Roughrider discovery, and we all know what happened with that one.” David Talbot, Dundee Securities, February 19, 2014 (Rio Tinto acquired Hathor for $654m in January, 2012). Award-winning explorers. Fission Uranium’s high-grade, shallow-depth uranium discovery is so impressive that PDAC 2014 has awarded its President and Chief Geologist, Ross McElroy, with the Bill Dennis award for exploration success. For the same incredible discovery, the Northern Miner has named Mr. McElroy and Fission’s CEO, Dev Randhawa, as “Mining Persons of the Year 2013” and top it off, Finance Monthly has awarded Mr. Randhawa “Dealmaker of the Year 2013” for his business acumen.
Bottom photos, left to right: Patterson Lake South; inside drill rig. Top row next page: Fission CEO Dev Randhawa; Fission President and Chief Geologist Ross McElroy; core shacks.
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Probably the best hole ever drilled in the uranium industry. Patterson Lake South (PLS) is located in Canada’s Athabasca Basin, home to the world’s richest uranium deposits and mines. In just over one year, it has grown from a single discovery hole to an on-trend strike length of 1.78km. It has grades so high and depths so shallow that industry analysts called one of its recent holes (PLS14-129) probably the best hole ever drilled in the uranium industry. At spot prices, the hole is equivalent to 117 m of 5 oz/t gold, i.e. 150 g/t. Hole 129 has a Grade x Thickness (GT) value of 992.8. To put that into perspective, an absolute minimum GT for an operating mine is around 0.1 to break even. Most very good holes have a GT of 50 and above. Over 100 is exceptional and over 300 is phenomenal. With its GT of 992.8, hole 129 is one of a kind. However, the high-grades at PLS don’t stop there. A few examples of other PLS assays include: (PLS13075) 54.5m @ 9.08% U3O8, including 21.5m @ 21.76% U3O8 and (PLS13-080) 43.0m @6.93% U3O8, including 14.0m@15.63% U3O8.
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Shallow Depth. The bulk of mineralization at PLS is between 60m and 150m making it potentially the only unmined highgrade discovery in the world that may be open-pittable.
The overall drill hit success rate in 2013 was 86% and so far, a little way into the current $12m, 30,000 metre drill program, the hit rate is 100% to date.
Underexplored region of the world’s premier high-grade uranium district. PLS isn’t just unique for its grades and close-to-surface mineralization. It was discovered by Fission Uranium’s team in November 2012 in the south west of the Athabasca Basin – an area that was virtually unexplored. It set off a staking rush that the Basin hadn’t seen in 40 years and just last month, uranium explorer, NexGen, intersected mineralization (assays pending) on its property adjacent to Fission’s PLS project. With good access to power and the highway, PLS sits in an area of Canada that has been mining uranium for decades. Strong support for the uranium sector is to be found at every level – from First Nations and local communities, through to Provincial and Federal Government.
Technical Innovations. Part of Fission’s success is due to the team’s knack for innovation. It was their patent-pending airborne survey that led to the identification of a highgrade boulder field, which was an important step towards making the discovery. Fission also implemented the use of radon surveys in frozen ice conditions. The company brought in radon survey experts, RadonEx, who drilled holes in the ice and lowered sensors into the water down to the bottom of the lake. Despite Radon being such a mobile gas, this technique and the subsequent results analysis helped deliver the high drilling success rates. Due to the impact of their radon survey approach, Fission recently announced a ten-fold increase in the budget for radon survey use at PLS. With more than 100 conductors on the property, it’s Fission’s belief that they have only just begun to unravel the remarkable mineralized system at PLS.
Industry-leading team. Fission’s team has made two major high-grade uranium discoveries in three years and chief geologist, Ross McElroy, has been instrumental in a further two, including being part of the small geo team that made the McArthur River discovery (the world’s largest highgrade uranium discovery). Under his leadership, Fission’s team has grown PLS to its current extraordinary level with little more than two drill programs.
Most aggressive drill program to date. In the current 100 hole program, Fission will be drilling more holes in one exploration season than in all of 2013. Five rigs are currently in play on the property and the camp has over 100 staff, including geologists, geo physicists, geo chemists, drill teams and support staff. The world’s most exciting uranium discovery is growing fast.
