Snowline Gold soars by enticing investors with near-record Yukon drill results on Rogue project

Dawson City, Yukon — Shares in Yukon-focused Snowline Gold (TSXV: SGD; US-OTC: SNWGF) have rocketed 90% year-to-date with analysts saying another discovery this month at its Rogue project makes it a pumped-up version of Kinross Gold’s (TSX: K; NYSE: KGC) Fort Knox mine in Alaska.

Snowline reported a new high-grade zone of more than 2 grams gold per tonne at depth in its Valley target on Aug. 3 along with its strongest gold intersections so far that it said rank among the Yukon’s best ever. It’s the latest in a series of drill results that have driven investor interest past the $19 million investment by B2Gold (TSX: BTO) in March despite the project’s remote location about 200 km beyond developed roads and the lack of a resource estimate.

“Valley is Fort Knox on steroids,” Michael Gray, a mining analyst at Agentis Capital, said in a note after Snowline reported 2.48 grams gold per tonne over 553.8 metres from surface including 5 grams over 132 metres from 6 metres downhole. “We consider it a breakthrough to see more than 2 grams gold per tonne mineralization over a broad interval to more than 450 metres vertical depth.”

Snowline is the standard-bearer of a surging exploration scene in the Yukon along the Tombstone gold belt. It arcs north from British Columbia then sweeps west from the Northwest Territories into Alaska, where Fort Knox has produced more than 9 million oz. over 27 years. Along the way is the Yukon’s only operating hard rock gold mine, run by Victoria Gold (TSX: VGCX), plus juniors Banyan Gold (TSXV: BYN; US-OTC: BYAGF), Sitka Gold (CSE: SIG) and St. James Gold (TSXV: LORD) with early-stage projects.

Shares in Snowline Gold rose nearly 5% on Wednesday afternoon to a record $6.05 apiece even as wider markets fell, valuing the Vancouver-based company at $859 million.

Investor darling

The Rogue project, like others along the belt, is on a reduced intrusion-related gold system but the grades in its drill results – like the 2.5 grams over 383.8 metres from surface including 4.1 grams over 120 metres reported this month – are magnitudes more than Fort Knox’s 1 gram or Victoria’s 0.7 gram. That’s made Snowline an investor darling since it started assays tables two years ago. The company again generated buzz at a mining conference in Dawson City, Yukon, last month.

“Obviously it’s exciting and it’s good to see recognition about what’s coming together out at Valley and more generally we’re really happy about this discovery for what it is in terms of good grades, good geometry, good continuity of grade, potentially a very low strip ratio, strongest grades right near surface, good metallurgy,” CEO Scott Berdahl said in an interview at the conference. “Basically, it ticks every box we want to see.”

Snowline may drill as much as 12,000 metres at Valley this year, part of an 18,000-metre program encompassing the Rogue, Einarson, Ursa and Cynthia projects, said Berdahl, whose father, Ron, began prospecting the area in the 1980s. The CEO declined to say when the company would aim to publish a resource estimate for Rogue, but gave a few clues.

“One nice thing about this deposit is the continuity of the system makes it very easy to understand,” he said. “This is a system that we can come to a resource with low tens of thousands of metres of drilling as opposed to hundreds of thousands or even millions of metres of drilling you see in some other large systems.”

However, Agentis has modelled two pits, one containing 3.6 million oz. gold from ore grading 1.9 grams per tonne, the other with 9.4 million oz. from ore grading 1.3 grams. Analyst Gray forecasts an after-tax net present value of US$1.8 billion at a 5% discount rate with a 40% internal rate of return.

Majors’ interest

Berdahl, who has degrees in geology, earth sciences and engineering, science writing and an MBA, said B2Gold’s 9.9% investment is good for its stamp of approval, but won’t necessarily dominate Snowline’s trajectory.

“We’re really not ready to tie ourselves to any one master just yet,” he said. “We’re not mine builders but we are cognizant of value creation. There’s a sweet spot we would get to where our cost of capital in terms of dilution to develop a project really doesn’t add a whole lot yet somebody with a better cost of capital could still pay a premium and acquire the assets and still do very well for that kind of a transaction.”

The remoteness of the site, where Rogue, Einarson, Ursa and Cynthia are in a cluster 223 km from the nearest town of Mayo, is the chief topic raised by potential investors, Berdahl said. Yet a winter trail for heavy machinery servicing a silver mine is about 30 km away. The territorial government has visited and is committed to area road upgrades, he said. It’s part of a general takeaway in investor sentiment from the conference that strong grades tended to overcome lack of services.

“At Valley we found what is the kind of deposit that we needed to find out there that can handily overcome those kinds of obstacles,” he said. “If Valley is a sort of proof-of-concept like that, and if additional discoveries can be made, whether on our project or on other projects, then there’s a lot of runway here as the industry and the broader investment world wakes up to the potential existence of a regional-scale bootcamp out here.”