August 2, 2021

highland-laundry

Through Education Matters

This company has new discoveries on the horizon in a virtually unexplored gold belt

Aurion Resources holds a dominant land position in the Central Lapland Greenstone in Finland and already has a world-class discovery at its Aamurusko project

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By: James Kwantes

  • The drill is turning at Aurion’s 100 per cent owned high-grade gold target
  • The company holds a dominant land position and JVs in the under-explored Central Lapland Greenstone Belt of Finland
  • The company is on the doorstep of Rupert Resources’ emerging $800 million gold discovery

Finding gold is hard. Companies that efficiently mine the precious metal are lousy at identifying new deposits. Gold producers typically wait for a smaller exploration company to “hit pay dirt,” then swoop in and buy up the gold in the ground.

Thousands of juniors are scouring every corner of the Earth looking for economic gold deposits and a happy ending. The vast majority fail.

When a junior exploration company identifies a major discovery that is later purchased by a producer, the wealth creation for shareholders can be spectacular. Many successful juniors start by securing large land packages in prospective gold belts and systematically explore them.

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Greenstone belts are a great place to look. These formations of volcanic and sedimentary rocks developed up to 3 billion years ago and tend to host large deposits of high-grade gold.

“We’re positioned in the right place at the right time: at the core of an emerging gold camp.”

Matti Talikka, M.Sc., FAusIMM (CP), CEO and director, Aurion Resources Ltd.

Take Canada’s Abitibi Greenstone Belt, a 450 km geological structure that straddles northern Ontario and Quebec and hosts prolific gold camps including Timmins and Kirkland Lake. In 1909, prospectors exploring an area of northern Ontario, opened up by a new railroad, discovered a giant dome of quartz containing visible specks of high-grade gold.

Other prospectors flooded into the area, among them barbers, Benny Hollinger, Scotsman Sandy McIntyre and brothers, Noah and Henry Timmins.

Summit of Dome, 1911. COURTESY OF ONTARIO ARCHIVES ASSOCIATION
Summit of Dome, 1911. COURTESY OF ONTARIO ARCHIVES ASSOCIATION

If the prospectors on that giant quartz boulder had somehow stepped into a 110-year time machine, they would have walked out into the heart of the legendary Timmins gold mining camp. Underneath the boulder was a vast endowment of gold that became the Dome mine, which produced 15 million ounces (Moz) before it closed in 2017.

The “Big Three” mines in the Timmins gold camp — Dome, Hollinger and McIntyre — produced an estimated 45 Moz. Other nearby gold mines brought the total to 70 Moz.

Timmins was the first major gold camp in the Abitibi, whose mines have produced more than 180 Moz of gold since the first discoveries a century ago. Some operations have closed, but the golden bounty endures: the Abitibi hosts both Canada’s largest open-pit gold mine (Yamana/Agnico Eagle’s Malartic) and one of the country’s highest-grade major gold mines (Kirkland Lake Gold’s Macassa). New gold discoveries are still being made.

Most of the world’s greenstone belts have been well-trampled by prospectors and geologists but one is virtually unexplored: the Central Lapland Greenstone Belt (CLGB) in northern Finland.

The gold belt has many similarities to the Abitibi and hosts Europe’s largest gold mine: Agnico Eagle’s 7 Moz Kittila mine. Exploration in the CLGB has been limited, however, for two main reasons: foreign companies have only been allowed in since 1995, and the focus of state miner, Outokumpu, was base metals, not precious metals.

High-grade gold discoveries by Rupert Resources over the past year suggest that there is plenty of gold yet to be found in the overlooked belt. Spectacular intercepts such as 167 m of 4.2 g/t gold and 188 m grading 4.4 g/t gold at Ikkari have made Rupert a market darling, vaulting its valuation to $900 million.

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Interest is building; so is anticipation over who will hit pay dirt next on the way to a multi-million-ounce deposit in the emerging gold belt.

Rupert Resources Ltd.’s 3-year share price chart. SUPPLIED
Rupert Resources Ltd.’s 3-year share price chart. SUPPLIED

Canadian-based gold explorer, Aurion Resources (TSXV: AU | OTCQX: AIRRF), holds a dominant land position — about 950 sq km of claims — in the CLGB and has a world-class discovery at its Aamurusko project.

