Japan closed all 76 of its gold mines during World War II, and reallocated personnel to base metal mines and factories. After the war, it only reopened 12 of the mines, leaving the other 64 closed to this day.
It wasn’t until 2012 that Japan allowed foreign mining companies to come to its shores for the first time in its history.
That’s when entrepreneur John Proust formed Japan Gold (TSXV: JG; US-OTC: JGLDF) and assembled a portfolio of 12 gold projects, which contain 42 of the 64 gold mines that were closed during the war. The projects are on Japan’s three largest islands: Kyushu, Hokkaido and Honshu.
Newmont Goldcorp (TSX: NGT; NYSE: NEM) holds a 19.9% stake in the company. Other shareholders include Resource Capital Funds, with an 8.8% stake, and two large Japanese funds that together own another 8.8%.
“We were the first one in the world to go there. We were there within a month or so of the change to the mining law — and it took us about two years to understand all the opportunities,” Proust says in an interview, noting that the company had acquired its gold projects and another five gold-bearing lithocap projects long before the second publicly listed foreign mining company, Irving Resources (CSE: IRV), came to the country in June 2016.
“I expected competition would come sooner or later, and that’s why we did everything quietly,” he continues. “We didn’t publicize it, didn’t tell people where we were going, and so we’ve built a lovely portfolio.”
Japan Gold recently kicked off its first drill program this year at the Ohra–Takamine project in the southern island of Kyushu. The initial 2,100-metre program will test an open-ended, 3.5 km corridor of alteration in the central area of the project that hosts three past-producing mines: Ohra, Takamine and Urushi, which produced until their closure in 1943.
Diamond drilling will target extensions and parallel vein shoots below and along strike of shallow mine workings to depths of 700 metres.
Ohra–Takamine is 20 km from the producing Hishikari gold mine, which is owned by Sumitomo Metal Mining Company. Hishikari has produced 7.6 million oz. gold to date at average grades of between 30 grams and 40 grams gold per tonne.
Other gold producers within the district that have closed are the Yamagano mine, 7.5 km away, which churned out 910,000 oz. gold at an average grade of 17.4 grams gold per tonne. Farther afield are the Kushikino mine, 20 km southwest, that produced 1.8 million oz. gold at a grade of 6.7 grams gold, and the Okuchi mine, 25 km north of Ohra–Takamine, which churned out 714,000 oz. at 13.6 grams gold.
The targets the company has assembled for the historic mines are all low-sulphidation, epithermal zones, and Proust points out that Sumitomo’s Hishikari is also a low-sulphidation epithermal mine.
Hishikari, one of the highest-grade gold producers in the world, was discovered in 1981 under four shallow historic gold mines.
“Hishikari was found 200 metres beneath the old mines on that site, and we’re targeting between 200 and 250 metres below the three historic mines on our project,” Proust says.
Japan Gold also plans to start a 3,000-metre drill program, 2,575 km north of Ohra–Takamine at its Ikutahara project in northern Hokkaido. Ikutahara covers 17 historic underground gold mines and surface workings that were all closed in 1943, and never reopened. Ikutahara is south of Sumitomo’s historic Konamai mine, Japan’s third-largest mine, which produced 2.4 million oz. gold at just over 6 grams gold per tonne from 1917, until it closed in 1974.
Drilling at Ikutahara will focus on vein zones below the historic Kitano-o gold mine, which operated between 1924 and 1943, and produced 96,450 oz. gold at a grade of 5.9 grams gold, largely from mining gold-bearing eluvium associated with sinter deposits and sub-sinter epithermal veins. The workings at Kitano-o comprise numerous shallow digging, pits, sluicing benches and collapsed tunnels, over a 2.5 by 0.4 km area.
“It was at surface where there was a silica cap lying over a very large hill, and just underneath that centre was a fixed clay layer running about 6 grams gold,” Proust says. “It was discovered in the 1920s, and then 10,000 people moved to this little town and built a 500-tonne-per-day processing facility, a rail line, and were scaling up to 2,000 tonnes a day in 1943, when the government closed down the mine, and moved them to other areas where there were base metal factories to support the war. And this area was abandoned.”
Proust adds that in 1991, the Metal Mining Agency of Japan drilled a vertical hole at 700 metres’ depth to the basement, and the company says there is an opportunity within that 700 metres to find feeder zones that brought the gold to the top of the hill. Drill pads will be placed near the top and on either side of the hill for a series of scissor holes.
In addition to the 12 gold projects, Japan Gold has five projects in southern Hokkaido, northern Honshu, and Kyushu that cover areas of known gold occurrences and gold-anomalous lithocaps, which appear to suggest the potential of porphyry copper-gold mineralization. In April, First Quantum Minerals (TSX: FM) elected not to pursue a formal earn-in agreement on four of the lithocap projects, but Japan Gold says it will continue to pursue “a variety of interested parties” to advance the properties.
In the meantime, the company has bought four drill rigs for $125,000 each from a large drilling company in Indonesia that is owned by Japan Gold’s president, Mike Andrews. The company can also bring as many as 18 drillers from Indonesia to run the program.
“Japan is full of contradictions,” Proust says. “It’s known for being one of the most technically advanced in the world, but as far as drilling goes, there has been no real need for it because there hasn’t been any real exploration, so we found that drill rigs weren’t available.
“I also wanted to get people who have done it all their lives, so we’re assured of excellent recoveries and drill metres.”
The mining executive notes that one reason the country lacks drilling expertise is that until fairly recently, Japanese mining companies were incentivized to go abroad and bring natural resources back to the island nation, rather than explore for metal at home. “Now the Japanese government wants to open new mines, and that’s why they changed the mining law, which denotes support for this process,” Proust says.
Japan Gold will also benefit from the 28 smelters built in the country.
“Just as Hishikari ore is shipped to a smelter, if we were successful in opening a new mine, it would be a low-sulphidation epithermal mine, with coarse veins with gold in them. And a number of smelters are letting us know they need silica or flux for their smelting process, so they are basically hoping that we might have a long-term relationship with them, and supply our silica to them.” (When silica, or quartz, is put into the mix at a smelter, it acts like a sponge that absorbs negative materials like iron. The iron bonds with the silica, and it can then be separated from the copper.)
Having access to local smelters will make permitting far simpler and capex less costly, he says.
“We wouldn’t have to raise capex to build a production facility, and our footprint would be smaller,” he says. “We’d be direct-shipping it by truck or rail to a smelter, and we have identified five of the 28 smelters that would be appropriate for our needs.”
Proust says that Japan Gold’s early-mover advantage makes it attractive to major mining companies that lack a presence in the Asian nation. “Building for the long-term, as we are now, with critical mass makes us very attractive to the international majors, and even the Japanese groups,” he says. “Even with the Japanese companies — they don’t really have exploration groups in Japan — and as funny as that sounds, they find what we’re doing very attractive, as well.”
Japan Gold has traded in a 52-week range of 7¢ to 38¢, and at press time traded at 26¢. The junior project generator has 114 million common shares outstanding for a $29-million market capitalization.