Treasury Metals to acquire Goldeye

Treasury Metals (TSX: TML) and Goldeye Explorations (TSXV: GGY) are planning to combine forces in an all-share deal that would give Treasury another significant gold project in northern Ontario.

Treasury is already advancing its Goliath gold project, 20 km east of Dryden in northwestern Ontario, to a feasibility study, and forecasts that if a mine is built there, it could produce at least 80,000 oz. gold and 100,000 oz. silver annually over a 10-year mine life.

The company’s plan at Goliath is to build an open-pit mine and 2,500-tonne-per-day processing facility, with underground operations developed in the latter years and funded by cash flow from the initial open-pit operation.

Goldeye’s high-grade Weebigee gold project, also in northwestern Ontario, is near Sandy Lake in the heart of the Sandy Lake greenstone belt. The 60 sq. km property is 200 km west of Goldcorp’s (TSX: G; NYSE: GG) Musselwhite mine and 225 km north of Red Lake, one of the world’s most prolific gold camps.

Robin Luke Webster, Goldeye’s president and CEO, declined to be interviewed until after a definitive agreement, but Marc Henderson, Treasury’s chairman of the board, said in an interview that the acquisition would give Treasury a second attractive asset in a safe mining jurisdiction.

“There are early-stage indications that something interesting is going on in a greenstone belt that a lot of geologists feel excited about,” Henderson says. “It’s elephant country — it’s a greenstone exploration project that is well-known and advanced, as opposed to an absolute greenfield project where you start with just an idea.”

Henderson notes that Weebigee would have been explored much sooner, but its proximity to the Sandy Lake First Nation’s traditional territory meant that to proceed Goldeye first had to reach an agreement with the First Nation. Goldeye signed such a comprehensive exploration agreement with the Sandy Lake First Nation in 2013.

Then, in February and March 2014, Goldeye completed a 2,200-metre shallow drill program at Weebgee, and flew a versatile time domain electromagnetic airborne survey over the project in mid-2015. The project’s Knoll and RvGv zones were found by drilling beneath showings sampled in mid-2013. (Henderson says that “the guys at Sandy Lake First Nation are quite excited to see the development happen.”)

What Goldeye knows so far about Weebigee is that the main Knoll zone is open in all directions and shows  continous moderate to high-grade gold mineralization within a coherent alteration zone over a strike length of more than 100 metres and 100 metres deep.

Core racks at Treasury Metals’ Goliath gold project in Ontario. Credit: Treasury Metals.

Highlights from drilling the Knoll zone included intercepts of 18.69 grams gold over 3.9 metres from 52 metres deep; 12.45 grams gold over 3.5 metres from 15 metres; 8.59 grams gold over 6.8 metres from 78 metres; 6.71 grams gold over 5.5 metres from 22 metres; and 6.76 grams gold over 7 metres from 21 metres.

Drilling in the RvGv zone returned assays of 23.15 grams gold over 4 metres from a 43.6-metre depth and 9.35 grams gold over 4.5 metres from 49 metres. In the Bernadette zone, the company received intercepts of 70.23 grams gold over 1.2 metres starting from a 34-metre depth and 10.89 grams gold over 3.9 metres from 8 metres.

Two other zones — Wavano and Tully — remain to be drilled tested. But channel sampling in 2013 at Wavano, which the company says is a similar setting to Knoll, returned a sample grading 17.7 grams gold. At Tully, historic sampling returned gold values, and 2013 geophysics located several IP anomalies next to regional iron formation that coincided with old trenching.

Henderson notes that some geologists believe that the Sandy Lake greenstone belt is analogous to Red Lake, but that it’s still early days and more drill holes are needed.

Weebigee is accessible by winter road from Red Lake and Pickle Lake, and the airport in Sandy Lake has daily passenger flights to Winnipeg, Sioux Lookout and Red Lake. The project is also 30 km from the Northwind Lake Dam, which powered the Berens River mine.

At Treasury’s Goliath project, meanwhile, the company is pushing ahead with mine permitting, technical engineering studies, condemnation drilling and more exploration. Henderson expects to complete a feasibility study in the next six months.

“The plan at Goliath is to get it permitted, get the feasibility study done and published, and then go and build it,” he says. “The completion of the feasibility study is no more than a six-month exercise from where we are now … we’re a little bit behind schedule on everything, mainly because we were pretty funding dependent, and until six months ago, the market wasn’t friendly or accommodating for funding junior gold development stories. Everything gets accelerated more quickly when funding is more fulsome. We’re in a climate now where that seems to be happening in the last six months.”

In May, Treasury completed a previously announced brokered private placement for $3 million (6.26 million units at 48¢ per unit.) In addition, it sold on a non-brokered basis another 2.08 million units to a strategic financial advisor for additional proceeds of $1 million. The proceeds of the combined offering will be used to fund technical programs and mine permitting. Last month, Treasury closed a term loan for US$4.4 million with Extract Advisors LLC, a natural resources fund manager concentrated in the junior mining sector.

Exploration this year will include field exploration and diamond drilling to explore high potential areas at Goliath, with the objective of adding gold ounces to the current resource estimate. The company has a three-year exploration permit from the Ministry of Northern Development and Mines that will support exploration and development activities through to April 2019.

Goliath comprises two historic properties: the Thunder Lake property that Treasury bought from Teck Resources (TSX: TCK.B; NYSE: TCK) and Corona Gold Corp., and the Laramide property, transferred to Treasury from Laramide Resources (TSX: LAM; US-OTC: LMRXF) upon the company’s spin-out in 2008.

Teck carried out most of the work at Goliath before 2008, beginning in 1990 with Teck’s first discovery hole and continuing through to the 250-metre underground drift and 2,400-tonne bulk sample in 1998, at which point the project was put on hold before being acquired by Laramide in 2007. (Teck and Corona completed a first resource estimate on the deposit in 1999.)

A core sample with eight visible gold blebs from Treasury Metals’ Goliath gold project. Credit: Treasury Metals.

A National Instrument 43-101 compliant resource estimate published in August 2015 outlined measured and indicated resources (for both open pit and underground) of 20.6 million tonnes grading 1.69 grams gold per tonne for 1.11 million contained oz. gold and 6.4 grams silver per tonne for 4.25 million contained oz. silver. Inferred resources add 3.5 million tonnes averaging 2.96 grams gold for 330,100 contained oz. gold and 8.3 grams silver for 928,000 contained oz. silver.

If the takeover goes through, Goldeye shareholders will receive 0.10 of a share in Treasury Metals for each Goldeye share. The deal values Goldeye’s shares at 6.5¢ apiece, based on the company’s closing share price on July 8 of 4.5¢, which represents a 44.4% premium. The agreement would see Treasury issue a total 5.01 million shares.

Under the proposal, announced on July 11, Treasury would also loan Goldeye $150,000 for interim working capital, and has could convert the loan into Goldeye shares at a deemed price of 5.5¢ per share.

GPM Metals (TSXV: GPM) signed an option deal with Goldeye in April 2015 to earn an undivided 50.1% of the project, and also has the right to earn another 19.9% stake.

But Henderson isn’t concerned about owning part of a joint venture. “They have a long way to go on the earn-in,” he says. “Even if we ended up in a minority position — 30% of something big is something big.

“Assuming they complete the joint-venture, we’ll sit back and watch the next $4-million-plus of expenditure being spent, and have no funding obligations,” he continues. “If there’s a discovery, we’re obviously hopeful that it’s in the first $4 million.”