Silver as an investment

Canadian Golden Elephant

zealllc.com / Scott Wright / October 31, 2014

Elephants are the world’s largest land animals.  And though there aren’t many, they can still be found scattered across the planet.  In the mining industry, super-large-sized deposits are often referred to as elephants.  Like the animal, these deposits aren’t all that common.  But also like the animal, they can still be found.

Elephant country is somewhere miners tend to gravitate towards in their hunt for meaningful discoveries, as elephants can usually be found in herds.  And one of the world’s most prolific gold herds is found in British Columbia’s Golden Triangle.

The Golden Triangle, also known as the Stewart district, is located in northwestern BC.  I’ve seen several different illustrations of this triangle drawn out on a map, but they’re all very similar with the long end stretching south to north from the town of Stewart to Dease Lake, roughly 300km.

I won’t go into a ton of geological detail, but the Golden Triangle resides in what is known as the Stikine terrane.  It is generally believed that this terrane’s hydrothermal systems were seasoned longer than most.  And the effect is a cornucopia of mineralized deposits including the volcanogenic massive sulfide, alkaline porphyry copper-gold, and transitional epithermal intrusion-related precious-metals types.  This favorable geology has yielded several elephants.

The Golden Triangle has seen mineral exploration for over a century.  And modern methods over the last half century or so have unearthed some of its greatest treasures.  The best known as measured by yield is the famous Eskay Creek gold/silver deposit.  This Barrick-run mine was once the world’s highest-grade gold mine (48 g/t) and fifth-largest silver mine by volume.  Eskay Creek closed due to depletion in 2008, and over its life produced 3m+ ounces of gold and 160m+ ounces of silver.

While Eskay Creek was quite impressive, the Golden Triangle’s largest elephants are still in the ground.  Towards the north are the massive Galore Creek and Schaft Creek projects.  These projects, majority owned by Novagold and Teck Resources, hold two of the world’s largest undeveloped copper/gold deposits.  Their combined resources of 22b+ pounds of copper and 21m+ ounces of gold, along with substantial byproducts of silver and other base metals, are astonishing.

Moving south closer to Stewart we find the KSM, Snowfield, and Brucejack projects.  These polymetallic projects also hold a smorgasbord of metals, but with higher concentrations of gold.  Seabridge Gold’s KSM project is the largest of the bunch, a 70m-ounce 23m-pound gold/copper behemoth.  Snowfield and Brucejack are much smaller relatively speaking, containing around 30m ounces of gold resources each.  But these elephants still rank within the top 5% globally in terms of size.

So as you can see, the Golden Triangle is host to one of the world’s most robust elephant herds.  But while elephants are highly desirable assets for miners to have in their portfolios, they do have their drawbacks.  And the most onerous is the massive amount of capital it requires to develop them.

In order to profitably mine large lower-grade polymetallic deposits, they typically need to operate on economies of scale (large-scale production).  Once up and running proposed operations at such projects as KSM, Galore Creek, and Schaft Creek would indeed deliver high margins/profits, even at today’s metals prices.  But getting them up and running is no easy task since large-scale mines come with large-scale price tags.

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