Who says mining is not sustainable? The recent announcement by IAMGOLD to start building a C$2 billion Cote Lake open pit gold mine 140 km north of Sudbury which will employ 1,000 workers during peak construction and roughly 450 full-time middle-class jobs is welcome news. The mine life is expected to be around 18 years, however, ongoing exploration may extend the life of mine.
Vale’s Creighton mine which started production in 1901, is still going strong 8,000 feet below surface. The deeper the company goes, the richer the nickel/copper and PGM content of the ore gets. Kirkland Lake’s Macassa gold mine started production in 1933. With new discoveries at deeper levels and a roughly $320 million investment for a new mine shaft, Kirkland Lake Gold’s CEO Tony Makuch is extending the mine’s life for another 30 to 40 years!
Northern Ontario’s mining camps have seen many mines whose lifespans have lasted 50 years or much longer while hundreds of others with shorter operations have still provided tens of thousands of jobs and billions in economic activity for the Ontario economy over the past century.
Meanwhile car manufacturing at Oshawa’s General Motors plant started in 1907 and unfortunately closed in 2018, dealing a devastating blow to southern Ontario’s auto-focused economy. Similarly, in 2011, Ford Motor Company permanently closed its St. Thomas assembly plant that opened in 1967. Now there are rumour’s that Ford may be closing its giant auto assembly plant in Oakville.
While Premier Doug Ford has done a terrific job on managing the COVID crisis, the economic challenges and high unemployment facing the province with a threatened and declining manufacturing sector will be extraordinary. Without a doubt, the mining and exploration sector – which has been severely hampered with lengthy environmental assessments and regulatory red tape over the past 15 years of Liberal rule – could make a huge contribution to the economy of the province with the highest sub-national debt in the world.
Now may be the time with the price of gold approaching the U.S.$1900.00 an ounce level – the highest since 2011 – the potential for more mine development and mineral exploration throughout Ontario’s many gold-producing districts is promising, especially with governments running multi-billion/trillion dollar deficits with no end in sight.
Without a doubt, the mining and exploration sector – which has
been severely hampered with lengthy environmental assessments and
regulatory red tape over the past 15 years of Liberal rule – could
make a huge contribution to the economy of the province with the
highest sub-national debt in the world.
However, these multi-billion-dollar projects like Cote Lake are largely dependent on vibrant junior mineral exploration companies – Orefinders Resources being one of them – which find these economical ore deposits and are the lifeblood of the mine ecosystem.
There are many wild stories which stem from the world of the junior mining business and one recent corporate battle between Orefinders and Mistango Resources has all the elements of a soap opera. Ironically, it was the same group behind Orefinders who were behind the early days of what is now IAMGOLD’s Cote Lake project.
On the morning of September 10, 2019 at the Mistango River Resources’ Annual General Meeting at their Kirkland Lake office, there might have been blood on the floor if this was the United States or even Australia.
But being Canada and our national tendency to keep our cool and be “nice”, no physical altercations occurred. But make no mistake, this was a vicious proxy war between two junior exploration companies and the stakes were some of the choicest ground in the Kirkland Lake camp, the third richest gold producing region in Canada at almost 47 million ounces (MNDM).
When you first meet Orefinders Resources Inc. CEO Stephen Stewart, he looks unassuming and mild-mannered until you start talking about the junior exploration sector. That is when he becomes animated, passionate and opinionated. You can quickly see that long-suffering shareholders – it has been an astonishingly long slump in the junior exploration sector – are his top priority.
Always on the lookout for undervalued properties, Stewart first approached Mistango about their Omega deposit which is strategically located in between Orefinders’ Mirado and McGarry projects. “Consolidating properties in the Kirkland Lake camp is one of the best ways to increase shareholder value”, says Stewart. “The previous Mistango board were not interested in any joint venture even though their company’s stock was languishing in the one to two cent range with very little trading. They had not issued an exploration news release in five years!”
Considering that Mistango’s Omega property contained almost 600,000 ounces of gold in the Indicated and Inferred category (2013 NI 43-101 estimates) and had previously produced over 215,000 ounces of gold between 1935 and 1947, Stewart sensed an opportunity, magnified he thought, by disappointed shareholders.
In May of last year, he struck a deal to acquire the 31% of Mistango River Resources shares that Osisko Gold Royalties owned in exchange for Orefinders’ stock. That made Orefinders the biggest shareholder of Mistango. It was also the start of this long drawn out battle which his hidden pit-bull tenacity and determination was absolutely critical.
