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Modern Yukon Gold Rush - Revisited

Sometimes it feels like far more than just five trading days must have passed since I last wrote because just so much can happen.

This time the ‘much’ included a conference and three site visits in the Yukon for me, a series of weak economic data points for the US, and a gold sector – metals and miners – that turned up.

The Yukon was, once again, a great trip. Most importantly: after managing to avoid the SourToe Cocktail for my five previous trips (a feat of which I was quite proud!) this time the crew caught me and I had no choice.

What is the SourToe Cocktail you ask?

The legend of the first “sourtoe” dates back to the 1920’s and features a feisty rum-runner named Louie Linken and his brother Otto. During one of their cross-border deliveries, they ran into an awful blizzard. In an effort to help direct his dog team, Louie stepped off the sled and into some icy overflow—soaking his foot thoroughly.

Fearing that the police were on their trail, they continued on their journey. Unfortunately, the prolonged exposure to the cold caused Louie’s big toe to be frozen solid. To prevent gangrene, the faithful Otto performed the amputation using a woodcutting axe (and some overproof rum for anesthesia). To commemorate this moment, the brothers preserved the toe in a jar of alcohol.

Years later, while cleaning out an abandoned cabin, the toe was discovered by Captain Dick Stevenson. After conferring with friends, the Sourtoe Cocktail Club was established and the rules developed. Since its inception, the club has acquired (by donation) over 10 toes.

The rules: the toe goes in a shot of Yukon Jack, which is an atrocious Southern Comfort-type drink, and you have to let the toe touch your lips as you drink the shot. There’s even a rhyme: “You can drink it fast, you can drink it slow, but your lips have gotta touch the toe!”

Of course I jest – the Sourtoe was far from the most important aspect of the trip. Going to the Yukon was important because major miners have arranged to invest more than US$600 million in the territory since May 2016.
  • May 2016: Goldcorp buys Kaminak Fold for $520 million
  • June 2016: Goldcorp invests $2 million for 19.9% of Independence Gold
  • December 2016: Agnico Eagle pays $14.5 million for 19% of White Gold
  • March 2017: Newmont signs property earn-in with Goldstrike worth as much as $53 million
  • March 2017: Goldcorp pays $6.3 million for 19.9% of Triumph Gold
  • March 2017: Coeur puts $2.7 million into Rockhaven
  • April 2017: Barrick signs property earn-in and strategic investment deal with ATAC worth as much as $63 million
That’s a simplified version. For example, Agnico has since put another few million into White Gold to maintain its 19% position after Kinross put the White Gold project into the company in exchange for shares.

It all means Yukon has seen more investment that any other jurisdiction in the world, provided you exclude mines under construction or expansion.

It’s a modern day gold rush and, most surprisingly, it’s happening even though the Yukon has yet to host a significant hard rock gold mine. Placer miners have pulled many millions of ounces from the Yukon’s rivers and gravel beds, but the territory has yet to offer up a large gold deposit that makes it to production.

That’s not to say there aren’t contenders. Victoria Gold’s project is permitted and lacks only a construction decision and financing; the team there is taking a step back and searching its larger land package for higher-grade feed to boost the economics. Kaminak’s (now Goldcorp’s) Coffee project is arguably ready to permit, though there’s reason to think Goldcorp is looking to grow the deposit and then rejig the mine plan before going too far down the permitting road.

And Western Copper & Gold’s Casino project hosts an immense gold resource, alongside an immense copper resource. The permitting process continues there, and will do so for another few years.

But explorers are convinced there’s more. And there likely is. There certainly is some impressive silver. The Keno Hill district produced 200 million oz. silver from incredibly high-grade ore between 1920 and 1990. Now Alexco Resource is managing the dual task of remediating the old tailings and mine water (through their stellar subsidiary Alexco Environmental) and preparing to start mining once again. There’s a long story to be told there, but I will save it till next week or the week after. For now suffice to say Alexco has outlined several new silver deposits that carry incredibly high grades, like 800 g/t, and between Alexco and neighbor Metallic Minerals there is a very good chance of finding more.

Yukon has zinc, lead, barite, lithium, platinum, palladium, nickel, cobalt, copper, gold, silver, and probably a whack more minerals I haven’t yet realized are there. It’s a rich, rich place. It’s rugged, for sure. It gets ridiculously cold in the winter (the motivation for the Sourtoe Cocktail is that it is the quick way to become a Yukoner; the only other way is to spend four seasons in the territory…and most would rather have a desiccated toe in their whiskey!). There is a lack of power. Roads are limited. In some places the mountains are big and steep.

But it also has a very supportive and reliable system for exploring and permitting mines. Most of the First Nations have settled their land claims and are happy to work with explorers provided the approach is done right. Mining support services abound, from drillers to heavy machine operators to helicopter pilots. A new Save On Foods being built in the middle of Whitehorse is going to offer bulk deliverables, so that cooks at exploration and hunting camps can order their groceries online and have a transport company pick them palletted and ready to be flown into the field.

And the tales of Yukon placer gold are unreal. Near the end of Eldorado Creek, close to the spot where the first discovery of placer gold kicked off the entire Yukon gold rush, one placer miner shows up for a few weeks a year and reliably pulls a few hundred ounces from the ground. Multiply that by $1200 an ounce – not bad pay for two weeks work. That richness is why, during the gold rush, Dawson City was the biggest city on the continent north of San Francisco.

The question is: where did all the placer gold come from? For there to be so much gold in the gravels, there has to be gold in the rocks, right? So goes the logic and with it, now, hundreds of millions of exploration dollars.

I think those dollars will find some success. Yukon went through its first round of the modern gold rush in 2011 and 2012, when retail dollars flooded into the territory following Underworld Resources’ White Gold discovery (that Kinross quickly bought).

Suddenly everyone and their uncle was drilling a gold-in-soil anomaly in Yukon. Most of those efforts produced nothing but failed drill holes and worthless share certificates. The hope is that the experience taught some lessons, which the majors are now heeding as they stampede in.

Area plays are a strange phenomenon. They are even stranger when the players are major miners. Given that they are all long established businesses with strong technical and corporate cultures, it’s amazing how majors still often follow each other blindly. Once two or three of them have moved into an area, the rest will follow, whether it really makes sense or not.

That is part of what is happening in Yukon. Some of the investments make a lot of sense and will advance assets that deserve the dollars. Others, not so much. My hope is just that the inevitable exits – when the weaker projects get dropped and their majors move on – don’t infect the whole area. Yukon didn’t ask to be the next major area play. It just happened, a result of majors wanting that ideal post-bear market combination of district-scale potential with security and support.

Yukon provides that, which is its strength. I hope majors don’t spoil it because of their own follies.

Even if they do, that day is some time out yet. Yukon is going to see a tonne of work over the next one to three years, which is great. If that work can generate a strong new discovery, the resulting excitement will override all else. So here’s hoping!

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