The official Yukon Mining Tour kicked off (read part 1 from Friday here) with a 6:30 AM checkout in Whitehorse.
We made our way to the Alkan Air Hangar which services northern Canada and Alaska, based out of Whitehorse. The group boarded a 15 person fixed wing airplane to make the 1.5 hour journey to ATAC Resources (TSX.V – ATC) 100% owned Rackla gold project in the central eastern Yukon.
We arrived on the 3000’ gravel Stewart air strip, one of the three air strips servicing ATAC’s claims. This is a fly in only camp with roads yet to be built. From their Tiger oxide gold deposit it is 48km to Keno City which has a government maintained highway. The plan is to build an access route in the near future. Using a cost/Km metric for road construction on a comparable Yukon project ATAC’s proposed 48km road could roughly cost $2.4M, feasible with their current treasury (approx $19 million).
Vanessa Pickering, Corporate Communications Manager, of ATAC Resources accompanied us on the flight and at the airstrip we were greeted by Julia Lane, B. Sc, P. Geo, VP of Exploration, who manages all geological aspects of the Rackla gold project.
Ms. Lane has worked in mineral exploration in the Yukon since 2006 and joined ATAC in 2009. Ms. Lane is also a Partner of Archer Cathro & Associates which provides project management services to ATAC.
ATAC has a significant 1700km² land position which hosts the Rau Trend and Nadaleen Trend. It is situated on settled land in the Traditional Territory of the Na-cho Nyak Dun First Nations. There is a mutually beneficial Exploration Cooperation Agreement between the two groups. My understanding is that the First Nations of the Yukon are pro-mining and forward thinking in terms of working cooperatively with explorers for the future benefit of all Yukon citizens.
Given our time constraints we would be focusing on the Nadaleen trend which is 30km long and hosts two areas of Carlin-type gold mineralization. This is Canada’s only Carlin-type discovery. The Carlin-type mineralization are made up of both the 12km² Osiris Cluster & 18km² Anubis Cluster. This Carlin-type discovery created a frenzy from 2008 to 2011 which caused the share price to soar from $0.075 to over $9.00, a 12,000% return, if you bought and sold at the right time.
ATAC has determined their Nadaleen trend as Carlin-type mineralization as it exhibits very similar geological characteristics to the original Nevada Carlin-type gold mineralization. Since I’m an accountant and not a geologist I won’t talk about this in depth but those similar characteristics are based on: geological setting, host rocks, mineralization control, alteration types, associated mineralization, mineralizing fluids, gold hosts, and igneous correlation. Notable differences are age of host rock, age of mineralization, and proximity to large scale intrusions.
We all arrived safely and sat down in their dining hall where Ms. Pickering and Ms. Lane debriefed us on the Rackla project. This summer, management are focused on advancing the Anubis cluster, located in the Nadaleen trend which has shown robust outcroppings. They are committing $3M towards exploration and drilling with the majority being spent on Anubis.
As of June 30, 2015 the company reported a working capital of $18.45M, cash position of $19.21M, and management expects to end 2015 with about $16M cash. ATAC management are focused on cash conservation as the current venture markets have proven unfavourable for financings. The Rackla Gold project has still garnered substantial interest from the market with management raising $62M over the last 4 years. They are financially well positioned to wait out a market recovery.
Management is excited about the Anubis region due to the geochemical footprint being as large or possibly larger than the Osiris Cluster which currently hosts 4 Carlin-type targets. Furthermore, Anubis is lower elevation and flatter topography providing easier access to prospect and drill the area. ATAC is implementing cost effective RAB (Rotary Air Blast) drilling at Anubis to test 8km of anomalous strike length this summer. RAB drilling opposed to diamond drilling is much more bush friendly as it is literally a mobile drill rig capable of quickly drilling down 100m.
A significant hole at Anubis was AN-12-001: 8.51m of 19.85 g/t Au and outcropping grab samples have returned grades as high as 139 g/t Au. The zone certainly has the grade and intercepts. Management is looking to replicate what they have discovered at the Osiris Cluster, multiple areas with high grades and large intercepts.
Management said enough metres have been drilled to define a resource at Osiris, but they noted with the current state of the market, the resource released would not be fully appreciated. The plan is to wait for improved market conditions. This will be a major future catalyst for ATAC if they can time the release well.
Management discussed the always viable option of a take-over which would be of interest to a major gold producer once a gold resource in the range of 3M-5M Oz Au was defined. Management firmly believes with the exploration upside at Anubis and Osiris which host Carlin-type style mineralization, that resource is a possible reality.
Ms. Pickering stated, “What has always been abundant at our Rackla Gold Project are the opportunities and mineralized showings creating an endless amount of targets. If a deal were to be done with a major we would need to understand where our gold endowment is so we aren’t giving away assets that aren’t defined due to a lack of exploration. Our project is massive and we have only soil sampled 30% due to the size creating tremendous exploration potential.”
I will briefly discuss the Tiger deposit which was discovered in 2007 and is defined by a PEA. There are funds set aside from the $3M summer budget for optimizations such as geotechnical studies and new processes being investigated such as Continuous Vat Leaching (CVL) to improve processing efficiency. There may be additional drilling to upgrade inferred resources to indicated along with 6 untested oxide gold targets that need to be explored.
Management feels the PEA has vast room to improve as it defines a small but economic gold resource. The LOM production would be 221,558 Oz at an average grade of 3.72 GPT Au. At $1,100 USD gold there economic sensitivity analysis shows after-tax IRR 11.2%, after-tax NPV $12.6M (5% discount), and 3.2 years to payback.
The ore at the Tiger deposit is heavily oxidized (brittle) which is excellent for economics. It would be purely excavated out of the ground not requiring any significant blasting, which is rare for hard rock mining. Crushing and separation of the gold is simpler with oxide ore. The process to extract the gold is a 2 part system; the coarse fraction is a heap leach with confirmed test results of 88% recovery. The fine fraction is put into an agitated tank carbon-in-leach (CIL) boasting a 91% recovery. It cannot be completely heap leached due to the fine fraction, but management are considering options to optimize the economics to use a single separation method.
ATAC is a Yukon exploration story which is going to deliver shareholder value through the drill bit. The Carlin-type gold discovery is exciting which rewards ATAC with high grade and large intercept findings. They have demonstrated an abundance of gold at the Nadaleen Trend specifically the Osiris Cluster and the potential for similar results at the Anubis Cluster. The question is how much?
If you have a multi-year investment horizon and are a gold bug, ATAC will provide strong leverage to the gold price. They are well financed with $19.21M cash to prudently explore and spend capital dependent on their findings. Their biggest challenge is infrastructure as the location is remote and fly-in only access at the moment.
We wrapped up the tour by having a great lunch in their dining hall. Seriously, the camp folks eat better than I do at home! Check back here on Tuesday for the next site visit to the past high grade silver producer Alexco Resources. They are waiting for silver prices to rise and have the infrastructure already built to churn out silver dore with the flick of a switch.
Symbol: TSX.V – ATC
Market Cap: $52.42M
Shares Outstanding: 117.79M
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