The Stillwater mining complex in Montana. Credit: Franco-Nevada Corp.
The Stillwater mining complex in Montana, on which Franco-Nevada has a 5% NSR royalty. Credit: Franco-Nevada Corp.

Franco-Nevada is a diamond in the mining industry, as a steady and profitable royalty and streaming company. In a world of low yields and interest rates, investors are hard-pressed to find the kind of returns that will make them look at their RRSP with pride. Chasing returns also carries significant risk, which Franco-Nevada controls for by not operating mines, developing projects, or conducting exploration. 

Low-Risk, Reponsible Management

The company instead focuses on managing and growing the company’s portfolio and streams, giving them exposure to commodity price optionality and a perpetual discovery option over large areas of profitable and geologically prospective real estate. This low-risk, steady, and high-reward business model is a counterbalance to the hit-and-miss strategies of many other mining companies. The company has limited exposure to many of the risks associated with operating companies because of its capital-light business model. This nimble operation strategy allows it to pivot to new projects, mines, and even supporting the industry when needed. The company engages in exploration efforts as part of advancing a property in advance of taking on an investment. This due diligence is necessary as the company relies on the industry operating responsibly to both reduce risk, and honour the royalty and streaming agreements they make. 

By The Numbers

With the stock price sitting at over $109, the company is more expensive than many of its peers, but this is an investment that gives more than it takes, just as it should be. Their portfolio of precious metals like gold, silver, and platinum group metals, oil, gas, and natural gas liquids allows them to give investors a dividend yield of 0.90%. With an operating margin of 28.18% and a return on equity of 5.18%, this is one of the rare mining companies that consistently turns out results investors can be pleased with. With zero debt, and a fully equity-funded balance sheet, not only are the paper stats solid, but the bottom line fundamentals are strong enough to keep buying the stock as it gains. 

Their recent announcement of a US$0.26 per share dividend to be paid on March 25th, 2021 to shareholders of record on March 11th, 2021 was welcomed warmly by investors. Analysts are estimating 15% growth for 2021, and as the company gears up to report 4Q2020 earnings on March 10th, investors eagerly await a sign that all is well with this steady performer. Whether 2021 will shape up to be as good a year for Franco-Nevada as 2020 was is still yet to be seen, but with restrictions lifting, business activity picking up, and an optimism in the air, new projects and mines will continue to need the company’s services, bringing more dividends for shareholders quarter after quarter. 

Dividends Keep Padding Portfolios

We will continue to watch the dividend payout ratio, as the company must balance paying out less in dividends than it earns; the opposite would make the dividend unstable. Franco-Nevada paid out 74% of its earnings to investors last year, an average level for most businesses, and nothing they need to worry about adjusting. Dividends also used just 27% of the free cash flow it generated, leaving a comfortable margin to continue paying a dividend throughout 2021. As long as earnings don’t drop precipitously, the dividend looks to be stable and is covered by both profit and cash flow. 

*This story will be updated on March 10th after the earnings report.


The Critical Investor profiles a miner that is ramping up its gold mine in Nevada on time and on budget.

Pan Mine, Nevada

1. Introduction

Fiore Gold Ltd. (F:TSX.V; FIOGF:OTCQB) has progressed its Pan Mine in Nevada, U.S. in a very steady fashion, on time and on budget. Exploration for additional resources (and hopefully years of mine life as well) has been successful so far, and a new COO has been hired. Recently, the latest financials regarding the first quarter of the new year were released, which are always an interesting reference of the state of a company, especially with producers. Therefore, it was time to have a closer look at Fiore Gold, Frank Giustra’s baby. Besides an update on proceedings, the other purpose of this article will be the outlining of future cash flow and valuation potential, as I view Fiore Gold as misunderstood by the markets at the moment.

All presented tables are my own material, unless stated otherwise.
All pictures are company material, unless stated otherwise.
All currencies are in US Dollars, unless stated otherwise.

2. Pan Mine

The ramping up of the Pan Mine is progressing according to plan, and the company is actually ahead of schedule, as the production rate increased from the planned 10,000 tpd capacity to 14,000 tpd, which was supposed to happen much later. The highlights of the first quarter of fiscal year 2018 are according to the news release:

  • Revenues of $8.26 million from the sale of 6,467 gold ounces with a gross margin of $2.54 million or 31%.
  • Inventory of 11,335 estimated recoverable ounces placed on the leach pad at Pan as of December 31, 2017.
  • Working capital of $13.51 million as of December 31, 2017.
  • The first full quarter of steady-state production at the Pan Mine in Nevada.
  • Operating costs ($/ore ton) 6.2% below budget for the quarter.
  • Successful construction of the Phase II heap leach pad at the Pan Mine, adding an additional 2.2 million square feet of leach pad space. Approximately $5.3 million of capital expenditures for the Phase II expansion was treated as sustaining capital costs for the quarter, resulting in significantly higher All-In Sustaining Costs (AISC) for the current period.


Let’s dig a little deeper into the financials here. In the first quarter of the current financial year, Fiore was surprisingly able to report a comprehensive income of $3.05M, or roughly 3 cents per share. However, this strong net profit was predominantly caused by an unrealized benefit from the fair value of the warrants (in green) and the lack of any tax payments (in red):


The tax holiday is into effect as the company has substantial carry forward losses (in red):


The operating income in the first quarter was $780,000. Fiore Gold is debt-free though, as the long-term liabilities (in green) aren’t long-term debt obligations.

