Klondike Gold – Searching for the Mother Lode
“The placers dwindle, but the veins that gave rise to the placers are inexhaustible.”
A line from The Age of Gold, by H.W. Brands, depicting sentiment towards ‘hard rock gold’ during the California Gold Rush. This realization – gold found via placer mining was but a fraction of the hydrothermal source held in the hard rock – would change exploration and mining practices forever.
For hundreds of years, gold has been discovered through placer mining. In this rudimentary practice, Mother Nature has done most of the work, having separated the gold from rock. Hard rock gold, usually found in quartz veins, is understood as the source of placer deposits.
The Making of the ‘Mother Lode’ – Thank Californians
During the iconic California Gold Rush, the discovery of the “Mother Lode,” as it was christened, “inspired awe in the gold-hunters.” In his book on the multifaceted history of the California Gold Rush, H.W. Brands stated,
“The mere thought of this huge body of ore lying beneath the foothills set the crustiest miner quivering.”
The discovery of gold in California took place in 1848, some 50 years before the precious metal would be found a few thousand kilometers to the North – up in the legendary Klondike (we will explain the significance of this shortly).
Modern estimates by the U.S. Geological Survey estimate about 12 million ounces of gold were removed in the first five years of the California Gold Rush. Produced strictly through crude placer mining (shovelled and panned), this is an astounding feat.
By the mid 1880s, historians estimate hydraulic mining in California recovered 11 million ounces of gold. By the late 1890s, dredging extracted more than 20 million ounces.
By necessity, Californians began chasing the gold deeper, adopting quartz mining as their method to go after the ‘mother lode’. It involved superior geology, metallurgy, engineering, physics and chemistry. Hard rock mining led to shafts as miners followed outcroppings and gold bearing veins deep underground.
According to various sources, Between 120 and 200 million ounces of gold have been produced in California since that first discovery. This makes the Klondike’s approximate 20 million total ounces of gold production seem rather small… and that’s a good thing from our vantage point.
The Klondike’s Mystery
Approximately 20 million ounces have been mined from the river beds, creeks and surrounding top soil in the Klondike. We speculate that, as was the case in California, many times that exists in the hard rock source(s), which no one has discovered yet. And we’re certainly not the only ones who believe this…
On August 1st, Sunny Freeman of the Financial Post published an article titled, In search of the motherlode: Why Yukon is experiencing a 21st-century gold rush.
We have been writing and producing videos about this precise topic for years. This “mysterious mythology,” or what geologists have been searching for since the first gold discovery in 1896, is the source of the Klondike placer gold fields. In all the years of gold production, there has never been a hard rock gold mine in the Klondike. All of the 20 million ounces mined have come near the surface in riverbeds and topsoil. The world’s largest gold companies are surely aware of this.
And, as this gold market heats up (gold is up nearly 12% year-to-date) amidst a declining U.S. dollar, majors are not sitting idle.
According to Sunny Freeman’s article mentioned above, “Companies including Goldcorp Inc., Newmont Mining Corp. and Barrick Gold Corp. have lined up to invest more than US$600 million in the Yukon since 2016 – more than anywhere else in the world.”
Check out the action in the Yukon over the past 14 months – reported in Freeman’s Financial Post article:
- May 2016: Goldcorp buys Kaminak Gold for $520 million
(We wrote about this company’s rise in The making of a Junior Gold Buyout: the Kaminak Story)
- December 2016: Agnico Eagle pays $14.5 million for 19% of White Gold
- March 2017: Newmont signs property earn-in with Goldstrike worth as much as $53 million
- April 2017: Barrick signs property earn-in and strategic investment deal with ATAC worth as much as $63 million
The above represent three of the top four gold producing companies in the world. All of them have taken a meaningful stake in the Yukon over the past 14 months. The only one not included is AngloGold Ashanti, a company focused in Africa.
Enter Klondike Gold Corp. (KG: TSXV). This junior explorer has one of the largest land packages in the Klondike and its board recently approved an 80-hole drill program. With well-known shareholders that include famed billionaire mining investor Frank Giustra (as of June, Mr. Giustra owned directly and indirectly roughly 14.5% of Klondike Gold Corp.), a healthy treasury and being in the midst of its most aggressive work program to date, we felt now is the ideal time to release this report on Klondike Gold.
