Tracker - April 23, 2020: Eagle Plains to relaunch an old Cominco Sullivan Two Hunt
Eagle Plains Resources Ltd has had a Bottom-Fish Spec Value Rating since December 31, 2018 and is a KRO 2020 Favorite because this junior is the best practitioner of the prospect-generator-farmout model focused on British Columbia and Saskatchewan. Headed by CEO Tim Termuende and exploration VP Chuck Downie, Eagle Plains has operated without a rollback since 1995, still has only 106 million shares fully diluted, a portfolio with a couple dozen projects farmed out or available for farmout plus a dozen royalties, and has working capital of about $3.5 million (not including the value of shareholdings in other companies) which it keeps stable by offsetting overhead with income from its TerraLogic exploration service business and share or cash payments from farmouts. Eagle Plains is based in Cranbrook where it owns the office building its team occupies 75% with the rest rented to professionals. The junior is a data-miner which monitors the claim holdings in BC and Saskatchewan which, unlike the Yukon and NWT, have a map staking system in place. Under the Canadian claim system claims are cheap to "stake" but come with spending requirements for which assessment reports must be filed that become open to the public after a certain period. The claim expiry is based on how much was spent. Eagle Plains targets claims where enough work was done to establish a mineralized system that fell short of the development threshold. While such claims have a long life, eventually they do come to an end and are often allowed to lapse. Some prospects with ounces or pounds in the ground are simply optionality plays but others lend themselves to a geological rethink. Eagle Plains will digitize historical work and revisit the prospect with a fresh set of geological eyes and the question: is what the previous operators found all that there is to get? The junior will conduct basic work, often involving new geophysical surveys whose technology allows more to be seen in the third dimension than older surveys. It then shops the dressed up play around for farmout to other juniors or majors, sometimes retaining a temporarily carried working interest, sometimes just a royalty with hefty staged stock and/or cash payments. Where the farmed out project is substantial as was the case with Copper Canyon Resources Ltd Eagle Plains will do a spinout and retain a 19.9% or lower equity stake so that it is easy for the project majority owner to take out the minority stake. The latest such spinout is Taiga Gold Corp of which EPL still owns 12 million shares. Taiga owns the Fisher project farmed out to SSR Mining Inc which can earn 80%, plus several other Saskatchewan prospects of which Leland, surrounded by SSR, is the most interesting. Fisher covers the 20+ km extension of the shear structure that hosts the Santoy Mine now owned by SSR. Since 2016 SSR has drilled 48 holes representing 21,000 m, with another 12,000 m program started in early 2020. SSR CEO Paul Benson in a March 10 Webinar declared that SSR will be exploring the Fisher property for the next 4-5 years, implying that it is just a matter of time and money before a discovery is made that can feed the Seabee-Santoy mill. Eventually SSR will make a takeover bid for Taiga Gold; the question is what price will it have to pay that boosts Eagle Plains' treasury by what amount. The value chart below tracks the monthly total value of the stock that has been spun out stacked on top of the current EPL stock price.
During 2020 Eagle Plains will self-fund a $200,000 hole to test a Sullivan Two type and scale geophysical target on its 100% owned Vulcan project which it has been assembling since 2002. Vulcan has had intermittent exploration since the eighties but most of the historic work has been based on an interpretation of the Sullivan Time Horizon, the transition between the Lower to Middle Aldridge formation, which Eagle Plains management now believes is located several hundred metres west of the previously presumed location. Eagle Plains hopes to start drilling a 700 m hole in June to test a MagnetoTelluric and IP resistivity low anomaly that emerged at a depth of 300-700 m from a single line dual purpose survey conducted in 2019. This survey also revealed a bigger target at a 1,000 m depth which Eagle Plains will leave alone. At a minimum this hole will yield important geological information about management's rethink about the stratigraphy at Vulcan; at best it will intersect massive sulphide zinc-lead-silver mineralization associated with an anomaly that has a 50-100 million tonne footprint which could turn into the hundred bagger discovery resource sector speculators dream about. In the wake of the covid-19 lockdown crisis base metal prices will be weak, but not in the longer run once this pandemic is behind us. The economic fallout mitigation response is laying the foundation for a gold bull market which will drag efficient and effective prospect generators like Eagle Plains out of bottom-fish slumberland. The upcoming Vulcan drill program, which is permitted, is a good reason to own Eagle Plains now, as is the possibility that SSR finally hit a discovery zone on Taiga Gold's Fisher JV with its recently completed drill program. Nominally Eagle Plains' stock price has been in a decade long bear market, but the timing is right for a new value creation cycle.
