Alaskan Gold?
By Jackie Steinitz
13 Feb 2007 at 02:32 PM EST
resourceinvestor.com
LONDON (ResourceInvestor.com) -- Although exploration company International Tower Hill Mines [TSXv:ITH; OTCBB:ITHMF] is now several years old it underwent a significant transformation and expansion six months ago when it raised finance to complete the acquisition of AngloGold Ashanti’s [NYSE:AU] integrated exploration programme in Alaska. This comprised the acquisition of 100% of seven of Anglogold’s projects, an option to acquire a 60% share in two of its more advanced projects, its exploration database and key personnel.
In the six months since this ‘rebirth’ ITH’s share price has risen from just under C$1 to C$2.35 today, and the company now owns ten gold and base metal projects covering 900 square kilometres in the Tintina Gold Belt of Alaska.
In its latest metamorphosis there are a number of plus points which could make ITH of interest to investors, offering significant competitive advantage:
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Some of the projects, arguably, have the potential to be world-class deposits. USC Resource Consult, a German Research House, have estimated that ITH’s projects could deliver between 5-10 million ounces of gold. With a market valuation of $75 per reserve ounce this would imply that ITH has an NPV of C$636 million equivalent to C$17 per share.
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The Management team is highly experienced in exploration, has a proven track record of discovery and offers complementary skills. CEO Jeff Pontius was formerly Explorations Manager North America for AngloGold. The VP Exploration, Dr Russell Myers, has worked for AngloGold, in academia and in the development of geological models. Significant shareholders Cardero Resources offer considerable skills in resource marketing.
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The new company has effectively started life several rungs up the exploration ladder as Anglogold had already invested $12 million in the region and projects, ITH has information from the extensive database on exploration in Alaska on 8000 gold deposits in the State, and the Management team already have an intimate knowledge of the projects as they had previously worked on them for AngloGold.
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Alaska offers the opportunity of unexplored territory but the strengths of security of tenure and a supportive and stable political environment.
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ITH is underpinned by its partnership with AngloGold Ashanti. This offers the benefits of the mine development skills and operational strengths of a major with the agility and aggressiveness of a junior.
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ITH’s business model seeks to optimise shareholder value by leveraging ITH’s primary skill – that of exploration – in low risk, non-operator arrangements with production partners.
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The company has a strong code of conduct, ethics and safety (which is clearly laid on its website). It has good relations with both the State of Alaska and local communities.
Here the energetic and enthusiastic CEO, Jeffrey Pontius, talks further to Resource Investor about the company, its business strategy and future plans.
RESOURCE INVESTOR: Could you begin by telling us a little about the history of ITH? Why the name? And why were AngloGold Ashanti prepared to sell you the properties?
JEFF PONTIUS: During my seven years with AngloGold Ashanti our team acquired significant assets in Alaska. However in 2006 AngloGold recognised that although Alaska was highly prospective for the discovery of new gold mines it was not in a position to aggressively develop those assets as quickly as it would have liked due to other global commitments.
AngloGold therefore decided to vend the projects to a public company and ITH was selected because due to its market skills as an outgrowth of its association with the Cardero group [TSX:CDU; AMEX:CDY].
On 4 August 2006, an agreement was signed whereby ITH received a 100% interest in seven exploration properties in return for AngloGold receiving a 19.99% share in ITH and a commitment for ITH to raise US$10 million in financing so that the projects could be advanced on a rapid basis. In addition ITH was granted the option to acquire a 60% interest in Anglogold’s LMS and Terra projects by incurring US$3m of exploration expenditure on each project within four years.
The name International Tower Hill Mines is a legacy from the Tower Hill area of Ontario where the original Tower Hill Group explored for gold.
RESOURCE INVESTOR: And what, briefly, is the background and exploration track record of the Management Team?
JEFF PONTIUS: I have worked for 29 years in exploration, mostly on greenfields discoveries and project development for mid-tier and major mining companies in North America, focussing in particular on Western North America. During that time I have been involved in the discovery of 3 gold mines, two of which were in Nevada and the largest, Cripple Creek, in Colorado. Cripple Creek has mined ounces and reserves in excess of 8 million contained ounces.
Meanwhile Russell Myers, the exploration Vice President for ITH, has a distinguished CV. A summa cum laude graduate from the Missouri School of Mines he has a Ph.D. from the University of Witwatersrand and has been involved in both academia and industry with a focus on the development of exploration models and their application to “in the field” exploration programs. He also worked for AngloGold Ashanti with me on major exploration programmes in Nevada, Canada and the Northern Cordilleran gold belt of BC, Yukon and Alaska.
The Chief Geologist, Chris Puchner, has 25 years experience of working in Alaska where he has been involved in a number large exploration programs including the development of the Nixon Fork high grade gold mine. We have in addition a really excellent team of geologists from Northern Associates our Alaska based consulting group, who are very experienced in the region. Put all this with the marketing skills and experience of Henk Van Alphen, Chairman of ITH and President of Cardero Resources and the result is a very experienced team, but one which can be agile to move and respond as conditions require.
RESOURCE INVESTOR: What is the vision and business model of ITH?
JEFF PONTIUS: Our primary goal is to execute our exploration plans effectively and aggressively and then rapidly advance our projects towards major discoveries and production.
