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Please note: the views, opinions, estimates, forecasts or predictions regarding Gold Terra’s resource potential are those of the author alone and do not represent views, opinions, estimates, forecasts or predictions of Gold Terra or Gold Terra’s management. Gold Terra has not in any way endorsed the views, opinions, estimates, forecasts or predictions provided by the author.

Gold Terra announced the maiden resource estimate on the Con Mine property in the Northwest Territories, optioned from Newmont, on  September 7, 2022, focusing on the Yellorex mineralized envelope, which consists of 4 subzones, represented in the blue rectangle below:

The resource consisted of 109koz @ 7.55g/t Au Indicated, and 432koz @ 6.74g/t Au Inferred, totaling 542koz @ 6.96g/t Au Ind & Inf using a cut-off grade of 3.5g/t Au, and was based on 21,019m of drilling (41 holes), and all historic drillholes drilled before 2002 as interpreted by the company. A specific gravity of 2.8t/m3 was used, together with a capping value of 28g/t Au. As the sensitivity table for cut-off grades shows below, my earlier back of the envelope estimate of 600koz @ 6g/t Au wasn’t far off, which can be hypothetically represented by a cut-off grade of 3.0g/t Au:

CEO Gerald Panneton was pleased with this initial resource:

"This initial mineral resource estimate (MRE) on the Con Mine Option Property represents a measuring stick of our progress toward satisfying one of the requirements of the option agreement with Newmont, namely delineating a potential of a minimum of 1.5 million ounces of gold in all categories. This initial MRE confirms the significant high-grade potential of this project as it remains open for further expansion in all directions, and along its 6-kilometre-long structure. The Con Mine produced more than 5 million ounces of high-grade gold (16 g/t Au) from the Campbell Shear structure on 2 kilometres of strike length alone. We strongly believe that additional drilling along strike and at depth will continue to expand the current MRE, as all the surface drilling so far has been very successful. The Company has spent approximately C$6.2 million for an approximate cost of C$12 per ounce of gold to date."

As this resource didn’t include any of the deeper drilling at the Campbell Shear, and according to an earlier update the plan was to have a targeted 1Moz Au maiden resource on the Campbell Shear by the end of 2022, I wondered why there was a slight change of strategy here. CEO Gerald Panneton answered: “We need to do more additional drilling at depth, and are currently continuing this deeper drilling using wedge holes. We believed it was a good thing to already update the markets with this Yellorex/Kam resource. The deeper drilling program will continue into next year and the results will be reflected in a future updated mineral resource. He continued by stating:

"We look forward to continuing our drilling program on the Campbell Shear with the goal of advancing the project towards an economic study and bringing further value to our shareholders by discovering more multi-million ounces deposits on our projects."

I wasn’t aware of more multi-million ounce prospects on the properties outside the Campbell Shear, so I was curious if Panneton and his team have been identifying new targets for drilling. CEO Panneton answered that while there are indeed many other targets on our district size property, we remain focused on the Campbell Shear south of the Con Mine as that is currently the best target to delineate additional ounces.

As a reminder, this is what the Campbell Shear (yellow) looks like, with the mined out Con Mine deposit (red) projected on it:

Management is planning a winter 2023 drilling program which will include testing all zones mentioned in the initial MRE at depth and along strike, south of the Mine. If budget permits, Gold Terra will also be testing the Campbell Shear up to 2,000 metres below surface. This isn’t without reason, as lots of the Con Mine deposit was located below 1,000m depth as can be seen in this updated long section:

As another reminder, it can be seen that most of the Con Mine deposit was visualized green, meaning mineralization with gram Au*metres of 5 to 20. The high-grade zones with g*m of over 100 certainly would have more appeal to investors, and provide the most economic mineralized pockets, but don’t build the entire resource. Gold Terra recently hit a low-grade g*m of 23, implying a yellow colored zone at Yellorex North, and the hunt is on for new red and magenta colored areas.

Gold Terra has completed 8,327.96m of diamond drilling this year on the Campbell Shear and 6,011 metres on the Mispickel, and is looking to do another 30,000m for a total of 40,000m on the Campbell Shear. At the moment, the company has one rig turning at the Campbell Shear, and is currently drilling via wedges in the area of Y88 at approximately 1000m below surface. Gold Terra intends to return to the Yellorex area next winter, or earlier, once the extended all year road is approved south of the Con Mine. The current cash position stands at C$1.67M, enabling Gold Terra to last into early 2023. The next batch of drill results is expected around late fall.

