Alaskan Gold: A New
Super-Deposit in the Making?
www.Top40GoldStocks.com and www.BNWnews.ca
Though gold discoveries in Latin America and
other far-flung locations have been lighting up the stock markets lately, Alaska
is now earning back some of the limelight.
This is where over 115 million ounces of gold
have been outlined in America’s last mineral frontier by three high-flying gold
developers, namely Novagold Resources, Northern Dynasty Minerals and
International Tower Hill Mines.
The latest development to illustrate how their
world class discoveries rival the best on offer anywhere else in the world
involves a new high-grade discovery zone at the emerging 10.9 million ounce
Livengood gold deposit in politically stable, pro-mining central Alaska. Wholly
owned by International Tower Hill Mines (NYSE-AMEX: THM) (TSX: ITH), the deposit
is located 70 miles north of Fairbanks, Alaska.
Last week, the company (ITH) announced its best
drill results to date. This new development could lead to a significant
expansion of what by global standards is already an unusually large asset,
according to company CEO Jeff Pontius.
With drilling highlights that include 112
meters of 2.63 grams per tonne of gold, he adds that ITH is now tapping into
previously unexplored deeper gold mineralization, which is still shallow enough
to be amenable to cost-efficient open pit mining.
“This all bodes well for what could evolve into
a major resource expansion of the deposit,” he says
Several mining analysts who have studied ITH’s
recent drill results concur with Pontius, at least in terms of acknowledging
their potential to enrich the overall value of the deposit. They include
Toronto-based Alex Terentiew of the global investment bank, Credit Suisse.
“…the high grades lead us to suspect there is
good potential for the average grade of the deposit to be enhanced,” Terentiew
says. “As the deposit is designed as a bulk tonnage, low grade mine, an increase
in the average life-of-mine grade can have a substantial impact on the project
A pre-feasibility study (an initial blueprint
for a mine) is underway at Livengood and is expected to be completed by the fall
of 2011. By which time ITH hopes to have outlined considerably more gold,
He adds that the prolific size of the deposit
has already attracted potential takeover candidates. They include some of the
world’s largest gold miners, all of which are scrambling to replenish dwindling
gold inventories. This is proving to be a daunting challenge against a backdrop
of a global decade-long trend of falling output numbers, which have been
consistently dropping at around 5% per annum.
Hence, the world’s well-established gold
producers – emboldened by strong balance sheets – are all focused on ramping-up
their production figures to continue to cash in on a secular bull market in
bullion prices. So says Michael Jalonen, a Toronto-based mining analyst for the
U.S. investment bank, Bank of America Merrill Lynch.
In a recent research report entitled “Global
Gold M&A Heats Up”, he says that these gold miners cannot rely on organic
growth, alone, and that they stand to grow much faster by making acquisitions.
“…we expect the reserve-hungry senior and
mid-tier producers to continue focusing their attention on resource-rich junior
producers and developers,” Jalonen adds.
“By our count, the top ten gold producers under
coverage will need to replace 38 million ounces of gold reserves mined in 2010,”
he says. “We estimate the biggest gold companies could generate $80 billion of
free cash flow over the 2010-2015 period that could be deployed for
Pontius is remaining tight-lipped as to who
ITH’s suitors actually are. However the 5.4 million ounce Fort Knox Mine, which
is owned by mining powerhouse Kinross Gold Corp. (TSX: K) (NYSE: KGC), lies just
60 miles southeast of the Livengood project.
The Fort Knox mine is expected to wind down by
the time Livengood may be ready for commercialization. And Kinross has extensive
gold processing infrastructure already in place that could be of value to ITH,
assuming the project gets the go-ahead to become a mine in 2016 or the following
Such a scenario makes Kinross an obvious strong
contender to gobble up ITH, according to Wendell Zerb, a Vancouver-based mining
analyst for the stock brokerage firm, Canaccord Genuity.
“Kinross is a very logical potential candidate
for being interested in Livengood,” he says. “But given the size of the deposit,
there could be a fit with a number of different major gold mining companies.”
The overall size of Livengood’s growing asset
base is already a strong selling point as major mining companies are known to
prefer deposits that can yield significant amounts of gold year after year. Ones
that can have a meaningful impact on their bottom line.
And 10-million-ounce-plus deposits are becoming
increasing rare worldwide, according to Zerb, who adds that Livengood is “one of
only a few very large gold assets with considerable upside leverage in a strong
gold environment (greater than US $1,100/oz).”
This view is shared by Michael Curran, a
Toronto-based mining analyst for the major Canadian investment bank, RBC Capital
“In our view, International Tower Hill has been
one of the better exploration success stories over the past few years,” he says.
“With potential for resource increases…we see above average potential for the
deposit to ultimately be developed as a large open pit mine capable of producing
Meanwhile, Novagold (NYSE-AMEX: NG) (TSX: NG)
and Northern Dynasty (NYSE-AMEX: NAK) (TSX: NDM) have already demonstrated how
big Alaska’s world-class gold discoveries can actually get. Their giant assets
are located in western Alaska and weigh-in at 37.9 million ounces and 66.9
million ounces, respectively.
Novagold is an equal partner with the world’s
largest gold miner, Barrick Gold Corp. (TSX: ABX) (NYSE: ABX), in the
development of the Donlin Creek deposit, which promises to become one of just a
handful of operations worldwide that can yield more than one million ounces of
gold annually. The partners are aiming to bring the mine on-stream by 2017 or
Northern Dynasty is also in a 50/50 partnership
with another big league mining multinational, Anglo American plc (LSE: AAL), to
develop the Pebble project, which is by far the largest gold deposit in the
Americas. The deposit’s owners hope to commission a mine by 2016.
By comparison, the Cerro Casale
mine-in-the-making in Chile, which is jointly owned by Barrick Gold and Kinross
Gold, is Latin America’s biggest in-development gold project. It hosts 26.4
million ounces. And only six other deposits of around 10 million ounces in size
or better are being developed in South America, with three of them located in
politically problematic Venezuela.
The principals of
do not directly or indirectly own shares in any of the companies mentioned in