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Critical Investor – “EGR Exploration: Looking For Another Giant At Detour West”

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Critical Investor – “EGR Exploration: Looking For Another Giant At Detour West”

 

 

 

 

  1. Introduction

 

As nearology plays are often characterized by flavor of the day metals and new, hot discoveries front and center, resulting in a staking frenzy around such a discovery, EGR Exploration (TSX-V:EGR) is a bit different. Its predecessor Gambier Gold already owned the substantial and highly prospective 39,218ha Detour West land package on trend and indeed west of the giant Detour Lake gold mine in Ontario, and lots of shareholders at the time weren’t particularly satisfied with the way things were going as exploration at Detour West was unstructured at best.

 

A following proxy fight in June last year resulted into a change in Board of Directors and management, a 3 to 1 roll back, a name change, a C$300k debt refinancing (C$100k cash and shares) and a C$952k private placement closed in December, taking a C$637k working capital deficiency into a C$212k surplus. To me this is a textbook model of a complete overhaul after a proxy fight, justifying a roll back completely as it is a new start. The current team has laid out a thorough exploration strategy, contrary to former exploration efforts, and I am looking forward to the unraveling of a potentially very, very substantial exploration puzzle.

 

All pictures are company material, unless stated otherwise.

 

All currencies are in US Dollars, unless stated otherwise.

 

Please note: the views, opinions, estimates, forecasts or predictions regarding EGR Exploration’s resource potential are those of the author alone and do not represent views, opinions, estimates, forecasts or predictions of EGR or EGR’s management. EGR Exploration has not in any way endorsed the views, opinions, estimates, forecasts or predictions provided by the author.

 

 

 

  1. Company

 

EGR Exploration is a mineral exploration company focused on exploration for gold in the Detour-Fenelon Gold Trend, approximately 300 kilometers north of Timmins, Ontario. As the name didn’t really ring a bell, I asked CEO Rodriguez what it means. He answered “Everywhere Good Results or Eager”, which I like as it is kind of funny. It’s flagship Detour West gold project is directly on strike with Agnico Eagle’s property which contains the Detour Lake Gold Mine and is located approximately 20 kilometers from the mine itself, which is hosted in the Abitibi Greenstone Belt just like EGR’s project.

 

The company is targeting gold deposits associated with the potential extensions of the Detour-Fenelon trend structures onto the Detour West property. EGR also holds the Urban Barry property in Quebec, which is also located onto the Abitibi Greenstone Belt, and directly adjoins Osisko Mining’s Windfall deposit (4Moz Au).

 

 

EGR Exploration is led by CEO Daniel Rodriguez. Daniel has a financial background, and entered the junior mining space as the former VP of Corporate Development at Warrior Gold in 2020, and has over 14 years of capital markets and financial service experience. Previously, he was a manager at CIBC, and advisor at RBC and Jordan Capital Markets, with a focus on the junior mining sector. He holds a BA from the University of Toronto.

 

He is assisted by CFO Mark T. Brown, who is a household name in the Vancouver mining scene, and is the President of Pacific Opportunity Capital, which is a financial consulting and merchant banking firm active in venture capital markets in North America. He made a name for himself as one of the founders of the very successful rare earth company Rare Element Resources, after tracking the rare earth sector for years in the nineties. Mark has over 25 years of executive management experience in the mining sector. His corporate activities include merger and acquisition transactions, financing, strategic corporate planning, and corporate development. Mark received a Bachelor of Commerce Degree from the University of British Columbia in 1990 and is a member of the Institute of Chartered Accountants of British Columbia. Mr. Brown was the controller of two operating gold mining companies (Miramar Mining, Eldorado Gold) with operations in northern Canada and South America. Currently, Mr. Brown is an officer and director of a number of public and private companies besides EGR, as he is for example CFO of Gold Terra Resource, Copper Fox Metals, Adamera Minerals and Fjordland Exploration, and Chairman of Avrupa Minerals and Alianza Minerals.

 

Daniel and Mark are assisted by an impressive group of geologists and prospectors, as there are Rafael Vaudrin, the senior project geologist of Skeena Resources, Dusty Nicol, with 45 years of experience and multiple gold and copper deposit discoveries under his belt, Bernie Kreft who runs a prospecting company and owns over 75 projects in Canada, Robert Cameron, a geologist with 40 years of experience and President and CEO of Commander Resources, and Brian Atkinson who also has over 40 years of experience as a geologist, primarily for the Ontario Geological Survey in Red Lake and Timmins.