Klondike Gold | A Long Time Coming
We’ve been covering this company’s story for three years, have made handsome profits from its stock on more than one occasion, and visited its assets in the Klondike for the past three summers. After spending a few days on its project with the company’s President and CEO a few weeks ago, it became apparent just how ambitious Klondike Gold’s plan of attack is.
You see, Peter Tallman, the company’s CEO, explained where and how he is hoping to discover the source of gold mined in and around the Eldorado and Bonanza Creek beds. Combined with the Victoria Gulch (a smaller creek that leads into the Bonanza), Klondike believes this placer gold may have come from its Lone Star target – where it is currently drilling (assays expected shortly). To date, solely from placer mining, these creeks have produced approximately 8 million ounces of gold…
As you will see from the video below, 100 hundred+ years after the original Klondike Gold Rush, the placer miners are still busy in the region, some with significant operations, quietly making a mint.
Klondike Gold began hitting on its Lone Star target last summer. Its exploration narrative is starting to mature and the company is as well capitalized as we’ve ever seen it with roughly $7 to $8 million in its treasury – well capable of executing an ambitious work program. Furthermore, we believe that Tallman and his company’s years of experience in the Klondike give them an exploration insight edge. Let us explain…
In the summer of 2016, drilling at Lone Star encountered near-surface gold mineralization across broad widths of more than 30 meters. The results covered a strike length of 700 meters and remain open in all directions.
A couple highlights from last season’s drilling:
Hole LS16-58 struck gold from 6.5 meters to 43.5 meters, totaling an interval of 37 meters averaging 2.4 grams per ton. Hole LS16-59 struck gold between 16.5 meters and 44.2 meters, averaging 1.2 grams per ton over 27.7 meters.
See more results here.
N.B. Kaminak’s Coffee Deposit in Yukon had total indicated gold mineral resources of 3.0 million ounces or 63.7 million tons averaging 1.45 grams per ton gold at the time of its approximate CAD$520 million buyout by Goldcorp.
Klondike is attempting to define a multi-kilometer strike length
According to the company, “The 700 meter drilled length of gold-mineralization encountered at Lone Star is associated with a 1,500 meter induced polarization (“IP”) anomaly (the length of the survey, target remains open) and a 4,000 meter long gold-soil anomaly, as compiled from various c.1980’s exploration efforts.”
The 2017 exploration season is attempting to demonstrate mineralized continuity. In fact, the title of Klondike Gold’s August 1st press release is:
CEO Peter Tallman summed it up best:
“The Company has achieved a number of important milestones with the discovery of large, bulk tonnage style mineralization on its Klondike district property. At the Lone Star target, recent systematic drilling confirms continuity of near-surface gold mineralization along strike over 750 meters. Step out holes, 500 meters in one direction to Pioneer and 700 meters in another to O’Neill, both have lithologies containing visible gold which potentially doubles the Lone Star mineralized target length to 2 kilometers if these zones can be connected with ongoing exploration. Our current focus is continuing to expand the footprint of gold mineralization at the multi-kilometer long Lone Star target, one of four gold-bearing targets identified in the Eldorado Creek – Bonanza Creek area.”
If proven, a 2-kilometer mineralized trend length would be the largest we’ve ever featured from a gold explorer.
Klondike Gold’s Lone Star History
The Lone Star mineral claim has quite a history. In fact, between 1911 and 1914, the Lone Star prospect produced an unknown amount of gold from surface with some reports showing the grade near 5 g/t.
Klondike Gold – Lone Star Today
As an exploration company, when you are ‘on the gold’ as they say, it’s best to keep drilling. And that is precisely what Klondike Gold is doing.
