A junior miner’s probability for value creation, like any equity asset class, should be evaluated based on a set of fundamentals that have been shown to maximize this probability, and with it, the potential for attractive returns.
In the case of a junior miner, these fundamentals include:
- Target commodities, ideally with large, established markets and documented long-term growth prospects.
- Asset quality, where results do all the talking in terms of delineating a pathway to production and resource expansion.
- A leadership team that has proven itself in similar arenas before.
- Valuation, ideally with the stock misrepresenting the junior miner’s track record, offering investors a bargain entry point.
- An idiosyncratic catalyst that differentiates the junior miner in the marketplace.
A stock that fits this profile with value-accretive precision is Lahontan Gold (TSXV:LG), market capitalization C$10.31 million, a Nevada-based junior gold and silver miner actively developing a portfolio with multi-million-ounce potential in one of the world’s top mining jurisdictions, while its stock sits at a more than 85 per cent loss since inception in 2022.
The Santa Fe project
Lahontan’s flagship 100-per-cent-owned Santa Fe project spans a 26-square-kilometre, district-scale land package in Nevada’s Walker Lane, where a collection of green flags grows in support of open-pit gold and silver mining. These include:
- Five known deposits Lahontan has shown to be hosted by the same rock types and open along strike and at depth, each supported by northwestern and easterly faults favourable for gold and silver.
- Gold‘s more than 80 per cent ascent since 2019 to an all-time-high in excess of US$2,700 per ounce on the back of strong central-bank buying, industrial and retail demand in the face of lingering inflation, and the metal’s millennia of history as a safe haven for value preservation.
- Silver‘s more than 90 per cent climb, rising from approximately US$17.50 per ounce in 2019 to more than US$33 presently, primarily driven by a global deficit and its essential role as an electrical conductor for cells in the booming solar power market.
- Historic production of 345,499 ounces of gold and 710,629 ounces of silver at an average grade of 1.1 grams per ton (g/t) of gold equivalent between 1988 and 1995, enabling fast-tracked production.
- Year-round access and high-quality infrastructure with a substation on site and access to three water wells.
- A 2021 drill program spanning 9,410 metres that discovered and expanded high-grade gold and silver zones, as well as good-grade and shallow mineralization at the Santa Fe pit and Slab target areas. Highlights include 188.9 m grading 1.75 g/t gold and 9.9 g/t silver, and 138.6 m grading 1.01 g/t gold and 3.4 g/t silver.
- A 2022 drill program exploring the Slab-Calvada pit area, with down-dip extensions of oxidized gold and silver mineralization east and northeast of the Slab pit yielding highlights of 25.9 m grading 2.55 g/t gold and 3.4 g/t silver, as well as 32 m grading 0.59 g/t gold and 4.4 g/t silver.
The junior gold and silver miner consolidated this picture into a maiden 2023 mineral resource estimate for the Sante Fe project, substantiating a pit-constrained 1.11 million gold equivalent ounces indicated and 0.55 million ounces inferred at an average grade of 1.12 g/t gold equivalent.
Supported by over 1,200 drill holes spanning more than 125,000 m, the estimate delineates a readily exploitable resource amenable to rapid mine development and low-cost production. That said, management hasn’t rested on its laurels when it comes to continuing to drill and optimize Santa Fe’s exploration upside.
2024 drilling
Lahontan’s 2024 drilling program consists of a planned 15 holes spanning 3,000 m in the Slab-Calvada and Santa Fe pit areas. The junior gold and silver miner will follow up 2023’s successful campaign, having identified multiple attractive targets to potentially expand mineral resources, before completing a preliminary economic assessment (PEA) for Santa Fe later this year.
Phase one of the 2024 drilling campaign yielded highlights of 41.2 m grading 0.88 g/t gold and 2.1 g/t silver, as well as 16.8 m grading 0.48 g/t gold and 2.1 g/t silver, both announced in July, successfully expanding high-grade mineralization at depth while improving drill hole density at Slab-Calvada. Lahontan backed up these results with additional high grades in August, including 48.8 m grading 0.44 g/t gold and 7.4 g/t silver, and 7.6 m grading 2.06 g/t gold and 18.2 g/t silver, expanding gold and silver mineralization by hundreds of metres at the Slab open pit.
Lahontan has since integrated phase-one assays, those pending from phase two, as well as 2023 drill data, into an updated 2024 mineral resource estimate of 1.539 million ounces of gold equivalent indicated and 411,000 ounces inferred to inform Santa Fe’s upcoming PEA.
