“The ice is now retreating.”
That doesn’t mean that Greenland is easy now, but with a little bit of judicial planning, assets can be acquired that offer real economic potential.
So it is with Alopex.
The company is focussed on the acquisition of known gold occurrences in south Greenland, where the logistics are simpler, and in particular on the Nalunaq project, where there is a known resource.
“The largest challenge we face is weather and services,” says Olafsson. “But everything else is manageable. The access is good – we have open sea access. All the big discoveries have come from assets similar to Nalunaq.”
Funding process succcessful
Any investors who think they’ve heard this story before are partly right. In days of yore Nalunaq used to be held as a secondary asset by one Angel Mining PLC, a London-listed company that never quite made it off the blocks, focussed as it was on the Black Angel zinc project, which is now in private hands.
But Nalunaq is different. It hosts a high-grade NI43-101 resource of 263,000 ounces of gold grading 18.7 grams per tonne, and historically produced over 350,000 ounces of gold at grades of upwards of 15 grams as part of Crew Gold.
Olafsson is mindful of the history, which has its good points and bad. But one thing he was clear about – he was going to start afresh.
“Many people would have done an RTO,” he says. “But we want to build a company with a clean structure. We raised capital in Canada, Iceland and Zurich.”
He describes the funding process as successful, and says that of the meetings he went into, 80% converted into an investment.
That’s not a bad hit rate, and testament to two things. One, there’s life in the mining markets now in a way that there wasn’t 12 months ago. And two, that the quality of the assets, based around Nalunaq, has real potential to draw in investment.
Accordingly, Alopex came to the Venture Exchange in July following a C$6.7mln raise at C$0.50 per share, giving it a punchy market capitalisation on debut of just under C$24.8 mln.
The shares are currently trading at C$0.59 on admittedly small volumes, as Olafsson begins to step up marketing in Europe.
And it’s a compelling tale he has to tell.
“Nalunaq was discovered in 1994 and brought into production in 2004,” he says. “But Crew did no exploration after they declared first production and that got us interested.”
As a geologist Olafsson got to thinking that if he could locate the high grade structure that Crew had been mining on the other side of the mountain from where they’d been mining it, then he could make a strong argument for continuity and work back from that.
And so it proved.
“We managed to find the vein on the other side of the mountain,” he says. “In thickness it’s extremely high grade, sometimes as high as 4,000 grams per tonne.”
If that sounds high, then it’s worth remembering that Crew’s average production grade ran at around an ounce, although there was significant dilution along the way. But that in itself is interesting, as Olafsson reports a thick layer of pulverized mineralised material lying on the floor of the mine grading 15 grams per tonne.
More broadly, SRK Consulting has stated that the overall exploration potential at Nalunaq stretches to 1.2 mln ounces assuming continuity of grade, and that is a lot of high grade ounces close to the sea.
“We need to confirm it,” says Olaffson. “We’re drilling for structure. The key is finding the quartz vein, finding the structure to prepare ourselves for underground development.”
That exploration work will account for about C$3mln-C$4mln of the money raised at listing, leaving some room for manoeuvre afterwards.
“We’re financed for at least 18 months,” says Olafsson.
Resource update in two months
There will be a resource update within the next two months, although the nature of the mineralisation means that a detailed inferred resource is unlikely.
Looking slightly further ahead, Olafsson reckons it will take something of the order of US$20mln-US$30mln to get the project into production.
If that doesn’t seem like much for a million ounce-plus mine, then recall that in the days when Crew was running it, operating costs ran at between US$300 and US$600 per ounce, and that harbour, road, plant and even parts of the mine are already in place.
That plant can be restored relatively easily and there’s lots of free gold, meaning simple gravity circuits will be enough to ensure recovery.
“It’s about execution, logistics and resources,” says Olafsson.
So, any good news from Nanulaq will likely be well received by a market already primed for success. And upcoming exploration results on the wider portfolio are only likely to intensify interest.