Fission Uranium Corp. 700-1620 Dickson Avenue Kelowna, BC, Canada V1Y 9Y2 Phone: 877.868.8140 ir@fissionuranium.com www.fissionuranium.com TSX.V: FCU OTCQX: FCUUF FSE: 2FU Year Hi/Low: $1.48/$0.52 www.ReportOnMining.com
PDAC 2014 | Planning for Profits | Report on Mining 15
A TA C A MA P ACIFIC
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he oxide gold resources at Atacama Pacific Gold Corporation’s Cerro Maricunga gold property keep growing. After only three years of exploration, which has included over 105,000 metres of drilling, extensive metallurgical testing, the acquisition of water and a preliminary economic assessment, Atacama recently announced another resource increase at Cerro Maricunga with pit-constrained measured and indicated (“M&I”) oxide resources increasing by over 1 million ounces to 3.5 million ounces of gold making Cerro Maricunga one of the largest undeveloped oxide deposits in world. The 3.5 million ounces of M&I gold resource is in 249 million tonnes grading 0.43 grams per tonne gold (“g/t Au”) with a further 43,000 ounces of gold in 3 million tonnes grading 0.43 g/t Au in the inferred category. The new resource was confined within a pit modelled using a U.S. $1,200 per ounce gold price. The majority of the M&I resource gain was due to the conversion of inferred resources to the M&I category on the back of a 25,500-metre infill drilling program completed by the Company in mid-2013.
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Cerro Maricunga lies in Chile’s Maricunga Mineral Belt, an established mining camp located in a country consistently ranked as one of the top jurisdictions in the world for mine development. Dr. Albrecht Schneider, Chairman, and Mr. Carl Hansen, CEO, have a long and successful history of making significant discoveries and developing properties in the Americas and in particular, Chile. In 2013, Atacama released a preliminary economic assessment which demonstrated that the Cerro Maricunga project has the potential to produce an average of 270,000 ounces of gold per year from an 80,000 tpd heap leach mine with a 10 year mine life. Cash costs were estimated at U.S. $652 per ounce with all in cash costs of U.S. $846 per ounce. At a capital cost of U.S. $515 million, the PEA calculated that the project could generate a very respectable after tax IRR of 26.6% at a U.S. $1,450 gold price. With the new 3.5 million ounce resource in hand, Atacama is working towards completing a prefeasibility study for release during the second quarter of 2014.
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The Company has completed extensive metallurgical studies on the Cerro Maricunga gold mineralization confirming the oxide associated resources are amenable to simple heap leaching. Average gold recoveries are in the order of 80% at a crush size of 19 mm and leach times are impressive with the majority of gold recovered within the first three weeks of leaching. The Company is looking at leaching at a coarser crush size and recently reported attractive gold recoveries of 76% on non-agglomerated material crushed to 150 mm.
As Cerro Maricunga is located in the Atacama Desert, finding sufficient sustainable water for mining operations can be an issue. However, Atacama recently announced that it has signed a deal with a local water utility to use industrial water for mining operations. This would represent a first in Chile for a high-Andes operation and should accelerate the permitting process as scarce water is not being taken from the environment. Atacama has reported that it has identified a number of potential opportunities to reduce the capital costs of a heap leach operation at Cerro Maricunga without significantly impacting potential production. These opportunities are being examined and, if warranted, will be incorporated in the upcoming prefeasibility study. With all the baseline environmental data collection completed, Atacama will look to move ahead with final feasibility work in 2014 and preparation of an environmental impact study for the development of a major gold mining operation at Cerro Maricunga. Atacama Pacific Gold Corporation 330 Bay Street, Suite 1210 Toronto, ON, Canada M5H 2S8 Phone: 416.861.8267 info@atacamapacific.com TSX.V: ATM Year Hi/Low: $3.00/$0.69
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PDAC 2014 | Planning for Profits | Report on Mining 17
Improving Commodities Outlook Hindered by Escalating Problems in Emerging Markets 2013 was Challenging Due to Oversupply, Investors’ Preference for Equities By Elvis Picardo, CFA
