(I apologize in advance for how the pictures display in the article. You may need to open in a separate window to see the full picture.)
About a week ago (late-August '22), I had the opportunity to visit HighGold’s ($HIGH) Johnson Tract Project in Alaska as one of the companies that I do work for happens to be one of HighGold’s technology vendors. I was able to pull some strings and finagle my way onto the team that was being sent the site to repair and upgrade a mountain-top microwave tower to improve the internet access to HighGold’s camp. After having spent a full day traveling all over the project site as part of our work as well as interacting with several members of the HighGold team in the process, I wanted to put together this write-up for others on CEO.CA who are invested or interested in HighGold. This was not a coordinated analyst visit, rather just some things I observed while I happened to be working on the site. HighGold did not know that I was a shareholder or that I regularly publish articles on mining exploration/investing on CEO.CA until after I arrived on-site. After meeting with some of the HighGold team, I obtained permission from HighGold to put together and publish this material. Please see the disclosures at the end of the article for further explanation and details.
Background on HighGold and the Johnson Tract Project (“JT Tract”)
Being an Alaskan, I have a heightened interest in all the ongoing Alaskan mineral exploration projects, so HighGold got on my radar not long after they optioned the property in 2018. At first, I saw an interesting prospect with a very large land package (20,942 acres) located about 200 kilometers southeast of Anchorage and across Cook Inlet from the Kenai Peninsula. The project had some potential with quite a bit of historical work done on it from the late 1970’s until about 1997. During that period, three different exploration groups drilled a total of about 27,500m meters and developed an initial mineral resource (about 500k oz on the JT Deposit). After the departure of the last operator (Westmin) in 1997, no additional work was performed on the property until HighGold commenced its operations in 2018. With the historical work having been done so long ago, there is always the possibility of newer geological theories being able to really unlock the full potential of what was discovered before.
The entire property that HighGold is exploring is owned by Cook Inlet Region Inc. (“CIRI”), one of Alaska’s 13 regional native corporations (CIRI owns the surface/mineral rights to the southern half, and mineral rights to the northern half). CIRI has leased the property to HighGold under a 10-year lease that started in 2019 with an additional 5-year development extension. If HighGold decides to move forward with a mine, the lease will extend indefinitely while production is ongoing.
HighGold is actually a spin out of Constantine Metal Resources Ltd. and while JT Tract is their flagship project, HighGold also has multiple exploration properties in the Timmins region. As the JT Tract is currently accessible only during the summer season (June-October), HighGold focuses on exploration on their Timmins project when they are unable to do exploration work on the JT Tract.
HighGold’s early work on the JT Tract in 2018-19 focused primarily on getting the camp set up and operational (which is still pretty spartan and has its own challenges) as well as confirming the the results of the historical work performed on the property (which was all pre-43-101).
HighGold started attracting some increased attention in September 2020 when they released drill results from the JT Deposit zone of 72m of 17.9g/t of gold. While that is a top-notch drill result, because they were drilling in an area with substantial historical work (appears that they were twinning some historical drill holes) and the estimated true width was only about 50% of that length, I still had some reservations on JT Tract’s exploration potential. What really caught my attention were drill results from the Difficult Creek Prospect (“DC”) that were released in October ‘21. The first set results released from the DC prospect included 6.4m at 578g/t Au and 2,203g/t Ag. This turned out to be the third best reported drill result in the world (measured by g-m AuEq) in 2021, with only the results at Osisko’s Windfall and Pretivm’s (now Newcrest) Brucejack coming in higher.
In the aftermath of the blowout results at DC, HighGold immediately cashed up their operation with an $18.8M bought-deal PP. HighGold released the remainder of the drill results for 2021 drill season in Dec ‘21 and Jan ‘22. They also followed up the drill program with an updated resource estimate for the JT Deposit in June of this year that included about 1M oz of Au at an average grade of 9.39g/t AuEq. HighGold also announced the commencement of a $9M drill program for 2022 that included the commissioning of on-site core sample preparation facility (crushing and pulverizing).
First results coming out of the 2022 drill program should start being released soon.