As Gold Terra is spending a minimum of C$8M in exploration expenditures over a period of four years when earning in on their Con Mine property deal with Newmont, also including all exploration expenditures incurred to date, the company has spent C$6.2M to date, and as such is well underway. Gold Terra has also agreed to complete a mineral resource estimate containing a minimum of 1.5M oz Au in all categories, consisting of a minimum of 40% of a measured and indicated resource and not more than a 60% inferred resource; obtain all necessary regulatory approvals for the purchase and transfer of MNML’s assets and liabilities to Gold Terra; and post a cash bond to reflect the status of the Con Mine reclamation plan at the time of closing. This cash bond will cost Gold Terra approximately C$8M. Finally, Gold Terra has to make a final cash payment of C$8M to Newmont. All in all including G&A etc, a rounded C$24M sum for at least 1.5Moz high grade gold doesn’t seem very expensive, as it would imply a US$10/oz acquisition price which is pretty cheap these days at US$1,700/oz gold.

An important part of the reasons for this implied (and still very hypothetical) cheap price besides exploration risk is the presence of refractory ore in the (perceived) upper areas of mineralization. The news release of August 31, 2022 elaborated on this in more detail when discussing metallurgical testwork on Yellorex. Refractory ore isn’t exactly something investors are cheering for, as this type of ore prevents normal processing because of fine gold particles being encapsulated in sulphides or arsenic minerals. This typically demands roasting or pressure oxidation (POX), which translates into the use of an autoclave, which in turn is relatively expensive. Companies often chose to produce a gold concentrate which is sent off to refiners abroad, instead of gold bars on the mining site, and this obviously has consequences for economics.

The presence of refractory ore was no secret, as the Con Mine had to deal with it practically most of its mine life. Most of this ore was found above 1000m depth, and below this most ore was free milling. Recoveries have always been excellent, ranging from 88% to 95%. The former owners of the Con Mine elected to produce gold bars on site, and used an autoclave. The Yellorex resource estimate contains refractory ore as was expected, and recent metallurgical testwork confirmed recoveries of 92% for 10g/t Au samples, and still a very decent 66.6% recovery for a 1.64g/t Au sample. Senior SGS consultant Chris Fleming outlined the 2 options for Gold Terra:

The main advantage/disadvantages of the float and flog option are:

• Lower capex and simpler operation by avoiding POX/CIL etc.
• Lower gold recovery in flotation when making a high-grade concentrate for sale to a smelter (reduce shipping costs etc).
• Potential risk on gold losses to custom smelting charges.

The main advantage/disadvantages of the float/POX/CIL option are:

• Higher gold recovery by allowing for higher mass pull in flotation.
• Possibly lower grinding costs with a coarser primary grind.
• Flexibility to treat lower gold grade feed to POX/CIL and recover gold from lower grade ore zones of the deposit
• Higher capex and potential operational complexity."

Since companies go to great lengths to avoid using POX/autoclaves, and resort to concentrates most of the time, I wondered what kind of back of the envelope capex figure Gerald Panneton as an experienced mine builder has in mind for a POX/autoclave flowsheet option. I also wondered if the 1.5Moz Au number was chosen with this option in mind as a minimum, and if the higher than anticipated cut-off grade for Yellorex depended on this option as well. On a sidenote, several years ago, with base case gold prices hovering around US$1200/oz, refractory deposits not only had to be high grade to be viable, but also of huge size (often over 6-8Moz Au). Today’s gold prices justify much higher base case pricing and smaller deposits. It was too early according to CEO Panneton to say anything regarding minimum deposit size and cut-off grade of Yellorex: “We have not determined whether we will produce a saleable concentrate, or produce gold on site through the POX process”.

As Gold Terra also owns the Sam Otto/Crestaurum deposit, hosting 1.2Moz Au, which contains no refractory ore, and a historic 600koz Au resource at depth at the former Con Mine, likely also not refractory, a future mine plan fortunately will 

not be based entirely on costly recovery methods. As former owner Miramar used a blended approach by mixing free milling ore with refractory ore, there are various options for Gold Terra.

Conclusion

A bit to my surprise, Gold Terra decided to inform the markets with a maiden resource estimate on Yellorex, before the deeper parts of the Campbell Shear were drill-tested. This was done because more drilling at the deeper parts was needed. Notwithstanding this, Gold Terra was able to add over 500koz Au, and total resources on the Con Option/Yellowknife City Gold Project now stand at 1.75Moz of gold. Deeper drilling continues now, up to 2,000m depth, with results expected around late fall and into the winter. Considering the bulk of the Con Mine reserves were located below 750m depth, expectations for deeper exploration potential remain fully intact. Metallurgical testwork showed that the ore up to 1,000m depth is of refractory nature, as was the case with the adjacent Con Mine, which will require 2 scenarios: shipping concentrate or using the more costly pressure oxidation/autoclave. Current gold prices provide a good economic base for both combined with the other deposits, and it is up to Gold Terra to prove up at least another 1Moz of high grade gold at the Campbell Shear.

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.

Disclaimer:

The author is not a registered investment advisor, and currently has a long position in this stock. Gold Terra Resource is a sponsoring company. All facts are to be checked by the reader. For more information go to www.goldterracorp.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.