Goldman Sachs recently announced a very positive forecast for the gold market. With prices at an all-time high and already surpassing Goldman Sachs previous forecast of $2300/troy ounce, the bank revised its year-end price target up to $2700/troy ounce. The report characterized gold as being in an ‘unshakeable bull market.’
One way to capitalize on the trend is to buy stock in publicly traded gold mining companies. These can generally be categorized in three tiers: the majors, mid-level producers, and junior miners. The majors are the Barricks, Newmonts, and Kinrosses of the world, producing millions of ounces/year and looking for acquisitions to bolster capacity. The mid-level producers are smaller companies usually focused on one or two projects, and are often acquired by majors. The stock price of producers is generally tied to the price of gold, give or take some variables, so investors can usually have a pretty good idea of the upside potential.
For those investors looking to take a chance on higher upside with greater risk, junior miners would be the place to investigate. They are in some ways the lifeblood of the industry, planting stakes and making claims and constantly looking for the next big deposit. There are many, many companies operating on this level, and not many of them will strike it rich. Occasionally though, an exploration company comes along with a lower risk profile and a potentially higher chance of success.
Element79 Gold Corp. (CSE:ELEM) (OTC:ELMGF) (FSE:7YS) looks like one such company. Element79 owns a gold and silver mine in Peru, the Lucero Property, that was officially in production as recently as 2005. The Shila Mine, Lucero’s former name, was one of the highest-grade underground mines in Peru’s history at grades averaging 19.0g/t Au Equivalent (“Au Eq”) (14.0 g/t gold and 373 g/t silver). In its past 5 years of production ending in 2005, it produced on average 40,000oz+/yr.
Element79 CEO James Tworek discusses the history of the Lucero Property and the company’s plans to get the site back into production in the very near future.
Current Status of the Lucero Property
The Lucero Property is currently permitted to generate 350 tonnes of ore per day. Element79 is in the midst of extensive exploration work on the property, to confirm and prove the resource in the ground and accurately map the extent of the existing underground work. Since the mine was shut down in 2005 due to economic considerations, local artisanal miners have been (and are currently) working the property. Element79 acquired the mine in 2022, and has since undertaken a community outreach program to create a positive working relationship with the town of Chachas and the local miners.
The company would rather bring current production under the umbrella of its legal mining rights by hiring the workers, as opposed to getting into a legal battle with the community that would necessarily be providing the labor base as Element79 develops the project further. It’s the tail end of the rainy season, and the company is in negotiations to formalize an agreement with the local miners so that the current 70-100 tonnes/week of ore being produced on site can be legalized under Element79’s mineral leases.
Element79 has an LOI with a local mill site to process ore from Lucero once production gets going again. The initial Pilot Program outlines the milling of 200 tons/day on average, which is kind of a baseline production level the company plans to reach this year.
Where Lucero is Headed
Element79 has been processing and announcing positive results from its 2023 exploration program. Through extensive mapping and channel sampling, the company is getting a more complete understanding of the property’s existing workings and the potential to expand exploration far beyond the current area.
With the rainy season ending, Element79 is planning an extensive drill program that utilizes the information gathered to-date. The goal of the drilling will be to update the resource on the property to current NI 43-101 standards. The Shila/Lucero mine has never been explored with modern techniques. It remains to be seen what the results will be, but the area offers plenty of potential.
“Lucero offers a rare opportunity to explore for not only an underground high-grade low sulphidation system but potentially an open pit-able high sulphidation system as well,” stated Neil Pettigrew, M.Sc., P.Geo, Director of Element79 Gold at the time of the acquisition. “This project has never experienced modern exploration techniques and I am very confident that significant gold-silver resources are to be found.”
In preparation for the anticipated re-opening and expansion of the Lucero Property, Element79 has assembled a team of executives and advisors with extensive experience creating, developing, and operating actual mines. Many junior miners are understandably staffed by exploration experts, and while Element79 employs those types of people the Lucero Property requires a different skillset.
Here, Element79 CEO James Tworek highlights some team members with operational expertise.
The Big Picture
Rare for a junior miner, Element79 is on track to create revenue via mineral production in the very near future. Profits from even the initial limited operations planned in the next few months can go a long way toward funding further exploration and development of a much larger operation should the resource prove out.
Element79 is also expecting to receive CAD$4.4 million from the sale of its Maverick Springs Project in Nevada, along with CAD$3.5 million worth of shares resulting from the deal. The sale is expected to close on or before July 21, 2024. By flipping the Maverick Springs Project, acquired in 2021, Element79 is creating additional revenue to fund expansion of the Lucero Property.
Junior miners represent the highest upside potential in the mining sector, combined with the highest risk. With its permitted and past-producing Lucero Property in current informal production mode and promising assay results pointing toward confirmation of a significant resource, Element79 Gold Corp. may have found a way to significantly de-risk its investment. Stay tuned for more news as the company kicks developments into high gear.
