VANCOUVER — With a new project, a new board of directors, a refreshed treasury and new membership in a successful group of Vancouver-based exploration companies, Laurentian Goldfields (TSXV: LGF; US-OTC: LRTNF) is being reborn.
For years Laurentian was a prospect generator — a junior explorer with a large portfolio of early stage projects. Then Darin Labrenz came on as president and CEO. Labrenz joined in 2011, just as it was becoming difficult for Laurentian to find the joint-venture partners that a prospect generator needs to survive.
A geologist with decades of experience starting and operating mines, Labrenz kick-started a corporate transition by searching for a flagship project. After assessing hundreds of possible projects, Labrenz homed in on the right opportunity during a conversation with Mark O’Dea.
O’Dea is the founder of Oxygen Capital, a concentration of funds and expertise that O’Dea often describes as a “mining-company incubator.” Many of the people at Oxygen came from Fronteer Gold, the Nevada explorer Newmont Mining (TSX: NMC; NYSE: NEM) took out in 2011 for $2.3 billion. The group has since created several success stories, including current market darlings True Gold Mining (TSXV: TGM; US-OTC: RVREF) and Pilot Gold (TSX: PLG; US-OTC: PLGTF).
Labrenz told O’Dea of his search for a flagship asset for the new Laurentian. O’Dea suggested a return to an area where Labrenz had worked years earlier — the Red Lake district in Ontario — and that he try to get his hands on the Madsen gold project.
“It’s Canadian, it’s high-grade gold, and it covers one of the best land positions in the Red Lake district,” Labrenz said in an interview. And Madsen now belongs to Laurentian, after the company gave Claude Resources (TSX: CRJ; US-OTC: CLGRF) $6.3 million in cash and 9.8 million shares for the project. Another $2.5-million payment in the coming months will finish the deal.
The Madsen project covers the southern end of the main gold trend in Red Lake, which stretches for 12 km from the Starratt–Olsen and Madsen mines in the southwest to the historic McFinley mine in the northeast, now dubbed the Phoenix gold project and being pushed toward renewed production by Rubicon Minerals (TSX: RMX; NYSE: RBY).
The Madsen mine operated from 1938 to 1974, and then again from 1997 to 1999, producing 2.5 million oz. gold from 7.9 million tonnes grading 9.7 grams gold per tonne. It was an underground operation with one main shaft at 20 levels.
Claude Resources operated the mine in its second stint, resuming production soon after acquiring the property in the mid-1990s. However Claude soon ran into issues, which Labrenz relates to a lack of geologic understanding. The company took a step back, compiled historic data and started exploring, but then the recession hit and Claude had to focus on its operating asset, the Seabee gold mine in northeast Saskatchewan.
“I believe they ran out of time,” Labrenz said. “In many ways Claude was compelled to sell, and we saw that as a bit of an opportunity. In our negotiations you could tell they still have a deep love for the project, and it was hard for them to let it go.”
After signing the Madsen deal, Laurentian needed to raise the money to pay for it. Labrenz said that while financing in today’s markets was a challenge, the Laurentian story resonated with investors.
“For one, we’ve got a company that was set up to do this — we went through a share consolidation a little over a year ago,” he said. “We revamped the board and are building a team of technical experts, plus we’ll have access to the folks at Oxygen Capital. Also being in Canada — I think we’re seeing a return to safer jurisdictions as well as a move away from large and low grade into higher-grade. And it’s permitted.”
Madsen offers several small, high-grade gold zones with defined resources that total 3.2 million indicated tonnes grading 8.93 grams gold, plus 788,000 inferred tonnes averaging 11.74 grams gold.
The story of high gold grades in an underexplored but permitted property resonated with enough investors that Laurentian raised $18.6 million, selling 74 million units at 25¢ apiece. Each unit comprised a share and half a warrant exercisable at 50¢ for 30 months. Following the financing Laurentian has 97 million shares outstanding.
