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 Fri Sep 18, 2020
Tracker: What's Next for Eskay Creek Mining Corp?
    Publisher: Kaiser Research Online
    Author: Copyright 2020 John A. Kaiser

Eskay Mining Corp (ESK-V: $0.840)

Tracker - September 18, 2020: What's Next for Eskay Creek Mining Corp?

Eskay Mining Corp was made a Bottom-Fish Spec Value rated Favorite at $0.215 on June 29, 2020 after CEO Mac Balkam cleaned up the balance sheet and raised $2.4 million to fund a major rethink of the SIB-Corey project in the Golden Triangle where efforts to find Eskay Creek 2 have been frustrated for decades (see Tracker June 29, 2020). The rethink initiative was launched in Q4 of 2019 when ESK brought Quinton Hennigh on board. He in turn recruited VMS experts John Monecke and John Dedecker to assist with a reinterpretation of the 25 km long property in the middle of a very prolific part of the Golden Triangle. This was a year after SSR dropped its 60% option on the SIB-Lulu portion after spending $8 million on a new approach based on the idea that the Coulter Creek Thrust fault coming from the east had decapitated the gold-silver enriched Lulu mudstone from the tilted VMS prospective Salmon River stratigraphy and displaced it westwards, an approach proposed earlier by Hennigh. Dedecker took a detailed look at the SSR drill data, confirmed that the subtle alteration on the SIB claim is indeed related to VMS style hydrothermal processes, and made the startling discovery that the Coulter Creek Thrust was backwards, rising from the west rather than the east and pushing younger Bowser Lake rocks over the Salmon River Formation. The past exploration goal was to find the Contact Mudstone which hosts the extremely rich 2.5 million tonne Eskay Creek deposit, but under the new Coulter Creek Thrust hypothesis this unit would be under the Bowser Lake sediments west of where all the drilling was done. The Lulu Zone mineralization was hosted by a "lower" carbonaceous mudstone unit into which fluids from a VMS feeder had bled laterally on their way to a seafloor vent at the Contact Mudstone unit (it is called "Contact" because it was buried by a post-mineral basalt flow) where something like the Eskay Creek deposit might have formed. So the potential for another Eskay Creek style deposit in the SIB-Lulu area just south of Skeena's property effectively remains untested. Once Dedecker figured this out, the question arose, how much else of the past exploration strategy was based on a misunderstanding of the geology? So in July 2020 Dedecker embarked on a program to relog and re-assay samples of the historic core stored in a warehouse, and then spent much of the summer at the SIB-Corey project visiting the known showings and remapping the geology. It turns out past exploration programs did not have a coherent understanding of the geology, and that the entire SIB-Corey project needed to be re-assessed, not just the SIB-Lulu area. This enabled ESK to raise an additional $3.4 million during the summer at $0.45 for hard and at $0.645 for flow-thru dollars. A decision was also made to fly a Skytem Mag-EM survey over the northern part of the property whose conductors were supposed to be the basis for a drill program, but bad weather prolonged this survey so that its final interpreted results will not be available until early October. IP surveys have also been done over selected targets but are only finishing now. Dedecker's digital compilation of the 30 holes drilled in 1995-96 on the Jeff and TV targets, gold bearing VMS style mineralized showings about 2 km apart, revealed that the past drill holes did not properly assess what appear to be stacked, east dipping lenses within a carbonaceous mudstone unit. A 3,000 m plus drill program began on August 21; a second rig was added in mid September when about 1,000 m had been drilled. The program is currently in a race against the weather with mid October projected to be the end of the season. Because the geophysical surveys took so long to complete Dedecker has designed a program of very small stepouts from the Jeff and TV zones in an attempt to establish their geometry and the geology of the area, which in turn will be used to calibrate the geophysical data for assessment in 2021 of new targets revealed by the Skytem survey. The company is not talking about the drilling program which will include some more aggressive holes in the 2 km segment between Jeff and TV, and, given the slow assay lab turnaround, we may not get a drill results report until late November. The north-south oriented footprint of the Jeff-TV zone is bigger than that of Eskay Creek, so there is room for a discovery hole during the 2020 season. But this summer's work will lay the foundation for a substantially bigger program in 2021 which may include deeper drilling in the SIB-Lulu area to test the revamped Coulter Creek Thrust hypothesis. Dedecker has also pointed out that field work highlighted other showings such as Spearhead, Tet, Cumberland and the intriguing C10 area which has a significant gold footprint that is not related to a VMS style hydrothermal system. Following the recent financing Eskay Mining Corp has 168.3 million fully diluted, which at $0.84 implies a $141 million value for the 100% owned portion, and $177 million for the 80% owned portion. An Eskay Creek clone would be worth CAD $4.7 billion today and under the rational speculation model that valuation is above the fair value channel for such an outcome, though for the 100% owned ground it is within the fair spec value range. Since Eskay Mining Corp has a meaningful exploration program underway at SIB-Corey, which will not exhaust the capital raised this summer, a Bottom-Fish Spec Value rating no longer applies. Accordingly effective September 18, 2020 Eskay Mining Corp is converted to a Fair Spec Value rated Favorite at $0.84. The Jeff-TV drilling has the potential to deliver a discovery hole, and will most certainly deliver a better understanding of the mineralization in this area. In the absence of flashy drill results the stock will be subject to end of year seasonal pressure. The degree that the stock price remains resilient will hinge on the new exploration potential that this summer's "rethink" grunt work has unveiled.


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