Parallel trends: leveraging momentum in gold and energy metals
By: Jason Smith
Cobalt is now a part of the Carruthers Pass exploration for Cariboo Rose
Gold and base metal prices don’t always trend in the same direction, but sometimes, the market conspires to send both upward at the same time.
The current economic environment is ripe for parallel uptrends in the yellow metal, as well as in the base metals that undergird global economic growth. A combination of solid global economic growth, loose monetary policy in the developed world, and rising government debt levels have created the potential for inflation-infused growth.
The recently passed U.S. tax bill is unleashing a flood of debt-financed stimulus onto an already hot U.S. economy. The inflation that could result has the potential to drive gold higher, as investors seek refuge from the wealth-destroying effects of rising prices.
At the same time, growth in the developing world (e.g., China and India) should boost demand for commodities of all stripes.
Of particular interest are the metals like lithium, cobalt, copper, and nickel — demand for which is being driven by the clean energy boom. With electric cars intensifying demand for copper and for the minerals associated with lithium-ion batteries, prices for these metals are on a decidedly upward trajectory.
Thanks to its flagship gold-copper Canadian Creek project in the Yukon and its broad portfolio of base- and precious-metals focused projects in British Columbia, Cariboo Rose Resources Ltd. (TSX.V: CRB) is well positioned to take advantage of rising prices.
Cariboo Rose: A Model for Success
Cariboo Rose has amassed a strong portfolio of gold and base metal projects, and it has done so by following the prospect generator model of junior mining exploration. Under that model, companies use their technical expertise to identify and acquire projects of merit. They then shop those projects to joint venture partners, who agree to foot the bill for the more expensive aspects of exploration (e.g., drilling) in exchange for an interest in those projects.
When executed well, the prospect generator model allows its practitioners to build a diversified project portfolio that gives the prospect generator, and its investors, more chances at exploration success. And it does so while allowing the company to maintain a tight share structure.
One of Cariboo Rose’s advantages as a prospect generator is its technical expertise, which enhances its ability to identify quality projects through field exploration. Company President and CEO Bill Morton elaborates: “We’re a technical company, more so than most juniors. We have a number of seasoned geologists as directors and a long history of identifying and securing good projects.”
It’s a portfolio that recently saw two projects (CHG and Kosher Dam in British Columbia) optioned to third parties. Those partners will conduct work programs on these projects this year at no cost to Cariboo Rose.
The company has other projects available for joint venture in its portfolio, as well as a flagship gold-copper project, Canadian Creek.
The Three Things that Matter
The key to Canadian Creek’s promise is summed up by the old saw about the three things that matter in real estate: “Location. Location. Location.”
The district-scale Yukon property shares 12 kilometres of border on its northern side with Goldcorp’s Coffee deposit (3.0 million ounces of indicated gold and 2.2 million ounces of inferred gold). To its east, it shares six kilometres of border with Western Copper & Gold’s Casino deposit (4.5 billion pounds of copper and 8.9 million ounces of proven and probable reserves.)
The region got a shot in the arm recently when the Canadian and Yukon governments pledged $360 million to upgrade infrastructure in the territory. The pledge included complete funding for upgrading 82 kilometres of existing access road to Casino and 30 per cent of the funding for a new access road.
Morton commented, “The costs of creating road access were making the economics tough for Casino. This new road should make it viable, and because Casino extends onto Canadian Creek, the road could change the valuation picture for Canadian Creek as well, especially since Goldcorp may well want to extend the road to access to Coffee.”
With a series of gold and copper targets, Canadian Creek is a good fit for the current metals markets. Add in the recent cobalt “discovery” at Cariboo Rose’s Carruthers Pass project in north-central British Columbia, and you have a company well placed to provide leverage on gold and the energy metals.
A Hot Project for Copper…and Now Cobalt Too
Carruthers Pass has already shown itself to be a prospective copper project. A 2011 drill intercept there cut 3.2 metres of 6.24% copper, 5.87% zinc, 2.37 g/t gold, and 192.0 g/t silver.
That’s an impressive piece of mineralization, one that demonstrates the project’s potential to host a significant polymetallic deposit. And Cariboo Rose recently stumbled onto an exciting addition to Carruthers Pass’s metal composition: cobalt.
Cobalt is a key component of lithium-ion batteries, and due to supply concerns that regularly crop up in its primary producing country — the Democratic Republic of Congo — cobalt always has the potential to be a bottleneck in lithium-ion battery production.
The “discovery” of cobalt at Carruthers Pass came courtesy of a heads up from a VP of Phelps Dodge (since bought by Freeport McMoran Copper & Gold), which sold the project to Cariboo Rose in 2003.
Morton explains: “In the 2003 deal, we inherited a dataset that got lost in the shuffle. With Carruthers Pass making news recently, one of Phelps Dodge’s former VPs recently asked us about the project’s cobalt content. We did a search, and lo and behold, there was the missing database.” That database contained more than 1,000 samples, including quite a few with significant cobalt showings.
With cobalt now a part of the Carruthers Pass equation, Cariboo Rose should have an even easier time finding a JV partner to develop the project further.
The recent movement in the precious and commodities markets has loosened up the joint venture market for Cariboo Rose’s 100%-owned projects.
Bill Morton and his team anticipate a JV deal for Carruthers Pass at some point this year. They also expect Canadian Creek to stay on the market’s radar, as Goldcorp has committed a significant development budget to Coffee in 2018.
Between this potential news and the work the company’s JV partners have planned for CHG and Koster Dam, Cariboo Rose Resources Ltd. (TSXV: CRB) is set up for a productive year.