Thomas Kaplan fund invests in Victoria Gold

Billionaire Thomas Kaplan has a thing for the Yukon.

His Electrum Strategic Opportunities Fund L.P., a mining-focused private equity fund that is one of the investment arms of his privately held Electrum Group, is investing in Victoria Gold (TSXV: VIT) and its Dublin Gulch gold project, marking the entrepreneur’s third investment in a mining project in the Canadian federal territory.

The New York-based global natural resources investment management company already has stakes in Kaminak Gold’s (TSXV: KAM) Coffee gold project and Wellgreen Platinum’s (TSX: WG; US-OTC: WGPLF) Wellgreen platinum group metals and nickel project.

Under the latest deal, Electrum is investing $24 million (80,000 units of Victoria Gold at 30¢ per unit) for a 13.6% stake in the junior. It also has the right to nominate one person to the company’s board of directors and to participate in any future equity offerings in order to maintain its pro rata shareholding.

In addition, Sun Valley Gold LLC, an existing shareholder, has agreed to subscribe for 20 million units and increase its ownership in the company to 18%. The money from both the Electrum and Sun Valley investments announced this week will be used to continue exploration and development of the project’s Eagle gold deposit.

Victoria Gold says the fully permitted, shovel-ready Eagle deposit will be the Yukon’s next operating gold mine and the largest in the territory’s history. Eagle Gold is part of the Dublin Gulch project, about 375 km north of Whitehorse and 85 km from the town of Mayo in central Yukon.

The deposit is part of the Tintina gold belt, a tectonically thickened, gold-rich rock package north of the Tintina fault that cuts east-west across the Yukon.

The proposed mine will produce dore from a conventional open pit operation with a three-stage crushing plant, in-valley heap leach and carbon-in-leach adsorption-desorption gold recovery plant. 

The deposit has indicated resources (including probable reserves) of 222 million tonnes averaging 0.68 gram gold per tonne for 4.9 million oz. of contained gold and a further 78 million tonnes averaging 0.60 gram gold for 1.5 million oz. gold in the inferred category.

Victoria Gold has started work on updating a feasibility study completed in 2012 that was based on inputs from the fourth quarter of 2011 (that study estimated construction and working capital costs of around $400 million and production of around 212,000 oz. gold a year.)

The company believes that events over the last 18 months have enhanced the project’s economics including a weaker Canadian dollar, lower fuel and equipment costs, and an improved labour environment. It also received a water use license, the final permit that it requires to build and operate the project.

The updated feasibility will also incorporate into the mine plan a maiden resource for the Olive satellite zone, adding a second heap leach pad to accommodate lower grade run-of-mine ore, and examine capital cost savings.

Victoria Gold has started an 8,000-metre diamond drilling program on its Olive-Shamrock target, within walking distance of the Eagle gold deposit, or about 2 km from the mill site. Three drill rigs are turning on the property. The company has also partnered with SGS Minerals to provide a mobile on-site prep lab for more timely assay results.

About $3.6 million has been earmarked for its exploration program this year at Olive-Shamrock. In addition to the drill program, Victoria Gold will undertake surface trenching and geophysical surveys with a focus on previously underlined areas linking Olive and Shamrock mineralization.

The program aims at expanding the strike length of confirmed near-surface, high-grade gold mineralization within the Olive-Shamrock shear zone trend and target the previously untested, 300-metre separation zone between the Olive and Shamrock targets. A 3D Induced Polarization geophysical survey in 2014 defined several large changeability anomalies.

Metallurgical testing completed last year indicated that the high-grade zone is amenable to Eagle heap-leach recovery at the same crush size as Eagle’s project feed.

Victoria Gold acquired the project in 2009 when it took over StrataGold. Since then it has drilled over 57,000 metres of exploration and development drilling on the property and more than doubled the Eagle gold resource as well as identified new gold and silver targets along a 13-km belt of gold and silver mineralization known as the Potato Hills Trend. The property also hosts the Wolf tungsten deposit.