Yukon-focused explorer and developer Metallic Minerals (TSXV:MMG,OTCQB:MMNGF) kicked off the year with a celebrity royalty deal, signing an agreement with Little Flake Mining, a company led by Parker Schnabel.
Schnabel is the star of the popular Discovery Channel show “Gold Rush,” and through the transaction his company has exclusive rights to extract gold from 5.5 miles of alluvial gold claims at Metallic’s Australia Creek property, with Metallic receiving a percentage of production as a royalty.
During a tour of Yukon mining sites organized by the Yukon Mining Alliance, the Investing News Network (INN) had the chance to visit Australia Creek and hear from Metallic executives about their plans to look for more royalty deals.
Metallic’s deal with Schnabel and Little Flake Mining
When the deal between Metallic and Schnabel was announced in January, Schnabel said a 400 hole drill program was planned for the winter, with mining operations expected to begin later in the year. For Metallic the appeal was twofold — the company was keen to work with Schnabel, who has experience with alluvial gold production, and the firm also said the royalty would allow it to fund exploration at its hard-rock silver and copper projects in both the Yukon and Colorado.
According to a release at the time, Metallic “must complete a $1 million minimum annual work commitment and pay Metallic Minerals an annual advance royalty plus a variable royalty on all gold production.”
Speaking to INN, Metallic President Scott Petsel was positive on the relationship. “Parker’s a very legitimate operator, a big-scale operator, and that’s what you want — somebody that’s recognized for what they do,” he said.
Parker Schnabel guides a tour of the Australia Creek site.
Photo by Bryan Mc Govern.
How to pick a royalty agreement partner?
Building on the success of its relationship with Schnabel, Metallic is interested in setting up more royalty deals.
When asked about the process of evaluating potential new partners, Petsel told INN the company wants to see a solid track record in terms of both results and reputation. “We’ll continue to vet additional operators partly through word of mouth — identify them and have conversations and really build this out as a revenue component of the company,” he said.
For his part, Chris Ackerman, vice president of corporate development at Metallic, told INN the Yukon mining community has a strong bond that can often play a role in finding people to work with.
“It’s a small community and everybody knows each other,” he explained.
Metallic Minerals’ Australia Creek site.
Photo by Bryan Mc Govern.
Junior mining space may soon see turnaround
Speaking about the junior resource sector, Greg Johnson, CEO and chairman of Metallic Minerals, told INN that exploration companies have experienced quite a few downturns in the recent past, including at the start of 2023.
However, he pointed out that as larger companies begin to see more success, retail investors tend to start looking for growth and value in the junior space. Showing optimism, the executive said some producers have started to see 52 week highs, and after such a long run of consolidation, a turnaround may not be too far away.
“There’s been a real disconnect in the market value wise … we do feel like maybe we’re poised for a turnaround in the sector that also includes the smaller exploration and development companies,” Johnson said.
The company secured a C$6.3 million investment from Newcrest Mining (ASX:NCM,TSX:NCM) in May of this year.
“What we’re doing right now is initiating a drill program with that money,” Johnson said, noting that the funds are being deployed at the company’s La Plata operation in Colorado, where an updated resource estimate was just completed. The company’s other main asset is the Keno Hill silver project in the Yukon, where it is moving toward an initial resource estimate.
Investor takeaway
Metallic’s leadership team has opened the doors to royalty deals as a way to build revenue for shareholders, and according to the company first production from Australia Creek is expected in August.
“Our hope is that, if we see firmer metals prices going into the fall, we start to see investors looking for exposure to very active projects that are going to be adding value,” Johnson said.
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Securities Disclosure: I, Bryan Mc Govern hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence. Flights, accommodations and meals were provided to this reporter by the Yukon Mining Alliance on a special invitation case.
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