Red Pine Exploration needs a fresh infusion of cash, quickly, to kickstart a drilling program at its Wawa Gold Project.
The struggling Toronto junior miner is out of pocket and is looking to raise $9.5 million this fall in order to regain the confidence of the market and lay out the big picture of what a mining operation might look like down the road.
In a Sept. 4 webinar, new CEO Michael Michaud projected confidence and enthusiasm in selling the blue-sky potential of its gold deposit, two kilometres outside Wawa.
In lobbying to restart drilling activity that was halted in mid-May in the wake of an assay manipulation scandal, Michaud said the project is at a point where they have to show its full potential and take it forward to a development stage. That means “drilling and adding value as quick as we can.”
Michaud joined Red Pine in July after heading up exploration efforts at Wesdome Gold Mines.
The company posted a new gold resource estimate late last month showing a million ounces has been gained since the last gold count in 2019. The gold resource stands at almost 1.7 million ounces, but there’s been a drop in the overall grade from five grams per tonne to less than two.
While Red Pine has taken steps to clean up its assay database and introduced a new CEO, the company remains on shaky ground. They do not have the funds to resume drilling.
Red Pine management issued a dire warning back in June in a Management’s Discussion and Analysis document. With only $3.5 million cash in the bank at the end of April, if additional funding couldn’t be secured by the end of September, Red Pine would have to shut down all activity at the site.
Ten years of exploration with no mining revenue has taken its toll in sustained operating losses, the company’s auditors said last year.
While the company is a long way from making a decision to build a mine, they’ve mapped out a spot on the 7,000-acre property where an open-pit mine could be placed.
With lower grade gold near the surface, Michaud said they have the option to begin mining with a starter pit before heading underground to pursue higher grades.
In the webinar, Michaud said he wants to run a “modest” 20,000- to 25,000-metre drilling program, which would cost $5 million. Tack on corporate expenses and the full amount comes to $7 million.
A day later, Red Pine decided to upsize that to more than $9.5 million, raised through a combination of a common and flow-through share offering, which is expected to close Oct. 1.
The company said their success depends on market confidence in the Wawa project and the management team and the “perception of the relative strength” of the new gold estimate.
The 7,000-acre Wawa Gold Project sits in the middle of a historic mining camp that produced some high-grade gold, but was largely underexplored because of the fragmented property ownership that did not allow explorers to get a big-picture view of the area’s geology.
“We’re just getting started to understand the real potential of this property,” said Michaud.
His proposed program would involve fully drilling out the area down to 300 to 350 metres, where a pit would go, to probe the upper portion of a prospective geological feature called the Jubilee Shear. He also wants to take some stabs at deeper exploration drilling.
Michaud explained the gold mineralization pattern at the Wawa project is the same with other mining operations in the area. The “obvious gains” to grow the resource are to be found deeper down.
Mining at Wesdome’s Eagle River goes down deeper than a kilometre, at 1,600 metres, while the bulk of mining at Alamos’s Island Gold extends down 1.5 kilometres.
“I think, with more exploration, we’ll be rewarded, just like some of these other projects,” he said.
“This is a big gold system. We know they extend to depth. We’re in the same rock as what they find at Alamos and Wesdome.”
Red Pine’s financial struggles and the gold potential of the property may open up an opportunity for a larger mining company to move in.
There’s been interest from Alamos, a 13.5 per cent shareholder in Red Pine, who also owns the nearby Island Gold and Magino mines outside Dubreuilville, and Barrick Gold, operator of the Hemlo mine on the north shore of Lake Superior, which has staked claims close to Red Pine’s camp and is quite active in the area.
Michaud and board chair Paul Martin said they’ll look to add more value to the property before engaging in discussions with other companies about “partnership” opportunities.