The cash flow statements indicate a ramping up producer as well. The operating cash flow (or OCF, before changes in Fiore’s working capital position, which is the most reliable figure for small producers, especially when ramping up, as OCF after changes can vary a lot in this case) was approximately $1.5M (OCF in orange, without changes in working capital in red, for an operating cash flow of approximately 225 dollar per ounce), and this wasn’t sufficient to cover the $4.4M in capital expenditures (in green):


However, there are two important remarks to make here.

First of all, Fiore Gold plans to produce 35,000-40,000 oz Au this year. Even if the lower end of this guidance is used, Fiore Gold will still have to produce about 35,000 – 6,467 = 28,500 oz Au in the next three quarters of its financial year. This equates to an average of 9,500 oz Au per quarter, or an increase of almost 50% compared to the Q1 production rate.

This means that if production increases, the economies of scale will start to have an effect and the operating margins will improve. Keep in mind that the quoted margin of $225/oz in the first quarter includes $1.267M in G&A expenses. The G&A cost per ounce was $195 in Q1, when this fixed cost could be spread out over 9,500 oz, it drops to $133/oz, which is a pretty substantial improvement. On top of that, the other relatively fixed expenses will also be divided over more ounces. So, the margins will increase as more gold is being produced.

Second, Fiore Gold has guided for a full year capex of $5.5M (red):


On a side note but an important one: comparing the 2018 forecast for gold ounces mined vs gold ounces produced shows a global recovery target of about 50%. However, the Feasibility Study provides a recovery of 72% for an operation with crushers and an agglomerator, and 60% for a run-of-mine operation. As Pan is a heap-leach operation ramping up production, it is never easy to start up heap leach mines, and recoveries often seem a matter of trial and error it seems before all issues are ironed out. The option to add a $14M crusher and agglomerator is a likely one but still uncertain, depending on the outcomes of ongoing test work. A decision on the C&A circuit will likely be made mid-2018, and a realistic timeline on eventual completion of this will be Q1 2019 according to management. At the last PDAC I met with CEO Tim Warman, and he had this to add:

“The idea was always there to use the crusher and the belt agglomerator, but it was such a close call that we decided this could be best tested in a production environment using available space on our newly constructed Phase II leach pad.”

As current working capital stands at $13.5M and the Pan mine is about to become free cash flow positive, the timing is perfect. Let’s continue with the budgeted $5.5M. A big part of this was spent in Q1 alone which means the earlier planned capital expenditures in the next few quarters will be substantially lower as well. Fiore Gold has started a drill program but the combination of higher operating cash flows (due to production increases and margin expansions) and a lower capex should ensure Fiore Gold reaches positive free cash flow.

The interesting thing is that Fiore’s operating costs are pretty much fixed which means the additional ounces will be high-margin ounces. Assuming a production increase of 3,000 ounces per quarter, the operating cash flow will very likely increase by $2.75-3.25M per quarter (assuming $1,300/oz Au, and no taxes will be due for the first few years as mentioned earlier) towards $4.25-4.75M per quarter. Besides this, keep in mind that gold stands at $1353/oz at the time of writing, which could add a further $0.5M per quarter. Furthermore, I’m also assuming the sustaining capex will reach an average of $1.5M per quarter; this should result in Fiore Gold generating approximately $2.75-3.25M per quarter in free cash flow until the taxes start to kick in. And on top of that, U.S. corporate taxes enjoyed a big haircut recently thanks to Trump, so this is beneficial for Fiore in the future. Production will probably improve according to guidance, resulting in an annualized $17-19M operating cash flow in H2, 2018. Using a $1350/oz gold price would result in an annualized $19-21M operating cash flow, which is huge for a small producer in Nevada with just a C$65M market cap. More on this later; let’s have a look at ongoing exploration.

3. Exploration

Besides production, Fiore Gold is also busy with exploration on every asset at this time. I will focus on the infill- and stepout drilling on Pan, as management is looking to extend the mine life substantially. The results of the first six holes were released a month ago, and delivered good intercepts, the best ones highlighted in green:


As a matter of fact, all holes returned economic mineralization as the mine cut-off grade is 0.14-0.21g/t Au, according to CEO Tim Warman:

“These first six holes show excellent potential to increase the resource and reserve base both at depth and laterally beyond the current mine plan boundaries. We’re extremely pleased with the success rate so far, with each of the first six holes encountering mineable widths of gold mineralization above the mine cut-off grade. This is a very good start to a program that we’re confident will allow us to extend operations at Pan well beyond the current mine life.”

In order to get an idea of locations of drill collars here is a map representing them:


To get a good impression about the significance of these intercepts, let’s have a look at this section:


It will be clear that if Fiore manages to prove up sufficient mineralized tonnage below/west of the current pit outline between PND18-06 and PND18-01, a new and much deeper pit outline could be based on these intercepts and significantly expand mineable reserves/resources. In case ongoing drilling would generate the same kind of results for the entire southern part of the North pit, I wouldn’t rule out an increase of 100-150koz Au, which in turn would extend the life of mine (LOM) to eight to nine years from the current six years.

As the company returned some good intercepts on Pan recently, I felt it was time to ask CEO Tim Warman for some color on proceedings:

TCI: 13 holes were completed, and 6 assays reported so far. When can we expect the remaining 7 assays?

TW: We expect to have those in early April. Through the end of March, we have drilled about 10,000 feet (about 3,000 m), and we expect to do 15,000-20,000 ft RC and DD combined.

TCI: Hole 5 and 6 seem to have resulted in economic mineralization, but hole 3 as an extension at depth at relatively low grade seems unlikely to be economic considering the increased strip ratio?

TW: We think the mineralization of hole 3 isn’t too deep but this area needs more drilling for sure to define new resources.

TCI: Where exactly is further drilling targeted?