Description of the Property and Travel to the Property
While JT Tract is only about 200km away from Anchorage (Alaska’s largest city), make no mistake about it, it is a very remote site. Currently the site is only accessible by airplane or helicopter, although developing a road from the camp down to a future shipping port for barges along the navigable Cook Inlet doesn’t appear to be too difficult of a project to construct. Flying to JT Tract is arranged through local regional airlines (the ones that fly to Bush communities and fly out fishers and hunters to remote locations). Due to the shifting Alaska weather, the availability of flights can be hit or miss. My group had trips scheduled on a Thursday and Friday that were scrapped due to weather before we were finally able to fly to the site on the next Monday. The flight from Anchorage takes a little more than an hour but due to the nature of the approach into JT Tract and the short gravel runway the planes able to fly to the site are relatively small bush planes.
While I am fairly accustomed to flying on bush planes in Alaska, I have to admit that the approach into JT Tract is a memorable one. I definitely wouldn’t recommend it to someone who has a fear of flying. In order to enter into the valley where the JT Tract camp is located, the plane travels over a fairly narrow saddle. While I am sure there was adequate clearance as the plane passes through the saddle, it feels like you are no more than 10 feet off the ground as you clear the gap.
(Our plane approaching the saddle - as you can see, it feels like you are going to fly right into the hillside)
After entering the valley where the camp is located, the plane loop through a valley around one mountain before coming back into the main valley and landing on the gravel runway outside of camp.
(After passing over the saddle - you can see the valley with HighGold’s camp in the upper left with the gravel runway below that)
(Turned around and approaching the runway - welcome to the Alaskan Bush!)
When you arrive, you definitely feel like you have wandered far away from civilization.
(The scenery that awaits you when you step off the plane - The JT Deposit location is up the valley that you can see under the wing.)
The project has a decent size camp that includes an office building, kitchen/lounge facility, core shack, core preparation facility, as well as several other smaller huts for employee to sleep in and so on. The site is definitely in the Alaskan Bush, in fact we encountered a brown bear while driving in a side-by-side from the runway into camp.
While working on the site, HighGold's helicopter took us to the locations where we needed to go.
(Helicopter coming in to pick us up from camp to take us up the mountain to the microwave tower)
(Taking off in the helicopter out of camp - the valley straight ahead leads to the Kona prospect. Over the mountain at the end of the valley is where the DC and Easy Creek prospects are located. The face of the mountain at the end of the valley is where the Milkbone prospect is located and the Kona prospect is moving across that face to the left. The JT Deposit is in the next valley on the other side of the near mountain on the left)
(Farther up the valley - the Kona prospect is along the right and if you follow the valley around to the left, it leads back around to the JT Deposit)
It is while traveling by helicopter to our installation site (and to other parts of the property to pick up some HighGold employees who were assisting us) that the actual size of this project begins to hit you. We just throw around numbers like 20,000 acres, but actually seeing it first-hand changes your perspective entirely. In fact, the immensity of the size and scope of the project was probably my biggest takeaway from visiting the site.
Meeting with Darwin Green, HighGold CEO
Luckily, HighGold’s CEO, Darwin Green, and Chief Exploration Geologist, Nathan Steeves, happened to be in camp the same time I was there and I had the opportunity to discuss the exploration of the JT Tract with them while I was there.
This was my first time meeting Darwin. I had watched several interviews with him online and while he comes across as a very competent and intelligent guy, he is also not someone who just naturally conveys a lot of passion and excitement during his interviews. What was nice about being able to visit with Darwin on the JT Tract site is that I felt like I got to interact with him in his natural environment. He looked like he hadn’t shaved in a few days and he was dressed in such a way that I wouldn’t have guessed he was the CEO if I hadn’t recognized him from previous interviews. As I said earlier, he didn’t know that I was coming until after we were introduced in the camp. What was clear to me right away is that Darwin is at his core an exploration geologist. In my time interacting with a number of CEO’s of junior exploration companies in various contexts, I can generally tell when I am dealing with a C-Suite type and when I am dealing with a dirt-dog exploration type. Darwin definitely comes across as the latter. After some initial greetings and introductions, I started asking several specific questions about the project. As it became clear to him that I was someone who was quite familiar with HighGold's project and with mining exploration in general, he lit up with excitement. He spent well over an hour talking with me (I was waiting for the rest of my team to arrive on site in a separate plane), pointing out various parts of the geological structure that can be seen from camp, as well as the locations of the various prospects that HighGold is exploring. We walked over to some old boxes of core from 2019 and he just kept opening box after box pointing out various structures and mineralization that are regularly seen in the drill core from the project. It was very apparent to me that this is a guy that really gets excited telling the HighGold story and explaining the mineralogy and geological structure of the JT Tract. If there was one criticism that I have it is that I have never really seen Darwin explain HighGold with the same sort of excitement (which is a contagious excitement) in the interviews or promotional videos I have come across. I am not sure how HighGold could effectively capture that on video, but it is definitely something I think they should be trying to accomplish.
