In the far northwest territory of the Yukon, Canadian-based Victoria Gold Corp. is in midst of developing a major project at the company’s Eagle Gold site, which is shovel-ready and expected to produce in excess of 200,000 ounces of gold per year once it is up and operating at maximum capacity.
The Eagle Gold project is fully permitted for construction and operations with shareholders who are well positioned to participate in a highly leveraged gold play and construction of the largest gold mine in the territory’s history.
Yukon is known for its sparsely populated, rugged, mountainous geographic area, synonymous with such outdoors activities as dog-sledding, canoe expeditions and hiking. Victoria Gold is doing its part in continuing to prove that gold exploration is also a significant part of the territory’s identification characteristics and economy.
The Canadian Business Journal recently spoke with Victoria Gold Corp. President and CEO John McConnell about the latest developments at Eagle Gold and other ventures on the go. The company has origins dating back to 2002 but the current directors and management team became involved in 2007. It was the result of Kinross’s $3.2 billion friendly acquisition of Bema Gold.
“In 2007 Bema Gold had a large interest in a company called Victoria Resources and they made up the management team and the board of directors and they were exploring in Nevada,” McConnell begins.
Kinross had a decision to make regarding an orphaned company known as Victoria Resources. The man who spearheaded the takeover was Kinross Executive Vice President Hugh Agro.
“Hugh Agro approached our current chairman, Sean Harvey, and me because we’d known each other from previous work history and he asked us if we’d join the board. We did that and it started the new Victoria,” McConnell explains. “We immediately did a financing with Kinross’s support and away we went.” McConnell served as a director until 2010, which is when he took the reins as chief executive.
The wide-reaching global economic downturn in 2008 was seen by McConnell and Victoria Gold as an ideal opportunity to acquire two companies: Gateway Gold in late 2008 and StrataGold in early 2009.
“Gateway gave us more assets in Nevada and Strata gave us our now flagship asset in the Yukon – which is Eagle,” he tells us.
Fast forward to the present when Victoria Gold just recently announced additional financing of $24 million, much of which will go towards the continued development of Eagle Gold. McConnell says there are also some procedures and protocols they can put in place to reduce risk factors in terms of further permitting and exploration and on the property.
“We haven’t totally decided what the use of those proceeds will be yet,” he remarks. “We may also – depending on markets – sit tight and conserve our cash and that money will be part of the ultimate financing of the project.”
Preparing for Full-Scale Operations
It is estimated about $400 million will be needed to launch a full-scale project at Eagle Gold, although McConnell says that is not specifically the primary near-term objective. For the time being, he is primarily focusing his attention on two main areas. The first is exploring an area called Olive-Shamrock, which is of interest because of its location, just 2.5km from Eagle. Preliminary data indicates it may yield about 50% higher grade with similar leach kinetics as Eagle, meaning it has the potential to be a nice supplement to Eagle or a nice starter pit to get the project moving.
“We’re drilling that off right now, with three drills running and we hope to finish by mid to late June.” McConnell confirms. That aspect is related to Victoria Gold’s second area of interest, which is updating a feasibility study that came out in 2012. Along with new gold prices, exchange rates and fuel and labour prices coming down as well as steel and concrete, McConnell says he and his team are contemplating the notion of ushering Olive into the picture as part of the mining plan.
“That’s why we’re in a rush to get it drilled off and get it to a reserve category and then we can use it in the updated feasibility study,” he adds.
Needless to say, Olive has been somewhat of a pleasant surprise for McConnell and his executive team. While they anticipated it would yield strong results, he says it has slightly exceeded expectations. “It’s still early days with nine holes of an 80-hole drill program so there’s lots more news to come. It’s certainly been positive what we’ve seen so far,” he says.
Once the Eagle Gold project is up and running at full capacity, McConnell expects the workforce during construction will require anywhere from 300 to 400 people with about 200 onsite at any given time, working on a rotating schedule. The projections are for similar numbers during the operations’ phase as well. There will be a fly-in and fly-out operation for about 50% of those workers coming in from other parts of Canada. It’s expected about 50% will be workers from Yukon.
Eagle currently has a projected lifespan of at least 10 years, but McConnell is quite confident it will far exceed that and run for 20 to 25 years, and maybe longer, with such vast exploration potential in the region. The footprint of the mine and related infrastructures amounts to about 5km-square. Victoria Gold also owns a very large land position in the order of 20km by 10km in size.
“We have other properties in the Yukon as well that we’ll get focused on once Eagle is up and running and cash flowing,” McConnell says.
Three years ago, when the gold price was $1,700, McConnell and his team were confident they would be moving to construction with a core team of about 30 people. But the situation over the last couple of years with both the lower price of gold and sluggish capital markets, Victoria Gold was forced to cut back to a staff of about 10, including administration, scientists, engineers and geologists. It’s a small team of talented experts that McConnell is extremely proud to work with and one he depends on immensely for support.
“We have a very good group and I very much rely on their input. We make decisions as a team,” he says.
The main office for Victoria Gold is in Vancouver, which is where the engineering and administration staff can be found, but McConnell made a 100% commitment to the Yukon project by moving to Whitehorse about five years ago. The relocation has formulated a noticeable difference in hastening the timeline in advancing the Eagle project forward far more quickly. McConnell has been in this line of business his entire life, having been born and raised in a mining town, so the move to the site is a decision he wholeheartedly embraces.
“It’s been a philosophy of mine going back a number of years,” he says of the move. “I feel you need a senior person in the organization living in the jurisdiction where you intend to build a mine. Prior to moving here I probably met the premier once or twice, but now I can honestly say he’s my friend. It makes a big difference all around.”
A number of other mining companies have been known to try and emulate Victoria Gold’s template of working with the First Nations in order to improve their own relations. While many mining companies have been tied up in a plethora of legal battles with various First Nations tribes, McConnell’s company has been able to forge ahead with an alliance founded in trust and respect thanks largely to open and transparent dialogue.
“It’s one of the things that separate us from a lot of companies – our strong relationship with the First Nations,” he states. “We’ve been working with them for eight or nine years. In 2011 we signed a full impact benefits agreement and since then they’ve essentially been our partners moving forward. It doesn’t just come about. It takes a lot of work and understanding where they come from.”
Victoria Gold also owns property in Nevada called Santa Fe, which is somewhat in the background right now but is a property that McConnell and his team believes will be a pipeline for the future. There are also several smaller complementary property sites near Eagle, which McConnell believes will get some activity this summer. The company holds a solid cash position which opens up the option for potential acquisition opportunities, although that clearly is not a primary goal at this time.
“Over the past couple of years we’ve probably looked at 40 different projects or companies and we just haven’t found the right fit,” McConnell notes. “I’d say we’ve taken a step back now and we’re not really looking at other opportunities; we’re more focused on moving Eagle forward now.”
There is still a lot of work to do in the near term, but looking further down the line McConnell is extremely optimistic about the company’s vast potential.
“By 2020 Eagle will be up and running and producing 200,000 ounces of gold at quite a nice margin because our cash costs are estimated to be about $615 per ounce,” McConnell says. “By then we’ll be looking towards the next Eagle; whether it will be in the Yukon or another jurisdiction, I don’t know but with Eagle, Victoria will be an established small gold producer looking to grow itself.”