The company is currently drilling and plans at least 10,000 m at its 100 per cent owned Risti and Launi properties, which total 300 sq km. The drill is turning first at Aamurusko, where Aurion discovered a vast field of boulders containing high-grade gold in 2016.

Up to 10 holes are planned in the first phase; the second phase will test targets at Launi East including the Hinge Zone prospect, discovered last year. Aurion is well-financed to expand the program as merited.

“The abundance of recent high-grade gold discoveries by Aurion and our neighbour shows the prospectivity for gold mineralization of significant scale,” says Aurion CEO, Matti Talikka.

“After a limited 2020 program, we’re excited to build on those discoveries with a full year of exploration. We’re positioned in the right place at the right time: at the core of an emerging gold camp.”

Aurion’s land package. SUPPLIED
Aurion’s land package. SUPPLIED

First-mover advantage

In junior mining, investors who enter a promising story early — ahead of the herd — greatly increase their odds of making money. In mineral exploration, the same is true for prospectors and companies that establish large land positions in prospective mineral belts. “Location, location, location” — it’s as important for exploration companies as for residential real estate.

The Klondike Gold Rush, for example, saw an estimated 100,000 adventurers surge north to seek fortune after the 1896 gold discovery in modern-day Yukon. The vast majority went home empty-handed.

The big winners were northern prospectors already in the region, who were sleuthing for gold nuggets while living in spartan cabins and hunting for food. These prospectors were positioned to move quickly and staked claims on the most productive creeks in the Klondike gold district. Some became fabulously wealthy.

Aurion’s experience securing much of the CLGB was no less opportunistic, if more civilized. The company began assembling its dominant land position in 2014 during the depths of a bear market.

The lack of interest from other exploration companies ensured Aurion got its pick of prime real estate in a virtually unexplored gold belt. Under the leadership of founder and former CEO, Mike Basha, Aurion secured a total of 950 sq km of ground, locking up 80 km of the 125 km long Sirkka Shear Zone.

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The Sirkka Shear Zone is the crustal-scale fault structure that hosts high-grade gold in the CLGB. It closely resembles prolific fault zones in the Abitibi such as the Destor-Porcupine Fault (70 Moz Timmins gold camp) and the Cadillac-Larder Lake Break (40 Moz Kirkland Lake district). Yet the only multi-million-ounce gold deposit within the CLGB is Kittila. High-grade gold discoveries by Aurion and Rupert suggest other economic deposits lurk beneath the surface in these highly prospective rocks.

Aurion’s discovery of quartz boulders — 1,200 of them averaging 25 g/t gold over a square kilometre — at Aamurusko on its Risti property in late 2016 captivated the market and sent the company’s stock soaring.

Aurion leveraged the discovery to raise exploration money with minimal dilution to the share structure and brought in core investors including Kinross Gold, the world’s fifth largest gold miner.

The discovery sparked a staking rush that put the CLGB on the gold exploration map. Like several northern Canadian gold projects, the belt is on the perimeter of the Arctic Circle. Thanks to the Gulf Stream, the CLGB is warmer by approximately 20 degrees Celsius on average, resulting in no permafrost and making year-round exploration possible.

Aurion prospectors inspect visible gold on surface at Risti. SUPPLIED
Aurion prospectors inspect visible gold on surface at Risti. SUPPLIED

Aurion has since made the most of its dominant land position through both exploration and joint ventures. Base of till sampling is a key grassroots exploration tool in the CLGB, since most mineralization is under cover (the gold boulders notwithstanding). As the drills turn at Aamurusko, Aurion is taking till samples on areas of its Risti and Launi properties that have never been explored.

On the drilling front, the company has already intersected multiple bonanzas and high-grade gold hits at the Aamurusko discovery and 600 m to the northwest in prior campaigns. Aurion has found gold in different settings including quartz veins and sediments.

Top intercepts include:

  • 789 g/t gold over 2.9 m (Aamurusko)
  • 41 g/t Au over 11.1 m (Aamurusko)
  • 3 g/t Au over 19.5 m (Aamurusko NW)
  • 3 g/t Au over 4.0 m (Aamurusko)

Other companies interested in exploring the CLGB moved quickly to partner with Aurion. Gold producer B2Gold entered the belt in 2015, optioning a 250 sq km land package to the west of Aurion’s 100 per cent owned properties.

