The first challenge for any junior gold explorer is to actually find some gold. Preferably, a large amount of gold at a high enough average grade to make it worthwhile to do everything that a company must do in order to build an operating mine. Then, once an explorer has found the gold, a new challenge arises: how to actually produce gold from the deposit.
Of the myriad challenges that come from actually mining gold from an ore deposit, the biggest ones usually involve infrastructure, or rather, lack thereof. A one million ounce gold deposit grading 1 gram/tonne gold with an existing mill, power lines, and road access is likely to be more economic than a million ounce gold deposit grading 10 grams/tonne gold that is in the middle of nowhere with zero infrastructure. This concept is extremely important for junior mining investors to understand because companies can highlight flashy grades and impressive drill intercepts, but if it costs $3 billion to build the project it likely means that the project is not economic.
It is extremely rare to find a nano-cap junior mining company with mining permits in hand, an existing 43-101 compliant resource, and substantial infrastructure already in place. Normally, by the time all of these boxes have been checked, a junior will typically have achieved a $100+ million market cap. This is why I was particularly surprised when I came across a junior explorer based in British Columbia, Canada with a 144 square kilometer property package with full year-round road access to site, an existing 43-101 compliant resource totalling nearly 400,000 ounces (in all categories) grading ~3 grams/tonne gold, and current mining and underground drilling permits trading at a meager C$5 million market cap.
New Carolin Gold (TSX-V:LAD, OTC: LADFF) is focused on its 100% owned Ladner Gold Project in southwestern British Columbia. Ladner is located in an area just off the Coquihalla Highway two hours east (150km) of Vancouver.
The Ladner Project is not only unique due to its excellent location with road access to site, but Ladner also boasts 5 historical mines and 24 known gold occurrences across its 144 square kilometer property package. The most notable of the 5 past producing mines at Ladner was the Carolin Mine, which produced 45,000 ounces of gold between 1982 and 1984. The Carolin Mine was shut down in 1984 due to a combination of a falling gold price and poor gold recoveries because the management team running the mine at the time did not understand the metallurgy of the ore they were processing. New Carolin has since done metallurgical test work with ~94% gold recoveries, and the New Carolin team is confident that the processing challenges encountered in the early ‘80s will not be encountered again.
Ladner possesses an infrastructure advantage that I have never seen in a C$5 million market cap junior explorer:
New Carolin Gold Opportunities:
- Substantial infrastructure in place including road access to site, extensive underground development (existing adits), fully permitted tailings storage facility, hydro power runs through the property, and valid water licenses in place.
- Ladner is 18 kilometers from Hope, BC which means that New Carolin does not need to build a camp on site and has access to skilled and experienced mining labor.
- Existing 43-101 compliant resource totalling nearly 400,000 ounces of gold gives New Carolin a solid foundation from which to build upon.
- Underground drill permits good through April 2022 with drill already in place in an existing adit. Drilling should begin within two weeks and could potentially continue through year-end (depending upon market conditions and financing).
- Tremendous location advantage with hydropower running through the property, highway access within a few kilometers of site, abundant labor in a mining-friendly area of southwest British Columbia, fully permitted mine where the ground has already been disturbed (brownfields) makes it much easier to restart operations and potentially get additional permits in the future.
- Relatively low-cost drilling with all-in costs of drilling currently coming in at roughly C$250 per meter.
- New Carolin’s Ladner Project is a district-scale property (144 square kilometers) that is under-explored, despite the fact that it has seen mining for more than 120 years. There is robust exploration potential throughout Ladner and the imminent underground drill program will focus on testing downplunge targets at the Carolin Mine. However, New Carolin has also identified multiple targets at surface at the Emancipation Mine, Pipestem Mine, and multiple other occurrences across the district-scale property.
When I first heard of New Carolin Gold in November 2018 (Via Bob Moriarty of 321gold), I figured there must be some fatal flaw with the Ladner Project. However, as I dug deeper, I simply couldn’t find a fatal flaw. Like any other mining project, Ladner has a few challenges and risks.
New Carolin Gold Challenges & Risks:
- Exploration risk. Probably the biggest risk for New Carolin is simply that they might not find enough additional gold to justify the capex outlay which will be required to build a mill (estimated cost of C$50 million) and refurbish some of the other existing infrastructure at Ladner.
- Financing risk. With a small market cap, it can be challenging to raise the sums required to put together extensive new drilling programs. It will be important for New Carolin to have success with this next phase of drilling in order to increase the share price, and to help generate the trading volumes to support a larger financing closer to New Year’s.
- Gold price risk. Like any other junior explorer/developer, New Carolin’s fortunes rise and fall with the gold price. This is particularly true for the Ladner project whose economics look robust at a C$2,000+ gold price, and much less attractive down around C$1,500.
- Execution risk. Ladner doesn’t have a PEA yet (in an ideal scenario, New Carolin would like to generate a PEA during the first half of 2021), which means that although we think we have a good idea of how much it will cost to move this project back into production, we don’t know for certain and therein lies some unknowns in the domain of execution risk.
