{kanada_flagge} The last one turns off the lights, they say. Or as they say in miners’ language: Schicht im Schacht. Until recently, this fate of slow decline seemed preordained for the tradition-rich Flin Flon mining district in Saskatchewan. New geophysical survey methods and a resulting spectacular new discovery could now change the omens for the entire district. Callinex Mines Inc. (TSXV: CNX) und Searchlight Resources (TSXV: SCLT, FRA: A2JRPS) have set out to turn the lights back on at Flin Flon.
Callinex’s share price has already increased tenfold since last summer and has further multiplier potential; Searchlight is about to start its first drill hole on a similarly defined target very close by and could become the next multibagger.
There is a simple reason why the name “Flin Flon” is likely to trigger an immediate “aha” effect for few private investors. Unlike the prominent mining districts of Val d’Or in Quebec, Red Lake in Ontario or the Golden Triangle in British Columbia, there has been no marketing for Flin Flon for decades. Flin Flon simply didn’t need it, because mining giant Hudbay (TSX: HBM) dominated the district almost single-handedly for a long time, leaving no room for juniors, let alone other producers. Yet Flin Flon is one of the world’s most important districts for VMS-type deposits (volcanogenic massive sulfides), with 130 million tons of copper ore produced, and one of the most productive copper districts in Canada.
More than 30 mines have operated within less than 20 kilometers of the town of Flin Flon over a period of nearly 100 years, including the namesake Flin Flon Mine itself, which produced 62.5 million tonnes of ore grading 2.2% Cu, 4.1% Zn, 2.6 g/t Au and 41.5 g/t Ag between 1930 and 1992.The weighted average grade of 144 million tonnes of ore produced from all deposits between 1917 and 2005 is 2.2 % Cu, 4.4% Zn, 2.0 g/t Au and 30.6 g/t Ag (according to a report from Strathcona Minerals Service dated 2007).
An estimated CAD1.6 billion, meanwhile, was spent on road, rail, power and water infrastructure to enable rapid development of new discoveries. At the center of this is the Hudbay processing plant, which has an impressive daily capacity of 6,000 tons per day and employs more than 800 people. Because there has been a lack of new discoveries for years, the Hudbay plant is now underutilized and there are even plans to close it. This is because the special nature of the ore deposits around Flin Flon poses special challenges for a large corporation like Hudbay. The polymetallic VMS projects around Flin Flon, while extremely high-grade and profitable, are rather small, averaging 2 to 5 million tons of ore. For a company that wants to show the longest possible asset life on its balance sheet, this is a problem. More than a decade ago, Hudbay therefore made the strategic decision to develop large-volume, long-life projects, for example in South America. Exploration on the doorstep in Flin Flon was, if at all, only pursued with a limited budget.
Figure 1: Each symbolic shovel represents a mine: 32 mines have been operated in the 20-kilometer radius around Flin Flon to date. Most of them were so-called VMS deposits with an average of 2 million. to 5 million tons of ore. In the center is the large Hudbay processing plant. Searchlight Resources holds the third largest package of exploration licenses (in red and striped) after Hudbay and SRR Mining.
Recent Callinex VMS discovery changes the rules of the game in Flin Flon.
In this mixed bag, news of the recent VMS discovery at the Rainbow project of Callinex Mines Inc. (TSXV:CNX) was literally like someone turning on the lights in the Flin Flon district. Not only the “what,” but the “how” of the discovery is remarkable. Modern technology in the form of deep-penetrating electromagnetic pulses has led to the new discovery, which was not discovered earlier in part because it lies beneath a lake. Geophysical measurement methods now make it possible to look as deep as 800 meters. Compared to that, Hudbay geologists were virtually blind when they went exploring in the 1950s, 1970s or even 1990s. Back then, geophysical surveys didn’t penetrate deeper than 100 meters.
Callinex has just raised CAD 7.7 million at CAD 4.20 in an oversubscribed capital increase. Investors are hoping the Callinex Rainbow project will be nothing less than the largest VMS discovery ever at Flin Flon.
Figure 2: Southwest of the 1960’s Pine Bay Mine, Callinex has traced the signature of a one kilometer anomaly. Four cross-cut VMS packages are waiting to be tested by drilling. Most excitingly, the strike length of Flin Flon VMS deposits allows one to make statements about the expected depth extension “down plunge”. Factors of five to eight are used as a rule of thumb. The map in Figure 2 shows that Hudbay has drilled unsuccessfully thousands of meters further north of Pine Bay in the past. The difference is that Callinex and also Searchlight Resources now have new geophysical tools that Hudbay geologists did not have at the time.
Modern technology in the form of deep penetrating electromagnetic pulses could completely redevelop the Flin Flon mining district! A key witness to this thesis is, of all people, Mike Muzylowski, founder of Callinex and member of the Canadian Mining Hall of Fame. The man (>86 years old), who has discovered no less than 13 mines in his long career, recently stated: “I believe the Rainbow discovery could be one of the more significant discoveries I’ve been involved in during my career in the Flin Flon Greenstone Belt.”
{letter}
Searchlight Resources follows on the heels of Callinex’s approach
In our opinion, it’s only a matter of time before the newfound interest in Callinex and the Flin Flon District spreads to a third player: Searchlight Resources (TSXV: SCLT, FRA: A2JRPS). Searchlight, under the leadership of Stephen Wallace, an ex-Goldcorp, Geologist, assembled a massive portfolio of properties and projects around Flin Flon almost unnoticed by a broad investor community. After Hudbay and SRR Mining, Searchlight is now the third largest public landholder around Flin Flon in terms of exploration licenses.
