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Kaiser Watch January 19, 2023: A James Bay Area Play Tipping Point?

Posted: Jan 19, 2023JK: Kaiser Watch January 19, 2023 with Jim Goddard and John Kaiser
Published: Jan 19, 2023KRO: Kaiser Watch January 19, 2023: A James Bay Area Play Tipping Point?
Kaiser Watch is a weekly 15-30 minute audio show produced by KaiserResearch.com with Jim Goddard and John Kaiser discussing the junior resource sector. The show has three parts: the first is a general topic, the second discusses developments involving the KRO Favorites which as of January 1, 2022 are no longer exclusive to KRO members, and the third is a peek inside the members only KRO Bottom-Fish Workshop. KRO is transitioning into a Do-It-Yourself research platform that covers all Canadian and Australian resource listings and which also features a Bottom-Fish Workshop where John Kaiser highlights juniors with solvable "missing pieces". Companies that graduate from the Workshop may become part of the Annual Favorites collection whose profiles and related commentary are unrestricted for non-members. Visit the KRO Favorites Dashboard for quick access to all the unrestricted Favorites related content. KRO is not sponsored or compensated directly or indirectly by public companies. The business model is based solely on membership fees in the form of a USD $450 Annual Individual Membership that at some point will increase substantially to reflect KRO's shift to a research platform. However, when the change happens active members will be grandfathered to renew indefinitely at the current rate provided they maintain a continuous paid membership. Kaiser Watch is available at Kaiser Research YouTube and as a Podcast downloadable from KaiserResearch.com. Each episode will be made available through the publication of a Kaiser Media Watch blog report which will provide links to specific questions and include supplementary graphics. All episodes will be archived at Kaiser Watch.

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Kaiser Watch January 19, 2023: A James Bay Area Play Tipping Point?
Jim (0:00:00): Eskay Mining provided an update for last year's work in the Scarlet Ridge area. What are the implications for an Eskay Creek 2 discovery?

Eskay Mining Corp announced on January 18, 2023 the results for the first 15 holes in the Scarlet Ridge area which create hope that the Eastern Anticline at the northern end of the Eskay property just 7 km southeast of Eskay Creek 1 has potential to host a similar gold and silver enriched VMS system. This area has seen little historical exploration which was focused on the main Eskay Anticline, immediately south of what is now Skeena's Eskay project and is called the Sib-Lulu area where SSR spent $7.7 million between 2017-2018 before dropping out, and farther south in what is now the TV-Jeff area.

Unfortunately none of the results reported for the Scarlet Ridge area include anything resembling hole 109, or even the 22 Zone to the southwest where Murray Pezim's Calpine drilled first before the 1 km stepout got lucky. The holes in the Scarlet Valley area for which assays were reported were less than 5 m intervals with gold below 1 g/t though silver grades were impressive at 12-96 g/t (0.5-3.0 opt). The company now views this mineralization is distal to the Tarn Lake-Scarlet Knob area about 3 km to the southwest.

The Tarn Lake-Scarlet Knob area was drilled later in the season and only Tarn Lake got any holes of which assays have been received for 15 holes. Of these 3 were deemed significant enough to be worth reporting in Wednesday's press release. Hole 10 had the best interval of 5.43 m of 4.1 g/t gold and 98.3 g/t silver. Eskay Mining did not say how many holes are still pending. A drill plan showing labeled locations and traces for the Tarn Lake holes was not provided in the press release though one was for the Scarlet Valley holes to the north. Leapfrog 3D images were provided for some of the Tarn Lake holes but these do not create a sense that a significant zone is emerging.

The Tarn Lake and Scarlet Knob targets sit across an 850 m wide portion of the Bruce Glacier which peters out to the north towards the Scarlet Valley area. Both areas yielded good gold and silver values from surface grab samples, with the best gold values on the eastern side in the Scarlet Knob area. The Scarlet Ridge to Tarn Lake area is underlain by the Eskay Rhyolite which hosts Eskay Creek 1 and is cut by a series of east-west andesite dykes interpreted as feeder structures for the stockwork and replacement style mineralization present at surface. John Dedecker believes Tarn Lake and Scarlet Knob are part of the same system under the glacier.