Another reason I could tell that Darwin was in his element was the way that the other employees interacted with him as they would walk by. There was a lot of joking and kidding around, which tells me that he is very comfortable being one of the guys in a work camp. Personally, I think it is important to have someone like that if you are going to try to explore and develop a property in the Alaska Bush like JT Tract. Working in this type of location is not for the faint at heart. Due to the remoteness and inherent challenges of just being in Alaska, it is important to have leadership that is comfortable being among their troops out deep in the boonies.
While it was probably not the best move on my part catching Darwin off-guard and unannounced like this, being able to interact with him this way on-site was enlightening for me and definitely assisted in being able to get a better feel for what the future holds for this project in a way that is difficult to convey through other formats. I probably owe Darwin an apology for my surprise visit though.
Major Takeaways from Site Visit
Necessity of Looking at JT & DC as Completely Separate Projects
The JT Deposit and DC Prospect (as well as some of the other prospects) need to be looked at as completely separate projects. I have to admit that prior to my visit, I had been a little critical about HighGold’s release of an updated technical and resource in June of this year. Although 1M oz of Au at 10 g/t is nothing to laugh at, putting out that number a few weeks into the current drilling season and after the third largest drill result in the world the prior year seemed rather anti-climatic at first blush. At least for me, the timing felt wrong for this type of release. After all the buzz coming out of last year, seeing an updated resource of only 1M oz caused a little bit of a “That’s it?” response. What I learned (that I probably should have figured out earlier on my own with more careful research…) is that while the JT Deposit and the DC Prospect are parts of the same structural trend, they are very distinct projects.
(Looking towards the valley where JT Deposit is located. DC is 90º to the right and several km away up a valley and over a mountain ridge. This site is very large!)
I am not even sure that the pictures really show how far removed the DC Prospect is from the JT Tract, but they are not even in the same zip code! The updated resources that HighGold put out this year covers only the JT Deposit and doesn’t include any of that super high grade material that was found at DC last year. I am not even sure how long it will be until DC is adequately drilled to that extent that it could be included in an updated resource, but I wouldn’t be surprised if it wasn’t for at least a few more years.
Drilling Challenges
We would normally expect that when an explorer comes across a hit like HighGold had at DC last year that it would jump right back at it with a program of step-outs and in-fill drilling to quickly define the scope of the deposit. As we were taken around the site in HighGold’s helicopter to do our work, it became clear why that type standardized drilling program is not realistic in a place like the JT Tract. Most of the locations that HighGold is drilling from are on hillsides, some of which are quite steep. HighGold has to build wood structures into the hillside for each drill location as well as a separate location for the helicopter to take drill operators in and out of the drill sites.
(In the middle and down to the lower left, you can see three drilling platforms were constructed into the hillside. This is in the Milkbone prospect. I am not sure if these platforms were from drilling this year or from a prior year.)
In fact, you could see the climbing ropes laid out where the helicopter would drop employees off at a prior drill site and they would climb or descend to the current drill site.
(Over the ridge and looking down on one of drilling rigs operating in DC prospect - I believe this is not far from where the monster hole was found last year! The drilling terrain in DC prospect is on a hillside but not nearly as steep as Kona and Milkbone prospects)
(On top of one of the opposing hills looking back down on the JT camp and runway in the distance - the valley heading to the left leads down to Cook Inlet just a few miles away)
This might also provide a possible explanation for why some of the earlier drill results released on the JT Deposit had ETWs in the 50% range. When the means of moving and setting drills is so restrictive, HighGold has had to get creative in how it tries to hit its exploration targets and that means that they are not always able to intercept them at the ideal angles.
