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Junior miners in North Sask. ready to pounce on high gold prices

Spiking gold prices could send junior miners to the hills in search of the metal. That’s because gold hasn’t reached these heights since 2011. After years of hovering at about $1,300 USD an ounce, it climbed to more than $1,800 USD this month.
Near Stony Rapids this month, a geologist drills into a rusty outcrop on a historical gold showing.

Spiking gold prices could send junior miners to the hills in search of the metal.

That’s because gold hasn’t reached these heights since 2011. After years of hovering at about $1,300 USD an ounce, it climbed to more than $1,800 USD this month. That’s left junior miners, who explore and drill holes looking for deposits, primed to move on wealth hidden in the province’s north.

“Here we are now in a frenzy. Literally, a frenzy,” Warren Stanyer, CEO of ALX Resources Corp., said. “Junior mining companies are getting millions of dollars from bankers and investors because everyone thinks gold’s going to go a lot higher.”

He attributes that hike to the uncertainty roiling the economy. Governments issuing more money and entering into more debt, he said, strengthened gold and helped cash flow for firms like his.

ALX Resources has been active. On July 9, it announced it acquired Sceptre Gold Project, which is about 125 kilometres east of La Ronge. It’s also exploring a showing on its nickel project roughly 20 kilometres northwest of Stony Rapids.

“Suddenly, we’re in the gold business,” he said.

The belief that Saskatchewan gold has gone overlooked is part of that optimism.

“There’s certainly no reason to think all the gold has been found,” University of Saskatchewan geology professor Kevin Ansdell said.

He pointed to SSR Mining Inc.’s Seabee gold mine located approximately 125 kilometres northeast of La Ronge. In 2019, it marked its fourth straight year producing a record amount of the metal.

An issue, though, is gold deposits in the province are relatively small, he said. While they can be economically viable, even success stories like Seabee’s gold deposit can be small compared to larger deposits around the world.

That may leave room for smaller companies in the province to explore and find deposits, Ansdell said.

“There’s good potential, so it’ll be interesting to see what happens over the next year or two.”

Another issue is the durability of these prices.

For one, Alfred Stewart, vice president of corporate development at Searchlight Resources Inc., was confident high prices were sustainable, noting their relationship to government responses to the pandemic.

Last month, his company announced new exploration of its English Bay Gold Project, about 10 kilometres north of La Ronge. Among other factors, the company noted in the release that the robust gold market left it well-positioned as it set to work.

The USD gold price, coupled with the Canadian exchange rates, made it a historic high, he said in an interview

“Now things are beginning to boom. It’s been pretty good in June and July. And we’re seeing a lot of financings in the junior market, and a lot of activity in Saskatchewan,” he said.

Higher gold prices boosted interest in exploration companies, and investors aiming to support that work, noted Mike Labach, who represents investor relations for Taiga Gold Corp., and Eagle Plains Resources. 

The higher prices justify spending more searching for gold, renewing “market interest in our industry after close to a decade of downturn,” he wrote over email.

University of Saskatchewan economics professor Joel Bruneau, however, questioned the reliability of any predictions during COVID-19.

“Anything you thought was a good predictor of what’s going on is probably off the table at this point,” he said, adding spikes in gold likely stemmed from that uncertainty.

Prolonged high prices would make exploration more valuable, easing cash flow for companies looking to invest in junior miners on the hunt for deposits.

If those prices are sustained, that could also in the long-run bring jobs north, he said. It could further diversify the economy after COVID-19 revealed the vulnerabilities of not doing so.However, he cautioned against predicting huge job numbers.

“I wouldn’t be buying gold at this point,” he said. “I’m sticking with the stock market.”

Despite the jump in gold prices, there is also a valuation gap between junior companies and their larger counterparts, noted Brian Skanderberg, CEO of GFG Resources in Saskatoon. He added,  most junior explores aren’t seeing their valuation materially change.

On the other hand, operating mines are doing well, said Skanderberg, who previously helmed former Seabee operator Claude Resources. For him, that could mean opportunity.

“You’re probably going to see more investment come here as gold price continues to stay where it is or even escalate further.”

For companies like Warren Stanyer’s the province is attractive, boasting well-developed infrastructure and a supportive environment for industry.

Saskatchewan scored second out of 99 jurisdictions globally in the 2019 Mining Journal world risk report.

The province also consistently ranked in the top 10 of Fraser Institute’s mining surveys. That said, its industry attractiveness survey conducted in 2019 saw the province drop from third to 11th place.

In that environment, Stanyer believed gold deposits in the province held promise. Granted, that comes with risks: If gold sags to its formers lows again, it may douse hopes. He was confident nonetheless of gold’s chances.

“Potential in Saskatchewan has gone unrecognized.It just never had the goods,” he said. “But it does. It does have the goods.”

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