Ladner consists of a 28 kilometer x 5 kilometer contiguous land package that trends northwest along the Hozameen Fault:
All historic mines and artisanal workings are situated on the east side of the Hozameen Fault and trend to the northwest. All known gold zones at Ladner are associated with the ultramafic contact on the Hozameen Fault and as seen above, there are strong ultramafic (purples) and sediment (blues) geophysical signatures that trend for 28 kilometers in a northwesterly direction.
The Hozameen fault system separates rocks of the Coquihalla ultramafic belt from volcanics of the Spider Peak Formation and Ladner Group metasediments. There are three main settings for gold mineralization on the property that are situated along and within proximity to the Hozameen fault system. All three styles of mineralization are controlled by lithological and structural controls.
All of New Carolin’s upcoming drill targets at the Carolin Mine, Emancipation, and Pipestem are within these blue/purple geophysical signatures in the above map and are designed to test down plunge extensions of known gold occurrences. New Carolin’s understanding of the lithological and structural controls on gold mineralization at Ladner helps to offer a better probability of hitting successful drill intercepts that could significantly add to the resource.
In September 2018, New Carolin announced assay results from 13 holes (1,493 meters of drilling) that included hole 18-NC10, which intersected 93 meters grading 1.39 grams/tonne gold (including 7 meters of 5.75 grams/tonne gold). Any hole that intersects more than 120 gram-meters gold over a broad intersection is notable, however, this hole was even more significant due to the following:
“The current and historic drilling confirms the presence of a significant new zone of gold mineralization, offset to the southwest and distinct from Carolin Mine Main Zone. Within the context of the Company’s Main Zone geological model, which interprets mineralization as hosted within a shallowly northwest plunging anticlinal hinge zone, the discovery of a broad zone of gold mineralization within drill hole 18NC10 is significant in that it may represent a parallel fold structure, or potential fault offset of the Carolin Mine Main Zone. The current Hozameen Zone gold intercept represents a near-mine “blind” discovery that warrants additional follow-up diamond drilling to establish its geometry, vertical, and lateral continuity.”
During this next phase of drilling at Ladner, New Carolin intends to follow-up on this discovery of a new zone (the Hozameen Zone) offset 200 meters to the southwest. Upcoming drilling is intended to test down plunge extensions of the antiform structure below historical drilling. A massive pillowed andesite unit forms the footwall to the Carolin Mine closer to the portal of the 825m level. This andesite is not seen in drilling to the northwest, indicating that the continuation of the Carolin mine may be downdropped to the north.
Another focus for New Carolin will be to drill the “Aurum Connector Zone”, which is an area that represents a 280 meter gap between the Aurum Target and the Aurum Deep Target. The existing underground adits allows New Carolin to more easily access the ore bodies with 100-130 meter holes, which makes for more efficient and cost-effective drilling. In the upcoming 20+ hole drill program, New Carolin should be able to learn a lot about some of these undrilled areas, and hopefully make some new discoveries as well as expand upon known areas of mineralization.
New Carolin has a strong management team lead by President & CEO Ken Holmes. For the past twenty-two years, Mr. Holmes has acted as corporate counsel, held senior management roles for public and private companies, and participated in a broad range of businesses and transactions, including several involved in the natural resources (mining, oil and gas) sectors. In addition, directors Bob Lunde and Chris Taylor (CEO of Great Bear Resources) add unique skills and experience to the New Carolin Team. Mr. Taylor has a masters degree in structural geology from Carleton University, and he has been at the helm of one of the greatest junior mining success stories of the last few years, Great Bear Resources (TSX-V:GBR).
New Carolin advisor Ed Beswick is also a key member of the New Carolin team; Mr. Beswick was the former north central BC Regional Ministry of Mines Manager based in Prince George and former Inspector of Mines and Resident Engineer in southern British Columbia for the MEM. Most recently Ed was Director of Environment and Permitting for Hillsborough Resources Limited in Vancouver and worked with Hard Creek Nickel Corporation managing environmental, safety and First Nations programs.
New Carolin has all the key ingredients required to be a successful junior mining company, now it will come down to effective execution of the company’s plans as well as a little bit of luck with the drill. I have accumulated a significant position in New Carolin Gold shares during the last four months, and I see value in accumulating LAD shares at C$.15 or below. I can envision LAD shares trading up to the C$.20-$.25 area over the coming weeks, as the drilling gets into full swing at Ladner. More importantly, with some drilling success and a strong gold bull market, I don’t think a C$20 million market cap is unreasonable for New Carolin. This would put LAD shares above C$.40 given the current share count of 47 million shares.
New Carolin Gold (TSX-V:LAD, OTC: LADFF)
Shares Outstanding – 47,011,064
Warrants – 20,193,888
Options – 2,620,000
Market Cap (at C$.125 share price) – C$5.8 million
Fully Diluted Market Cap (if all options and warrants are exercised New Carolin would receive total cash proceeds of more than C$5 million) – C$8.7 million
Disclosure: Author is long LAD.V shares at the time of publishing and may choose to buy or sell at any time without notice. Author has been compensated for marketing and promotional services by New Carolin Gold Corp.
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