After paying for the property transaction, those funds will support Laurentian as Labrenz and his team reanalyze reams of historic data — there are logs from 13,000 underground drill holes, plus detailed maps of all workings — over the next few months. By mid-2013 Labrenz plans to be ready to drill.
Laurentian will join a rush of explorers and miners returning to Red Lake, a historic district that has already produced 28 million oz. gold. Goldcorp (TSX: G; NYSE: GG) just built a new headframe over the high-grade zone at its flagship Red Lake mine while refurbishing the headframe at the nearby Cochenour mine for a restart. Meanwhile Rubicon is seeking funds to build a mine at Phoenix, and several other companies are probing old areas for new discoveries.
The Madsen mine sits along an unconformity that divides the younger Confederation assemblage rocks on the east from the older Balmer assemblage to the west. All the past gold produced at Madsen came from the Balmer assemblage, within 2 km of the unconformity.
Laurentian thinks there is likely more gold near the unconformity, but the team is even more excited about other types of gold mineralization at Madsen.
In its later stages of mining at Madsen, Claude drilled a vertical hole down from the bottom of the shaft and intersected what is now known as the No. 8 zone, more than a kilometre underground. Intersect indeed: the drill returned 6.4 metres grading 21.9 grams gold.
Intriguingly, the No. 8 zone is not along the unconformity, offers gold hosted in an ultramafic rock unit rather than in the Balmer volcanics and appears to be more of a quartz-carbonate gold system than the volcanic tuffs system mined at Madsen.
That kind of mineralization has only been found in one other place at the Madsen property — an area known as Aiken–Russet. Aiken-Russet sits on surface — right where the ultramafic unit hosting No. 8 zone should project to surface — and hosts a historic resource, not compliant with National Instrument 43-101 regulations, of 63,360 tonnes grading 9.3 grams gold. If the unit is gold-bearing from No. 8 zone to Aiken–Russet, that would mean 1.6 km of mineralization.
“It’s the only place in the ultramafic with any defined resource, so we see that unit as offering great potential to host additional resources,” Labrenz said. “And we have strong reason to believe this thing extends to depth. Archean deposits generally have good lateral extent and strong roots.”
Those are not the only targets at Madsen. A few hundred metres south is the Fork zone, situated on a flexure in the contact between the Balmer volcanics and another unit of ultramafic rock. Claude tested the Fork zone with a series of holes in 2008 and hit into good gold grades, including 31.4 grams gold over 1 metre, 49.8 grams gold over 1.3 metres and 17.3 grams gold over 10 metres.
And similar to the potential connection between Aiken–Russet and the No. 8 zone, the ultramafic unit at the Fork zone could extend down towards a high-grade intercept drilled from the Madsen mine’s 16th level. In a search for new resources Claude drove level 16 several hundred metres southwest. One of the holes drilled from the end of this exploration drift returned 21.3 grams gold over 1.5 metres, in similar geology as that seen at Fork, 600 metres up.
There are other targets too, like Treasure Box, an ankerite-altered vein system with visible gold, and the Buffalo mine, a near-surface sheared intrusive contact that hosted a small open-pit mine in the 1980s.
“There are a lot of opportunities,” Labrenz said. “We’re going to spend the next few months really focusing on understanding the structural context of mineralization from the historical data, because I think we can pull more information out of that data. Then we’ll start drilling [in mid-year] and continue for the balance of the year.”
In the meantime Laurentian’s rebirth will continue. The board has been revamped with the addition of O’Dea, Graeme Currie and Lenard Boggio. Troy Fierro and Rob Pease will also join, once shareholders approve a board expansion. Laurentian will rebrand under a new name in the coming months and the company just moved its Vancouver headquarters to share offices with its Oxygen Capital peers Pilot Gold and True Gold.
“The other thing I think Madsen suffered from for decades is a lack of focus — it was never the flagship,” Labrenz said. “We’re walking in and this is our property, this is our flagship, and we’re building a company around it.”
Laurentian shares were halt-traded from December until early March while the Madsen deal was completed. When trading resumed LGF shares jumped from 7¢ to 40¢, where they remain.
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