GMS: Lessons from Great Bear’s smashing $2B success at Dixie

One of the most exciting gold exploration stories in recent years has been Great Bear Resources and its Dixie gold project near Red Lake, Ont. The company was acquired by Kinross Gold (TSX: K; NYSE: KGC) in February — even before it had a chance to compile an initial resource for the high-grade, large-scale project. In September, Royal Gold (NASDAQ: RGLD) bought Great Bear Resources — a spinout of Great Bear whose only asset was a 2% net smelter return royalty on Dixie — for $200 million, bringing the total value of Great Bear’s assets to $2 billion. 

Great Bear Resources’ former president and CEO Chris Taylor joined The Northern Miner’s Q3 Global Mining Symposium on Sept. 29 to discuss the company’s success, and what other exploration companies can learn from it. Taylor was previously named The Northern Miner‘s 2021 Person of the Year.

Be prepared for personal sacrifice  

Great Bear’s story is a classic story of an exploration discovery, entailing years of hard work and personal sacrifice to get to the prize. Taylor, a structural and economic geologist, financed the project personally in the early days when investors were skeptical and it was difficult to raise money. He racked up $300,000 worth of personal debt on his line of credit, because he believed in the project. 

“If you have a story you really believe in, you have to be able to stick with your guns,” he said. For him and his family, that meant many years of “paying more into the company than you ever take out of it.” 

While the slumps in the industry are difficult, they are great times to pick up projects, he noted.  

“The Dixie acquisition, now the Great Bear project, was about a $200,000 total acquisition that ended up with a $2 billion total valuation only seven years later. This is the kind of thing that can happen in a bad market. So stick with it… (and) look for those opportunities.” 

On the other hand, Taylor advised that geologists should never fall in love with their projects, or they risk plowing too much time, money and effort into a project that will never work because of its location or other factors. 

Follow the data 

While Red Lake is a historic gold mining camp, Great Bear’s discovery was in an area that wasn’t thought to be prospective and in host rocks that weren’t supposed to carry gold. 

“In the Red Lake camp, you’re not going to be looking for a major gold system in the area that we were, and you weren’t going to be looking for it in the felsic rocks that we were finding all this gold in. So initially, there was a lot of skepticism in the market,” Taylor recalled.  

However, the project came with data generated by past operators that showed the geology had been previously misinterpreted.

It was Taylor’s partner in Great Bear, Bob Singh, who was the company’s VP exploration and chief geologist that first flagged the project’s potential. 

“Bob had been working in the Red Lake area and seen drill core from this project going back about 10 years ago now,” Taylor said, adding that not only was it prospective, but it was in an area with solid infrastructure and community support for mining. 

“This was one of those rare opportunities where we had a suite of over 150 drill holes, and Bob had identified the prospectivity on the system.” 

Being stuck in a certain way of thinking about a camp or region limited previous explorers from finding the big deposit, which eventually became clear to the Great Bear team as they sorted through the data. 

“One of the most interesting things about being a geologist is when you have a project that’s rich in data, you have the ability to go through and filter that data and evaluate it with fresh eyes. And what you’ll see if different generations of operators on a project will often have very different interpretations of the rocks,” he said. 

Taylor, who’s intensely interested in solving puzzles and in strategy games, likened the process to solving a puzzle — the aspect of mineral exploration that drew him into the field in the first place. 

“Geology, especially exploration geology, is one of these fields where if you can think creatively think outside the box. Mother nature has provided you these enormous puzzles that you can unravel, you always have incomplete information, you’re always using your science training and your intuition to try to figure out what may lie out of view in the ground,” he said.

“The mineral exploration business is really that science element and the puzzle solving, and then these incredibly complex variables of the market. So how are you going to tell a story? How are you going to raise the money that keeps people interested and compelled to keep investing with your company instead of somebody else, and you’re mixing together those factors with the puzzle solving aspect of figuring out what’s in the ground before you actually know, and then testing it. There aren’t very many careers like this on the planet.” 

With enough data to reevaluate the project, Great Bear was able to see beyond what it was supposed to find in the storied Red Lake camp.  

“What we found… is something that was completely new to that district.” 

Instead of discontinuous high-grade, vein-hosted gold mineralization typical of Red Lake, Great Bear found continuous sheet-like mineralization with high-grade gold occurring within a lower-grade mineralized halo. 

Drilling has shown continuity over 4.2 km of the 10.8-km LP Fault at the Great Bear project so far. While Kinross is getting ready to release a first resource for the project before the end of the year, Taylor said that he believes “it’s only going to be a representation of the near-surface portion of that mineralized system.” 

The 44-year old, who compared the project to the long-lived Hemlo gold mine added: “I don’t think you will know how much gold is in the ground there, even in the course of the rest of my lifetime. I’m very optimistic, when this thing gets into production, that it’ll have a multi decade life and there’ll be exploration going on for many, many years.”  

Don’t ignore retail shareholders 

“A lot of the time, money is hard to find, and you’ll kind of take it from whoever you can get it from,” Taylor acknowledged. “But if you can be more discriminating on who becomes a shareholder, you can have a very loyal shareholder base that follows your story with a great deal of interest.” 

While Taylor admitted that the attention he paid to retail shareholders — which included returning phone calls at all hours — wasn’t conducive to work-life balance, he said that it was well worth the effort. 

“Retail sets the price in the market a lot of the time,” he said. “Institutions are a bit more passive — I mean, if they’re going to buy, they’re going to buy, and if they’re going to sell they’re gonna sell. But it’s the retail guy who’s following your story and engaged in it, who will pick up a bit of stock here and there and keep that keep that price set in the market. So don’t neglect it,” he advised. 

“I understand that it’s more work… But at the same time, those relationships are going to build dividends over time. And there’s no way to shortcut that kind of process.” 

The impact has been that it wasn’t only institutional investors who made money from Great Bear’s discovery. About a half dozen individual shareholders made millions (up to $30 million) from their investment in Great Bear, he said. 

“We’ve had people with their Great Bear winnings established charities, we’ve had people put their kids through university, we’ve had people just have absolutely life changing outcomes from this — including our First Nations partners. I mean, these are going to be big projects that are going to have very positive impacts on those communities, too.” 

Build value over time  

Taylor put just as much time and effort into Great Bear’s communication strategy as the company put into its technical work. He took investor presentations to another level, infusing a clear story into PowerPoint presentations and bringing the story to life on webinars where he’d draw on the screen to illustrate his point, engaging investors in a way that most juniors do not.  

He also deliberately avoided getting the market too excited about drill results before the team knew what they meant. 

“One of the traps that companies fall into is… they’ll put out pictures of the drill core, they’ll show all the gold in it, and they’ll tell you to wait for assays,” Taylor said. “It’s like getting an audience that’s just looking for an adrenaline hit or a drug hit… it’s not the best way to build the company over time.” 

The best way, Taylor said, is to build a narrative over time, like writing a novel. 

Despite that, Taylor said he understands being tempted by the “Dark Side of the Force” to take the short cut and showcase the “great-looking gold intercepts,” especially when it’s hard to raise money. 

“I always had Bob Singh sitting there on my right shoulder, as that sort of angel, saying, ‘Don’t do it, Chris, don’t put up pictures of the gold before we get the assays,’” Taylor said. “Working with good people keeps you on the straight and narrow.”