Drilling Deep: Trillium Gold Mines

Trillium Gold Mines Drilling Out Good News as Gold Soars Higher 

As gold prices continue to climb ever higher, our favorite microcap gold mining company is rapidly building significant momentum in the execution of its new business strategy. Trillium Gold Mines Inc. (TSX.V: TGM) (OTC: TGLDF) announced the commencement of new drilling at its flagship Newman Todd Structure (NTS) property on July 15, and followed up with the announced commencement of exploration at its solely owned Leo property on July 22. As previously reported in our June 26 article—“Gilded Explorers: Trillium Gold Mines”—based on historic drilling, the NTS had a valuation north of $C100 million in 2011. And this valuation may still be far too low, should the property hold parallel ore veins as strongly suggested by a re-examination and reconsideration of the area’s geology. Geology similar to that of Great Bear Resources Ltd. (TSX.V: GBR-X) Dixie Lake claim, a mining site that turned the former small cap mining company into a near billion-dollar mid cap. Dixie Lake, it should be noted, is located only 20 miles as the crow flies from NTS.

Meanwhile, TGM has also bolstered the ranks of its management team with more high-quality, seasoned mining executives; settled debt and boosted operating cash with a stock share trade and private placement. “All in all, very exciting times for the company,” said incoming President and CEO Russell Starr. 

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Gold Hits New All-Time Highs

Gold hit new all-time highs last weekend, when it breached US$1,920 per ounce in Asian Markets Sunday, an action that saw follow through in North America Monday, when gold hit a new record of US$1,938.10 per ounce. Gold’s rise is uncharacteristically occurring in near lockstep with a stock market rally and in the absence of any real inflation. While the stock market’s incredible rise since the March sell-off could suddenly and sharply reverse course at any time due to the impacts from the worldwide pandemic, civil unrest, or any number of Black Swan events, gold will likely hold its course as it serves its traditional role as a safe haven for troubled times. In fact, all that government stimulus money being printed out of thin air will eventually lose its power and inevitably give rise to the inflation demon. We believe that investors have been turning their attention to gold for just that reason and feel that the current economic climate portends increased momentum in gold buying that will continue to drive it ever over the next decade.  

Striking Gold with the Smaller Players   

While investors can strike gold by purchasing bullion, gold futures or by investing in the larger, well-established gold exploration and mining companies, we prefer smaller microcap and small cap gold companies. We believe they offer the biggest bang for the buck because they tend to garner less investor attention, which helps keep them undervalued. All gold exploration and mining companies reap the rewards of a gold rally, but smaller cap companies tend to realize bigger share price gains, especially when they announce material drilling results or increase a claim’s proven reserve numbers. Consider the previous gold rally starting in 2008 which saw small-cap Wheaton Precious Metals Corp. (NYSE: WPM) hit a high of US$47.60, a gain of 1,536%. Or take Royal Gold (NYSE: RGLD), which saw its share price gain almost 350%, and Newmont Corp. (NYSE: NEM), which realized a 237% gain during this gold rush period. 

Smaller Firms Targeted by Chinese

We’re not the only ones who see value in the smaller gold exploration and mining companies, as the Chinese have been actively buying up gold mines around the world, with particular attention to Canadian junior mining firms. The Zijin Mining Group completed the takeover of Canada’s Continental Gold for C$1.3 billion earlier this year and then announced in mid-June that it was acquiring Toronto-based Guyana Goldfields for C$323 million. And Shandong Gold Mining, one of China’s largest gold producers, recently made an offer to purchase Toronto-listed TMAC Resources for around C$230 million. 

Large Canadian and American gold mining firms are likely to get in on the M&A action, too. These companies straightened up their financials during the recent gold bear market and analysts suggest that robust balance sheets, ongoing free cash flow, and the rising price of gold will prompt senior mining companies to bolster their development pipelines by gobbling up attractive looking junior companies.

The Drills Are Spinning at Newman Todd!

In the midst of this gold boom, Trillium Gold Mines is starting to gain notice. With so much positive news of late, it’s hard to know which of it we should drill down into first. Then again, the commencement of drilling at NTS is probably the most relevant, as positive drilling results are the primary driver of shareholder value. Given that mining at NTS has historically produced results with every hole, further strikes seem almost guaranteed. Gold has been identified in various amounts in every drill hole and assay conducted at NTS since 2005. Historic NTS drilling suggested there were more than 20 individual high-grade zones along its current 2.2-kilometre strike length. More than 40% of 50 drill holes identified over 20 grams per tonne (g/t) at a variety of interval lengths. One drill hole returned an amazing 681 g/t over a 0.5-meter length, while another identified 7.43 g/t over a 10-meter length. Past geological mapping, surface sampling also discovered high-grade gold mineralization at the surface, suggesting a high probability of near-surface pockets. 

Even more exciting, though, is the company’s reconsideration and re-examination of NTS’s geology. This began in 2018 when TGM technical advisor Andy Randell—who specializes in geological mapping and geochemical targeting, among other mining exploration skills—found inconsistencies between drilling results and the known geology of the site. This led him to wonder whether this anomaly might be explained by ancient volcanic activity given the significant presence of volcanogenic massive sulphide (VMS) ore deposits. During his research, Randell discovered a 1971 map produced by the Ontario Geological Survey that presented a geologic picture different than the one used during previous exploration and drilling efforts conducted by the management of TGM’s predecessor, Confederation Minerals. The 1971 map supported Randell’s growing theory that VMS formation at the site during ancient times likely created parallel feeder bands to the main vein of volcanic activity where previous gold was discovered in significant amounts. Because most VMS deposits tend to create a vertical zonation of gold, any VMS feeder bands will likely include healthy deposits of gold. 

