With large companies shedding assets to trim costs and juniors struggling to pay the bills—not to mention raise money—it’s probably safe to say that listing a new exploration company these days is not for the faint of heart.
But you just can’t wipe the smile off the face of Roger Walsh, chief executive of Rapier Gold (RPR-V), when he talks about the potential the newly minted company has to offer.
Rapier’s Pen gold project sits on 16,000 hectares of ground on the Porcupine Destor Fault about 75 km southwest of Timmins that Walsh has day-lighted over the last year in deals with Rio Tinto (RTP-N, RIO-L) and Rogue Iron Ore (RRS-V) and which he believes could be—wait for it— the next Kirkland Lake.
In the process he has managed to convince Daryl Hodges, a geologist and president and chief executive of Jennings Capital and Chris Rockingham, vice president, exploration and business development of AuRico Gold (AUQ-T, AUQ-N), that Rapier may be on to something special.
Rockingham, who first identified Young-Davidson as a site with considerable exploration potential when he worked for Northgate Minerals prior to its amalgamation with AuRico, liked enough of what he saw after a visit to the Pen project that he persuaded the board to take a strategic 19.9% stake in Rapier (AuRico acquired 4.7 million shares at 30¢ apiece). AuRico also has the first right to negotiate a joint-venture on portions of the project if Rapier decides to seek partners. (The Pen project lies about 100 km to the northwest of AuRico’s Young-Davidson mine.)
“Once you have a footprint in a significant camp you start to look at other things nearby—that’s just the evolution of how mining companies operate,” Rockingham says. “We’re not betting the farm, it’s a small stake...but I was impressed with the degree of alteration and the fact that there was visible gold that seemed to be in a specific setting. It’s not like downtown Timmins—it hasn’t been beaten up over the years with intense exploration that obviously goes on around something like a Hollinger or a McIntyre—but the Pen project is arguably on the same trend.”
As for Hodges, who cut his teeth drilling off the Hoyle Pond discovery and looking at projects around Timmins and Kirkland Lake, followed by another 15 years in exploration, the Pen property has potential.
“The characteristics I see are very similar to the heart of the Porcupine district around Timmins, which would include the Hoyle Pond environment,” he says. “This is not to say it is the same as the Hoyle deposit, but very similar to the Hoyle environment, with the type of altered mafic and ultramafic rocks, quartz–feldspar porphyries, the visible gold in deformed quartz veins, the intense carbonate and fuchsitic alteration, and shear zone deformation in places. So that’s why I put on my boots and jeans and lumberjack shirt and flew up to Timmins to spend a day looking at drill core and going out to the field to look at the geology.”
What he saw there was what looked to him like many of the important geological indicators that he has seen in the Timmins and Kirkland Lake camps. “I came away from that visit feeling quite positive. This project will take a lot of work and it will be complicated,” he says. “But I saw all the evidence that made me think we’ve got an extension of the Porcupine gold camp and possibly the Destor–Porcupine fault zone well west of where anybody would have thought that you would find all those important indicators of gold mineralization.”
The Rapier tale — a combination of serendipity and savvy — begins in February 2012 when Walsh joined Rogue Iron Ore as a consultant with plans to help the junior base metal explorer spin-out its gold properties. When Rogue’s management mentioned to Walsh that Rio Tinto’s industrial minerals division was also interested in monetizing some of the ground it held near the junior’s Radio Hill iron ore project and near which it had operated a talc mine for several decades, Walsh sensed an opportunity to combine the two land positions.
Rio discovered the gold in 1998 when a geologist was re-logging talc core three years after it had been drilled. “They discovered gold there by accident, literally by accident,” Walsh beams. “They were really just trying to see if there was any more talc that they were missing.”
The precious metal findings in the core were not even brought to the attention of Rio’s senior management until 2001 because there was little interest at the time in gold, which in the late 1990s was trading at between US$273 per oz. to US$313 per oz. and talc was worth a whole lot more. It wasn’t until the start of 2008, when the price of gold had climbed to around US$833 per oz., that Rio approved a small budget for a 1,305-metre drill program to test the northerly extension of the talc mine. Rio drilled seven holes to a maximum vertical depth of 150 metres.
The drill core showed carbonate and fuchsite alteration indicative of Abitibi greenstone belt gold mineralization with the most significant intersections being 0.30 metres grading 22.1 grams gold per tonne; 2.0 metres of 9.96 grams gold; and 0.30 metres of 13.3 grams gold. On the recommendation of consultants, Rio then staked a further 4,760 hectares of land in the area.