The Aurion-B2Gold joint venture (JV) has yielded several high-grade discoveries, including 11.4 g/t gold over 13.3 m. B2Gold has identified gold mineralization over more than a kilometre of strike length at the Kutuvuoma project, just 8 km west of Rupert’s Ikkari discovery.

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Aurion has also optioned a project to Strategic Resources, which is backed by mining tycoon Ross Beaty. The Strategic option is on a vanadium project in the northern CLGB.

Back on track

The outbreak of COVID-19 in early 2020 prompted a pivot for Aurion. With the virus spreading rapidly, the company pulled its Canadian field crew and diamond drilling team home to Canada, where they remained for the year. That forced the suspension of a helicopter-supported drill program at the flagship Aamurusko project, which is now being drilled by Aurion’s Finnish-based drill crew. Assays are pending.

Aurion’s exploration team refocused on earlier-stage exploration in 2020 including a scout drill program at the Launi East property. That drilling yielded several sniffs of high-grade gold and will be followed up with diamond drilling this year. Aurion geologists also refined drill targets for this year’s program through geological mapping and data evaluation.

Many junior mining companies have an abundance of technical talent but lack capital markets savvy. Aurion stands out for marrying a skilled geological team with capital markets professionals who know their way around a balance sheet.

CEO Matti Talikka leads a strong technical team with deep roots and experience in Finland, which helped Aurion move its projects forward during the pandemic. Talikka is a geologist and Finnish national who is well-known in Finnish mining circles and has been exploring the CLGB for much of the past 20 years.

From 2007 to 2015, he was a senior officer with Dragon Mining, the Australian-listed company from whom Aurion purchased the Kutuvuoma and Ahvenjarvi projects (B2Gold JV). Talikka joined Aurion’s board in 2015 and became chief executive last year.

The level of financial expertise on Aurion’s capital markets team is unique for a junior explorer. Aurion chairman Dave Lotan is a seasoned Bay Street veteran with deep and broad connections from years in the finance and hedge fund worlds. He worked as a portfolio manager for one of Canada’s largest pension funds prior to joining Aurion’s board in 2017.

Chief financial officer Mark Serdan spent a combined 15 years as a resource-focused portfolio manager at BMO Global Asset Management and UBS Global Asset Management. In those roles, he won multiple Lipper Awards, presented annually to the top-performing fund manager among peers in the category.

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Between them, Serdan and Lotan have evaluated more than 1,000 junior resource companies. That has helped them identify the ideal path for success and ensure that Aurion remains on it.

Lotan, an accountant, believes Aurion’s sum of parts adds up to much more than the current stock price. He has spent more than $1.85 million purchasing Aurion shares since December 2020 and now owns more than 9.8 per cent of the company.

“It’s really without precedent to find all this gold on surface, to be able to stake 80 kilometres of a major fault, to find high-grade gold in quartz lying all over the surface, and to have it in an area where exploration is extremely economical,” Lotan says.

The majority of Aurion’s land package is governed by the Finnish state forestry company and has been extensively logged. Those logging and road construction activities have greatly aided Aurion’s exploration efforts.

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Value of discovery

The greatest value in mineral exploration is created by new discoveries. Aurion proved it in 2017 with the high-grade boulder discovery at Aamurusko, which sent the stock from dimes to dollars. Aurion’s neighbour, Rupert Resources, demonstrated it a year ago with their world-class gold discoveries on the doorstep of Aurion ground.

Importantly, Rupert’s Ikkari and Heina discoveries are in a different geological setting than Aurion’s high-grade finds to date. That gives Aurion’s geologists another valuable exploration tool as they hunt for Ikkari-style mineralization on 100 per cent owned ground. Aurion’s Risti property alone hosts 15 km of the same geological setting where Rupert hit pay dirt.

Rupert’s stock chart also hints at Aurion’s potential. The two companies were trading at a similar valuation in April 2020 before Rupert’s Ikkari discovery. Rupert is now trading at a valuation north of $900 million — more than 9x higher than Aurion’s $100-million market cap. The hits keep on coming — on April 20 Rupert announced its best hole yet at Ikkari — 4.4 g/t gold over 188 m starting from 64 m, including 8.9 g/t over 23 m.

Rupert is drilling “ferociously” ahead of a maiden Ikkari resource estimate this summer, which will give the market “a first glance at the potential scale of the discovery,” according to Stefan Ioannou, a mining analyst with Cormark Securities.

