Kirkland Lake Gold Ltd. Chairman Eric Sprott says he will continue to look for out-of-favor companies and management teams that would therefore come cheap for merger and investment opportunities, even if such moves receive heavy criticism as they have in the past.
Sprott said in his keynote address to the Precious Metals Investment Symposium in Perth, Australia, on Oct. 4 that it was the case in one of his first investments when he got into gold when it was about US$250 per ounce by investing in Goldcorp Inc. with its Red Lake mine, whose management was under-rated and no one was covering it, but whose founder Rob McEwen was a "maverick" — in a good way.
"In the early days it always looks like incredible risk and when it's successful everyone forgets. We all forget how risky Fosterville was," he said, referring to Kirkland's famed mine near Bendigo in Victoria, Australia, which the company transformed into one of the world's highest grade gold mines whose success is the type which he said confounds the market.
He said that even in his nearly 20 years in the gold sector, Kirkland Lake's last intercepts announced on Sept. 19 that included 289 g/t over 7.45 meters ranked as "outer-worldy, crazy good numbers ... and most people can't adapt to outer-worldy numbers, and high grades in particular."
Such was the case also with RNC Minerals, whose CEO Mark Selby confirmed to S&P Global Market Intelligence on the conference sidelines that Sprott has more than 10% in his company and is "excited" by its exploration potential in particular.
Sprott referred to RNC's Oct. 2 announcement that it had now extended the known sediment structures by 540 meters from the Father's Day Vein structure to the mine's 1250 Level.
This has led to expectations that a minimum of 30,000 ounces to 35,000 ounces of coarse gold will be recovered at Beta Hunt in Western Australia, where the company discovered a 95-kilogram specimen containing an estimated 2,440 ounces of gold and a 63-kilogram specimen containing an estimated 1,620 ounces in September.
"Knowing that this is an existing mine, it shouldn't be hard to drill it and find out whether you have a big one. It's not every day you get to use the word 'world', but this is a world-first," Sprott said.
Selby said RNC always believed in the potential of a mine at Beta Hunt, but lacked the cash to do the development work to fully ramp up, so having "struggled along for quite a period of time," it now has the funds from all the ounces it has pulled out of the Father's Day vein, guided in its drilling by Western Mining Corp. Pty. Ltd.'s work some three decades ago which identified but reportedly ignored the gold potential.
"We know where the shears are and where the sediment layer is sitting, so it's just a matter of getting the drill rigs in and getting the meters through and hopefully define a pretty big resource with a nice layer of cream running right through the middle," Selby said.
When asked by Martin Place Securities Executive Chairman and Kirkland Lake investor, Barry Dawes, about Kirkland's long-term investor strategy in light of the miner's preference for high-grade deposits, Sprott responded that "we look for huge opportunities where we think we're stealing something. I always say that my business is the business of stealing — stealing value. It's what you want to do, buy something when it's cheap."
Sprott cited the example of Kirkland's involvement in Bonterra Resources Inc. which recently merged with Metanor Resources Inc., and Osisko Mining Inc., all of whom are in the same Urban-Barry area in Canada, where he said Osisko's geologic team believes there is "plenty of upside."
"Osisko came out with a whole new structure at a new level [in July] called the Triple 8 zone where the grades blew out and it really wasn't supposed to be there. So we're quite hopeful that it will in fact be a mining camp in Canada," Sprott said.
"We're always looking around for interesting things that in the future [will be successful]. We got deeply criticized for the Newmarket Gold Inc. transaction [in 2016]. I have more stab wounds in my back than you can imagine, but it worked out, and a lot of these things take time, so our purchase of Osisko and Bonterra I'm sure will work out [too]."