None of Rio’s historical drill results (a total of fourteen holes) were ever made public and eventually Rio decided to separate the talc rights from the gold rights on its entire land position. In March 2011 it sold its talc division, which included the Ontario mine and several others in the United States, to Imerys for more than US$300 million. Rio’s industrial minerals group in Denver then set out to sell the rights to the gold, but only approached a small group of junior companies.
“I became aware of it when those juniors started banging on Rogue’s door because it has the larger block, which is on the Porcupine Destor Fault, and I then went to Rio and proposed a consolidation,” Walsh explains. “They were not interested, preferring an outright sale, but then came back to me as they realized none of the parties would do a deal until they had Rogue stitched up in a joint venture.”
“Nobody in the gold space seemed to be aware of this — nobody!” Walsh adds. “It was one of the luckiest breaks I think I’ve ever had.”
One of the things that stood out for Walsh was that Rio’s drilling never went deeper than 150 vertical metres in a district where mines are typically developed well below the 1,200-metre level. The property was also in a hot neighborhood with the likes of Lakeshore Gold’s (LSG-T) producing Timmins West mine about 57 km to the east; Probe Mines’ (PRB-V) Borden Lake property 150 km to the southwest; and Queenston Mining’s (QMI-T) Upper Beaver project 160 km to the southeast.
Consulting geologist John Reddick, who sits on Rapier’s board of directors, says some of the things that he likes about the Pen property include the fact that the ground has been relatively unexplored and the rock types and the structures that run through it are similar to those elsewhere in the district.
“Rio had the ground pretty well tied up with the talc mine and nobody has done much exploration on it,” he explains in a telephone interview from his home in Kingston. “The style of mineralization is typical of some of that found in the Porcupine camp. The variety of mafic, ultramafic and sedimentary rock types is similar to those found in the Porcupine camp and these rocks are cut by major structures related to the Porcupine Destor Fault.”
“It’s been known for a long time that these structures run west from Timmins so from a prospectivity point of view it’s really quite interesting,” he adds. “It’s got the major faults, the right rock types, and a couple of sniffs of gold.”
Under the deal with Rio Tinto, Rapier paid $600,000 upfront and has committed to spending $1.5 million on Pen Gold North, including drilling, within 18 months of closing the equity financing. After a 43-101 report confirms an economic resource (indicated or better) Rio will be paid $5.00 per oz. on any ounces of gold contributed from Pen Gold North with a cap of $5 million.
When Rapier completes a feasibility study, if the Pen Gold North contribution of ounces to the project is less than 1 million oz. gold, payment will be pro-rated according to ounces contributed against the total project ounces. Rapier will also pay a 2% net smelter return on any ounces of gold mined from Pen Gold North and a 0.75% NSR on any ounces mined from Pen Gold South.
“I just shake my head and say, ‘How did all of this happen?’ Walsh says. “It’s fantastic, very significant geology on a large land position, in a location that has the best infrastructure and lowest geopolitical risk in the world.”
As for Rogue, it spun off its gold property adjacent to Rio’s ground and gave shareholders one new Rapier share for every four they held of Rogue.
“The idea was to see how much value we could create for Rogue shareholders for their non-iron ore assets and I think we’ve done a very good deal,” Walsh says. “They haven’t given any of it away.”
“Most of the drilling that has been done is not on their ground,” he adds. “Think back a year ago: Rogue had a small treasury focused on advancing an iron ore project...I think most of the shareholders are going to be extremely happy because we are taking steps to fully explore this land position, which has an extremely good address.”
Since the junior’s listing on the Toronto Venture Exchange on Mar. 12, the priority has been to start a 5,500-metre drill program of about 20 holes on four separate areas of the project. This program should take about six weeks.
In May, Rapier plans to trench sample the eight target areas identified by Rio for follow-up at a cost of about $500,000. (Rapier geologist Mary Stalker worked for Rio when the mining company was examining the property’s gold potential.) Once the ground is clear of snow, a mapping program will get underway to generate drill targets for the 2013 winter drill program at a cost of about $300,000.
At presstime in Toronto Rapier shares were trading at 23¢ a share, 10¢ below its IPO price. The junior has 23.5 million shares fully diluted.
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