With environmental data collection nearing the end of its final phase, the PEA marks a productive history since Lahontan was founded in 2020, with the junior gold and silver miner having completed 79 drill holes across 19,152 m on Santa Fe to date. This work has been interspersed with strategic satellite acquisitions, also in the Walker Lane, with results-driven upside that enhances the miner’s potential for shareholder value creation.
The West Santa Fe project
The 19-square-kilometre West Santa Fe project, which shares a geological setting with the Santa Fe project only 13 km away, boasts a robust historical database – 171 drill holes over 13,000 m – outlining a shallow oxide gold-silver deposit up to 1 million ounces starting at surface with the potential for low-cost, open-pit mining.
The project is under a seven-year, 100 per cent option agreement (slide 22) featuring only C$1.4 million in exploration commitments and back-end-loaded cash or share payments, granting Lahontan flexibility to properly investigate the land package. The junior gold and silver miner’s milestones on West Santa Fe to date include:
- High-grade rock chip samples announced in February 2024 up to 2.61 g/t gold and 899 g/t silver (14.60 g/t gold equivalent).
- An almost 1,000-m eastern extension of gold and silver mineralization from historic drilling announced in July 2024.
Lahontan is progressing towards a planned 3,000-m drilling program, having completed conceptual pit shells based on historic drilling, with further mapping and sampling to follow.
The Moho and Redlich projects
Lahontan rounds off its satellite portfolio with two 100-per-cent-owned Nevada-based assets whose exploration histories suggest they’ll have promising long-term futures:
- The 11-square-kilometre Moho project features an open multi-vein system with a strike length in excess of 2,500 m and historic grades up to 25 g/t gold and 300 g/t silver indicative of million-ounce potential.
- The 6.4-square-kilometre Redlich project‘s value proposition is vouched for by a 16.5- million-ounce historical silver resource and thick zones of disseminated gold and silver that Lahontan discovered during 2018 drilling. The zones averaged 17 g/t silver equivalent with a strike length of more than 2,000 m. Drill-ready, permitted and on strike with the more than 45-million-ounce Candelaria open-pit silver mine, management sees strong reasons to pursue a major discovery.
Lahontan’s demonstrated ability to uncover attractive grades across its portfolio, potentially re-start production at Santa Fe and increase market awareness is guided by a leadership team synonymous with successful shareholder outcomes.
A leadership team with a track record to trust
With insider ownership of approximately 7 per cent, the executives at the helm of Lahontan Gold are aligned with shareholders in the pursuit of value, and they bring the multi-decade industry pedigrees required to find it. Let’s meet them now:
Management
- Kimberly Ann, founder, president and chief executive officer (CEO), has founded multiple junior mining companies where she served as CEO, president, chief financial officer (CFO) and board member. She currently serves as managing partner of KA Gold, a private company with a portfolio of advanced gold-silver exploration projects in Nevada, including a 6 per cent stake in Lahontan. Ann has raised more than C$210 million in project financing and collaborated on three junior mining M&A projects over the past 12 years. Her previous roles include:
- Her previous roles include head of corporate communications at Prodigy Gold, where she collaborated on the company’s C$340 million buyout by Argonaut Gold in 2012.
- CFO and vice president of corporate development at PPX Mining (TSXV:PPX), bringing the high-grade Callanquitas gold-silver underground mine into production in northern Peru.
- Founder of Latin America Resource Group (LARG) in 2017, building Jasperoide from two small concessions into a 57-square-kilometre strategic project in Peru’s most prolific copper-gold mineralized belt. LARG merged with Carube Copper in 2020 to create C3 Metals (TSXV:CCCM).
- Ann’s newest role, that of chairman, comes after Victoria Gold – Lahontan’s largest shareholder at approximately 24 per cent – experienced a cyanide solution spill in the Yukon and went into bankruptcy. The incident led to John McConnell, Victoria Gold’s CEO, relinquishing his role as Lahontan’s chairman, and Victoria Gold’s share block being put into receivership under the management of PricewaterhouseCoopers (PwC). PwC’s business valuation skills, proven across 151 countries and 87 per cent of the Global Fortune 500, and the requirement of court approval to sell the shares, make it likely that shareholder interests will be kept front and centre.