TW: Drilling in this first phase is targeting areas close to the North Pit, as well as some smaller future satellite pits in the central part of the deposit.

TCI: I see that RC drilling is used a lot in this round of drilling; don’t you have the risk of contamination with this method in this environment? I recall the same thing happening when Gustavson was working out the resource estimate for Pan in the not-too-distant past.

TW: There is always a bit of smearing with RC, but we understand the deposit a lot better now than in the Midway days. For this type of resource expansion, doing only DD is too expensive now, although we will be doing about 5,000 ft of diamond drilling in key areas.


TCI: Is the Gold Rock resource update planned for late 2018?

TW: We are still planning the program for Gold Rock; we like to fund this from incoming Pan cash flow and use the rig from Pan when drilling is finished there. This will probably be April or May after the snow is cleared.

TCI: Do you have new plans for the Chile asset and the Washington asset?

TW: We are still reviewing plans for the Chilean assets, although we just announced some good exploration results from Rio Loa. As for the Washington asset, we’re talking to a few people about it but it’s still in the early stages.

TCI: The Gold Rock FEIS (= EIA) has been submitted for review, and the Federal Record of Decision should be received before mid-year. What is the status nowadays?

TW: The Record of Decision wraps up the Federal permit, which is the one that takes the longest. The various state permits typically take six to eight months, but we won’t start applying for those until we’ve done a lot more engineering work, since they require fairly specific information.

TCI: Last question: what can you tell us about met work for Gold Rock so far?

TW: The recovery appears to be pretty good, actually a little better than at Pan, Gold Rock has a recovery of about 65-75%. And as you know we are looking at improving Pan recoveries by adding a crusher and an agglomerator.

This concludes the short interview with Tim Warman, which provided a solid update on exploration and related subjects. Now it’s time to take a look at ways how to value Fiore Gold.

4. Valuation

When Fiore Gold is compared to a few other junior gold producers (some data coming from Haywood’s weekly update the Weekly Dig) it can be seen that Fiore Gold is pro forma (as a ramping up producer) valued on EV/CF ratios comparable to the more adventurous jurisdictions like Turkey or Mexico:


And part II:


For the best jurisdictions in this list, Ontario/Quebec and Nevada, the EV/CF metric is substantially higher, and I don’t even consider the corresponding companies top notch although Rye Patch got acquired by Alio Gold very recently.

At a current market cap of about C$61M, it seems that Fiore Gold is valued only on the Pan NPV, when using my estimate from another article on the company:

  • the current exploration assets, of which I estimate El Peñon at C$1M and Cerro Tostado at C$4M
  • about C$7M in cash, zero debt
  • the Pan Mine with a C$65M NPV and ramping up production
  • the Gold Rock historical deposit and the exploration potential of both Pan and Gold Rock combined at C$20M
  • Golden Eagle at C$5M, bringing the total NAV at C$102M.

Obviously, Pan is discounted by investors, as it is still ramping up production and is looking at adding the crusher and agglomerator for better recoveries, and the market doesn’t appear to assign much value to the other assets. Especially Gold Rock could be capable to add a $80-100M NPV in a few years as it is a bigger and higher grade mineralized project in my view. Nevertheless, the valuation of a producer is usually much better represented by the market cap to operational cash flow ratio (which varies from about 8 to 12 (even 16 for very profitable mines) in good jurisdictions at current gold prices/sentiment), which can be narrowed down further to EV/CF.

When looking at this metric and using the operating cash flow estimates mentioned earlier in this article, the re-rating potential becomes clear. With a potential estimated OCF of $17-19M (= C$22-25M), the company would be valued at 2.0/2.8 times cash flow which is very cheap on EV/CF and P/CF metrics for a profitable Nevada gold play. When Fiore Gold starts generating quarterly cash flows as estimated, and coverage picks up, I am happy to stick with my forecast for a potential double. Increased resources should be able to add LOM years for Pan, and a solid resource on Gold Rock could likely further support a higher valuation.

5. Conclusion

Ramping up to 14,000 tpd steady state went almost flawless for Fiore Gold, as the company did save on operational costs, but didn’t reach its desired 60% run of mine recovery, as it expects to get to 50% for the full year 2018. Therefore, the option to add a crusher and an agglomerator is being evaluated at the moment, increasing recovery, hopefully in line with FS levels. When this staged development would be completed, Fiore Gold will likely boast an annualized cash flow of about C$22-25M, which in turn deserves a much higher share price based on producer average multiples. It is a stock that demands more patience than others, but in the current positive gold environment investors could very well be nicely rewarded in the not-too-distant future.

Pan Mine; scenery

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, in order to get an email notice of my new articles soon after they are published.


The author is not a registered investment advisor. The author holds a long position in this stock. Fiore Gold is a sponsoring company. All facts are to be checked by the reader. For more information go to and read the company’s profile and official documents on, 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.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long term commodity pricing/market sentiments, and often looking for long term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

What’s going to be the catalyst for the junior gold stocks to escape this sideways to downward movement? To me, the key to a momentum change is discovery. Although the market on a whole seems to be stuck in neutral, money has been injected into the best junior gold exploration teams, and because of this, I think it’s only a matter of time before we get a stellar drill hole, which will bring eyes and cash back to the sector.

Supply and demand fundamentals control the direction of markets over the long term, and when looking ahead at almost any metal’s supply fundamentals, I think it’s clear that we’re in for a metal supply crunch in the years ahead. Bull markets driven by supply destruction are very strong, mainly because it requires not only the discovery of new deposits, but those discoveries also have to be permitted developed, and that takes time.