He expects Rupert to prove up a multi-million-ounce resource over time that could be open-pittable. Given proximity to Aurion’s JV claims with B2Gold, the odds that gold mineralization continues across Rupert’s property boundaries are high.

“The beautiful thing for Aurion and B2Gold is that as you follow Rupert’s Ikkari discovery along strike to the southwest, it leads right onto Aurion’s JV ground,” says Ioannou, who covers Rupert and has written about Aurion. “Rupert is drilling within a couple hundred metres of the property boundary.”

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Last year, Aurion’s JV partner, B2Gold, hit narrow, high-grade gold mineralization on the greater Kutuvuoma property, some 8 km west of Rupert’s Ikkari and Heina discoveries. This year, B2Gold is planning a first-phase 5,000 m drill program on the JV side of the property boundary with Rupert, along strike from Ikkari. “If they hit, watch out,” Ioannou says.

Rupert’s Ikkari discovery on Aurion’s JV property boundary. SUPPLIED
Rupert’s Ikkari discovery on Aurion’s JV property boundary. SUPPLIED

B2Gold currently holds a 51 per cent interest in the JV and can boost that to 70 per cent by spending a further $10 million on exploration over a two-year period. B2Gold can earn an additional 5 per cent interest (for 75 per cent total) by completing a bankable feasibility study.

Given the number of high-grade gold discoveries already on joint venture ground, a further earn-in by B2Gold seems quite likely. If the gold miner takes its ownership level to 75 per cent and the Rupert high-grade gold discovery continues onto JV ground, a 25 per cent stake in the project alone could be worth multiples of Aurion’s current valuation.

Potential path to a ten-bagger

With gold at about US$1,800 an ounce in a world awash in debt and money-printing, mergers and acquisitions are starting to pick up. In the latest deal, announced on April 26, Fortuna Silver Mines is paying about $1 billion to acquire Roxgold and its portfolio of West African projects.

Multiples paid in gold takeovers tend to rise along with grade and the number of ounces. Acquirers also pay a premium for deposits in stable jurisdictions. Finland fits the bill; the country is routinely ranked among the best mining jurisdictions in the world by the Fraser Institute, with excellent infrastructure and a skilled labour force.

It’s likely that the CLGB — like other greenstone belts it closely resembles — hosts several multi-million-ounce gold deposits. Aurion’s dominant land position and strong technical approach increases the company’s odds of discovering Ikkari-style gold mineralization on their wholly owned Risti and Launi properties. It has the makings of a brand-new gold camp taking shape in real time.

Finland is a top jurisdiction for exploration and mining.
Finland is a top jurisdiction for exploration and mining.

“Rupert has made a great discovery but it’s also ten times the market cap of Aurion,” says Cormark’s Ioannou. “If you can tolerate the exploration risk, Aurion is well-positioned to move significantly higher on drill bit success.”

He adds, “the company has the right address, it’s just a matter of methodical grassroots exploration over a compelling large-scale multi-target property package in an effort to tie together a meaningful envelope of gold mineralization.”

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The junior mining sector is notorious for its volatility and pendulum swings between fear and greed. Aurion’s story was on every speculator’s radar in the fall of 2017 amid the excitement of the golden boulders and a brand-new high-grade discovery. The stock traded to $3 and above.

Aurion Resources’ 5-year share price chart. SUPPLIED
Aurion Resources’ 5-year share price chart. SUPPLIED

With the challenges of 2020 in the rearview mirror, Aurion is well-positioned to build on its high-grade gold discoveries and make new ones. The company is fully financed for this year’s drill programs.

Yet, Aurion is firmly under the radar and its stock just recently rose above the dollar level. The action could lay the foundation for further upside moves — especially if the company can make high-grade Ikkari-style gold discoveries in an emerging gold camp still very much in its infancy.

There are no time machines and no shortcuts to identifying major gold discoveries. But in the decades to come, the CLGB seems destined to join the ranks of the world’s most productive gold mining camps. Aurion is poised to play a leading role.

To learn more about Aurion Resources, visit their website here.

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James Kwantes is the editor and publisher of Resource Opportunities, a subscriber-supported investment newsletter. He owns shares in Aurion Resources and was compensated for producing this article, which is not investment advice.

This story was provided by Market One Media Group for commercial purposes.

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