Searchlight holds a staggering 300 square kilometers of licenses. In addition, there are another 400 square kilometers in other parts of Saskatchewan. This access to large land packages is one of the important advantages of Saskatchewan compared to the better known mining provinces. Searchlight’s portfolio includes four past producing gold mines (Bootleg project with historical resource estimate and underground shafts south of Flin Flon), as well as a number of potential VMS targets, most notably the Beatty South VMS project, located just 15 kilometers from Flin Flon.
Figure 3: Beatty South represents a prospective VMS target according to geophysical evaluations. The project is located only 15 kilometers as the crow flies from the Hudbay refinery (777 Mine). Searchlight intends to commence drilling on Beatty South in the near future. The drill needs a solid ice cover because the target is under swampy ground. The swamp may have been one of the reasons why exploration has never been done at this location historically. The entire property around Beatty South is 30 square kilometers. Incidentally, the Callinex discovery is “on strike” (see Figure 1) to the east. Beatty South and the Callinex Rainbow project are separated by only one property from Hudbay.
Figure 4: The Beatty South detail shows the perfect connection to the road that leads (right image) directly to the Hudbay refinery.
The strengths of the Searchlight team clearly lie in the technical area. In addition to the CEO Stephen Wallace, independent director Peter Dueck, who is also a key idea generator and project facilitator, is particularly noteworthy. Dueck was chief geophysicist at Hudbay Minerals Inc. in Flin Flon until early 2018! He lives in Saskatchewan and knows the lay of the land like no other. Dueck was also one of the founders of Aerial Imaging Resources Inc. (AIR), a specialty aerial drone-based geophysical survey company. In 2018, AIR was acquired by Global UAV. Currently, Dueck is a Principal Geophysicist for Axiom Group. Of course, all of Searchlight’s geophysical studies are overseen by Dueck. This is also how the Beatty South target came about, which Dueck helped bring to Searchlight.
Callinex mentions on its website an interesting statistical fact related to discoveries made around Flin Flon. More than 50 percent of the discoveries resulted in production. The best example of how fast things can go is provided by one of the last major discoveries made in 2007/08, called VMS Resources, whose valuation climbed to a CAD 100 million valuation overnight after a VMS discovery. VMS Ventures was immediately funded by Hudbay (who else?) and subsequently acquired. Since then, the mine has been built and the ore mined out. Things happen quickly in Flin Flon!
Advantages and disadvantages of VMS deposits compared to porphyry projects
For one of our next articles, we have decided to compare the advantages and disadvantages of porphyry deposits (see Kodiak Copper et al.) and VMS deposits, even if this means comparing apples and oranges (see Hudbay’s strategy mentioned above). However, a factor in favor of VMS in the Flin Flon is clearly the high ore grade (in the case of Callinex at > 10 percent Copper equivalent) and the advantage of perfect infrastructure. The capex hurdle that eventually gets in the way of every porphyry project does not exist in the Flin Flon. Here, juniors with discoveries may not need their own processing. In the end they are only satellites around the gravitational center Hudbay.
Conclusion: Callinex Mines and Searchlight Resources have the strategic potential to revitalize the Flin Flon mining district. Both are possible and even likely takeover targets of Hudbay if successful. Callinex starts with a valuation of around CAD 60 million, while microcap Searchlight Resources currently brings in as little as CAD 7.3 million. The Callinex discovery is not yet fully priced. Searchlight has yet to make a discovery. A success at Beatty South could lead to an explosive revaluation of Searchlight. But even already respectable results from the four earlier gold projects could be reflected in the share price. We will follow Searchlight and Callinex closely at this point in the future.
Appendix: Strathcona Mineral Services Limited, 2007
{letter}
Risk notice: GOLDINVEST Consulting GmbH offers editors, agencies and companies the opportunity to publish commentaries, analyses and news on http://www.goldinvest.de. This content serves exclusively to inform the readers and does not represent any kind of call to action, neither explicitly nor implicitly, and is not to be understood as an assurance of any price development. Furthermore, it does not in any way replace individual expert investment advice and does not constitute an offer to sell the share(s) discussed or a solicitation to buy or sell securities. This is expressly not a financial analysis, but an advertising / journalistic text. Readers who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between GOLDINVEST Consulting GmbH and its readers or the users of its offerings, as our information only relates to the company and not to the reader’s investment decision.
The purchase of securities involves high risks which can lead to the complete loss of the capital invested. The information published by GOLDINVEST Consulting GmbH and its authors is based on careful research. Nevertheless, any liability for financial losses or the guarantee of the topicality, correctness, adequacy and completeness of the articles offered here is expressly excluded.
In accordance with §34b WpHG and § 48f Abs. 5 BörseG (Austria) we would like to point out that GOLDINVEST Consulting GmbH and/or partners, principals or employees of GOLDINVEST Consulting GmbH hold shares in Searchlight Resources and therefore a conflict of interest exists. GOLDINVEST Consulting GmbH also reserves the right to buy or sell shares in the company at any time. Furthermore, a contractual relationship exists between Searchlight Resources and GOLDINVEST Consulting GmbH which involves GOLDINVEST Consulting GmbH reporting on Searchlight Resources. This is another clear conflict of interest.