It’s my contention that the next bull market in metals will be discovery driven, as the world’s major mining companies look to fill the supply gaps that are developing in most of their reserve and resource inventories.

In my opinion, buying the highest quality companies gives you the best possible odds of being right when the market turns. The company I’m going to share with you today, Northern Empire Resources Corporation, is, in my opinion, one of those high-quality companies, and they’re poised to discover and expand their resources at the Sterling Gold Project in Nevada.

Let’s take a look.

Northern Empire Resources Corp. (NM:TSXV, PSPGF:OTC Pink)

  • DTC Eligibility for its common shares listed on the OTC market in the United States

MCAP: $86.4 million (at the time of writing)

Shares: 66,586,700

Fully Diluted: 77,139,302

CASH: $16 million

Management/Insiders: 7.9%

Institutional Ownership: 32.7%

Coeur Mining: 11.6%

Imperial Metals: 3.7%

Northern Empire’s People

Northern Empire is led by President and CEO, Michael Allen, who is a professional geologist by trade and has 20 years of experience in the mining industry. Allen has worked in various senior roles over the course of his career with Redcorp Ventures, Silver Standard Resources and, most recently, West Kirkland Mining. For those who are not familiar, West Kirkland Mining’s gold project is located in Nevada, giving Allen 8 years of jurisdictional experience, and should prove to be an X-Factor when it comes to developing and exploring for gold on Northern Empire’s Sterling Gold Project.

Additionally, Northern Empire has a strong Board of Directors, made up of individuals with extensive experience in the mining industry. The Board is led by Executive Chairman, Douglas Hurst. Hurst, a geologist by trade, has a great track record for developing mining companies into premier takeover candidates. Hurst was a founding executive of both International Royalty Corporation and Newmarket Gold Inc. Both companies were taken over, first International Royalty Corporation by Royal Gold for $700 million, and most recently, Newmarket Gold by Kirkland Lake Gold for $1 billion.

The Board is rounded out by people whose careers share a common characteristic – successful company building. Each member has been involved in at least one development success in their career, and to me, it’s clear that this is the main goal for Northern Empire; to develop their Sterling Gold Project into a premier takeover candidate.

The other Board members are as follows:

  • Raymond Threlkeld has more than 32 years of experience within the mining industry. Threlkeld was Chairman of Newmarket Gold which, as previously stated, was purchased by Kirkland Lake Gold. He was also involved with Western Goldfields which was purchased by New Gold in 2009.
  • John Robins, a professional geologist by trade with 30 years of mining experience. He was a founder and Chairman of Kaminak Gold, which was purchased by Goldcorp for $520 million in 2016.
  • Adrian Fleming, a geologist by trade with over 30 years of experience in the mining industry. Fleming was President and Director of Underworld Resource Inc which was acquired by Kinross in 2010.  Fleming was an early mentor in Michael Allen’s career when they both worked on the Hope Bay Gold Project.
  • Jim Paterson with 20 years of experience on the financial side of the mining business, and the founder, CEO and Director of Corsa Capital Ltd.
  • Darryl Cardey and Jeff Sundar both have several years of experience within the mining industry and were a part of the successful development and sale of Underworld Resources.

Nevada, United States

Northern Empire’s 100% owned Sterling Gold Project is situated roughly 160 km northwest of Las Vegas, Nevada and encompasses a total of 14,109 acres over 4 contiguous claim blocks.  Nevada is situated in the western United States and has a long history of mining dating back to the 1840s. Although mining began over a 150 years ago, Nevada’s real fame in the gold mining industry didn’t come until the 1960s when ‘Carlin Style’ or sediment-hosted disseminated gold deposits started being mined.Nevada Map - Sterling Gold Project

Why did Carlin Style gold deposits take so long to be mined? Simply, nobody saw them. Unlike the outcropping gold bearing epithermal veins that were discovered by early prospectors, Carlin Style gold is very fine grained and not visible to the naked eye.  Since the 1960s, Nevada has produced around 20 million ounces of gold, making it truly a world-class destination for gold mining.

2018 Fraser Rankings

Given this, it comes as no surprise to me that the Fraser Institute issued a mining investment attractiveness score of 85.45, ranking Nevada 3rd in the world. The Fraser Institute’s score is based on a mixture of criteria, which includes, but is not limited to, the jurisdiction’s legal system, taxation regime, quality of infrastructure, political stability, and arguably most importantly, the jurisdiction’s geological potential. In my opinion, in terms of mining investment, it doesn’t get much better than Nevada.

Sterling Gold Project

The Sterling Gold Project has a Global Resource of 23,811,800 tonnes at 1.29 g/t for 985,000 ounces of gold and can be broken down into two key areas; the Sterling Mine, which is in the southern portion of the property, and the Crown Block, which resides in the north.

Sterling Mine

The Sterling Mine is a past gold producer with the surrounding area having historical ties that extend back to 1906, with the Panama Mine operating until 1940. The region then saw limited exploration until 1980 when the Sterling Mine began production. The Sterling Mine consists of 3 separate open pits and 2 underground mines, which produced 194,996 troy ounces from 853,984 tonnes of ore for an average grade of 7.44 g/t, over its 20 years in operation.

The Sterling Mine’s deposit mineralization is Carlin Style and is amenable to heap leaching. In the past, the open pit and underground mined ore was placed onto heap leach pads and, without crushing, gold recoveries averaged 88%.

The Sterling Mine does have an existing pit constrained inferred resource of 3,081,000 tonnes at 2.57 g/t for 254,000 ounces of gold. The ‘pit constrained inferred resource’ refers to the estimated economic surface resources found within a 45-degree constant slope pit shell.