The Vulcan project first attracted Tim Termuende's attention in 1991 when he was hired by Ascot Resources Ltd to exploit the mountain goat skills he developed working for Ron Netolitzky in the Golden Triangle. Ascot had optioned from Cominco the mountainous northern Hilo part of the Vulcan property located 35 km west of the Sullivan deposit (160 million tonnes of 12% Zn+Pb and 67 g/t Ag) where stratabound zinc-lead mineralization was first found during the fifties. The 20 km north-south Vulcan property covers Purcell Basin sediments that dip about 60 degrees to the northwest with the stratigraphic sequence known as the Lower to Middle Aldridge Formation - the Sullivan Time Horizon - exposed at surface and striking the length of the Vulcan property. Cominco explored the area during the seventies and eighties without making a discovery; Ascot's drilling also failed to make a discovery. In 2002 in the wake of the Teck-Cominco merger the northern claims were allowed to lapse, possibly by accident, and Eagle Plains, which had become the flagship for Tim and his father Bob, snagged them the instant they became available. Eagle Plains conducted some geophysical surveys in the Hilo area but mainly monitored the southern portion down in the Dewar Creek area until it came open in 2015.
Cominco had conducted several geophysical surveys during the early eighties in the Dewar Creek area from which the Lower Middle Aldridge contact was inferred and which led to a 4 hole program in 1984 and 1 hole in 1985 that intersected fracture-vein controlled zinc-lead mineralization but not the bedded kind associated with a sea-floor smoker system that builds a Sedex deposit like Sullivan. A UTEM survey in 1985 revealed a multi-kilometre conductor whose depth was unclear. No further work was in this area until 2010 when Kootenay Silver Inc conducted a soil survey that established a north-south zinc-lead anomaly whose axis was 200-600 m west of the Cominco interpreted "LMC". Eagle Plains confirmed the soil geochemistry and came to the conclusion that the Cominco interpreted LMC may have been placed several hundred metres east of the actual location. Since the transition between Lower and Middle Formation sediments is not a sharp demarcation, such a confusion arising mainly from interpreting geophysical data is possible. Given the northwest dip of the stratigraphy that might explain why the 1984 holes did not yield a discovery; if the new interpretation of the LMC's trace is correct, the Cominco holes would have overshot the Sullivan Time Horizon and only tested younger Middle Aldridge rocks. Could it be possible that the southern part of the Vulcan property is essentially untested for an accessible Sullivan Two discovery? The Dewar Creek area is flat compared to the Hilo area with a road going past the soil anomaly, so with an assessment work deadline coming up Eagle Plains contracted Sid Visser to conduct a $30,000 single line magneto-telluric survey. Because of the convenient location next to the road he also collected IP survey data.
An IP survey reveals a chargeability high where disseminated sulphides are present, which is not going to be what you want when looking for massive sulphides. But it also reveals resistivity lows which indicate conductivity. The two IP sections above show a resisivity low emerging below the near surface chargeability high. The IP resistivity low coincided with a resistivity low revealed by the MT survey, which, because it can see deeper than an IP survey, also revealed a second much larger resistivity low at a depth of 1,000-1,200 metres. This was a big surprise for Eagle Plains because it offered strong support for its hypothesis that the LMC was farther west than had been assumed for the old Cominco drill program, reinforcing the implications of the soil survey. Given the perversity of exploration strategy where the best laid plans typically deliver nothing but some cheapo program in a convenient location to meet a deadline does deliver the goods, this outcome qualifies as the sort of serendipity event that almost seems a precondition for a big discovery.
Tim Termuende decided that this would be an "Andre Gaumond moment" where he violates the rule of always farming out drilling to some other sucker. So Eagle Plains will retain 100% for now and spend the $200,000 cost to drill a 700 m angled hole from the west side of the new LMC (the yellow line in the diagram below) which would cross through the conductors and test the shallow MT anomaly at a depth of 300-700 metres. The footprint of this target is not quite Sullivan scale - maybe 50-100 million tonnes - but that is still a potential $1 billion prize if it grades 10% plus zinc-lead with a couple ounces silver. Furthermore, the deeper MT target certainly has a footprint with Sullivan scale. In the composite graphic assembled below I have tried to make it easy for Spec Value Hunters to understand this drill play (the middle blue arrow points to the approximate location of the proposed hole to be drilled in a southeast direction along the red line). Eagle Plains hopes to start this hole in early June. At the very least it will deliver a detailed geological section of the stratigraphy and make or break the hypothesis about the new location for the Sullivan Time Horizon. Or for the first time ever a Sullivan Two Hunt delivers with the first shot. If you are feeling unlucky, can you afford to make it worse by not owning a stock that will double anyways over the next few months as a resource junior bull market gets underway?
*JK owns shares in Eagle Plains Resources Ltd