1911 Gold (AUMB) - Cashflowing Red Lake Asset with Their Own Mill

April 19 2021, 06:45 GMT+01:00

1911 Gold

  • Shares Outstanding: 46.62M
  • Share price C$0.63 (14.04.2021)
  • Market Cap: C$30M

ha1911 Gold Corporation is a junior Gold producer located in the heart of the world-class Rice Lake gold district in the West Uchi greenstone belt. The Company holds a land package of over 53,000ha, an operating milling facility, an underground mine with 1Moz in Resources, and upside surface exploration potential.

We spoke with Ron Clayton, President & CEO of 1911 Gold Corp. for an overview of the company and how they plan to finance their exploration programme without dilution for their shareholders.

Company Overview 

1911 Gold holds a land package that's the Western extension of the Red Lake Greenstone belt which is underexplored due to the historic fractured land package. 1911 has an exploration geologist who has over 17-years of experience in the district and is an exploration company with a land package which gives them the opportunity to find new deposits. They also have operating infrastructure in place so have the ability, if they get a discovery, to get back into production quickly and cheaply.1911 Gold (AUMB) - Cashflowing Red Lake Asset with Their Own Mill

Ron Clayton Leaving Retirement, Why?

Ron Clayton agreed to join the board about 6-months after he retired from Tahoe Resources as he was intrigued by this land package. He thinks there is an opportunity to create shareholder value, not just because of the exploration potential and the existing infrastructure, but they can also raise money for exploration at a premium through the Canadian flow-through program. That means they can raise money at effectively 1.6x what they have in their finances which helps keep that share count and dilution down. In Canada, 'flow-through' is a tax incentive built into the law to allow companies to raise money at a premium to their share price and the people who buy that premium basically are getting a tax incentive.1911 Gold (AUMB) - Cashflowing Red Lake Asset with Their Own Mill

What Worked at Tahoe, and How Will it Work for 1911 Gold?

Ron Clayton was the CEO of Tahoe Resources where it was a similar story and they IPO’d on an exploration property in Guatemala. Tahoe Resources took the property from 250Moz-300Moz Silver up to 500Moz Silver and got it operating in less than-3 years, and it became the single largest primary producer of Silver in the world in its first year of production. 1911 Gold is planning to do something similar at Red Lake in terms of a fast timeline to production which minimizes the amount of capital required. They were able to keep the stock price going up at Tahoe because they kept the excitement up and minimized that time of construction. 

Business Model: What’re 1911 Gold Trying to Build?

The key for 1911 Gold is to find a new ore body, and they have completed 3 drilling programmes during the winter of 2018-19, and have just completed one this winter. They are focusing on a couple of specific targets based on the results of those drill programmes. The first 27 of 28 holes hit Gold, and the structures they were looking for. The second round of drilling was almost as good and they still have about 26 out of the 49 holes that are waiting for assays which are expected sometime in the next month so will be announcing these results very shortly.

In Tinney, there are a couple of structures that are intersecting a porphyry body in a big regional fold nose. Clayton is keen to point out this is exactly the geology they're looking for that creates things like the Sigma-Lamaque, which is a 10Moz deposit in Quebec and Calgary in Australia which has a very similar geologic setting, and that's 60Moz worth of Gold.  1911 Gold (AUMB) - Cashflowing Red Lake Asset with Their Own Mill

Scott Anderson is a very scientific-based exploration geologist and a structural geologist and has probably mapped more of this district than anybody else in the world. They identified the targets so that every one of those drill holes was hitting the structures, the folds, the different lithologies or rock types, intersecting each other, that create the traps for the Gold. Clayton claims the model is working well and it means they are getting closer to finding that trap.

Grades: What Do They Know? 

1911 Gold has a couple of good targets that look very much like the early days of a Sigma-Lamaque or a Red Lake mine says Clayton and are hitting the same structures. One of the things that's really important in these types of deposits is the physical difference between two sets of rocks that are butting up against each other. One is more pliable and one's harder and more ductile which tends to create fractures when these faults and folds are happening that creates areas where the deposits are. 