Additionally, there’s a non-pit constrained inferred resource of 350,000 tonnes at 3.38 g/t (1.7 g/t cut-off) for a total of 38,000 ounces of gold. The non-pit inferred resource represents mineralization that could potentially be of economic interest, if selective underground mining of the mineralized zone, below the projected pit shell limits, was carried out.

NOTE: The Sterling Mine pit constrained inferred resource grade of 2.57 g/t is fantastic, especially if you consider that it’s amenable to heap leaching for the extraction of its gold. This is a great example of the upside potential at the Sterling Gold Project, as Carlin Style gold mineralization that’s mined in an open pit and has good grades can be very profitable!

Gold Production at the Sterling Mine

A major advantage to the past producing Sterling Mine is that its infrastructure is in place and ready for operation. In the photo below, you can see the layout of the processing areas: The active leach pad, the permitted leach pad, processing ponds and processing facility.
Sterling Mine leaching

Additionally, from the satellite photo below, you can see the layout of the permitted open pits, Burro, Sterling and Ambrose. In the top right of the image is the processing area, as shown above. Finally, the 144 Zone portal, in the bottom right, gives access to the historical underground workings.

With the necessary permits in hand, Northern Empire has greater control over their production start date, which is an enviable position for most gold exploration and development companies. Moreover, as an investor, the fact that Northern Empire has the necessary production permits in hand is a huge plus, because it reduces the overall risk associated with the Project.

Sterling Mine Exploration Potential

While having the production permits and an inferred resource are the basis for what looks to be a promising future for Northern Empire, the most exciting part of their story, in my opinion, is the exploration potential of the property.

Exploration and infill drilling on the Sterling Mine will focus on the 2017 high grade drill holes that sit on the pit shell edge, as can be seen in the satellite photo below.

Sterling Mine aerial photo

As well, in the computer-generated Sterling Mine model image, you can gain a better perspective on the 3 dimensional open pit shell and the location and orientation of the Burro Fault, which is thought to be one of the most important structures for the deposit. Other minor faults in the area trend north to north-northeast and are important in terms of the future exploration of the Sterling Mine area. As the Technical Report states,

“they are significant because they are intimately associated with mineralization, and were almost certainly conduits for hydrothermal fluids.” ~ Technical Report – pg.7-8

Sterling Mine computer generated model

PUSH: Watch for drill results from the Sterling Mine. Further proof of continuity in the existing inferred resource and successful step out drilling will be major gains for the company.

The Crown of Northern Empire

Crown Block

The Sterling Gold Project’s north end is occupied by the Crown Block, which is further broken down into 4 main targets: Daisy Deposit, Secret Pass Deposit, SNA Deposit and Shear Zone. The target mineralization which is found in the Crown Block is concentrated around the same detachment fault structure that hosted Barrick Gold’s past producing, roughly 2.3 million ounce Bullfrog gold mine.

The gold within the Daisy and SNA Deposits are carbonate-hosted and classified as Carlin-Style, while the Secret Pass is volcanic-hosted and classified as epithermal.



The Crown Block’s Daisy Deposit is a past producing open pit gold mine (Glamis/Rayrock), having produced 104,000 ounces of gold between 1997 and 2001. As listed in the Sterling Gold Project’s inferred resource table, Daisy has an inferred resource of 5,362,000 tonnes at 1.34 g/t for 222,000 ounces of gold.

High grade surface samples, up to 15 g/t gold, and 2017 drilling suggest there is potential for expansion of the Daisy Deposit resource. Examining the satellite photo below, you can see the highlighted 2017 drill intercepts – holes D17-002, D17-001 and the 2018 drill intercept from hole D18-003C – and the location of high-grade surface samples which are represented by the purple squares. PUSH: 10 holes are planned for Daisy Deposit in the 2018 drill program. As mentioned above, one stellar drill intercept has already been released, assaying 1.41 g/t over 123.93m, a great result. Watch for more drill results from Daisy in the weeks ahead, as Northern Empire looks to expand the Daisy Resource down dip.

Crown Block - daisy cross section

Daisy Deposit Cross-Section – Open Down Dip to the north

Secret Pass

The Secret Pass deposit, like Mother Lode, is volcanic-hosted with disseminated gold mineralization and has a current inferred resource of 11,143,000 tonnes at 0.93 g/t for 335,000 ounces of gold. 2017 drilling on the Secret Pass Deposit was highlighted by SP17-001: 82m @1.26 g/t Au and SP17-002: 30.48m @0.55 g/t Au. Additionally released on March 20th 2018 – SP18-003C: 70.0m @1.79 g/t.

All three drill holes can be found on the satellite photo of Secret Pass below, including the location of pending and proposed drill holes for 2018. With the purchase of additional claims south of the deposit, Northern Empire will be able to pursue hole D-164, which returned a huge intercept of 56.39m at 3.13 g/t.

PUSH: 15 holes are planned for the Secret Pass deposit in 2018. Watch for drill results in the weeks ahead, as Northern Empire looks to expand the resource both laterally and at depth.

Secret Pass

SNA Deposit

The SNA Deposit is a past producing mine and was formerly referred to as Sunday Night Anomaly from 1991 to 1995. The SNA Deposit hosts Carlin Style gold mineralization and has an inferred resource of 3,875,000 tonnes at 1.03 g/t for 126,000 ounces of gold.

Interestingly, the SNA Deposit lies in close proximity to Corvus Gold’s Claim boundary, and more importantly, their Mother Lode open pit. In the satellite image below, you can see Corvus Gold’s claim boundary outlined in orange, along with Northern Empire’s SNA Deposit toward the bottom right.