The results for the Scarlet Ridge area qualify as "encouraging" which means Eskay Mining plans to return in the summer to delineate these zones. The company is currently investigating if it can drill through the glacier. I downgraded Eskay Mining from a Fair Spec Value rated 2022 Favorite to my 2023 Bottom-Fish Collection, a move that the latest results vindicate. The junior drilled 29,500 m in 2022, much of it the TV-Jeff area where it would also like to return in 2023. We will find out how much most of this work cost at the end of January when the 9 month November 30 financials are due.

While I have Eskay Mining in my 2023 Bottom-Fish Collection, the stock chart is not yet showing signs of a bottom. In terms of the rational speculation model, this project, which I now treat as still being at the target testing stage in search of a major discovery, has an implied value of $176 million which represents poor speculative value for even a $2 billion future outcome. I would consider bottom-fishing after we learn what the balance sheet looks like, see how the market reacts and how CEO Mac Balkam will fund whatever the 2023 summer program will be. After March 8 there will only be 2.2 million warrants left at $3.40 from last year's flow-thru financing, so in terms of a warrant overhang Eskay Mining will be very clean. By Q2 of this year we will know if 2023 is indeed shaping up as a better year for the resource juniors, especially if gold remains strong. But right now there are cheaper and more timely bottom-fish to chase.

Eskay Mining Corp (ESK-V)

Bottom-Fish Spec Value
Eskay Canada - British Columbia 2-Target Drilling Au Ag Cu Pb Zn

Eskay Drill Results for Scarlet Ridge Area

Drill Plans for Scarlet Valley and Tarn Lake areas

Relative Locations of Scarlet Valley, Tarn Lake & Scarlet Knob targets

Implied Project Value Chart for Eskay Mining
Jim (0:06:54): Why was Patriot Battery Metals halted in late trading on Wednesday?

Patriot Battery Metals was halted around noon west coast time January 18, 2023 pending a news release. Since the company at $8 with 132 million fully diluted already has a $1 billion plus valuation and has drilled 100 holes into the CV5 pegmatite of its Corvette project in Quebec's James Bay region, I wasn't expecting assay results. I also wasn't expecting a bought deal financing because the company had raised $20 million at $13 in September and another $4 million with its ASX listing IPO. The next important milestone is a resource estimate for the CV5 pegmatite which sets the stage for economic studies but that won't happen until Q2 at the earliest.

A more plausible reason for a mid market halt in the current circumstances is that the company had received a takeover bid or perhaps a major financing offer at a premium to market from a strategic investor. For example, Rio Tinto has made no secret about being interested in the future of lithium supply, and the James Bay region is shaping up as a world class region. I don't think Patriot would consider a farmout offer as happened in the early days of the 1990s diamond boom in the Northwest Territories because the capital markets for major discovery plays are so much more evolved these days.

A negative reason for such a halt would be the arrival of a lawsuit challenging Patriot's title to the Corvette project. There is an adage that no world class discovery is real until a lawsuit has been filed. Another reason could be that a First Nations group has secured an injunction against further exploration work, something that is a risk factor in Canada, though not so much in Quebec where First Nations groups are much more involved in commercial activity than in northern Ontario.

As it turns out, none of these explanations apply because the news was that the best hole yet had been received for the Corvette project. The CV5 cluster which includes CV1 and CV6 has been traced over a 2.2 km strike length. Over 100 hundred holes have been drilled into the CV5 cluster, but on January 18 Patriot reported results for holes 67-83 which included several holes at the northeastern end of what technically is the CV1 pegmatite of which #83 yielded 156.9 m of 2.12% Li2O, including a sub-interval of 25 m of 5.04%. At $30/lb lithium carbonate that 5% interval has a rock value of $8,178 per tonne, while the broader interval at 2% has a rock value of $3,271 per tonne. If you want to use $10/lb as a long term price, dividing those rock values by 3 still leaves impressive figures.