While operating on the sides of the steep hillsides may add some extra challenges for exploration drilling, it shouldn’t be as big of an issue for development or production as those hillsides should serve well as portal entries.
Still an Early Exploration Project
While HighGold has already put out an estimated resource for the JT Deposit, it was very clear to me that this is still an early-stage exploration project. I think some of the market's enthusiasm that came after the initial DC drill results faded a bit because the remainder of the results released later that year didn’t seem to live up to the earlier hype. To be fair, it is a pretty tall order to live up to the hype after you release the third best gold drill result in the world for the year. But in a finicky and demanding market, the hype machine demands to be continually fed. What I didn’t realize is that the later drill results after the initial DC results in October were from entirely different prospects on the property. It is certainly possible that had the assays been turned around quicker in 2021, HighGold might have been able to drill one or two more holes in the same area as the DC blowout hole before the end of the 2021 drilling campaign. In fact, one thing that Darwin mentioned on multiple occasions was his frustration with lab backups and getting results turned around quickly as he would like. I think that is why it took so long to release their updated resource too. While the commissioning of the core preparation facility should speed up getting future lab results back, my sense is that Darwin was still not happy with how long it is taking to get lab results back. But, at the same time, that is a pain felt by every exploration company these days.
Back to the results from late 2021, it appears that what HighGold was doing was poking some drill holes around various prospect zones on the project to determine where to focus efforts in subsequent drill campaigns. I think it is a mistake to look at the results released later in the season as the “follow-up results” to the DC bonanza results from earlier in the season. One thing that Darwin did mention in passing is that due to the nature of the mineralization in the core, while they know that they are in the mineralized zone they are targeting, HighGold doesn't know how much gold or silver is in a core sample until they actually get assay results back. Since the big DC results didn't come back until September last year, doing quick follow-up drilling in DC later in 2021 was simply not realistic. This means that the follow-up results for DC should be coming this year. And before anyone asks, no, I was not able to get any inside scoop on when this year’s assay results would be forthcoming, although I did ask. I think the hope is that by improving the core sampling process as HighGold has done this year, that they should be able to do quicker follow-up drilling on big hits in the future.
Overall, I get the impression that the JT Tract is going to take several years of exploration work to figure out exactly what is going on with the geology. This project is located in an extremely active seismic zone as well as having substantial nearby volcanic activity. Interpretation of the geology here is going to take some time, especially because HighGold is the only company exploring in this general area, so there isn’t a lot of other geological work to piggy-back off of.
Potential for a Future Mine (i.e. Do Not Compare JT Tract to Pebble Mine)
While many investors try to time short-term market moves on TSXV junior explorers, my interest is primarily in trying to find exploration projects that have a legitimate shot to go the distance and become a mine in the future. Like many other people, I have been a little gun shy of late on the prospect of exploration projects in Alaska getting permitted and moving into production - especially after seeing the massive Pebble Mine project get derailed and an amazing potential district in Ambler District (where Trilogy/South32’s project is located) get bogged by federal bureaucracy and environmental legal challenges. Just looking at the map, it may appear that the JT Tract is practically next door to Pebble Mine, so there is a natural reaction to assume that any future development of the JT Tract would face the same vigorous opposition that Pebble Mine faced. In fact, a couple of friends I have spoken with who are also active investing in junior explorers have specifically mentioned concerns about the possibility that JT Tract would suffer the same bureaucratic death sentence as Pebble Mine. One thing that was clear to me after my visit is that the JT Tract is very different from Pebble Mine. First of all, Pebble Mine is on the other side of the mountain range and located in an entirely different watershed. HighGold is in the Cook Inlet watershed whereas Pebble was located in the Bristol Bay watershed. While Cook Inlet is an important fishery, it is nothing in comparison to Bristol Bay. Also, Cook Inlet already has offshore oil/gas drilling and across the inlet from JT Tract is a Marathon petroleum refinery as well as the proposed location for a major LNG terminal to export North Slope LNG from a proposed trans-Alaska gas pipeline. So while environmental considerations will definitely be there with the development of JT Tract, it shouldn’t face the type of hyper-vigilance that Pebble Mine faced being located in the headwaters of the Bristol Bay watershed.