Crown Block - SNA

In Corvus Gold’s 2017 drill program, they hit 51.8m of 1.86 g/t gold which included an interval of 19.8m of 3.43 g/t. The reason I mention this is because the hole was located roughly 8 meters from the claim boundary with Northern Empire. As you can see in the satellite image, Northern Empire’s property completely surrounds Corvus Gold’s Mother Lode deposit and needless to say, makes this is a very intriguing target area with a lot of potential for Northern Empire!

PUSH: +16 holes are planned for the SNA Deposit in the 2018 drill program. Watch for drill results as Northern Empire attempts to expand upon the SNA deposit resource.

Concluding Remarks

As I mentioned in my introduction, I believe that placing yourself in quality companies is the way to succeed in a business where the odds of success are typically stacked against you. That said, quality doesn’t mean they’re free of risk.

In terms of Northern Empire, I believe the biggest risk is an unsuccessful drill program in 2018, which would result in minimal to no improvement in their existing inferred resource. In this worst case scenario, I don’t see much upside from today’s current market cap.

While there’s always a chance of coming up empty handed when exploring, I think there’s a far better chance that their resource will increase, and with permits in-hand, Northern Empire’s Sterling Mine is ready to go.

Recapping Northern Empire’s strengths:

  • Good management team with extensive experience exploring and developing gold projects in Nevada.
  • The Fraser Institute ranks Nevada 3rd in the world for Mining Investment Attractiveness.
  • Northern Empire is in possession of all the necessary production permits to restart the Sterling Mine.
  • The Sterling Mine potential production scenario should be low cost, as the Carlin Style gold mineralization will be mined from an open pit and is amenable to heap-leaching.
  • Great exploration potential within the Sterling Mine and the Crown Block’s 4 main target areas: Daisy Deposit, Secret Pass Deposit, SNA Deposit and Shear Zone.  15,000m of drilling planned for 2018.
  • Existing inferred global resource of 985,000 ounces of gold at 1.29 g/t.
  • CASH – $16 million!!

I am invested in Northern Empire and am looking forward to news flow over the coming months.

Don’t want to miss a new investment idea, interview or financial product review? Become a Junior Stock Review VIP now – it’s FREE!

Until next time,

Brian Leni  P.Eng

Founder – Junior Stock Review

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria. I do own shares in Northern Empire Resources. All Northern Empire Resources’ analytics were taken from their website and press release. Northern Empire Resources is a Sponsor of Junior Stock Review.

Northern Empire Resources Corp. (TSX-V: NM) released results from its Daisy Deposit  as part of its 2018 15,000-metre drill program to expand resources at the Sterling Gold Project in Nevada.  These results will go towards an updated resource due in the first half of 2019 and indicate the potential for an open pit, heap leach operation. The Daisy Deposit is located within the Crown Block of deposits in the north of the Company’s property.

Drill hole D18-003C was a vertical core hole that returned an intercept of 123.93 meters of 1.41 grams per tonne (g/t) gold (Au). The intercept included 38.25 meters of 3.09 g/t Au and oxides in the hole extended to a depth of 173 meters.

This is the third drill hole Northern Empire has reported from the Daisy Deposit.  Results from last year included 47.24 meters of 1.47 g/t Au in hole D17-001 and 21.34 meters of 1.83 g/t Au in hole D17-002.   All historical drilling at Daisy occurred before the introduction of NI 43-101 reporting standards, so confirmation drilling is required to expand the resource. Historical drilling was also all reverse circulation (RC), so core holes are vital for developing a comprehensive geological model.

In comparison to historical holes near D18-003C, yesterday’s result encountered mineralization closer to surface than expected. In concert with nearby mapping and sampling which returned surface grades of up to 15g/t, these results are demonstrative of the potential this system could be larger than previously thought.  

Michael G. Allen, President and CEO, commented:

“D18-003C is the first of at least 10 exploratory, resource expansion, and infill holes that we plan to drill into the Daisy Deposit as part of our 15,000-meter program.  The exceptional grade of these results is very encouraging. All of the mineralization from 67.88 to 173.22 meters down the hole was oxidized, as was the final 2.87 meters of mineralization. For the high-grade core of the deposit, where we cut 38.25 meters of 3.09 g/t gold, cyanide solubility assays averaged 90% of fire assay, indicating that the Daisy deposit may be amenable to open pit mining with heap leach recovery of gold.”

The broad intervals of relatively shallow, high-grade oxide mineralization present here are key if Daisy is to ever benefit from a low cost and efficient open pit, heap leach operation.  The advantage of heap leach mining is that they generally have low all-in sustaining costs and provide rapid payback to the operator. The average grade of heap leach operations in Nevada is approximately 0.7g/t gold, which would make the inferred resource at Daisy of 174,000oz of gold at 2.12g/t triple that.

The Daisy Deposit is located in the Bare Mountain district known for its legacy of past production. The trend is along an east-west structure that hosts Barrick’s Bullfrog Mine on the westernmost extension and stretches to the east where Northern Empire’s SNA deposit and Corvus Gold’s (TSX: KOR) Mother Lode deposit. Mother Lode is located completely within Northern Empire’s claim package. Along this trend, more than four million ounces of gold have been extracted or identified in situ.

With several high-grade historical holes and showings, Northern Empire’s overall land package remains underexplored and numerous regional targets demand follow-up.   For 2018, Northern Empire management put together a large exploration program with the intention to expand the resource through drilling. The company’s exploration is starting to demonstrate the potential at the Daisy Deposit.

The market has been responding positively to drill results. Since initial results released from the Daisy deposit on October, 04, 2017, shares in the company have moved from 77 cents per share to a year-high of $1.43, and at close of Feb. 23, 2018, $1.30.  Upon release of the most recent results from Daisy, the stock rose 12 cents to $1.39 on 231,088 shares.