 

This new team, which came in after the aforementioned proxy fight, is aiming at doing things differently on the exploration side of things, as expectations clearly ran up high during predecessor pre-drilling days, but an ill-timed and rushed drill strategy caused the share price to crash from C$1.08 to a low of just C$0.03 in October of last year, undoubtedly amplified by a bear market for juniors and some tax loss selling:

Share price 1 year timeframe (Source: tmxmoney.com)

 

Some basic information on share structure: EGR Exploration has a very tight 31.95M shares outstanding, and trades at a small average daily volume of 36,984 shares. There are 18.33M warrants outstanding (The bulk of the warrants (15.8M) are priced at C$0.12 expiring at Dec 14, 2025, 1.78M is priced at C$0.69 expiring on April 15, 2023). I asked CEO Rodriguez if he knows if most of these warrant holders are long term holders, so there is no real overhang for the first 2 years. He answered that they know their shareholders well and have strong supporters. The 2.78M options are priced at C$0.45 (expiring between June 1 2023 and Sept 17, 2025) only 2.2M options so the fully diluted number stands at a tight 53.06M at the moment. Management and BoD have lots of skin in the game as they hold 7.6%. Fruchtexpress is the largest shareholder with 16.95% and the main initiator of the proxy battle last year, and well-known Crescat Capital holds 5.2% of outstanding shares, and is a shareholder since 2021. The current cash position is about C$500k, which means EGR will be able to set up several field programs (sampling, mapping, geophysics) for Detour West, and management estimates a new raise being undertaken somewhere in Q2, 2023.

 

  1. Projects

 

The 100% owned flagship Detour West project is 40,255 ha (since today after a small acquisition, was 39,217ha before, a bit more on this later) in size, has a 2.5% NSR and located approximately 300 km northeast of Timmins and 185 km northeast of Cochrane by road in the northwestern part of the Abitibi Greenstone Belt within the southern part of the Superior Province in Ontario.

The Detour West Property is located approximately 20 km west of the open-pit Detour Lake Gold Mine acquired by Agnico Eagle Mines in February 2022 and directly adjoins the holdings of Agnico Eagle. The project is in fact the last, most western project in a string of gold projects/deposits/mines along the 160km long Detour-Fenelon trend. Gold mineralization at the giant Detour Lake Gold Mine, the largest gold mine in Canada, is characteristic of greenstone-hosted orogenic lode gold style deposits. The Detour Lake Gold Mine produced 712,824 ounces of gold in 2021 and has proven and probable mineral reserves of 20.4Moz (835.1 Mt at 0.76 g/t gold) as of July 2022.

 

*Update per February 27, 2023: EGR announced the acquisiton of the small claim set located in the centre of the existing land package, for the tiny sum of $2,450 in cash, and the company granted a 1.25% Net Smelter Return (NSR) with a buy back clause of 0.75% by making a payment of $250k to the Vendor at any time before the property reaches commercial production:

 

 

The Detour Lake area comprises thick sequences of mafic to ultramafic volcanic rocks in structural contact to the south with younger sediments. This contact is characterized by a deformation zone referred to as the Sunday Lake Deformation Zone (SLDZ). The structures of the SLDZ are spatially related to most of the gold mineralization observed in the Detour Lake area. Exploration work on the Detour West Property by previous operators appears to indicate that the property may contain previously underexplored and unrecognized extensions of the Sunday Lake, Massicotte and Lower Detour deformation zones that host the adjacent Detour Lake gold deposit, and this is where the big prize could be for EGR.

 

As can be seen, there are several fault structures present, and continuing onto the Detour West property. One might wonder why there has never been much work done more to the west. According to CEO Rodriguez this is because all land further to the west is a watershed where the First Nations don’t have much interest in exploration on their lands. Fortunately this is not the case for Detour West, where management is building strong relations with the Moosecree First Nations. Please note the back 1/3 of the property is currently off limits as well. There are targets of interest back there but they have ample property to work with.

 

The predecessor of EGR Exploration completed a rotasonic/reverse circulation drill program at Detour West in 2021, and reported the results on March 21, 2022. 48 holes were drilled, using a dense 125 to 150m grid spacing. Only 6 out of 230 samples identified gold grades above 1g/t Au, which was very disappointing. The drilling (see white rectangles) was conducted at a central part of the property:

 

 

*Update: it seems the newly acquired claims occupy important ground for EGR, as these are right in between the former drilling areas.