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udging by market action in just the first five weeks of From March 2009 to January 2014, the TSX-V advanced 2014, this already promises to be a more volatile only 12%, with total returns of about 13.5% cumulatively year than 2013. Although global macroeconomic or a paltry 2.6% per annum, compared with cumulative risk did recede as we had expected last year, the main returns for the TSX Composite of 90% (14.0% per annum) beneficiaries of investors’ resurgent risk appetite were and 161% (21.7% per annum) for the S&P 500. Those equities, not commodities. Commodities as a group had numbers are a far cry from the Venture index’s glory days a difficult year, posting their first annual decline in five in the 2002-07 commodity boom, and perhaps simply years as supply exceeded demand for many of them. reflect the “regression to the mean” phenomenon that is Although much of the pessimism surrounding the commodity often evident in financial markets. complex had dispelled by year-end on the prospect of The index was weighed down by a broad commodity improving global growth, a literal eruption of problems slump in 2013. While the S&P GSCI Spot Index of 24 in diverse emerging markets in late-January has clouded raw materials and the Thomson Reuters/Jefferies CRB the outlook for commodities this year. The prospects for Commodity Index were only down 2.2% and 5.0% many commodities in 2014, therefore, depend on whether respectively last year, individual commodities fared much strength in advanced economies can offset growing worse. weakness in emerging markets. TSX Materials Index and TSX-V vs. Global GDP growth: 2009 - 2014 2013 Review: TSX-V underperformance widens after 24% plunge Investors who had pinned their hopes on a recovery in the TSX-Venture index in 2013 – after a 47% plunge in the preceding two years – were sorely disappointed, as the resource-heavy index fell almost 24%. The TSX-V has lost almost 60% of its value from 2011 to 2013, which means that the global equity rally that commenced about five years ago has bypassed it almost entirely.
18 Planning for Profits | Report on Mining | PDAC 2014
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Steep declines in most commodity prices The worst-performing commodity in 2013 was corn, which had its biggest drop in 50 years as it plunged 40%. The U.S. corn harvest rose to a record 355 million metric tons, rebounding 30% from a disastrous 2012 season when the harvest was affected by the worst drought since the 1930s. Sugar, wheat and cocoa were other agricultural commodities that had significant price declines in 2013. Base metal prices also fell. The London Metal Exchange’s six main metals all posted declines, with a collective drop of 8.5% in 2013 after a 4.5% gain in 2012. Nickel had the biggest decline, tumbling 19% as its global surplus reached 149,000 tons, while zinc had the smallest drop of 1.2%. Copper fell 7.0% last year as inventories rose for the first time in four years. Overall, precious metals were the biggest losers among commodities in 2013, with gold and silver posting their biggest declines since 1981. In particular, the 28% plunge in gold epitomized investors’ clear preference for equities over commodities in 2013. The precious metal fell last year for the first time since 2000, when it had commenced a rally that took it up more than 600% at its peak in September 2011. www.ReportOnMining.com
Energy was a bright spot last year. Crude oil gained 7.2%, while natural gas surged 26% – the largest gain in the 24-member GSCI index – as the U.S. endured its coldest winter in two decades. Equities trounced commodities in 2013 Returns from equities trounced those from commodities by the biggest margin in years in 2013. The MSCI All-Country World Index of 44 markets gained 20% last year as equity indexes in all 24 developed economies rose. Gains were led by a 51% surge in Japan’s Topic index and a 30% increase in the S&P 500, which set a new high as it recorded its best performance since 1997. But the equity environment was not as robust in Canada, despite the TSX Composite’s 9.6% gain for the year. Total financings on the TSX-V fell 37% in 2013 to $3.78 billion, while the number of financings fell 15%. New issuers listed and IPOs plunged by more than 50% to 76 and 52 respectively. On the senior exchange, total financings fell 21% to $39.9 billion, and the number of financings fell 17%. Although new issuers listed and IPOs on the TSX fell 18% and 16% respectively, IPO financings bucked the trend with a 28% increase to $5.5 billion. PDAC 2014 | Planning for Profits | Report on Mining 19