The company is also responding positively to these results with immediate plans to mobilize an additional drill rig to Daisy. Currently rigs are working on the SNA and Secret Pass deposits which are part of the Crown Block of deposits which includes the Daisy Deposit. In addition, field crews are mapping extensions of the known deposits and new drill targets.

This is just the beginning for Northern Empire in Nevada.  Nevada is one of the largest gold producers in the world, renowned for open pit deposits which are amenable to heap leach mining.  The early results from Daisy are indicating that the company is on the right track to adding high grade ounces to support the case for another open pit, heap leach mine in Nevada.


by Andrew Topf

50M+ ounce Walker Lane Trend

While most gold investors are familiar with the Carlin Trend – the largest gold-producing region in the United States – there are other, less explored parts of Nevada starting to attract a lot of attention. Specifically, the Walker Lane Gold Belt where company-making discoveries are being drilled.

Located in southern Nevada, Walker Lane has some of the most important mining districts in North America including Comstock, Tonopah, Goldfield, Bullfrog and Aurora. Estimated to host over 50 million gold ounces, the region is being actively explored by Kinross and Barrick at the producing Round Mountain Mine, Gryphon Gold at the Borealis Mine, and Newcrest Mining at the Redlich project.

Unlike the Carlin Trend, where most gold projects are mining ore less than a gram per tonne, Walker Lane is starting to stand out on its own merits with exceptional high-grade assays.

High-grade gold mine open for expansion

Northern Empire Resources (TSXV: NM; USOTC: PSPGF) is a well-financed gold exploration and development company focused on an emerging gold district in the Walker Lane Trend. The Sterling Gold Project hosts four distinct deposits, including a fully permitted, open-pit mine. The Sterling Mine is one of the highest-grade heap leach mines in the western United States.


(image 1) Nevada Regional Map: Sterling Gold Project

Situated 185 kilometres (two-hour drive) northwest of Las Vegas, on the eastern flank of the Bare Mountains, Sterling features five past-producing open pit and two underground gold mines. Drilling, surface mapping and sampling on the project suggests that the historic deposits are open for expansion and there is potential for new discoveries. The property still has infrastructure in place from 2015 when the Sterling Mine was last in production.

A history of success: $3B in takeout value

Along with having an outstanding property with exploration upside, Northern Empire also features a management team with an exceptional record of creating value for shareholders. Led by Executive Chairman Douglas Hurst and Michael Allen, President and CEO, the Northern Empire board has created over $3 billion in takeout value, including Newmarket Gold, acquired for $1 billion by Kirkland Lake, Kaminak Gold, acquired by Goldcorp for $520 million, International Royalty Corp, bought by Royal Gold for $700 million, Rainy River Resources, bought by Newgold for $310M, and Underworld Resources, purchased by Kinross Gold for $138 million.

Currently sitting at a $80-million market capitalization, Northern Empire has a cash balance of $18 million, having recently completed a $15 million bought deal financing that included no warrants. In fact, the company raised $35 million in 2017 with no warrants.

The gold junior is coming off a successful 2017 drill campaign and will aggressively drill known mineralized zones in 2018 to expand resources and explore for new deposits on its 125-kilometre land package.

709,000 ounces inferred, plus newly staked ground

The story of Northern Empire began in May 2017 when it acquired the Sterling Gold Project in Nye Country from Imperial Metals for $10M. The $20 million acquisition financing included an investment by global precious metals producer Coeur Mining, which earned an 11.6% stake in the company.

Northern Empire is backstopped by the low risk, permitted heap leach Sterling Mine; majors have an appetite for high margin, high grade assets. The main event, however is the blue-sky potential north of Sterling, where more ounces are ripe for exploration. In particular the focus is on the SNA deposit, which has Carlin-type mineralization adjacent to the Mother Lode deposit owned by Corvus Gold.

Between 1980 and 2000, nearly 200,000 ounces were pulled from Sterling’s three open pits and two underground mines. The run of mine ore was placed on heap leach pads, where gold recoveries averaged 88%.

Total inferred resources at the project are 709,000 ounces with an average grade of 2.23 grams per tonne gold – which is high for a deposit in Nevada where most deposits are lower-grade.

Northern Empire has all the permits required to operate the Sterling Mine. In May 2016 the mine was permitted to restart operations, with the Bureau of Land Management finding that the mine would not have significant environmental impacts.

Over the last six months the company has been aggressively expanding the property, having staked an additional 489 claims in June, thereby increasing its original land position by 50%. Another 261 claims were staked in October, which further solidified Northern Empire as the dominant landholder in the Bare Mountains, a district which includes the past-producing Sterling, 144, Daisy, Secret Pass, Gold Ace, Mother Lode deposits, and Bullfrog Mine.

Four jewels in The Crown

Exploration is focused on the Crown Block of deposits just 7 kilometres north of the Sterling Mine. For the first time the Crown Block has been consolidated in a contiguous land package under one ownership. The Crown Block hosts four primary targets: Daisy deposit, Secret Pass deposit, SNA deposit and the Shear Zone target. The mineralization follows the same East-West detachment fault structure that hosted Barrick’s Bullfrog Mine, which produced 2.3 million ounces of gold at an average grade of 3.2 grams per tonne (“g/t”).

Glamis and Rayrock previously operated the Daisy Mine, which included Daisy, Secret Pass, and Mother Lode pits, and produced 104,000 ounces of gold between 1997 and 2001. When gold dipped below $300, the mine was closed down.