No one could have blamed Orefinders Resources Inc.’s CEO Stephen Stewart if he did loose his cool at that Mistango AGM – he didn’t. The following six months were stressful and intense, spending hundreds of thousands of dollars on lawyers fees, while watching the previous management of Mistango dilute the company stock to the detriment of shareholders, and using a variety of other tactics to thwart Orefinders’ demands to finally hold this meeting. (The entire soap opera can be viewed through the news release section on the Orefinders’ website starting May 2019. http://www.orefinders.ca/news-releases/) It was a little over two years since the previous Mistango management had held an AGM, a violation of Canada Business Corporations Act regulations.
It was all for naught!
Immediately, after meeting scrutineer, TMX Group announced that 82% of Mistango’s outstanding shares had been voted and accounted for, the former Mistango CEO and Chair of the AGM abruptly adjourned the meeting thereby cancelling the vote even though the incumbent board of directors were informed of the results. The previous Mistango AGM in June 2017 garnered only 39.6% of shareholder’s votes which had been accepted. In hindsight, it was determined that the vote, which the chairman had refused to release, had in fact voted in favour of the Stewart nominated board.
An Orefinders news release the next day stated, “Given the undemocratic nature of Mistango’s shareholder meeting, where shareholders’ best interests were once again neglected, Orefinders will continue to fight for all shareholder rights, including taking legal action, to ensure that the votes validly cast for today’s meeting remain as they are and are not tampered or altered in any way.”
And Stewart did continue the fight. He set up a “SaveMistago.com website to support Shareholders Rights in Canada” and kept in contact with disgruntled shareholders who held significant blocks of shares. He legally forced another shareholder vote in Kirkland Lake on October 1, 2019.
“This proxy battle was a valuable lesson for me and demonstrated
that there are gaps in the regulations which protect shareholder
rights,” say Stewart. “We need to stop this type of entrenchment
which is particularly prevalent in small companies.”
This time, with an independent court appointed chairman and with Toronto lawyers on the phone including a judge who – after hours of heated debate between opposing sides – finally ruled in favor of immediately releasing the results of the second shareholder vote. Stewart won and his proposed slate of new directors finally took control of the board.
“This proxy battle was a valuable lesson for me and demonstrated that there are gaps in the regulations which protect shareholder rights,” say Stewart. “We need to stop this type of entrenchment which is particularly prevalent in small companies. There needs to be stronger mechanisms and/or enforcement of the rules that are in place to remove an ineffective, dormant or entrenched management team.”
Stewart Continues, “I think that in some cases, management and their boards forget that they do not own the company, it belongs to the shareholders. Rules should be put in place to ensure that AGMs should have an independent chair appointed by the shareholders. Chairs have extraordinary powers and if they are a member of management or the board, there could be a conflict of interest with shareholders and this conflict can lead to some very questionable tactics.”
The broader market certainly took notice of this particular proxy battle and started paying close attention to the land holdings of both Orefinders and Mistango and the philosophy of CEO Stephen Stewart.
Eric Sprott – Exploration Fairy Godfather
In four separate financings in February, March and May of this year Eric Sprott, and others, invested to total of $6.5 million in both Orefinders and Mistango with each financing being completed at successively higher prices.
“It doesn’t get any better than this,” says Orefinders CEO Stephen Stewart. “This is a resounding vote of confidence by one of the most significant mining financiers in the country. Eric Sprott has tremendous foresight and industry knowledge. And he’s very good with numbers. He does his tonnage and grade calculations, imputes a margin of error, discounts accordingly, then makes his bet and waits for the inevitable.”
In junior mining circles Eric Sprott might be best described as an “Exploration Fairy Godfather” sprinkling pixie dust dollars on companies that are strategically located in most if not all the best camps across the country. A mining billionaire, when Sprott invests in a junior, the market pays attention. Mr. Sprott was also the Chairman of Kirkland Lake Corp. for 5 years and is very familiar with the properties which Stewart controls in Mistango and Orefinders.
Orefinders was founded in 2013 during a protracted bear market for gold assets and severe difficultly in raising exploration dollars. CEO Stephen Stewart took over in 2015 and decided to focus on a “value-based approach” which was different from the “drill baby drill” attitude among most of his colleagues, many of whom were getting good core results which the market routinely ignored, creating intense frustration among their shareholders.
Stewart’s investment philosophy can be summed up as: 1) When the market presents an opportunity to acquire assets for less than their fair value, we look to acquire. 2) When the market pays fair value for assets and rewards exploration results, then we will pivot, return to the drill bit and focus on developing our existing assets.
“We are focused on gold exploration in the Abitibi Greenstone belt in Ontario and Quebec – as there is truth to the old saying that “the best place to find a new mine is in the shadow of a headframe,”” says Stewart.