The latest results represent a substantial thickening and enrichment of the spodumene zone at the northeast end. Between hole 17 and 83 there is a 250 m segment of high grade, wide pegmatite. A lake which tracks the linear trend of the CV5 cluster obscures at least another 2 km of potential strike extension at the end of which is the CV4 outcrop on the north shore that has not been drilled. A 100 m stepout in hole 93 is described as containing 52.2 m of spodumene.

If we do a back of the napkin tonnage footprint calculation where we assume 2 km of 50 m width and 200 m downdip extension with a 2.6 specific gravity, we end up with 52 million tonnes of open-pittable rock generally grading at least 1% Li2O which is $1,636 rock. With the strike doubling potential the market can dream of a 50-100 million tonne target. By Q3 of 2023 we could have a resource estimate which defines real numbers, an example of how quickly a world class near surface pegmatite can be delineated. I'm not sure the stock needed to be halted with an hour of trading left, but nothing grabs the market's attention better than being halted for an intersection that is the best yet and not an infill hole.

Patriot Battery Metals Corp (PMET-V)

Unrated Spec Value
Corvette Canada - Quebec 3-Discovery Delineation Li

Map showing main lithium deposits in James Bay Region

Geology Map for Patriot's Corvette Project

Pegmatite Locations within Corvette Claim Block

Drill Plan for CV5 Cluster

Tables for CV5 Cluster holes 15-56

Tables for CV5 Clsuter holes 57-83

Implied Project Value Chart for Patriot Battery Metals
Jim (0:14:34): Does the Patriot news have any implication for 2023 Favorite Brunswick Exploration?

Whenever a junior in a region delivers new and better results than previously known, it provides a powerful boost for area play psychology and in this regard Brunswick Exploration is particularly well positioned to benefit from the latest news by Patriot Battery Metals. I have Brunswick as a Fair Spec Value rated 2023 Favorite because the junior has been assembling land packages with LCT pegmatite potential since early 2022 when Bob Wares first wondered if he was too late for the lithium pegmatite hunt in Canada. It turns out he wasn't. Bob, his CEO Killian Charles and other members of this team have been going through the Canadian assessment archives digging up records of pegmatites encountered in the course of a century of exploration for base and precious metals deposits.

To their surprise much of the land with recorded pegmatite bodies was still open. Brunswick has staked claim packages in Atlantic Canada, Ontario, Quebec's James Bay region, and, just this week, 80,000 ha in Saskatchewan - most of the so called Trans-Hudson claims are within a triangle bounded by Flin Flon, La Ronge and Southend within which bottom-fish rated Searchlight Resources scooped the Jan Lake pegmatite field late last year when it came open. It isn't obvious that these will be LCT type pegmatites, but there is no evidence anybody ever tried to assess their potential, so who knows.

The stock took a small hit at the start of 2023 when Brunswick provided an update which reported that it has downgraded the potential of its Atlantic Canada prospects, the North Shore prospect on the St Lawrence, and the Pontiac area south of Val D'Or. This was accomplished by putting boots on the ground armed with XRF guns to see if any of the reported pegmatites kicked rubidium, meaning they were potentially LCT type, and visibly large enough to be worthwhile targets. In New Brunswick and Nova Scotia it turned out that not much was visible, meaning a lot more work to identify worthwhile drill targets is required. And at North Shore sampling did not show promising lithium values, as was the case at Pontiac. But at the Hearst project in Ontario, which they first staked in April but did not announce until October because it took that long to option an inlier claim, they have some serious size pegmatites they will be drilling by early February.