(image 2) Daisy Deposit map of drill holes

A total of 160 holes were drilled at Secret Pass which was previously mined in the 1990’s. Significant drill intercepts beyond the existing pit indicate potential resource expansion. Drill hole D-320 on the eastern edge of the historical pit intercepted 1.02 g/t gold over 77.7 metres.

SNA lies on a north-south structure that hosts Carlin-type mineralization which is open for expansion. Historically 149 holes were drilled at SNA. The Shear Zone is on the upper level of an epithermal vein and indicates potential for bonanza grades at depth. Past discoveries of mineralization were not followed up on.

2017 drilling confirms resource model, opens up new opportunities

In August 2017 Northern Empire initiated the first phase of an exploration program designed to confirm and expand the inferred resources at the Sterling Gold Project. Historic drill holes from the Daisy deposit include 68.58 g/t Au over 2.02 m, 7.37 g/t Au over 19.81 m, 80.77 g/t Au over 2.10 m, and 4.63 g/t Au over 35.05 m.

Of the planned 5,200 metres of drilling, over half was focused on the Sterling Mine, where Northern Empire outlined a pit-constrained inferred resource of 231,000 gold ounces grading 3.67 g/t. The work provided confidence in the resource, tested for extensions along strike and provided metallurgical samples prior to Northern Empire beginning economic studies.

The 52-hole drill program, 25 of which were reverse circulation holes and 27 that were diamond-drilled, started with the Daisy and Secret Pass deposits within the Crown Gold Project. The company also performed an evaluation of the entire project and flew a geophysical survey to identify new targets.

The Daisy deposit hosts an inferred mineral resource of 174,000 gold ounces at an average grade of 2.12 g/t gold, while the Secret Pass inferred resource is 188,000 ounces of gold at an average grade of 1.65 g/t.

The drills then moved to the Sterling Mine to complete infill, resource expansion, and exploration drilling.  

The first 24 results of the drill program were released in November. According to Northern Empire’s CEO Michael Allen:

“This round of drill results supports our resource model of the Sterling deposit, as well as the location of the underground workings. Sterling was known to be a narrow, high grade deposit with excellent metallurgy. Of note, are the occasional broader zones of mineralization, such as 12.19 metres of 8.37 g/t gold, as well as previously unacknowledged lower grade mineralization being identified by Northern Empire’s drilling; both of which may represent real opportunities within the Sterling deposit. Also, our early exploration of the area to the west and south of the Sterling deposit has yielded interesting results.”

Assay results from another seven holes reported in early December highlighted shallow, high-grade oxide gold at the Sterling Mine, with several holes hitting significant mineralization at the edges of the resource model, indicating the deposit remains open for expansion. Notable drill intercepts included 10.0 metres of 14.59 grams per tonne, 9.05 metres of 8.66 g/t, and 7.59 metres of 8.25 g/t.

2018 drilling year-round: in progress

As the calendar turns to a new year, Northern Empire is making plans for a 15,000-metre drill program it announced mid-December; the drills have already begun turning. In this new phase, drilling will be focused on infill and expansion of the Sterling Mine, Daisy, Secret Pass and SNA deposits, as well as testing high-priority exploration targets. Drilling will be completed with both core (diamond drilling) and reverse circulation rigs.

This area of Southern Nevada is accessible 12 months a year and Northern Empire will be aggressively working all year round. In early 2018 the company will turn its attention to the Crown Block, where drilling will begin on the SNA deposit where Northern Empire has identified the potential for a large Carlin-type deposit. This work will be targeting north-south structures exiting the Mother Lode pit, adjacent to the north and owned by Corvus Gold, and where historic drill holes such as ML088, drilled on the company’s property, returned 10.67 metres grading 4.13 g/t starting at 60.96 metres, and 28.96 metres grading 1.76 g/t starting at 100.58 metres.

Indeed an exciting aspect of this round of drilling is the close proximity of Corvus Gold’s drills on that company’s Mother Lode project, just metres away from Northern Empire’s holdings. Mother Lode produced 34,000 ounces at an average grade of 1.8 g/t in the late 1980s but closed due to low gold prices. In December Corvus announced it has expanded the sediment-hosted Mother Lode gold system to at least 450 metres along strike.

Corvus Gold’s exploration program at Mother Lode has received a major response from the market, with the stock more than doubling over the past year (+126%); most of the gain has been in the last three months and can likely be attributed to its success at the Mother Lode.

Since Northern Empire is the dominant land holder, and owns all the land surrounding Mother Lode, any extension of Mother Lode beyond Corvus Gold’s tight boundaries is likely to add ounces to Northern Empire’s Sterling Gold Project.  

Drilling will also be completed at the Daisy and Secret Pass deposits with the goals of upgrading and expanding the resources, collecting metallurgical samples, and testing exploration concepts. On September 18 and October 4, 2017, the company announced drill results for Daisy and Secret Pass, highlighted by 47.24 metres of 1.47 g/t gold at Daisy and 82.30 metres grading 1.25 g/t at Secret Pass.


Northern Empire has an impressive assemblage of both past-producing gold mines and enticing exploration targets at its Sterling Gold Project in one of Nevada’s most promising gold mining regions: The Walker Lane Trend.

With the gold price powering above $1,330 per ounce, mineral-rich gold companies are rising in valuation once again, so what better time to get in on an exciting gold play that appears to offer investors ample upside? Northern Empire has the property, the treasury and the team to make it happen.

About the Author:

With over a decade of journalistic experience working in newspapers, trade publications and as a mining reporter, Andrew Topf is a seasoned business writer. He holds degrees in journalism and political science, and earned a Masters from the London School of Economics.

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