“The mighty Macassa mine is one of the best examples of a struggling operation that with a different geological interpretation and some strategic financing became a world-class operation, significantly contributing to the high share price of Kirkland Lake Gold. Now Orefinders and Mistango collectively control one of the choicest land positions in the Kirkland Lake camp and are adjacent to the world’s highest grade gold mine – the Macassa.”
Kirkland Lake History
Perhaps a brief overview of the history and geology of the Kirkland Lake gold district might be in order to fully understand the value of the strategic land packages of both Orefinders and Mistango.
The Abitibi is the largest Archean greenstone belt in the world. It’s roughly 150 km wide and stretches from just west of Timmins in Ontario for about 650 kms. to Chibougamau, Quebec. The Kirkland Lake camp stretches from Matachewan on the western side, through the town of Kirkland Lake to the Ontario/Quebec border at Virginiatown.
Like most northern Ontario mining camps, Kirkland Lake has a colorful and wild history with a host of characters, that could easily pass for a Hollywood central casting call, hoping to strike it rich. Canadian mining history is anything but dull! American Sir Harry Oakes and British-born William Wright are the most famous, both separately arriving in the camp during 1911. Wright and his brother-in-law partner Ed Hargreaves staked the properties that would eventually become the Wright-Hargreaves and Sylvanite mines. Early on, Hargreaves sold out his share and it was Wright who became rich and would eventually fund the merger of two papers that became the Globe and Mail in 1936, Canada’s national newspaper.
Oakes, along with the Tough Brothers staked the ground that would become the Tough-Oakes Mine (renamed Toburn) which was the first mine to go into operation in 1913 but was the smallest producer of the seven mines in row – Kirkland Lake’s famous Golden Mile – which have collectively produced over 25.6 million ounces of gold from a single ore body. The mines follow the Kirkland Lake main break – a geological east-west running fault system – which itself is a splay or offshoot of the larger Larder Lake – Cadillac deformation zone.
The seven mines running west to east are the Macassa (5.5Moz and counting), Kirkland Lake Gold (1.8 Moz), Teck Hughes (3.7 Moz), Lake Shore (8.6 Moz), Wright Hargreaves (4.8 Moz), Sylvanite (1.7 Moz) and Toburn (570,700 oz). The Toburn was the only mine that had gold close to the surface. The gold bearing ore in the other six mines trended deeper as you went west.
To get the economy moving during the Great Depression, U.S.
President Roosevelt raised the price of gold from $20.67 to
$35.00 an ounce. Marginal properties became valuable and
northern Ontario exploration exploded with activity. From
1931 to 1941, Kirkland Lake grew from 1,170 to 9,915 people
and was one of the most prosperous communities at that time.
There are many deformation (break) zones throughout the Abitibi Greenstone Belt – the source of most of the gold bearing ore – two other examples are the Porcupine-Destor break in the Timmins camp and Sunday Lake Deformation Zone where Detour Lake’s giant open pit gold mine is located.
Oakes also staked some property for himself as he was determined to build his own gold mine. Using his share of the profits from the Tough-Oakes, he eventually built the Lake Shore which started production in 1918 and made him the richest person in Canada and the entire British Empire. At its peak in the 1930s, the Lake Shore was Canada’s greatest gold mine with company stock reaching $64.00 and paying a yearly dividend of $6.00 per share. Oakes would eventually move to the Bahamas to escape excessive taxes where he was brutally killed in 1943. The murder made headlines around the world and to this day the case remains unsolved.
To get the economy moving during the Great Depression, U.S. President Roosevelt raised the price of gold from $20.67 to $35.00 an ounce. Marginal properties became valuable and northern Ontario exploration exploded with activity. Gold mines were given a tax exemption in 1936 to encourage development in Canada. From 1931 to 1941, Kirkland Lake grew from 1,170 to 9,915 people and was one of the most prosperous communities at that time.
Ontario Department of Mines bureaucrat Thomas Gibson wrote in 1935, “Canada has a large national debt, mostly contracted abroad, and her large production of gold has not only maintained her credit, but has enabled the central government to substantially reduce the debt.”
Prospectors were focusing on Larder Lake, a few miles to the east of Kirkland Lake, as early as 1904 and while there were many promising outcrops, no major development occurred until 1938 when the legendary Kerr-Addison mine started production. By 1955, the Kerr poured its five millionth ounce of gold and was considered the largest mine in Canada. By the time it finally closed in 1996, it became the biggest historic gold producer in the camp at almost 10.5 Moz.
