Eira Thomas focuses on value preservation at Kaminak

It’s interesting to watch Eira Thomas’ transition from the diamond space in the gold sector, now that she’s heading up Vancouver-based junior Kaminak Gold (TSXV: KAM; US-OTC: KMKGF).

The geologist-turned-CEO has been serially successful in exploring and developing diamond deposits throughout her lustrous career. The 46-year-old executive is one of the few women in the world that wears diamonds from a mine that she helped discover.

“I love exploration: to me dirt is dirt, and it actually doesn’t matter what you are exploring for. I like to say I stayed in the precious side of the business more than any other side,” Thomas says of her switch to gold during a March interview in Toronto.

Thomas, who is the daughter of mining legend Grenville Thomas, says she took on the role of Kaminak’s president and CEO in March 2013 because of the junior’s high-grade Coffee gold project in western Yukon.

“I thought: ‘Yes, they have drilled this, they have got something intriguing. It is likely a mine, but there is still huge exploration upside.’ That was very appealing to me.”

The Coffee project’s location in Canada’s Far North added to the allure for the mining veteran, who spent most of her career working in the Northwest  Territories, Nunavut and northern Quebec. “The Yukon was appealing because I haven’t worked there before, and it was relatively easy to get to from Vancouver. And this project was just at the right stage.”

Coffee’s transformation

Within six years, Kaminak has transformed the Coffee project from a gold-in-soil anomaly into a potential long-life, low-cost open-pit mine project that is undergoing a feasibility study, slated for completion in early 2016.

“We’re halfway through the feasibility study, which is a huge undertaking for the company,” Thomas says. If the outcome is positive, the debt-free firm would pursue permitting — expected to take two years — and build the project in early 2018.

The Coffee project sits within Yukon’s White Gold district, 130 km south of Dawson City and 300 km northwest of Whitehorse. The property is accessible by airplane or helicopter from both cities, or by barge via the Yukon River.

Kaminak’s founder and former CEO Rob Carpenter picked up an option to buy Coffee in 2009 from prospector Shawn Ryan for $400,000, 2 million shares and a $1.8-million work commitment. Ryan retains a 2% net smelter return royalty, and Kaminak could buy back half of this royalty for $2 million.

The junior first explored the property in 2009, and kicked off an initial drill program in May 2010, with the discovery hole returning 17.07 grams gold per tonne over 15.5 metres.

From 2010 to 2012, Kaminak defined 16 gold trends on the Coffee property over 15 km and drilled more than 130,000 metres. It released a maiden National Instrument 43-101 inferred resource estimate in December 2012 for 3.2 million oz. gold (based on 64 million tonnes of 1.56 grams gold). The estimate — using cut-off grades of 0.5-gram gold for oxide and transitional material, and 1 gram for sulphide material — showed that most of the resource was on the Latte, Supremo and Double Double deposits.

Come 2013, Carpenter stepped down for personal reasons, and Thomas took the reins of the company in March, after joining Kaminak’s board in February and buying three-quarters of a $1-million private placement, or 560,000 shares, at $1.34 apiece.

In January 2014, Kaminak updated the resource estimate to 719,000 oz. gold in indicated from 14 million tonnes of 1.56 grams gold, and 3.4 million oz. in inferred from 79 million tonnes at 1.36 grams gold. The revised resource, based on 185,000 metres of drilling, contained 2.1 million oz. oxide gold. 

The oxide gold formed the basis of the June 2014 preliminary economic assessment. The study showed Coffee as a high-margin, 11-year open-pit mining opportunity, with start-up costs of $305 million. Annual production should average 167,000 oz. gold, at all-in sustaining costs of US$688 per oz. Coffee could generate 1.86 million oz. over its mine life at a diluted grade of 1.23 grams gold, with an 88% recovery rate. The strip ratio is 4 to 1.

Encouraged by the results, Kaminak began a feasibility study in the second half of 2014. This included infill drilling, metallurgical test work, environmental baseline activities and a condemnation program.

This year Kaminak has budgeted $21 million for feasibility activities, using the funds it raised in a recent private placement. (Ross Beaty and the Lundin family participated in the financing to keep their pro-rata stake in the firm at 9.9% on a partly diluted basis.)

Last year the junior invested $15.5 million on feasibility activities, bringing the total cost for the feasibility study at $36.5 million, up from the original estimate of $30 million. Contributing to the increased costs are scope changes, third-party consulting contracts and several trade-off studies. These studies include a coarser-sized crush and placing run-of-mine material directly on the leach pad, as well as adding gold ounces from the Upper Transition zone — which sits between the oxides and sulphides — and modifying the leach pad design.

The Coffee project lies within the settled land of the Tr’ondek Hwech’in First Nation group, based in Dawson City. In 2013, the Tr’ondek Hwech’in signed an exploration cooperation agreement with Kaminak, showing their support for the project through to a positive production decision. A year later, the junior entered a similar agreement with the White River First Nation.

Based on the work to date, Thomas says that “the great thing about Coffee is its simplicity. For us right now, it is just the timeline and how quickly we can move the project forward, and how long it will take to permit and get into production.”

First impressions

Thomas got her first glimpse of exploration from her father Gren, a mining engineer who emigrated from Wales in the 1970s. He started his career at Falconbridge, with stints at the Sudbury nickel camp in Ontario and the Giant gold mine in Yellowknife. From there, he branched off to look for mineral projects in the Northwest Territories.