It is a lot more cost-effective to drill relatively shallow, say sub-150m to get an idea of the structures and once you get those, the deposits are very short in strike length or along the surface but have huge depth lengths. It’s a little more expensive drilling deeper so it needs to be even more targeted which is what they're doing right now. 1911 Gold has some really good looking core which will hopefully translate into some great assays.1911 Gold (AUMB) - Cashflowing Red Lake Asset with Their Own Mill

Revenue & Tailings: Tight Corporate Structure 

1911 Gold is reprocessing tailings that were mined historically and has generated enough cash over the last 4-years to pay for their corporate G&A, wages and small overhead costs, plus the holding costs on the rest of the property. They  are keeping the share count down by raising only-exploration capital in the flow-through.

The flow-through money has to go into the exploration, it can't be used for anything else. The limitation on processing the tailings is the capacity of the mill which is a 1,300t/day mill. The company is actually putting a small amount of capital into the mill to try to bump that up a couple hundred tons a day, which will help with processing speed of the tailings. 

The most important part of this story is to have a discovery and if that's done they already have the mill there ready to go. They have a fully operational camp ready to go and infrastructure and power and roads. The power is cheap hydropower so it's a perfect setup for minimising the amount of time and cost to get back into production and generating cash flow. They have about 3-4 years more of tailings, so have some time to hit that discovery and then get on with developing it. 1911 Gold (AUMB) - Cashflowing Red Lake Asset with Their Own Mill

$5.2M Raised in July: Anything Soon?

1911 Gold raised USD$5.2M back in July and hasn't raised anything since then. There will be a time when they'll need to top up the exploration programme but that would be just some more flow-through. The $5.2M they raised has funded all the 18,000m drill programme which was announced in October plus some extra. Drilling costs are very low partly due to the infrastructure in the district. The roads are good so it's easy to get in and out and they don't have to do any helicopter supported work. If they do decide to drill year-round, that will change because it is an area that's very wet and boggy and why winter drilling is actually easier and cheaper, but if they're onto something, then they’re not going to take a summer holiday because it's wet and boggy, and would do some helicopter-supported drilling.1911 Gold (AUMB) - Cashflowing Red Lake Asset with Their Own Mill

When are the Assay Results due?

1911 Gold is expecting to put out 3 press releases between now and the middle of May which will be the remainder of the assay results. In the meantime, the company is upgrading their models with all the work they've done with the drilling. The core is all oriented core, which means that it can be used to refine the models. The company is preparing to get people back out in the field to look at some other targets in the pipeline of projects that they're building.

Greenstone Belt: What Does it Look Like?

The Greenstone belt has typically underground narrow-vein deposits which can run anywhere from 3m-15m in width. Typically, the veins in Red Lake are in that 3m-12m range and some of these structures can go as much as 2km deep, typically short along strike length. 750m is not an unusual number, to give you a feel for it, but they can be high grade.

What is the Future for 1911 Gold? 

Once 1911 Gold finds a discovery hole, they're going to take a 2-track plan with their exploration programme. They will continue to develop the pipeline of projects, and at the same time will start tight-space drilling at Badoo or Tinney with the idea that they will start the permitting process, get the baseline data, to get the mine permitted and built once they understand what it is. They don't need a lot of ounces to get started and the main concern is to create shareholder value. 1911 Gold (AUMB) - Cashflowing Red Lake Asset with Their Own Mill

1911 Gold plans to keep a tight capital structure and to get drilling as soon as possibly to put their own ore through their mill as quickly as possible to get cash flow. The 1911 Gold story is intriguing but with a low market cap. They will need to raise capital soon and the amount will depend on the outcome of the drill results. If they need to start tight-space drilling at Tinney and Badoo, in addition to continuing their other exploration programme, they'll be looking at a similar amount to the last raise. We look forward to hearing more from the 1911 story soon, particularly when the assay results come back in 4-6 weeks time. 

To find out more, go to 1911 Gold's Website.

Club Waitlist CTA
Share this article

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Crux Investor does not verify information provided by contributors or video interviewees on this site, and makes no assurance as to the adequacy, completeness or accuracy of any such information. Crux Investor steadfastly disclaims any liability or responsibility for the outcome of any investments made by users of this site or our branded affiliates. Users of this site (and our branded affiliates) should consult with their own financial advisors to assist them in making investment decisions. By accessing this site and our branded affiliates, you agree to the terms of service and privacy policy.