A penny stock buy for a new Yukon gold rush

There are strange things done in the midnight sun / By the men who moil for gold; / The Arctic trails have their secret tales / That would make your blood run cold; / The Northern Lights have seen queer sights, / But the queerest they ever did see / Was that night on the marge of Lake Lebarge / I cremated Sam McGee. (by Robert W. Service; published in 1907)

Penny StocksAbout 10 years ago, a century after poor Sam McGee’s legendary demise, the Yukon regained its status as a hot gold exploration district with a breakthrough discovery reported by ATAC Resources Ltd. (TSXV—ATC). Wide intervals bearing significant gold grades were encountered at its Rau Project, located in the Keno Hill district of the central Yukon—about 400 kms. north of the site of the spectacular cremation of the late and much-storied Mr. McGee from Tennessee.

The Rau Project announcement set off a staking rush that transitioned into a speculative frenzy as more than 100 exploration companies established leverage to the under-explored territory.

While overall sentiment for the entire sector subsequently descended into a nasty bear market that continues to drag on to this day, work has continued and several important discoveries in the Yukon have advanced along the development curve with the eventual commencement of mining operations coming into focus. Victoria Gold Corp. (TSXV—VIT) is the leading candidate, with its fully permitted Eagle gold mine currently under construction. Gold production is scheduled to commence in 2019.

In addition, a number of highlight transactions by senior gold producers along the way have demonstrated the commitment to the region even as investor interest has turned elsewhere. Agnico Eagle Mines Ltd. (TSX—AEM; NYSE—AEM) recognized the potential in the emerging district and partnered with White Gold Corp. (TSXV—WGO) in a deal valued at $8.7 million.

Kaminak Gold Corp. had outlined a large gold deposit of several million ounces at its Coffee project, leading to its acquisition by Goldcorp Inc. (TSX—G; NYSE—GG) in 2016 for more than half a billion dollars. Barrick Gold Corp. (TSX—ABX; NYSE—ABX) completed a major investment in ATAC in 2017 with an earn-in agreement valued at $8.3 million to advance a discovery that is part of its Rackla project.

There are many other active projects on the go in the Yukon that may emerge as the next big discoveries and perhaps attract hundreds of millions of dollars in project funding. I believe this is an opportune time to be accumulating junior gold exploration stocks with leverage to the Yukon.

Activity continues to advance in the high profile districts and this will create news flow to keep the Yukon on the front burner. Meanwhile, some very attractive companies are trading like bargain stocks in this bear market, ensuring that a basket of explorers can be added to a portfolio right now without having to pay the speculative premium of even just a couple of years ago.

Explorers flooding the North

One of the intriguing exploration stories on my list is the Golden Culvert gold project held by Stratabound Minerals Corp. (TSXV—SB). Located in the southeastern corner of the territory, this early-stage prospect has all the hallmarks of a budding discovery and has never been tested by a drill program. Several mineralized zones have been outlined through preliminary fieldwork at Golden Culvert, within a structural corridor stretching some 24 kilometres through the district.

The highlight zone from a series of drilling samples was found in a series of quartz veins outcropping at surface, where a section of one metre yielded gold grades up to 22.8 grams per tonne. This came within a larger zone of roughly three square kilometres identified through soil sampling.

It should be noted that Golden Predator Mining Corp. (TSXV—GPY) is advancing a gold discovery at its 3 Aces project, located along the same structural corridor and just 20 kilometers to the south. A winter drilling program was just completed at this project which successfully hit several mineralized zones with grades reported up to 30.1 grams of gold per tonne of ore. This came from ‘blind targets’ that were hosted within structural alteration and sheer zones not unlike those observed at Golden Culvert, but hidden beneath overburden.

At Golden Culvert however, the prospective targets outcrop right at surface. The setting is nearly ideal for speculative investors.

Stratabound controls 100 per cent of this large (nearly 84 square kilometres) property through its purchase option deal. High-grade gold has already been encountered at Golden Culvert along with similar alteration that led to significant discoveries elsewhere in the district. An all-season road runs right through the property area, and the company has completed a secondary access road to the target area.

Extensive trenching work is now underway, and it appears that the target area is in fact a swarm of veins through a prolific corridor, and this presents district-scale possibilities. Samples have already been submitted to a lab with assay results expected shortly. A drill program is set to commence this summer as target definition work is finalized.

Hopes of striking it rich

Despite all the potential for this story, and the fact that exploration work is ongoing with news flow pending, Stratabound is currently trading in value stock territory with a market cap below $10 million. Positive results could trigger an immediate move higher for the stock as the more speculative fall and winter months approach.

I also expect a tailwind of favourable news from other ongoing exploration areas in the Yukon that could attract more investment across the spectrum of companies that have leverage to the territory. The market sentiment will eventually transition to more bullish conditions and Stratabound should be a beneficiary of renewed money flow into the juniors.

The Golden Culvert property represents one of those ‘lottery ticket’ profiles given its large area, numerous attractive exploration targets, and the potential for a breakthrough discovery that could suddenly make this story very interesting.

The prototypical penny stock, Stratabound has the high-risk-to-high reward setup that so often generates the biggest gains at the discovery level. One need not bet the farm at the early stage, in order to achieve a substantial return if things go well.

Even during bear markets, there are many examples of huge speculative wins that have been captured when a junior explorer reports a new gold discovery. Such was the case a decade ago with ATAC Resources leading to the heightened exploration boom that continues to this day. I believe that the early fieldwork from Golden Culvert is more than a flash-in-the-pan and the potential for confirmation through further encouraging gold results will sharply raise Stratabound’s profile as an exploration candidate.

Mike Kachanovsky is a freelance writer who specializes in junior mining stocks and also covers technology companies. 

This is an edited version of an article that was originally published for subscribers in the July 20, 2018, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.

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