The biggest coup, however, was when Bob as an Osisko founder used his connections to secure 90% options on the Anatacau and Plex projects from Osisko Developments which inherited them when Osisko Gold Royalties merged with Andre Gaumond's Virginia Mines. The Corvette package was originally owned by Osisko which optioned it to Patriot in 2015 because Dave Hodge wanted to jump onto the Lithium Mania 1.0 bandwagon. Patriot's predecessor never got much done because lithium prices tanked in 2018 and did not revive until 2021 when Australians adopted the twice rolled back junior.

Andre Gaumond was never interested in lithium pegmatites but the claim packages he staked for their greenstone hosted base or precious metals potential typically straddled that portion where evolved pegmatites show up. Back then Francois Goulet was a junior geologist for Virginia and he recalls how Andre absolutely forbade the crew to waste time and money collecting samples from the bare ridges where they preferred to sample because there were no mosquitoes or bush but which Andre knew were pegmatites that never hosted gold or copper.

In late November Brunswick announced the Plex and Anatacau deals which are not cheap, but with the machine like method Brunswick developed in 2022 these will very quickly reveal any lithium pegmatite potential this summer. In the case of Anatacau that claim package includes a claim that adjoins to the east of the Cyr pegmatite which Paul Matysek's Lithium One delineated in the early 2010s before being acquired by ASX-listed Galaxy which ultimately merged with Allkem, currently permitting the proven and probable reserve of 37.2 million tonnes of 1.3% Li2O. On January 13, 2023 the Canadian federal government gave approval for Allkem to develop the Cyr project, though to go ahead the Quebec provincial government must also approve the project.

Galaxy had apparently intersected lithium enriched pegmatite at the eastern end of its property within 100 m of the Anatacau project but never followed up. Bob Wares thought that was strange but was happy to option Anatacau which will be drilled in late February and could have an extension or repeat of what is now called the James Bay project. In a curious turn of events Allkem came knocking on Osisko's door in early January to inquire about the Anatacau claims, and was surprised to learn they were too late. Were they just getting around to tying up a loose end that didn't really matter, or were they asleep at the switch, allowing Brunswick to snag a play will be be quick and easy to make or break with a Q1 drill program?

The Patriot news at Corvette is most relevant to the Plex project which straddles the same greenstone belt that hosts the Corvette trend, except it begins where the southwest-west trend inflects into a northwest-west trend. Being part of the Virginia land package it has never been assessed for its pegmatite potential and clearly does not have as much outcropping as the Corvette area or Patriot would have begged to option that also from Osisko. Francois Goulet who ran Harfang Exploration for Andre Gaumond until late 2021 is now Brunswick's exploration manager for Quebec with the task of figuring out all those ridges he was forbidden to prospect more than a decade ago. Brunswick finished 2022 with $10 million working capital so does not need to finance during H1. With potential results flowing from Hearst and Anatacau in late Q2, the market will be primed to see what the western extension of the Corvette trend yields. The main significance of the latest Patriot results beyond helping its stock price higher is that they elevate the market's perception of the James Bay region's potential to a new level. That news may be the tipping point that turns the James Bay region into an area play where everything gets staked up regardless of the relevance of the geology for LCT type pegmatite emplacement, and a combination of Australian, ex-cannabis and Canadian capital floods into James Bay projects. If this turns out to be true, Brunswick, which has been using geology and archival research to drive its staking and optioning strategy, should become a major target of speculators looking for the next CV5 discovery by an early stage junior.

Brunswick Exploration Inc (BRW-V)

Fair Spec Value
Anatacau Canada - Quebec 2-Target Drilling Li

Location of Brunswick's Osisko-Plex and Midland-Mythral Options

Detail Map of Plex and Mythral Projects

Map of Anatacau Option and Allkem's James Bay project

Implied Project Value Chart for Brunswick Exploration
Disclosure: JK owns shares of Brunswick Exploration; Brunswick is a Fair Spec Value rated 2023 Favorite; Eskay Mining was a Fair Spec Value rated 2022 Favortie and is now a member of the 2023 Bottom-Fish Colelction; Patriot Battery is unrated

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