Another key difference between the JT Tract Project and Pebble Mine is that the two projects have entirely different types of ore bodies. Pebble Mine is a massive low-grade bulk-tonnage gold/copper porphyry body (>100 million oz of Au but grades under .5 g/t) where HighGold is a high-grade epithermal system. The difference in grades is not merely economic, but also allows greater flexibility in mining techniques. In fact, the original mining proposal for the JT Deposit developed in the 1980’s was based on shipping ore by barge from Cook Inlet to a mill in British Columbia. With the relatively flat terrain from the ore bodies to the designated port location on the coast, I wouldn’t be surprised to see a future feasibility study utilize a similar model of processing ore from the JT Tract at another existing facility elsewhere in Alaska or BC.
A final major difference between Pebble Mine and HighGold is that while Pebble Mine has had to constantly fight against opposition from the regional native corporation in the area (Bristol Bay Native Corporation has formally opposed Pebble Mine since at least 2009), whereas HighGold is operating on land leased from CIRI (the regional native corporation where JT Tract is located). This sort of ongoing collaboration and cooperation between HighGold and CIRI should help considerably in avoiding the sort of public headwinds that Pebble Mine experienced with the development of its project.
While there are still some real challenges that will need to be overcome to get to the point that JT Tract becomes a mine, so far I am not seeing any major red flags or impediments at this point that would prevent that from happening.
Overall Conclusion
I felt very lucky to have the opportunity to visit the JT Tract site. Prior to going, I was starting to waver a little bit in my conviction on HighGold after all the buzz in the latter part of 2021. Being able to get eyes on the site and talking with some of the HighGold team really helped rekindle some of that earlier excitement. That said, while I am bullish on the future for HighGold, I think it is important to keep in mind that this is a project that is going to take some serious patience. Because of the logistical challenges of Alaska, limited drilling seasons, and the early nature of the exploration, it is going to take some time for all the pieces to come together on this project. I am not yet ready to put this down in the “Definitely Going to be a Mine Someday” column just yet, but having been on-site, I could definitely feel the pieces starting to come together.
Because of where this project is located and the logistical challenges that will need to be overcome to bring this project into production, I get a the impression that JT Tract is a good candidate for acquisition by a major or being brought into production in a JV with a major. Before that can happen, the project does still needs some de-risking and some of these other promising prospects on the property need some additional exploration done on them to figure out exactly what is going on with the geology. One of my concerns as an investor is HighGold's ability to maintain excitement for the JT Tract in the market year-around as the property that can only be worked at this stage for 5-6 months out of the year. I can't help but feel that a well-heeled major that can adopt a long-range approach might eventually be needed to come in to support the project on the course to development. While I think management is deeply committed to completing the exploration, I do have some small fears that weaker hand and finicky investors may not have the patience that this project will require. I do know from one of HighGold's OTC filings that, as of December 2019, Agnico Eagle held a substantial block of the shares of HighGold. That does make me wonder if JT Tract is a property that AEM has their eye on for a future acquisition or JV prospect. Either way, JT Tract is definitely a project to keep your eye on!
Disclosures:
I own a beneficial long position in HighGold Mining that I intend to maintain or increase in the future. I wrote this article out of personal interest without external assistance and it expresses my personal opinions and not those of HighGold. I was not asked by HighGold, or anyone associated with HighGold, to prepare this material. I have not and will not be compensated for researching, drafting or publishing this article. I have no direct business relationship with HighGold Mining, but as mentioned in the article, I work for a company that provides communication services to HighGold at the JT Tract. A copy of this article was provided to HighGold in advance of its publishing in order to obtain an exception to HighGold’s social media policy its vendors/contractors are obligated to follow. Effort was also taken to assure that the information discussed herein does not violate any applicable laws, rules or regulations pertaining to public securities. HighGold did provide some minor factual clarifications about the property and drilling after receiving an advanced copy of the article that I have integrated into the article, but the editorial content, opinions, and speculation expressed herein are entirely my own.
I apologize in advance that I wasn’t able to include better pictures. Because the purpose of my trip was to complete a fairly intensive equipment installation, it didn’t leave much time for trying to get better pictures.
It is recommended that readers do their own due diligence and research prior to making any investment decisions.
