GFG.V: A New Strategy for Greenfield Discovery In the Abitibi
GFG is exploring greenfield targets under shallow till along strike from giants in Timmins. CEO Brian Skanderbeg joins me to discuss their exploration strategy. Both article and summary included.
tl;dr:
I discuss GFG a little after my recent talk with CEO Brian Skanderbeg. Brian and his team have a smart and deliberate approach to exploration that I like. I provide a written summary of the interview after my article.
Index:
Part 1. Companion Article on GFG Resources
Part 2. Written Summary of the Interview
Part 1: The Article
So much of the resource exploration industry comes down to people. Smart, proficient teams with strong strategies are the ones that discover and develop mines. So while you invest in this space for the chance at buying into the next world-class discovery, you do so through the vehicle of the companies and the people who ultimately choose where and how to find them.
From this perspective, GFG is in a position of strength. Brian Skanderbeg leads a capable and experienced executive team that has a smart approach to exploration and the experience to prove it: Much of the team and BoD also worked together at Claude Resources, where Brian was CEO and led a struggling gold producer into revitalised profit and a $337M USD merger that began through new discoveries on old land.
Now, Brian is bringing that same approach to the world-famous Timmins mining camp. GFG has accumulated 800 square kilometers of land in prime areas, including their core focus right now - the Goldarm and Montclerg projects.
This property sits along strike some 30 km from the Kidd Creek mine, one of the largest, oldest, deepest base metal VMS-style mines in the world in the heart of the Timmins mining camp. And yet, Goldarm has practically never been drilled. The core reason for this is that any potential targets sit under 10-30m of glacial till. Enough to prevent historical exploration, but not enough to prevent modern technologies. This, to me, as an example of shrewd management.
Another example of the sort of flexibility and ingenuity I like to see in a company’s exploration strategy is that GFG are also looking at Goldarm through the lens that there might be the potential for Kidd Creek/VMS-style deposits (rather than the more typical style of quartz vein deposits you might expect from the Timmins Abitibi greenstone).
I believe these two points - the shallow cover and potential for VMS-style deposits - demonstrates the fresh-but-logical approach to exploration taken by Brian and GFG. They are bringing new ideas to old, overlooked land, and that has been a recipe for success many times over in this industry. That GFG is doing all this in one of the preeminent mining camps in the world is also, I would say, testament to quality of their decision making process. Ultimately, this intelligent, deliberate, yet fresh take on Timmins land is a good example, to me anyway, of the advantage of smart management, and the reason you invest in people in this industry.
GFG has filtered through a number of projects the past few years (Rattlesnake Hill, Pen, Dore) which has led to some retail shareholder frustration, which isn’t unfair, but also an example of how retail can shoot itself in the foot. Failure is an integral part of exploration process. Good teams start with failed targets and projects all the time, and expect to. That’s just part of the process. Chris Taylor of Great Bear fame spoke of this in a panel I hosted he took part in - GBR itself started with 3 or 4 failed projects before they landed on the Dixie Project. Regardless of individual outcome, it is critical to properly understand how much risk is taken off the table if you can find a team you trust and has the know-how to find the needle in the haystack. Brian in our interview said that the Lundins (who are GFG shareholders) don’t invest for the next hole “but for the next 100 holes”. Why? Because they invest in people and teams they trust.
The Montclerg, Goldarm, and Aljo properties look like they have plenty of potential - they’re largely greenfield targets in the right geological setting in a great jurisdiction. And positively, continued exploration news flow is also imminent, with 10,000ish meters of drilling to come on them over the next 6 months. However, it is the team that identified these targets and put together the campaigns that’s the true value creator. Regardless of the outcome of any individual drill result, Brian and GFG continue to explore in a fashion that seems destined to produce another winner.
Part 2: The Interview Summary
Below is a written summary of my conversation with Brian, with time stamps. Each individual time stamp is actually a link that will take you through to that time in the YouTube video interview.
Elevator Pitch on GFG
Brian explains that they are a $25m mc company supported by very savvy institutional investors. Lots of the team have found and built mines through to production together previously (Claude Resources)
Brian’s History and Experience
Brian is an explorationist geo by training. Has worked with Gold Corp in Red Lake, Inco in Sudbury, spent time internationally. First management role was with Claude Resources. Explains his role in Claude and what he accomplished there: Revitalised a marginal producer by discovering a new orebody that got taken to production in just over 4 years. Drove a rerate that ended up with Claude being merged with and taken over in M&A for USD $337M value. Took Claude investors from 10 cents to $5 or $6. Now, Brian and his team have reunited and are looking for the right project to build their next success.
Lessons from Claude
Brian discusses how you find opportunities in unexpected places. Said how Claude seemed like a dead end to people because it seemed so little. But recognising an opportunity to unlock value is the starting point of this industry. Claude just needed the right team with the right backing to figure it out. On an explorationist level – fertile belts have unique characteristics that create orebodies. Sometimes opportunities can be overlooked in those camps because they are seen to be so well explored. The orebody that changed Claude had been drilled twice historically and thought to be barren. Looking at things differently can yield great results and improve your drilling exploration success. For the most part, the geological targets have predictable parameters that can guide you. Brian emphasized the importance of getting the right people. Looking for new discoveries in established camps comes with so many benefits that it fundamentally improves the potential of any potential discovery.
Share structure and ownership
About 200 million fully diluted. Insiders own about 6-7% of the company. Brian invests in all his company financings. Brian’s cost basis is about 25 cents (above current share price) and has no seed stock or other cheap stock. Largest single owner is Abitibi-focused Alamos Gold at 9.9%. No board representation but they do help with technical support and input. Broad retail support with a few very larger shareholders. One private individual is also approaching 9.9% all shares bought in the market. Also have large institutional investors – Lundins have participated in multiple financings and own about 5%. Also have multiple other institutional investors – maybe half a dozen at 3-5%.
