The upside potential for Hemlo Explorers’ (TSXV: HMLO) flagship 24,000-hectare Pic Project received a significant boost with the recent announcement that the company has entered into a binding term sheet with a wholly-owned subsidiary of gold mining giant, Barrick Gold Corp. (TSX: ABX). The arrangement will see Barrick have the right to earn an 80% interest in the Pic Project.
The Pic Project is located 25 km west of Barrick’s Hemlo Mine, which has produced in excess of 22 million ounces of gold over its more than 30 years of continuous operation. Gold was originally discovered at Hemlo in the early 1980’s and initially led to the formation of the Golden Giant Mine, which produced 6 million ounces from 1985 to 2005, with Barrick eventually consolidating the region’s gold production.
A key component of the earn-in arrangement is that Barrick could earn up to 80% of the Pic project, subject to a series of development expenditure milestones on the property, and more importantly, by delivering a Pre-Feasibility Study to Hemlo Explorers within the six-year expenditure period outlined in the agreement. Under the earn-in agreement, Barrick must make minimum yearly expenditures of $1 million on the Pic Project after spending $800,000 in the first year.
Barrick also has the right to extend the yearly expenditure periods by two years by making cash payments to Hemlo of $500,000 per year. Once the earn-in conditions have been successfully met, Hemlo and Barrick will establish a joint-venture corporation on the basis of 20% to Hemlo and 80% to Barrick.
In addition to the earn-in, Barrick has agreed to participate in a private placement of up to $300,000, to a maximum of 5% of the company in the context of the market at the time of the definitive agreement.
Hemlo will make the southwest corner of the Pic Project, also known as Project Idaho, the main focus of its 2022 exploration season. Historical drilling in 1985 identified a zone of semi-massive to massive sulfide mineralization stretching 112 metres within a feldspar-porphyry breccia. Mineralization began 25 metres from the surface and the hole ended in mineralization. This drillhole is just 3 kilometres east of Generation Mining’s (TSX: GENM) Marathon Palladium-Copper proposed open pit operation.
The Barrick earn-in news follows the December 2021 announcement that Generation Mining had entered into a definitive precious metal purchase agreement with Wheaton Precious Metals Corp. (TSX: WPM) for production from its Marathon Palladium-Copper project. Wheaton will pay $240 million to Generation Mining in upfront cash, with an early deposit payment of $40 million for development of the Marathon Project prior to construction. These two events firmly establish the rationale that a producing deposit could potentially be realized within the Pic Project.
Hemlo Explorers has assembled a significant 380 square kilometre land package of prospective mineral rights in the prolific Hemlo-Schreiber Greenstone Belt in the Hemlo, Ontario gold camp, making it the largest claimholder in the area. The company is headed by a diverse management team with years of extensive experience in mineral exploration, geology, and finance, with several members of the team having worked at Barrick’s Hemlo Mine. Hemlo is well capitalized to continue to aggressively explore its claims. The Barrick earn-in agreement not only bodes well for the credibility and valuation of the Pic Project, but it represents a degree of derisking as well.
The April 4, 2022, Barrick earn-in news was well received by the market and Hemlo shares traded 21% higher, closing at $0.205 per share.
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