 

EGR Exploration has decided to follow the exploration approach which has been successful for the Detour Lake Mine. This approach had a number of subjects which EGR wants to apply, with a few tweaks here and there. A broader layout with hole spacing’s of 350m on fences spaced 750m apart would be sufficient to detect gold grain dispersion from a gold source of a potentially economic grade. A review of Detour Lake Mine’s 2018 NI43-101 report 1 indicated that a successful pre-drilling exploration approach especially south of the Lower Detour Deformation Zones (LDDZ) has been Induced Polarization (IP) surveys on 200 m line spacing and Mobile Metal Ions (MMI) geochemical survey to assist in ranking of the geophysical IP anomalies.

 

In 2010 and 2011 Detour Lake Mines collected 10,000 MMI samples at 50 m spacing on lines 400 m apart along 30 km of the LDDZ. Between 2011 and 2017 the miner completed 838.4 line km on mainly 200 m line spacing principally along the LDDZ with detail 100 m line spacing around the Zone 58N gold deposit. EGR acknowledges this strategy, and plans on potentially using MMI on a small target area. I wondered what the mistakes of former management were, as they also had the Detour Lake exploration strategy as follow up plan in mind. According to CEO Rodriguez, previous management went up north too late in the season and were caught in mud and had difficulty accessing the main targets. Drilling was done in locations off the eskers that had easier access. They had the write idea but the execution was poor.

 

The current exploration plan for Detour West consists of flying a high resolution airborne survey and interpretation and drill targeting in Q2, 2023. This will be followed up by investigating outcroppings from Lidar data in the summer, and by drill permitting in Q3 2023. After this site preparation will be done, and the highly anticipated drilling is planned to commence at the end of Q4 2023.

 

 

With a bit more detail, the company is looking to do a program along an 8 km stretch of the western interpreted extension of the Saturday Lake Deformation Zone (SLDZ) starting approximately 1 km to the southeast of the A series RS drill holes. There are 10 airborne anomalies and 3 elevated conductivity zones present along this stretch of the interpreted SLDZ. The initial phase would be MMI sampling along the 8 km length on 400 metres spaced lines to be followed by IP survey over initially the highest MMI anomalies to define drill targets. The drilling will be done by a combination RC-diamond core drill allowing for both till and rock core sampling.

 

This rounds up Detour West for now. The second EGR project is the 100% owned 10,762ha Urban Barry property, located in the James Bay region of Quebec in the Abitibi  Greenstone Belt, which is host to the nearby Windfall gold  deposit that holds nearly 4Moz Au (Indicated and Inferred resources).  The  Langlois  base  metal-silver-gold  mine  is located  approximately 30 km to the northwest.

 

 

 

 

 

From  November  2019  to  March 2020, the predecessor of EGR Exploration flew an airborne drone magnetic geophysical survey over the property, and elected not to pursue more exploration work on the property, and write it off. Results from this survey confirmed the presence  of the northwest extension of rock units and fault structures hosting the nearby Windfall gold deposit, giving EGR the incentive not to give up on Urban Barry just yet. EGR is currently reviewing all historical data on its Urban Barry property and is in the process  of planning future field programs or options with the property.

 

  1. Conclusion

 

After a very busy H2 last year, new management seems to have overturned the company completely, and clearly for the better. As the potential prize at flagship project Detour West could be colossal, but not easy to find, the geologists designed a very thorough exploration strategy in multiple stages, going from an airborne survey to drill targeting to investigating outcroppings from Lidar data, to drill permitting and site preparation, all this resulting in the commencing of drilling at the end of Q4 of this year. Today’s acquisition of the remaining claims in the center of the land package provide a useful consolidation considering nearby targets. EGR Exploration will be raising more cash in the upcoming quarter. I am very curious what they could find at Detour West, one of the most high profile nearology plays I know, as it is on trend and adjacent to the giant Detour Gold mine. Stay tuned!

 

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter at www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.

 

Disclaimer:

 

The author is not a registered investment advisor, and currently has a position in this stock. EGR Exploration is a sponsoring company. All facts are to be checked by the reader. For more information go to www.egrexploration.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

 

 

 

 

Posted February 28, 2023

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