By Kevin Michael Grace
Confederation Minerals Ltd V.CFM announced September 19 assays from the Newman Todd Project in northwest Ontario. Newman Todd consists of 195 hectares located 150 kilometres north of Kenora in the Red Lake gold camp, whose historic production and current reserves total 25 million ounces.
2.22 g/t gold over 22 metres
(including 6.14 g/t gold over 1 metre)
2.04 g/t gold over 29 metres
(including 13.8 g/t gold over 1 metre)
2.07 g/t gold over 13 metres
2.03 g/t gold over 17 metres
(including 4.76 g/t gold over 1 metre)
2.52 g/t gold over 13 metres
(including 15 g/t gold over 1 metre)
2.88 g/t gold over 17 metres
(including 63.3 g/t gold over 0.5 metres)
43.5 g/t gold over 1 metre
1.25 g/t gold over 25.9 metres
(including 9.37 g/t gold over 0.9 metres)
Confederation is the operator and will earn 50% of the project from Redstar Gold(V.RGC) after spending $5 million on exploration and paying Redstar $250,000 and 500,000 shares. Confederation has met the exploration requirement and paid Redstar $100,000 and 200,000 shares. Confederation may increase its share of the project to 70% by issuing a preliminary economic assessment (PEA) by November 2016.
Confederation also owns the Confederation Lake zinc-copper-silver project in the Red Lake district and 56% of Magna Resources Ltd, which owns the Green River Potash Project in Utah.
Confederation President Brian Bapty spoke to Kevin Michael Grace September 21.
RW: Tell me about your latest results.
BB: We’re quite encouraged. The results we continue to get at this property are very strong. Every time we hit at least three grams a tonne somewhere in the hole; 85% of the time we hit at least five grams; and almost half the time we hit 20 grams or better. Now, you can’t stitch a bunch of little intercepts together and call it a mine. So what we’re trying to do is tighten up the spacing in and around the Hinge zone in the middle of the property and start defining oreshoots and geologic controls. And that’s evolving well.
RW: How much drilling have you done?
BB: About 5,300 metres this year. We’ve released maybe 3,600. We have three or four holes which haven’t been released, and we’ve got another 5,000 metres to drill. I think you’ll see us expand that program and continue through the winter.
RW: How far are you from a resource estimate?
BB: We get asked that a lot. At Red Lake these deposits tend to be very vertically oriented and quite deep, and they tend to be high-grade underground operations. Goldcorp’s (T.G) Red Lake Mine [622,000 ounces produced in 2011 at $360 per ounce] and Rubicon (T.RMX) [Phoenix Gold Project, 2.8 million ounces indicated and inferred] are examples. We have shallow drilling across 1.8 kilometres, and so we could pull together some sort of resource estimate now, but unfortunately it would speak to an open-pit opportunity. We can come up with ounces, but it doesn’t speak to the whole property. As we get to depth and start drilling this thing a little bit deeper, the general trend in these deposits is that the grades get better. I think if we can start showing ounces in a vertical slice of the property, and people know it’s consistent along the whole strike, we’ll start to at least get some credit for the lateral extension, if we derisk the central component.
RW: Are you doing as much drilling as you’d like?
BB: You never say yes on that because you can always drill more. What we’re doing right now is important in defining the geologic control features. Once we’ve got that done, it lets us target holes easier. As we’re drilling right now, it’s a very sequential, organized process. And because that process is evolving into a thesis that we’re quite comfortable with, I would like to accelerate our drilling.
RW: What are your cash situation and burn rate?
BB: We have around $6.5 million in cash today, and this program has about another $1 million to $1.2 million in spending associated with it. Our overhead burn is about $100,000 a month, so we have ample funds to double this program and continue.
RW: When I interviewed [Confederation CEO] Larry Dick 18 months I noted that an analyst had put a target price of $2 on your stock. Since then we’ve had a general collapse in juniors and the collapse of your own stock price. Do you think the bad times are over?
BB: I’m extremely excited about the state of my company. I’m a capital markets person primarily, and I know we had a very strong run in mining stocks that lasted almost a decade. When that happens you tend to get a lot of paper printed, a lot of juniors, a lot of expectations baked into the market. I think the culling process still has to continue. It’s a frustrating process, but to some extent I think it’s a healthy process. I like gold right now, and I like that some of the senior gold miners are starting to move. So maybe it is the turn of the equities now, and if the high gold price is starting to trickle through to junior valuation, I think we’re incredibly well positioned.
RW: What are your plans for 2013?
BB: Drill, drill and more drilling. We’ve got high hopes for this project. If you look at just the sheer size of our mineralized zone, it’s many times the footprint of anybody else up there, and that speaks to a massive opportunity. That’s why we’re here. As we continue to drill and start to add ounces and build a floor under this stock, I think the Street will wake up. So we’re trying to go out there and prove it geologically and then make our case to bring the blue sky to the Street. If we prove up Newman Todd, and I think we will, shareholders will be well rewarded.
At press time, Confederation had 55.1 million shares trading at $0.36 for a market cap of $19.9 million.