Playfair Mining is high risk, potentially high reward

It’s usually a pretty good sign when a rival for land you stake runs out and buys stock in your company. 

That’s what happened when Playfair Mining‘s (PLY-V) vice-president of exploration, Neil Briggs, staked the Seal Lake basin in central Labrador, a 100-sq.-km copper-silver target that the junior believes holds tremendous potential.

“The land came open for staking at about 9 a.m. Newfoundland time, which is 4:30 in the morning Vancouver time, so myself and another geologist got up and staked it all online at 4:30 a.m.,” Briggs recalls.

“We got it all done in, oh, about seven minutes. When the market opened later in the morning someone bought 1 million shares of Playfair. We’re assuming it’s the same   geologist that told us a few weeks later that we had beaten him to it.”

Don Moore, the junior’s Vancouver-based chairman and chief executive, says Briggs is excited about Seal Lake because of its similarities with the White Pine copper-silver deposit in Michigan.

White Pine is a Kupferschiefer deposit, shale-hosted, stratabound sulphide deposits that in many parts of the world have been mined for silver and copper since medieval times. In German, kupfer means copper and schiefer means shale.

Historic Kupferschiefer deposits are found across north-central Europe and in Germany and Poland in particular. They have also been discovered in Zambia and Botswana. The stratiform deposits closely resemble sedimentary rocks.

At Seal Lake in central Labrador, the shale has been weathered down, exposing quartzite. And while previous work was done there by several different companies in the 1950s and 1970s, very little drilling has actually taken place.

“It’s been half a century since a hole has been plugged into it,” Moore says. “I find it hard to believe that nobody has stuck a hole into this thing in all of these years but now we’ll find out. At the end of the program, we’ll know whether it’s a truly viable Kupferschiefer district.”

The district was discovered in 1952 by a company called Frobisher, which eventually became Falconbridge Nickel.

In 1956, Frobisher made a deal with a subsidiary of Kennecott, Kenneco, which drilled about 26 holes or 2,300 metres at Seal Lake. 

In 1972, Brinex drilled 15 holes or 1,200 metres. “It was a very isolated area and they were looking for high-grade ratings – they wanted 2% copper and numbers like that and maybe 2 oz. silver, whereas we’re happy to look at 1-1.5% copper to 1-1.5 oz. silver,” Briggs says. “They could never put tonnage together to make sense for them. Now it’s so much less isolated and the prices for copper and silver are much higher, that it means you can look for something that is a little lower grade and bigger, which is what we’re doing.” 

Noranda staked the ground in the 1990s and spent a bunch of money doing airborne and ground work, and re-sampling the old trenches, but never drilled a hole.  

In 2000 Silver Spruce Resources (SSE-V) completed more airborne geophysics looking for uranium at the bottom of the basin but didn’t really find any and let the property go.

In total about $5.5 million (in 2010 dollars) has been spent on exploration since the 1950s and Playfair has access to all of the data and even to the core stored in Happy Valley, Goose Bay.

Playfair plans to start drilling at Seal Lake before the end of January and test the basin-wide continuity of known mineralization in two areas of the property that are about 25 km apart. The 4,000-metre drill program is expected to cost between $1.4 million and $1.5 million.

“We’re doing something no one else has done, we’re going through the centre of the property and drilling through the rocks to see what’s down there,” Briggs explains. “Other companies have been there and looked at the rocks and shared the same geological opinion but haven’t done what we’re about to do. If we hit on that stuff it will be a big deal.”

The drilling will start at Adeline Island near the western end of the property and proceed eastward about 10 km. The camp will then move 25 km further to the east. 

The Seal Lake property is a canoe-shaped basin. The most promising target on the west end of the property is Adeline Island. Some 6 km to the east of Adeline is the Ellis target. On the far eastern end of the property, 30.5 km from Adeline, is the Whisky target.   

Briggs says they should get an idea of what they’ve got fairly early in the drilling process.

“We’ll know some things right away by looking at the rocks because the bulk of the rocks in the area that we’re interested in are red shales. Within the red shales are some dark grey-green shales and that’s where the mineralization is, so we’ll at least know whether we’ve got the right type of rocks. We’ll have the first set of numbers in mid- to late February.

Highlights from historic work on the property include intersects of 6.4 metres of 2.5% copper at Adeline Island and 11.3 metres of 1% copper and 30.4 grams silver per tonne, including 4.9 metres of 2.5% copper and 93 grams silver, at Ellis. Whiskey Lake returned an intercept of 11 metres of 2.9% copper and 45.9 grams silver.

Moore says that “if this is real” the horizons “should be pervasive through the whole basin and it will be a variety of thicknesses and grades.” 

Playfair is convinced that Seal Lake has some of the same characteristics of other world-class Kupferschiefer deposits like White Pine and Hana Mining‘s (HMG-V) Ghanzi project in Botswana.

“Where Hana is exploring is on the flanks of an anticline,” Briggs explains. “Ghanzi is folded into synclines and anticlines. At Seal Lake, we’re going out into the middle of a syncline and drilling through overlying rocks.”

Moore believes Playfair has a good shot at success. “A year and a half ago, Hana Mining’s market capitalization was like ours at about $29 million,” Moore says. “Today it’s closer to about $379 million.”  

In a recent note, U.S.-based newsletter writer John Kaiser added Playfair to his list of new bottom-fish recommendations.  

“Copper and silver are hot these days, and this will have to be an underground mining system, but the outcrop grades are high and the overall footprint very large,” he writes. “Seal Lake could turn into a huge discovery play and right now the implied project value is only $25 million.

“Although the market may have to eat 25 million flow-through shares done at 10¢ when they come free trading in March-April,” Kaiser continues, “Don Moore refused to attach any warrants, which means that… might not give bottom-fishers a new chance to buy super cheap.”

Moore says he feels very strongly that juniors should not hold warrants. “It makes it easy for brokers when there are warrants involved but it’s looting companies unnecessarily because if a financing is successful the stock will move higher,” he explains. “It results in excessive dilution, a unit-holder psychology as opposed to a shareholder psychology, and tempers any potential rise you may get out of the stock. It severely curtails the leverage in these little companies.”

Kaiser also notes that before the financial crisis hit, Moore “had Playfair cranked up over a buck” based on the company’s portfolio of tungsten deposits.

“Bottom-fishers don’t like the downside risk of a naked exploration play, which is why Playfair’s tungsten assets are so helpful as an insurance policy,” he says.

Playfair owns 100% of the Risby tungsten deposit in the Yukon, 55 km west of Ross River. The deposit is open on strike and downdip and has a National Instrument 43-101 inferred resource of 8.5 million tonnes grading 0.457% tungsten oxide for about 89.4 million lbs. It also holds two other properties in the Yukon called Clea and Lened, both of which have historic resources.

In Newfoundland Playfair holds 100% of the Grey River tungsten deposit, adja
cent to the fishing village of Grey River on Atlantic tide water. That deposit is also open on strike and downdip and has a NI 43-101 inferred resource of 852,000 tonnes of 0.86% tungsten oxide for about 16.2 million lbs. tungsten.

Playfair also holds some rare earth element properties in the Leticia Lake area of Labrador, some of which it has optioned to Rare Earth Elements (RA-V).

At presstime in Toronto, Playfair was trading at 26¢ per share. Over the last 52 weeks, it has traded between a low of 6¢ and a high of 32¢ per share.