In the history of North American gold mining, very, very few deposits have produced more than 10 million ounces. In the Timmins camp, the “holly trinity” of gold mines, the Hollinger, the Dome and the McIntryre produced 19 Moz, 17 Moz and 10 Moz+ respectively. Barrick’s Williams mine in the Hemlo camp has exceeded 11 Moz and is still in production and the old Campbell Mine in Red Lake also exceeded 10 million. And the legendary Homestead Mine in South Dakota was a “super mine” producing almost 44 million over its century-plus life and was the basis of the popular T.V. series Deadwood.
The Macassa Mine, owned by Kirkland Lake Gold, was the last mine to start production on the Kirkland Lake main break in 1933 and is still in production, along with the Young Davidson mine at Matachewan owned by Alamos Gold. The Macassa did go through tough times in the 1980s and 90s with ownership changes that included LAC Minerals, Barrick, Kinross and mine damage in 1993 due to a seismic event.
Kinross sold the entire complex including mill and four other historic mine properties for $5 million in 2001 to mining entrepreneurs Brian Hinchcliffe and Harry Dobson who established Kirkland Lake Gold Inc. The new organization restarted production in 2002, focused on brownfield exploration and discovered the rich South Mine Complex which has become a proverbial “game-changer” for the camp as this is a north-south structure as opposed to the usual east-west breaks.
The Macassa, recently crowned the highest-grade gold mine in the world and has about 2.25 million ounces of proven and probable reserves grading at almost 22 gpt. The mine is scheduled to ramp up to over 400,000 ounces per year in 2023 from the roughly 241,000 it produced in 2019.
By the end of 2019, the Kirkland Lake camp had produced almost 47 million ounces (MNDM) of gold from 36 historic mines. This makes the camp the second richest in Ontario after the Timmins region which has produced about 76 million ounces of gold by Dec/2019 and the third most productive in Canada, the number two spot going to the Val d’Or/Rouyn-Noranda camp next door in the province of Quebec which has produced 72 million ounces of gold to date (Dec/2019).
According to Digi GeoData Inc., the total gold endowment for the Kirkland Lake area reached about 59,536,000 million ounces at the end of 2017, if proven & probable, measured & indicated and inferred resources are included.
While history doesn’t repeat itself, at times it certainly does echo the past. One can’t help but feel the ensuing COVID recession/depression, the many challenges of southern Ontario’s auto and manufacturing sectors combined with billion/trillion dollar deficits and high unemployment certainly mirrors the Great Depression of the 1930s. However, the escalating price for gold and northern Ontario’s terrific geology, will attract enormous interest from the junior exploration sector and perhaps more world-class discoveries in the North’s traditional gold mining camps.
Orefinders Eby-Baldwin Potential?
The two biggest landowners in the Kirkland Lake camp are Agnico Eagle and Kirkland Lake Gold. However, Orefinders and Mistango have key strategic properties on the gold bearing breaks and adjacent to current and past producers – the most interesting being the Eby-Baldwin adjacent to the Macassa mine.
One of the first initiatives undertaken once Orefinders realized the strategic nature – beside the Macassa – of the Eby-Baldwin was to significantly increase their land package. They currently have 4,300 hectares that are contiguous to Kirkland Lake’s Macassa Mine (5km southwest) and Agnico Eagle’s Upper Beaver deposit. Their properties show similar geology and mineralization and are at the confluence of a series of world class faults – Cadillac, Main, Amalgamated and Kirana faults that all meet on Eby-Baldwin property.
“The Main Break is considered the most important gold hosting structure at Macassa and the Amalgamated Break is a key structural control for Macassa’s South Mine Complex. The convergence of a number of significant structures on the Eby-Baldwin property potentially provides an ideal setting where large amounts of fluid carrying gold can rise up from depth,” says Stewart. “In addition, Macassa-like grades are found at surface and there has virtually been no modern exploration. These properties are beautifully positioned, practically a textbook example of where gold deposits could be found.”
Mistango will conduct significant drilling on these structures to further understand structural controls on known mineralization on the property.
“I am often asked if this proxy battle was worth all the time, money and aggravation,” says Stewart. “If the conditions and financial backing were available I would do it again. On May 2, 2019, the day before Orefinders announced its acquisition of 31% of Mistango, its share price was one penny and barely traded. In mid-May, 2020, MIS hit 35 cents and our volumes are now huge. Not a bad return for shareholders – Orefinders included. These are the returns people seek in the juniors. I’d also point out that Orefinders has also gone up three times in the last 90 days. Absolutely, it was well worth it!”
Stan Sudol is a Toronto-based communications consultant, freelance mining columnist and owner–editor of https://republicofmining.com/