Site visit: Blue Lagoon uses Dome cash to chase 1Moz

SMITHERS, B.C. – At Blue Lagoon Resources’ (CSE: BLLG; US-OTC: BLAGF) Dome Mountain mine, the morning meeting starts with safety and discussions about connection with the Yintah, or land.

The company is betting its community and team-oriented focus can help the small-scale but high-grade northern British Columbia restart into a million-ounce resource at the Boulder vein. The company declared commercial production mid-May after mining more than 100 tonnes per day for 30 days at the small-scale underground mine, about an hour by road from Smithers. The town is about 680 km northwest of Vancouver.  

The operation opened a year ago amid much celebration. It now aims to lift Dome to a steady 150 tonnes per day before drill rigs return to the 215-sq.-km property later this year.

“Really, we’re an exploration play,” CEO Rana Vig told The Northern Miner during a site visit this week. “The next big event that’s going to happen here after we achieve our 150 tonnes a day is going to be the beginning of the exploration.”

The drilling, Vig says, rather than the commercial-production milestone, carries the story from here, given the company has not, nor plans to complete a preliminary economic assessment on the project. If Dome Mountain can pay for its own resource growth, Blue Lagoon could do what few juniors manage: bootstrap an expansion of a high-grade mine, in a hard-to-permit province, without raising cut-rate equity each time the market turns against exploration.

Watch a video of the site visit below:

The company’s Toronto-listed shares are down about 6.5% over the past 12 months, last trading on Friday at 72¢ apiece. It has a market capitalization of $108 million (US$76.4 million).

Cash producer

Blue Lagoon has received about $4.5 million from gold and silver sales to date, Vig said. More regular payments are expected as the mine reaches 150 tonnes per day and the flow of material to toll-milling partner Nicola Mining (TSXV: NIM; US-OTC: HUSIF) steadies.

Dome is to produce 15,000 oz. gold over the next 12 months, then move toward 20,000 oz. per year. The mine’s roughly 9-gram-per-tonne grade, silver credits and toll-milling deal give the company a shot at that exploration target without building a mill or tailings facility on site.

The ramp-up comes with the daily grind of working a narrow-vein mine. Bill Cronk, Blue Lagoon’s chief geologist and Dome Mountain project manager, says the mine must open enough faces underground so crews can alternate between development and mining to avoid starving the mill feed.

“We have to develop as much as we produce,” Cronk said. “That’s key to all these narrow-vein mines.”

He describes the mine as a structurally hosted quartz-carbonate vein system carrying gold and silver, with lead, zinc and copper in the concentrate. Noranda discovered the Boulder vein in 1985 while chasing zinc-in-soil anomalies. Blue Lagoon is now following the same structure deeper and along strike.

Cronk, an experience-hardened “blue-collar geologist,” as he calls himself, warns against an industry trend that had seen some developers aim too high and build mills they can’t fill in hopes of a takeover, or simply chasing production scale before the mine can sustainably handle it.

“We’re just going to slowly increase this,” he said. “We made promises to the ministry, made promises to the Lake Babine Nation (LBN) and we want to keep those promises before we move on to the next.”

Small footprint

The operation is based on a small footprint. The portal, shop, dry, fuel tanks, ore storage and water treatment plant sit close together on the mountainside.

Mineralized material comes out of the underground, moves to a loading area and travels about nine hours south by truck to Nicola’s Merritt mill. Nicola turns it into concentrate, which Ocean Partners buys.

The distance raised eyebrows before mining began. Vig said the haul works because Dome Mountain is such a high-grade operation.

“The way I look at it, it costs us about a half a gram to ship it,” he said.

Drill focus

In plans yet to be formally announced, the exploration strategy is to hit Dome Mountain’s main working vein with more drilling.

A 2022 resource estimated 136,000 measured tonnes grading 10.32 grams gold for 45,000 oz. and 662,000 indicated tonnes at 8.15 grams for 173,000 ounces. Inferred resources add 85,000 tonnes at 6.02 grams for 16,000 ounces. The estimate uses a 3.5-grams gold cut-off and covers only the Boulder vein system.

Shift boss Matt Kindrat, right, and miner Patrick Redmond underground at Blue Lagoon Resources’ Dome Mountain gold-silver mine near Smithers, B.C. Credit: Henry Lazenby

Blue Lagoon says it can grow that inventory by drilling between known intercepts, along strike and at depth. Since acquiring Dome Mountain in 2020, the company has drilled about 50,000 metres, much of it aimed at upgrading resources and testing the limits of Boulder. Vig says the vein remains open east, west and down dip, with one past intercept 150 metres below the known resource returning more than 3 metres at about 18 grams gold.

The company is to drill every 25 metres in parts of the system to support a resource update due next year. It also wants to return to zones where earlier drilling hit mineralization before the company paused exploration to focus on permitting and mine development.

Dilution bulwark

That pause was deliberate, Vig said. Blue Lagoon could have raised heavily in weak junior markets, but Vig, a veteran of publishing and cannabis ventures, resisted swelling the share count before the mine permit arrived after a six-year process.

“The gold isn’t going anywhere,” Vig said of navigating a challenging permitting process where the “goal posts” moved several times. “But I was confident that we were going to get permitted.”

Vig says that restraint kept Blue Lagoon near 155 million shares outstanding.

The company’s backers include Crescat Capital, which owns just under 10%; Phoenix Gold Fund of Kuala Lumpur with about 6%; Nicola with about 6%; and Vig, his family and early shareholders with about 12%.

Ocean Partners, Blue Lagoon’s offtake partner, agreed in May to buy $3 million of shares at 90¢ apiece with no warrants and no discount to market.

Mining Yintah

Dome Mountain sits on LBN traditional territory. That relationship has become part of miners’ daily routine.

At the mine entrance, Blue Lagoon installed a mural by a Lake Babine artist showing the Nation’s culture, traditions and clans. The company put the mural there instead of in a boardroom so workers and visitors see it first, Vig said. The company later added murals to other site buildings.

The images reflect Yintah, which Vig described as the Lake Babine concept of the land, streams, fish and way of life. He said the company now folds that idea into mining meetings.

“Every mine site, every single morning does one thing: talk about safety,” Vig said. “We do two things: we talk about safety and we talk about Yintah.”

That relationship with the LBN and the land itself helped Dome Mountain win the Prospectors & Developers Association of Canada’s Sustainability Award in March after Lake Babine’s Chief nominated the company.

District upside

Beyond Boulder, Blue Lagoon says Dome Mountain hosts 15 known high-grade veins, many sampled but not drilled, plus the Chance zone and other targets across an 18-km strike length. The company says less than 10% of the property has seen focused work.

Cronk says the company has to grow in steps: mine enough to fund drilling, drill enough to grow Boulder and keep the operation from outrunning its people, permits and infrastructure.

“We’ve got to stay focused and grow this wisely,” Cronk said. “We’re not in the business to mine the investors, we’re in the business to mine the rocks. And we’re deadly serious about it.”