In 1980, Gren formed his flagship junior company, Aber Resources — now Dominion Diamond (TSX: DDC; NYSE: DDC). Taking part in Canada’s original diamond staking rush, Gren staked a large group of claims in the Lac de Gras region in late 1991.

Thomas, who was born in Calgary, spent a lot of her youth in the field with her father, who was exploring for commodities in Canada’s North. “Sometimes he would be collecting samples, or we would do geophysical surveys depending on what we were looking for. I was basically there tagging along,” she recalls.

Despite enjoying her days in the field, Thomas initially enrolled into a biology program at the University of Toronto before reconsidering.

“I got through first-year biology and hated taxonomy, so I said, ‘Well I don’t want to do that, so what am I going to do?’ I liked geology because it really combined all of the sciences… into one nice little package. That is how I ended up in geology,” she says.

Throughout university, Thomas worked with Noranda Mines, conducting early stage gold exploration. In 1990, she graduated with a Bachelor of Science in geology, and two years later joined her father at Aber.

Working as a young geolo
gist there, Thomas led the field exploration team that discovered the Diavik diamond project pipes in 1994 and 1995. (She was only 25 years old when the first pipe was uncovered.) 

“We found this incredible visible diamond in the core and that was our first inkling that we were onto something pretty special, because we knew that it was really rare to actually see visible diamonds from the drill core,” Thomas recalls.

Diavik, Canada’s second but largest diamond mine, started production in January 2003 and has generated more than 90 million carats so far. The asset is 60% owned by Rio Tinto (NYSE: RIO; LSE: RIO) and the rest by Dominion Diamond.

After spending four years as a geologist at Aber, Thomas became the company’s vice-president of exploration from 1997 to 1999, before venturing off on her own. She stayed on the board of directors for eight years until 2006. 

In 2001, Thomas co-founded Stornoway Diamond (TSX: SWY) with mining entrepreneur and friend Catherine McLeod-Seltzer. “I really felt there was good diamond exploration potential elsewhere in Canada, and I really had that exploration bug,” she says.

Thomas spearheaded the hostile acquisition that led Stornoway to acquire 50% of the Renard diamond project in northern Quebec in 2007, by buying both Ashton Mining of Canada, which owned half of Renard, and Contact Diamond, a 40% subsidiary of Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and a willing partner. Agnico financed part of the bid’s cash component.

In 2009, Thomas passed on her CEO role to Matt Manson, her colleague at Aber, and she became Stornoway’s executive chairperson until 2011.

Stornoway bought the remaining 50% interest in Renard from Soquem — the mining exploration arm of the Quebec government— in April 2011. The Renard project has been under construction since Stornoway closed a nearly $1-billion financing last July, with commercial production set for mid-2017. Once online, Quebec’s first diamond mine should churn out 1.6 million carats a year in its first 11 years.

Thomas is also one of the founders of junior diamond producer, Lucara Diamond (TSX: LUC), along with Lukas Lundin and McLeod-Seltzer. The three provided seed capital for the junior in 2007, and used two letters, each from their first names, to come up with “Lucara.” The junior’s Karowe diamond mine in Botswana, which has operated since 2012, should produce 400,000 to 420,000 carats this year.

Path to success

While there isn’t a straightforward recipe for success, Thomas says she’s been taking all of her experiences throughout the years and learning from them, and applying them in new ways. “I think you do have to do what you love and be committed. This is a business that really depends on perseverance, determination and tenacity. And it is high risk, so you have to be an optimist.”

Asked if she had to work harder as a woman in a male-dominated industry, Thomas says that in her early career days it was more her youth rather than her gender that raised eyebrows. “Sometimes you get these old, grizzled miners from Quebec that have been in the business for more than 40 years, and there’s a 25-year-old geologist going underground and trying to tell them what’s what — they are a little surprised. Sometimes you face that initial reservation, but if you do knuckle down and work hard, and demonstrate that you are actually there for a reason — you are there because you are capable, and can make a contribution — then that all disappears.”

Now a mother of two girls aged six and four, Thomas is skillfully juggling her CEO role and numerous directorships with her family life.

As Kaminak’s CEO she will focus on value preservation. Discovering a project with value determines how you advance that asset into production, she notes, adding  that many firms with good assets have struggled in the market downturn, because they have done financings at lower and lower prices.

“The shareholders really don’t benefit from what you found on that day, unless you do a good job in stewarding that asset through to production. You have to be cognizant of how you spend money… and really be opportunistic, and take projects forward.”

She admits that working in Canada’s North means looking at ways to reduce risks. “You need a deposit that is significantly higher value than one that is located in southern Ontario next to a road,” she says, adding that the “most prospective geology is in remote places, where people have a hard time getting to.” 

While there is interest in the Coffee project from major companies, Thomas is firm on taking Coffee to the finish line.

“We are excited about the project,” she says, noting Coffee has a high margin, is in a safe location and has strong community support. “We are feeling pretty good with where we are going right now.”

Kaminak shares recently closed at 93¢, within a 52-week range of 53¢ to $1.19. 

National Bank analyst Adam Melnyk rates the stock as an “outperform,” with a $1.40 target price. “Our positive view on Kaminak is based on the high-grade, high recovery potential of the Coffee project, which is supported by a mining friendly jurisdiction,” he writes.