- Brian Maher, vice president of exploration, is an economic geologist with 45 years of experience in international mining and exploration. He previously served as president, CEO and director of Prodigy Gold, where he oversaw expansive growth, exploring and developing the 6.6-million-ounce Magino gold deposit in Ontario that led to the Argonaut Gold acquisition. In 1982, Maher began a 16-year tenure at ASARCO exploring for gold and copper in diverse geologies across North and South America. From 1998 and 2004, he was project manager for Metallic Ventures Gold, guiding underground and surface exploration, mine development and operations at an underground gold mine in Nevada. In 2005, Maher joined Hochschild Mining (LSE:HOC) as exploration manager for the United States, Canada and Mexico. From 2013 to 2022, Maher was president and CEO of PPX Mining, leading development and operations at the Callanquitas mine. Maher is also a managing partner of KA Gold.
- John McNeice, CFO, is a Chartered Professional Accountant with more than 30 years of experience in public company reporting, M&A, financial management, accounting and auditing. He is also CFO of Gold79 Mines (TSXV:AUU), C3 Metals and Northern Graphite (TSXV:NGC), having held the role in seven public resource companies over the past 17 years. From 2004 to 2007, McNeice was CFO of Ur-Energy (TSX:URE), a uranium explorer and developer that has since entered production in the United States, playing a key role in the company’s initial public offering on the TSX and helping to raise more than C$150 million during his tenure. From 1990 to 2003, McNeice worked as an accountant at PricewaterhouseCoopers focused on auditing and regulatory reporting for publicly listed Canadian and U.S. companies.
Board
- Josh Serfass, director, is the executive vice president of corporate development and investor relations at Integra Resources (TSXV:ITR). He previously served as manager of corporate communications at Integra Gold, playing a key role in developing and selling the past-producing Lamaque mine in Val-d’Or, Quebec, to Eldorado Gold (TSX:ELD) for C$590 million in 2017. Before that, Serfass was a marketing manager at Citibank and a supply chain and operations analyst at Liz Claiborne and L. Knife and Sons.
- Bob McKnight, director, is the CFO and executive vice president of corporate development at NevGold (TSXV:NAU), where he applies his more than 40 years as a geological engineer and mining executive in copper, gold, base metals, coal and potash. McKnight has been directly involved in more than $1.5 billion in project debt, equity, stream financings and M&A transactions. His previous roles include:
- Executive vice president and CFO at Nevada Copper (OTCPK:NEVDQ), where he arranged more than $500 million in debt, equity and metal stream financings to develop the Pumpkin Hollow copper mine.
- Vice president and CFO of Expatriate Resources, which spun out Stratagold, Yukon Zinc and Selwyn Resources, the latter two acquired by Chinese entities. In 2004, Stratagold picked up what is now Victoria Gold’s multi-billion-dollar Eagle deposit from a subsidiary of Vedanta for C$6 million cash and 5 million Stratagold shares.
- Chris Donaldson, director, has built a 25-year track record of raising funds for public and private companies. He occupies the roles of CEO and director at Outback Goldfields (TSXV:OZ) and Vizsla Copper (TSXV:VCU), as well as director at Hopefield Ventures (TSXV:HVII). From 2013 to 2020, Donaldson held the dual role of director of corporate development with Western Copper and Gold (TSX:WRN) and director of corporate development and community with the Casino Mining Corporation.
Equipped with target commodities with reliable, long-term demand, a wealth of strong leads to expand mineralization, and a leadership team well-versed in developing mineral projects into deal-ready status, Lahontan Gold is locked and loaded to deliver on its considerable exploration upside.
A rare and robust deviation between stock price and intrinsic value
While the stock market will always reflect value over the long term, it will lose its head over shorter periods, unjustly punishing stocks whose underlying companies have done right by shareholders, creating opportunities for eagle-eyed allocators to reap outsized returns.
Lahontan Gold shareholders find themselves in this privileged position, primed to double-down and increase their exposure at a moment of peak pessimism, hanging their conviction on the picture of a model explorer with high-grade, untapped assets we have painted here.
With the sale of Victoria Gold’s share block likely to serve as a catalyst for market volume and increased investor awareness, as will the Santa Fe project’s upcoming PEA, an investment in Lahontan today grants you blue-sky exploration, development and production potential, fortified by:
- C$2 million in cash and no debt as of September 2024.
- 53 per cent institutional ownership.
- A low valuation compared with peers of only C$6.80 in market capitalization per ounce of gold equivalent, according to the junior miner’s latest investor presentation.
As gold and silver continue to soar, Lahontan’s path to a share-price re-rating is as sound as it gets, making it a stock well worth holding through the mining lifecycle.
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(Top photo: Lahontan Gold)
