Two Red Lake hopefuls crater on brewing Barrick beef

The shares of two Red Lake Gold Camp-focused ‘close-ology plays’ crashed on Tuesday after they made public that Barrick Gold (TSX: ABX; NYSE: GOLD) has named them parties in a statement of claim for $120 million for a cancelled exploration earn-in option on each of the companies’ respective exploration projects.

Dixie Gold (TSXV: DG) and Red Lake Gold (CSE: RGLD), each headed by CEO Ryan Kalt, revealed in public filings Tuesday that they had each received a statement of claim from Barrick seeking $120 million for a 70% exploration earn-in option in the Red Lake project, in Dixie’s case, and in Red Lake Gold’s Whirlwind Jack project, after both companies terminated their respective earn-in accords with Barrick on June 7.

The narratives behind both juniors’ stories are similar. Dixie Gold announced on December 31, 2019, that it had amassed a dominant land position contiguous to both Great Bear Resources’ emerging Dixie gold and BTU Metals Corp’s Dixie Halo projects.

Similarly, Red Lake Gold rebranded mid-2019 from minnow Pivit Exploration to advance the Whirlwind Jack project, immediately west and on-trend of Great Bear’s (now Kinross Gold-owned (TSX: K; NYSE: KGC)) Dixie project.

By the Fall of 2021, both juniors had engaged with Barrick regarding a potential exploration-focused earn-in agreement on their respective projects. By November 1, 2021, Dixie Gold had signed a formal earn-in agreement with Barrick, enabling it to earn a 70% interest in the Red Lake project. Red Lake Gold signed a similar deal on the same day to platform-in Barrick as the project partner.

Dixie Gold’s Red Lake claims. Credit: Dixie Gold

However, the happy new working arrangement was to be short-lasting. On June 3, 2022, Barrick served both junior companies with writs advising them of the imminent threat that they may lose their respective underlying claims due to an assessment credit deficit.

Barrick alleged a corresponding deficit of filed exploration work otherwise necessary to generate sufficient government-approved assessment credits relating to exploration work by Barrick to keep mining claims within the Red Lake project in good standing.

According to Dixie Gold, Barrick alleged that it had an obligation to maintain the claims for Barrick based on supposed good faith.

Assessment deficits

Barrick had served Red Lake Gold with a force majeure declaration on the same day, citing concerns, among other things, with community engagement work and title assertions. The notice also instructed Red Lake to act to prevent claim loss at Whirlwind Jack because of an assessment credit deficit.

Again, Barrick claimed in Red Lake Gold had an obligation to maintain the claims for Barrick based on a purported good-faith demand.

Barrick’s correspondence was met with the unilateral terminations of the earn-in agreements by Dixie Gold and Red Lake Gold on June 7.

Red Lake terminated the agreement with Barrick citing, among other reasons, the failure by Barrick to meet force majeure threshold requirements, the inability of Barrick to perform the necessary exploration work needed to keep the claims in good standing and for Barrick demanding that Red Lake Gold use its existing assessment credits for Barrick’s benefit to curing the assessment credit deficit.

In the seven months since the earn-in accord was inked and ultimately terminated, Barrick had only spent $30,538 of the government-prescribed minimum of $416,800 on Whirlwind Jack.

“Red Lake Gold believes that its shareholders are the rightful beneficiaries of assessment credits, including those held by the corporation from the Red Lake Gold exploration work or otherwise, and that Barrick has no contractual entitlement to demand possession or use of the exploration credits,” said CEO Kalt in a Red Lake Gold press release.

Red Lake Gold’s Whirlwind Jack project. Credit: Red Lake Gold

Barrick also demanded that Dixie Gold use existing assessment credits it held for work it had previously done to cure the deficit, while asserting in both cases it was the respondents’ responsibility to keep the claims in good standing regardless of Barrick’s stated plans and actual activities.

The Northern Miner has reached out to Barrick for comment but has not received a response as of press time.

Both juniors assert they would use their respective assessment credits to protect their assets in terms of Ontario legislation and that Barrick had no further recourse to the cancelled earn-in options.

“The corporation maintains that Barrick Gold has failed to meet contractual requirements under the earn-in option agreement, and moreover, Red Lake Gold maintains that no joint-venture exists as between the parties,” said Kalt in the Red Lake press release, with the Dixie Gold statement asserting the same.

The companies said that among other defendants in the claim, Barrick named ‘ABC Corporation Inc.’ as a placeholder for a party that it alleges may have attempted, or may attempt in the future, to intervene or acquire the projects following the termination.

Kalt is also currently the chairman and CEO of Clean Commodities Corp. Previously, Kalt was the CEO of Gold Royalties Corporation, an investment issuer listed on the TSX Venture Exchange, which was acquired by Sandstorm Gold (TSX: SSL; NYSE: SAND) in 2015.

Red Lake Gold shares tumbled nearly 54% on Tuesday to 3¢, taking the 12-month loss to 88%. It has a market capitalization of less than $1 million.

Dixie Gold fell 45% to a fresh low at 5.55¢, down 77% over the 12-month frame, capitalizing it at $1.54 million.