GTA Resources (GTA-V) caught the market’s attention in one fell swoop earlier this year with drill results from its aptly named Northshore project on the north shore of Lake Superior.
The intercept spanned 149.5 metres grading 3.21 grams gold and when it was released along with the results from 12 other holes GTA’s stock jump from 24¢ to $1.54 in a single day of trading.
While the assays seemed to shock the market they came as little surprise to GTA’s chief executive Peter Clausi as GTA had been getting significant early stage results towards the end of 2011.
“We took chip samples across the quartz vein systems and over 78% of them returned values greater than 10 grams gold,” Clausi says. “We put out a press release in November and the market did nothing….so we said ‘alright then’ and just pushed on ahead.”
In total 55 chip samples were collected and returned results with values ranging from 1.10 grams gold to 798.82 grams gold — promising early results indeed.
Those samples, and the eye-popping drill results all came out of three key areas at the project: the broader Afric Zone and the Audney and Caly vein systems that run within it.
Afric tracks east-west and historic drilling has outlined 480 metres of strike which remains open to the east. The zone is characterized by intense fracturing associated with moderate to strong alteration of felsic intrusive rocks that have been intruded with several northeast trending high-grade quartz vein systems including the Audney and Caly veins.
While past drill programs at Afric focused on areas immediately around the visible quartz veining, GTA’s approach was to find out if there was more continuity through out the zone than previously believed — and its February results showed that indeed there was.
Not that the company ignored the known veins. Over at Audney eight of nine holes hit mineralization and the system now has a strike length of over 100 metres and has been drilled to a depth of 110 metres. The system remains open in all directions.
As for Caly — a vein system which strikes parallel to Audney roughly 70 metres to the southeast — it was the vein which yielded the golden intercept that caught so many investors’ attention. Drilling to date has traced the Caly over 50 metres along strike and it also remains open in all directions.
Once the February drill results commanded the markets attention, GTA quickly moved to secure the capital it would need to keep the drills turning. A shrewd move given the large sell-offs experienced by junior miners in the following months.
But rather than market prescience, Clausi says the financing was driven by far more practical concerns.
“We wanted enough cash for three rounds of exploration,” he says.
GTA got the capital by closing a financing deal that raised $6 million through issuing units made up of a share priced at 90¢ and a half warrant with a strike price of $1.25.
With fresh capital in hand GTA’s vice president of exploration Robert Duess had the ammunition he needed to get the drills turning once again and with all-in drill costs of just $205 per metre the new capital is expected to go far.
Eight more holes have been drilled since the second phase of drilling got underway and two holes have been reported with one hole returning a highlight intercept of 240 metres grading 1.41 grams gold while the second hole returned 80 metres grading 0.77 grams gold. Both of those intercepts were made in the Afric zone between Caly and Audney.
And while it awaits results from the remaining five holes GTA is already gearing up for its third round of drilling. A recent 43-101 report — a report that did not include a resource estimate — called for $1.6 million to be spent on phase three. Clausi says $1.2 million of the total will go directly into drilling 6,000 metres worth of core.
Once the third phase is completed, GTA will have earned a 51% ownership stake in Northshore as its option agreement calls for a cash payment of $50,000, 2.5 million GTA shares and $2.5 million in exploration spent over 3 years.
The company can move up to a maximum 70% stake by making an additional cash payment of $100,000, issuing another 1 million shares and spending $3 million more on exploration over 24 months.
Given the prospectiveness of the early results, those terms are far from onerous. So how did GTA come to get such a bargain on a low political risk project with so much upside?
As is usually the case, timing was everything. GTA arrived on the scene shortly after Balmoral Resources (BAR-V) acquired Northshore as part of a larger deal with American Bonanza Gold (BZA-T).
That deal saw Balmoral pony up $3.7 million in cash and 4.5 million shares worth $3.4 million at the time to American Bonanza for a suite of projects in eastern Canada. At the time of the deal American Bonanza said it was selling the assets to raise capital for its flagship Copperstone gold mine in Arizona.
But Balmoral had its sights set on making another big discovery on the Quebec side of the Abitibi and quickly shuffled Northshore down the totem pole. So just six months after closing the deal with Bonanza, GTA was able get a shot at Northshore.
“Balmoral is an elephant hunter and they didn’t think this was an elephant,” Clausi explains.
And while Balmoral spared no capital on poking around at Northshore, that didn’t mean GTA was going in blind.
Even before American Bonanza began compiling geological information the ground had seen its fair share of prospectors, explorers and miners.
Before Bonanza there was Noranda, whose remnant drill core was left in ramshackle boxes in the woods, which Duess says the company is currently trying to sort through.
But the project’s history stretches further back than the Noranda days.
Gold was first discovered at Northshore in 1898 and between 1920 and 1937.
14 gold rich veins were discovered.
A company named North Shores Gold Mines was formed in 1933 and a 25-ton mill was built in 1934 with gold production getting underway the next year. In 1937 the operations came to halt after 3,808 tons of ore were milled yielding 2,441 oz. of gold and 226 ounces of silver.
GTA’s area of interest is roughly 700 metres south of the old mine and Duess is still trying to piece together how the mineralization that fed the old mine may fit with that in the Afric zone as the two zones trend in different directions and are made up of different host rock.
He says while it is early days a theory he is working with is that both mineralized areas could be part of a larger porphyry system that was displaced by faulting. So while the original miners rashly assumed that when the gold rich veins abruptly stopped at a fault line north of Afric the gold story at Northshore was over, GTA is proving that there is considerably more to it than that.
“It’s not a new discovery,” Duess says. “But we’ve brought a fresh look to it.