While TGM had possession of this map during previous drilling, Randell believes that the previous management team failed to look at the big geologic picture at the time, and instead focused on the suspected gold in the primary vein. Historic drilling, he believes, moved parallel to the feeder bands, but it appears that some of the last drilling at the site in 2013 picked up some anomalous gold by accidently clipping one or more of the bands.  This could easily double or triple the expected gold deposits on the NT property if the suspicion rings true.  Randell went on to tell further findings that corroborate haste on the part of previous management during the last gold bull run, noting that there are also several untested surface deposits at NT.

The initial drilling will focus first on the original structure, both to confirm the grade and density of the gold known to be there, but also to gather geological data to help them better target future drilling in the suspected feeder bands. Given the timing, we would expect to see the announcement of any drill core sampling finds by the end of August. 

What Secret Stashes Does Leo Hold?          

If you believe in astrology, you might think that TGM probably should have waited another day to announce commencement of exploration at the company’s Leo property. This would have made the announcement coincide with the start of Leo’s run on the astrological calendar, which would perhaps bring good luck. Fortune finding based on luck is always nice, but TGM certainly isn’t relying on such for Leo. Located 15 kilometres south of Great Bear’s Dixie Lake project, the property contains an array of characteristics and anomalies indicating the presence of gold. In fact, TGM believes that the Leo claim is “one of the most prospective land packages” in its portfolio of projects, based on numerous geological similarities to both Great Bear’s Dixie Lake project and Trillium’s Newman Todd.

The six-month exploration project will be used to “provide a higher resolution understanding of the structural and lithological controls on recognized targets at the site. It will also extend coverage to the previously unexplored western side of the project area. Exploration efforts will include ground and airborne drone magnetic surveying, terrain analysis, soil and till sampling, and outcrop mapping, with the goal of identifying and delineating future targets for drilling. The company expects to commence drilling at the site later this year or early in 2021. 

Company Expands Mining Expertise in Management Team

This month has also brought new mining expertise to the company’s management team, with a new president and CEO, a new chairman of the board, and a new director. Russell Starr was appointed as the company’s new chief executive officer and president on July 21, while Robert “Bob” W. Schafer was named chairman of the board and Krisztian Toth as director on July 28. Russell brings more than 20 years of corporate finance and business development experience focused in large part on private and public mining and exploration. In addition to holding senior level position and advisory roles with RBC Capital Markets, Scotia Capital, Orion Securities, and other financial institutions, Russell has held executive-level and board positions with Cayden Resources, Auryn Resources, Canada Nickel, and Gold Terra. 

A registered professional geologist with more than 35 years of experience, Bob Schafer comes to TGM with a stellar mining pedigree. He has been instrumental in exploring and discovering mineral deposits in several producing mines, including two strikes that produced in excess of one million ounces of gold. He has been an executive with Hunter Dickinson, Kinross Gold, and BHP Minerals, and is the founder and CEO of Eagle Mines Management. The current president of the Society for Mining, Metallurgy and Exploration, Bob is the first person to ever hold leadership roles in all of North America’s primary mining-related professional associations.

A partner at the law firm of Fasken Martineau, Krisztian is an experienced mining, capital markets, and M&A lawyer. His mining finance and M&A experience covers all jurisdictions and minerals and he has been recognized by a number of legal publications as a leading lawyer in mining, capital markets, private equity, and M&A

Former TGM CEO, David Velisek, will continue to serve on the company’s board of directors. Former president, James Lenec, will now serve as TGM vice-president of business development and as a company director.

Not only will the addition of this new talent add exceptional levels of mining expertise to help drive successful exploration, but it also strongly suggests that Newman Todd and Trillium are worth putting their reputations on the line. After all, such seasoned mining experts would not likely be attracted to or accept key roles in a fool’s gold exploration project.

Trillium Gold Mines Share Price Continues to Rise

TGM’s share price has nearly doubled since we first reported on the company on June 22, having risen to a recent C$1.70 from the C$0.90 it was trading at back then. We believe the share price increase was driven by a combination of reacting to recent news and in tracking overall gains in gold. That said, we believe shares remain undervalued, in part because investors do not fully understand all of the potential implications of the recent news. We have no doubt that any continued rise in the price of gold will push TGM’s share price higher but believe that pending results from Newman Todd will serve as an even bigger catalyst. As noted in our previous article, we believe Trillium Gold share prices could return the company to a C$100 million-plus market cap status that it enjoyed during the last gold rally. And that’s just based on the potential of the Newman Todd claim alone. New positive news from Leo or any of their other claims could make that share price projection obsolete.   

Press Release August 4, 2020:  Trillium acquires high grade gold property neighboring Newman Todd flagship asset in Red Lake.
Press Release August 11, 2020: Trillium Continues to Strengthen its Management Team with Christina McCarthy
Press Release August 13, 2020: Trillium Engages Windfall Geotek A.I. to Identify Gold Targets at Leo.

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