ITH are primarily discoverers; exploration is our biggest strength. Moreover we have great gold assets. But the next step after discovery is to translate that discovery into shareholder value.
We are keen therefore to build a portfolio of production which is low risk, U.S.-focused, unhedged and non-operational (i.e. one in which we create production alliances with other companies for the mine development but one which will allow us to share in the production stream).
Perhaps our nearest model in this respect is Royal Gold [TSX:RGL; Nasdaq:RGLD] who have a stunning P/E ratio compared to majors. Royal Gold holds royalties in a number of properties without incurring the ongoing capital or operating costs associated with an operating mining company.
However in the current cycle it is difficult to go out and buy these types of royalty assets. We feel that we have the ability to “grow or own,” so to speak, leveraging our highly attractive portfolio and new discovery skills. We hope that our future partnerships will prove even more robust than a standard royalty arrangement.
RESOURCE INVESTOR: Alaska already has five operating mines including Red Dog, the largest zinc mine in the world. What do you see as the principal advantages to operating in Alaska?
JEFF PONTIUS: One of the main findings when conducting an analysis of new frontier exploration regions for AngloGold was that Alaska was a shining star. It is far less explored than, say, Nevada, and it is still possible to come across world class deposits in Alaska which are sticking out of the ground. It is an area which has not been totally covered by geological survey. Moreover there is no native claim issue in Alaska and tenure is sound. There are huge tracts of state land in Alaska which make it very attractive.
Of course some of the region is remote which makes it more expensive to explore. But once a stellar deposit has been found it is possible to overcome logistical difficulties provided that there is security of tenure. This has been exemplified by the diamond development in northern Canada, and in our own backyard with the development of the Red Dog and Donlin Creek deposits.
Alaska is supportive of mining provided that it is done in an environmentally responsible manner which is a cornerstone of our code of conduct. We have a good relationship both with the State of Alaska and with a number of mining groups.
Our goal is for the discovery of world class mineral deposits those with cumulative values of more than 5 million ounces of gold equivalent. A number of these types of systems have been discovered in Alaska with deposits like Donlin Creek (estimated to be 25 million ounces), Pogo (5 million), Fort Knox (7 million ounces) and Pebble (33 million ounces).
Our business model is not that of recycling old projects but more focussed on new discoveries, and Alaska offers many advantages in this respect.
RESOURCE INVESTOR: The individual projects are well described on the ITH website. It is early days yet but can you summarise in broad terms the key exploration results to date? From your experience what do these imply about the potential of the projects?
JEFF PONTIUS: The key results fall into three categories. Firstly we have recently discovered a higher grade core area (95 metres at 1.6g/t of gold) at our large bulk tonnage project, Livengood, which may have the potential to be a world class deposit. This could be key to ITH turning the corner and we plan to focus further on Livengood this year with follow-up drilling of the high grade zones.
Secondly there have been high-grade high-value results from several of our vein type targets which include the Terra, Coffee Dome and West Tanana projects. Some of these have the potential to move into production more quickly than, say, a very large Livengood asset, so they are also key for us to advance.
Finally early results from our Chisna and BMP projects indicate we may have potential for large copper-gold and base metal systems with potential porphyry affinity. These are new discoveries and if realized could have a very profound effect on the company.
Given our high quality portfolio we believe that the potential for finding at least a 2 million ounce and potentially a 5 million ounce deposit is high.
RESOURCE INVESTOR: What are your plans, and what are the key milestones for ITH over the next year?
JEFF PONTIUS: At present the largest share of our budget is scheduled for Terra where we will be drilling on the Ben vein zone to define the grade distribution and shape of this initial vein deposit, (one of four currently discovered). This will enable us to take a detailed look at the system to assess minability and overall potential. We will reach our earn-in point with AngloGold with this phase of work (earning a 60% interest).
At Livengood we will be following up our recent exciting results with a drilling program in March and assuming that information is encouraging a major drill program in the summer with a goal of having enough information in hand to conduct resource calculations and an economic scoping study by winter.
On the other projects we will be drilling our targets and if results are encouraging advancing those beyond the initial discovery phase as quickly as possible. I can’t stress enough the importance of the drilling phase in the discovery process!
RESOURCE INVESTOR: Since the recent financing at C$0.96 per share in August 2006 shares in ITH currently stand at C$2.35 implying a market capitalisation of C$95 million (US$81 million). Could you talk a little about the shareholder base and about what investors should focus on as they track your performance. What do you envisage will be the key drivers of ITH’s share price?
JEFF PONTIUS: Shareholding in ITH is tight with about 40% of shares held by AngloGold (19%), Cardero Resource Corporation (10%) and Management (12%).
Our financing last August was at a blended price of 96 cents per share. The stock price then advanced rapidly but erratically until 5 December when the four-month hold period ended for the financing. Since then shares have hovered around the C$2.50 mark, plus or minus, and they are now trading at average volume of 60,000 shares per day.
To make the next step up in the share price we will need positive exploration results and/or other initiatives. We really want, therefore, to get resources ‘in the bag’ this year and to build on them quickly. Our team knows from previous experience at Cripple Creek and elsewhere that once a discovery is made you can advance quickly up the curve building ounces and thereby increasing shareholder value dramatically.
RESOURCE INVESTOR: Thank you! |