Improving outlook for global economy But there is hope for a turnaround in the commodity sector in 2014, despite the outlook being rendered somewhat murky by the turmoil in emerging markets. Things looked positively rosy heading into this year, and as recently as the third week of January, expectations were for global growth approaching 4% over the next couple of years. The International Monetary Fund (IMF), in its World Economic Outlook update released on January 21, had revised its forecasts for global growth slightly higher from its October 2013 outlook, largely due to the recovery in advanced economies. The IMF forecasts global growth of 3.7% in 2013 (up from 3.0% in 2013), and 3.9% in 2015. The U.S. economy is expected to grow 2.8% this year (up from 1.9% in 2013) and 3.0% next year, with Europe stumbling out of its recession for the last two years to grow at 1.0% in 2014 and 1.4% in 2015. As a result, the advanced economies are expected to collectively post economic growth of 2.2% in 2014 (up from 1.3% in 2013) and 2.3% in 2015. The emerging market and developing economies, on the other hand, are forecast to grow faster than the advanced economies in absolute terms – as is to be expected – but the rate of change is expected to be much slower than for the advanced economies. Specifically, the emerging market / developing economies group is forecast to grow at 5.1% in 2014 and 5.4% in 2015, but that’s not much faster than the 4.7% growth pace of 2013. Commodity outlook clouded by emerging market issues China’s economy is forecast to slow down to 7.5% in 2014 and 7.3% in 2015, from a growth rate of 7.7% in the preceding two years. Recent data seem to confirm the widespread suspicion that the Chinese economy is slowing down markedly. Given China’s status as one of the biggest consumers of commodities, slower growth in the Asian giant may cap commodity price gains. The outlook for commodities in 2014 is also clouded by the issues that have sprung up in a number of other key emerging markets. The recent devaluation of the Argentine peso and the plunge in the Turkish lira have led to concerns about “currency contagion,” similar to that witnessed in the 1997 Asian crisis. These concerns presently centre on the “Fragile Five” – Brazil, India, Indonesia, Turkey and South Africa – which have massive current account deficits and may find it difficult to attract external funding as global monetary conditions tighten with the onset of Federal Reserve “tapering.” 20 Planning for Profits | Report on Mining | PDAC 2014
Is the glass half-full or half-empty? Arguments can be made for both the bull case and bear case for commodities. The bull case for commodities is bolstered by the improving global economy and monetary policy that remains stimulative in much of the world. The bear case is supported not just by a looming slowdown in China and the rout in emerging markets – which could extract a toll on global growth – but also by the fact that most major economies are grappling with the spectre of deflation, rather than inflation. The IMF warned in its January update about the risks of lower-than-expected inflation in advanced economies, especially the euro area, which raises the likelihood of deflation if there are adverse shocks to the economy. Consumer prices in the euro area rose by only 0.7% in January from a year earlier, which is less than half the European Central Bank’s (ECB) goal of just below 2%. Deflation depresses demand as consumers wait for prices to fall further, and also increases debt burdens as real interest rates rise. While inflation tends to have a positive impact on real assets like commodities, which are viewed as a hedge against inflation, deflation has the opposite effect on commodities. Promising signs At the time of writing this article in the first week of February, there are promising signs of renewed interest in the resource sector. The TSX Materials sector was the worst performer of the 10 TSX groups in 2013 with a 30.6% decline, but as of February 7, had rebounded 10.9% for the second-best performance YTD. As well, 16 of the 20 best-performing stocks on the TSX as of February 7 belonged to the TSX Materials group, primarily gold and silver producers. In our 2014 Outlook report, we had posited that the energy and materials groups could benefit this year as investors rotate into these cyclical sectors, which typically do well in a late-stage expansion similar to the present one. Many resource-based companies are trading at deep discounts to net asset value, and offer attractive risk-reward payoffs for the patient investor. The fortunes of Canadian commodity producers are inextricably tied to global growth, as can be seen in the accompanying chart. Although short-term challenges remain, the prospect of faster global growth in 2014 should hopefully enable commodity producers to commence recovering from the intensely negative environment of the past two years. (Elvis Picardo is Vice President – Research, and a strategist & analyst at Global Securities Corporation in Vancouver. The opinions expressed herein are his own.) www.facebook.com/reportonmining