Site visit: Reality star Schnabel takes on new gold-focused role at Australia Creek

Metallic Minerals (TSXV: MMG) is tapping Gold Rush TV star Parker Schnabel to mine the unexploited Australia Creek in the heart of the Klondike 125 years after hordes descended on Canada’s Yukon Territory.

The 28-year-old Schnabel has been the most successful miner on the reality show for the past 10 of its 13 seasons. Metallic signed a royalty agreement this year with Schnabel’s Little Flake mining company to mine 9 km of placer gold claims on the 36.4-sq.-km Australia Creek project. Production is due to start next month.

“This is a guy who really knows his equipment, knows how to scale and operate efficiently,” Metallic CEO Greg Johnson said in an interview on the site. “He’s a real operator and he’s got real expertise. He just happens to be on TV at the same time.”

The 12-15% royalty, which Johnson estimates may pay as much as US$1.5 million a year, is a small but flashy earner for Metallic as Newcrest Mining (TSX: NCM; ASX: NCM) helps fund a drilling program and resource update on its main endeavour, the La Plata copper-silver-gold and platinum group elements project in Colorado. The Vancouver-based company also plans to release in two months its first resource report on its Keno silver project in the Yukon beside Hecla Mining (NYSE: HL), the largest primary silver producer in the U.S.

Newcrest, being taken over by Newmont (TSX: NGT; NYSE: NEM), invested $6.3 million for a 9.5% stake in Metallic in May to help advance La Plata. Eric Sprott holds 14% in the company and other leading shareholders include U.S. Global Investors and OTP, Johnson said. Management holds 17% including 6% with the CEO.

Australia Creek wasn’t mined in the gold rush of 1898 or in the decades after because it was deemed more valuable as a source of water and hydro-power. The creek’s dams came out in the 1980s and ‘90s, then veteran Klondike prospector Bill Harris began amassing claims along the waterway. Metallic acquired them in 2017, helping make it the third-largest placer land owner in the Klondike, Johnson said.

The project has spent US$1.5 million preparing 600,000 sq. feet (55,742 sq. metres) for sluicing as it targets 1 million sq. feet this year, Schnabel told The Northern Miner. An American from a mining family in Haines, Alaska, Schnabel says measuring square feet is easier to calculate progress in placer mining than using tonnes in hard rock mining. Little Flake agreed to a $1 million minimum annual work commitment on Australia Creek.

“I don’t really operate on budgets,” he said. “We just do things as efficiently as we can and then we’re out of money. Then we go find more.”

Where?

“Oh, I’m not going to talk about that.”

Tapping Australia Creek’s promise

Test drilling at Australia Creek has found 250 mg gold in some holes, suggesting a production rate closer to historical rates near 10 oz. per hour instead of 2 oz. per hour that many operators struggle to achieve today, Schnabel said. A recent pan in the creek showed some 50 “points of colour” instead of an area average of eight, he said. Klondike deposits can suffer from poor grades, limited access or being too deep, none of which really affect Australia Creek, he said.

“The drill grade average is a fair bit better than what we’ve been mining and that’s one of the reasons why we took the project on,” Schnabel said. “It does look like very promising ground.”

However, he said there needs to be significantly more test holes dug to determine the site’s true potential. He also acknowledged some water permits will expire in three years, requiring extensions and bureaucratic scrutiny to complete the project’s scope. Spring floods this year caused by heavy rainfall accelerating the snow melt delayed work for at least a month and a half.

In renowned Canadian author Pierre Berton’s history, Klondike, Australia Creek is only mentioned as the place where crusty solo prospector Robert Henderson, later a co-discoverer instigating the big rush, impaled himself on a broken tree branch. Laid up for two weeks in his tent, he soon hobbled to his discovery on Gold Bottom Creek. 

Metallic’s other Klondike area project is 10 claims totalling 1.6 km along a bench of Dominion Creek. The company entered into a production royalty agreement with “an experienced alluvial mining operator” in exchange for a 15% royalty on production, Metallic said. The property is road accessible and has permits for placer gold production.

Dominion Creek had its ups and downs in tales of the 1898 gold rush, according to Berton. Two neighbouring miners on the creek each installed butlers in their log cabins. But it was also the site of government graft when officials gave themselves first crack at the best stakes in a mini-rush on the creek.

A different kind of drama exists on a daily basis with Gold Rush film crews on Schnabel’s separate Dominion Creek site six days a week from late April to October in the Klondike’s work season. After more than a decade on TV, Schnabel reacts to the media grind with less enthusiasm than the mining work he clearly relishes.

“It’s an invasive process. You know, their best days are our worst days and so it’s always tough, right? They love it when things aren’t going right.”

Johnson said it’s been a tough market for raising capital, but that Newcrest investment secured two years of funding for the 171-sq.-km Keno silver project, where drilling began this week, while royalties are due to start within months from Australia Creek.

“When we’re talking about the Klondike, it’s such an interesting history with the historic mining here and the dredges and the fact that Australia Creek wasn’t mined,” Johnson said. “As Parker was talking earlier about that potential for the kinds of grades they used to see in these operations, we’re excited because the potential growth of the Klondike is Australia Creek which we control most of.”