The company is cashed up, having just completed a $5 million financing near the current trading price. And to that, even in the dark days of the gold bear market a few years back, Klondike Gold has never had an issue raising capital. When most other explorers packed their bags and went home back in 2014 and 2015, Klondike was progressing forward, never missing a work season thanks to its ability to raise capital. We attribute this to Peter Tallman’s unique rolodex and ability to attract some of the most famous Canadian financiers there are – including billionaire mining financier and founder of Yorkton Securities, Frank Giustra.
Peter always welcomes a chat with our team and relishes talking about geology. His passion for exploration and mining is truly contagious.
Lone Star Drilling in 2017 Has Begun
Already in 2017, announced August 1st, a total of 18 holes have infilled and all intersected near-surface gold mineralization at the Lone Star target. These results spanned a 750-meter length, primarily in the western and central portion of the target. The company confirmed,
“The relative step out locations of the O’Neill and Pioneer drill hole intersections are also listed, with a total potential mineralized length of nearly 2 kilometers.”
And yet, the vast majority of results are still pending – hence the timing of this report. Two things to consider:
“Thus far in 2017, the drill program has completed 35 holes. Assays for the earliest 11 holes have been received, including 9 holes in this news. Twenty-four holes are still in the lab queue, while drilling continues.”
Only 9 holes have been reported. Also, it was announced on August 1st that the Company’s Board of Directors approved a 20 hole expansion of the drill program to 80 holes. The rest of this summer and into fall are going to be very active for Klondike Gold, with news flow to boot. The company is drilling now in an attempt to connect the Pioneer and O’Neill targets, which could result in a 2km trend line of gold mineralization. If assays are strong and the company can prove continuity through more discoveries of near surface gold, all in a region roughly 20 kilometers from Dawson City, industry heads will turn.
In The Yukon Proximity is King
Having been to Klondike Gold’s camp just last month, we can tell you it is roughly a 20-minute drive on a well-maintained road from all the amenities of Dawson City. There are placer mining operations all along the road to Klondike’s Lone Star project. Proximity and low all-in sustaining costs so often come down to cheap power, good roads and a readily accessible workforce.
From our view, Klondike Gold has built-in advantages over many juniors. The company’s President and CEO, Peter Tallman, has been a part of teams responsible for two discoveries, one gold and one antimony, going into production – both located in Canada.
Well financed, with roughly $7 to $8 million in the treasury (July corporate presentation reported approximately $3 million in treasury and Klondike just completed a $5 million financing this month), Tallman and his team will likely be able to take many swings in the iconic Klondike – a luxury few junior gold explorers currently have. What’s more, according to Sunny Freeman on August 1st, “Companies including Goldcorp Inc., Newmont Mining Corp. and Barrick Gold Corp. have lined up to invest more than US$600 million in the Yukon since 2016 – more than anywhere else in the world.”
Gold traded to a high of US$1,292 an ounce Friday, and we expect this trend to continue. Ray Dalio, arguably the most successful money manager there is, who also runs the largest hedge fund in the world, shocked the media this week when he recommended buying gold amidst current political uncertainty with North Korea. Far from a gold bug, Dalio went even further, recommending investors allocate 5-10% of their portfolio to gold…
We own shares of Klondike Gold. Recognize that we are biased as the company is an advertiser client. Please take responsibility for practicing your own thorough and independent due diligence. Learn about the risks associated with investing in exploration companies of this nature. Pick your spots…
From our perspective, the potential reward justifies the risk of putting our name behind Klondike Gold (KG:TSXV). Based on the early success of drilling at the Lone Star target so far this season, the Company’s Board of Directors agreed to ramp things up, approving a 20 hole expansion of the drill program to 80 holes.
And we won’t have to wait long for news…
Finally, Klondike Gold has dozens of drill core soon to be assayed. Therefore, results should be steady through August into the fall season – hence the timing of this report.
All the best with your investments,
A Trip to the Klondike – Pinnacle On Site
Klondike Gold Stock Information
Stock symbol: KG – trades on the TSX Venture
Stock price (CAD$): $0.33
10-day avg. volume (approx): 440,000
Market capitalization (approx): CAD$23 million (source: Bloomberg)
Klondike’s Corporate Presentation
Disclosure, Risks Involved and Information on Forward Looking Statements:
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