Update on Phase 2 of 2023 Drilling Program at Montclerg/Goldarm/Aljo
They want to do 10,000 meters this year. 3500 meters were drilled in the spring and now have 5000-6000 left. Acquired Montclerg in Oct. 2021 and this is only their 3rd season on the land. Believes it hasn’t been well-explored the last few cycles. Most exploration dates back to 50s or earlier. GFG has drilled about 15000 meters so far. Believes they are growing the system in multiple ways – both on a local sense (making the orebody larger) but also proving up the potential of other targets. Believes in using about 30-35% of your meters to test new targets. 800km of ground in Timmins – believes there’s lots of hidden opportunity for new targets. Hoping they can lead Montclerg to a resource. Believes Abitibi is heating up again.
Breaking down the meterage of the drill program
Brian is generally a “70/30” guy. Wants 70% of meters going into resource-caliber targets. Infill and extension are both valid applications and 30% on totally new targets. 2000 meters dedicated to infill, 4-5000 meters at step-out work. Then the remaining to push further out to test unexplored strike length. Wants the best and majority of meters going into value creation. To Brian that means resource growth. Montclerg can become a resource he believes. But needs to balance that with finding the next one and more. Believes this is a balanced way to create consistent news, demonstrate to shareholder they are creating value without too much risk.
Historical/legacy exploration on the Montclerg/Goldarm land package and how GFG uses that data.
Legacy data is about 120 drill holes and about 20,000 meters, almost all shallow, and almost all entirely on Montclerg. Same style VMS deposit as Kidd Creek mine (deepest base metals mine in the world). That is compelling and informs the way they explore and interpret this land package. The lack of outcrop and 20-30m of till is what attracts them. Has reduced exploration historically that preserves strong opportunities to find new targets and discoveries. Outside of Montclerg there are only a couple dozen holes across 30 km. There are big deposits along these corridors and the actual exploration is remarkably immature. What does GFG need to add to the data layers to properly explore this land? After 2 years they are still acquiring data to help guide their drilling. That combination of infrastructure and location and ability for true new discoveries next to one of the largest VMS deposits in the world is what attracts GFG to this land package. VMS exploration requires a different package of data than just pure gold exploration.
Knowing when to keep exploring and when to move on. Finding the right land package. Discussion of pros and cons of Rattlesnake Hill, Pen, and Dore.
Finding the needle in the haystack that is a future mine means you will be sorting through a lot of different projects. Even the best fail more than they succeed. You can’t be afraid to pivot. Rattlesnake hills has 100,000 meters of drilling done into it. But it can only be explored about half the year. Also in the US, where there is no flow-through dollars. Wyoming is an extraction-friendly state, but there is no gold experience. There is a lot of positives to it, but GFG ultimately decided they couldn’t justify the capital and value creation balance it offered. Caused them to pivot to Timmins, which started with the Pen and Dore acquisitions. Timmins had the most attractive entry point of any sector in the Abitibi – you could get good land at a decent price. It was always part of the vision that Timmins and the Abitibi were their goal. GFG will scale up as a company as their development scales up. Montclerg is the second step of this process. Difference to RSH where it was a hard pivot, while now they are at home in Timmins. Ask management questions about their philosophy and rationale if they pivot. Most successful companies start by pivoting.
When is it finally time to move on? Brian’s dual path strategy to finding a meaningful project.
Dual strategy of exploring the land. Brownfield and greenfield in tandem. To change their mind: Is the deposit not on the path to an economic resource? No continuity, no grade. Does it belong in a mill? Also – is the area and the tenement conducive to how GFG is approaching its exploration philosophy? GFG is looking for targets under cover to reduce historical exploration, but not too much – say 50m or so – till. If they aren’t making discoveries, why? Is it not there? Too small? Or do they have to adjust their techniques/strategies? Drilling at Pen, for example, requires different exploration data layers and strategies than Goldarm.
Update on Rattlesnake Hills
Last public news was regarding prelim met work completed in 2022 that looked quite positive. 60-70% recovery without crushing or cyanide. However, capital has been a struggle for them and one of their primary owners isn’t focused on it. The asset will get relinquished back to GFG if Group 11 can’t finance, but they are actively looking for financial backing.
Lundin and Alamos Involvement – importance of these kinds of investors
GFG maintains positive relations with lots of mid-sized producers. Alamos came in 3 or 4 years ago because of positive results out of Pen. Saw some very high grade hits but couldn’t show continuity. Alamos sat out of one financing, but have since topped back up to 9.9% as GFG found more consistent success. Lundin have a great track record at true long term investing in the space. Technically competent and understand the risk of the business. They are buying for the next 100 drill holes, not just the next one. They invest in people they believe in.
What’s left to come in 2023 and the next 6-12 months in general
5000-6000 meters remaining. 250-300m holes. 20-25 holes. Provides a good news flow runway. No assays in the lab currently. The are working on proving up and expanding Montclerg. Looking along strike and at depth to chase the orebody. Depth continuity, bring it to surface, and some infill where there are gaps. Relevant, system-scale growth. In Q1 of 2024 they’d like to see another 3000m, and 10000m more done in 2024 in general. So continuous drilling through the calendar year thanks to wintertime drilling. Hoping for update on RSH. Also reviewing and considering how to advance Pen and Dore through that target identification process. Sometimes a target needs a new set of eyes.
Final thoughts to Brian
Brian discusses that he likes having the opportunity to discuss more philosophical/macro-style discussion to articulate his team’s commitment to exploration and target development over time.
A bit of a double barrel today - both article and written summary. If you’ve made it this far: Good on you. Thanks for reading.
-JRI
