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HighGold Mining looking to breathe new life into exciting Johnson Tract Alaskan gold project

The company is a spin-out of the gold assets of Constantine Resources and started trading on Toronto's venture exchange on September 23

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Johnson Tract was advanced to pre-feasibility by established mining firms around a quarter of a century ago but has lain dormant since

HighGold Mining Inc's (CVE:HIGH) flagship Johnson Tract property in Alaska offers investors exposure to an already well advanced, high-grade gold exploration project.

And its location on native corporation Alaskan lands is more of a potential boon than a negative, according to the newly-listed exploration firm's chief executive Darwin Green.

The company is a spin-out of the gold assets of Constantine Resources (TSX-V:CEM) and started trading on Toronto's venture exchange on September 23 - one of just three new listings on the TSX last month and the only resource group.

Well-backed financing

The float was accompanied by a well-backed C$7.65 million capital raise for future exploration and Green says the company "turned away about as much as we took" in terms of new money in the financing, underscoring the excitement surrounding the HighGold story.

Supporting the raise was an unnamed major North American gold producer, which now owns 7% of the capital and renowned Canadian gold investor Rob McEwen, who has a 7% stake.

So what's all the fuss about? Well, it's not that difficult to see why Johnson Tract catches the eye.

Essentially, it's a project, which was advanced to pre-feasibility stage by established mining firms around a quarter of a century ago but has lain dormant ever since.

It was discovered by Anaconda Minerals in the 1980s and previous drill intercepts showed spectacular results such as 71.4 metres (m) at 20.9 grammes per tom (g/t )gold and 108.6 m at 10.4 g/t of the yellow metal. What's more it boasts high-grade copper and zinc too just to add to the  mix.

Covering around 21,000 acres, Johnson includes the original high-grade gold, silver, zinc, copper, lead deposit but also several exciting prospects along an impressive 12 Kilometres (km) strike length.

"It's very unusual to have something with this much meat on the bone and very clear exploration upside to it, to have sat there for so long," says Green, adding that HighGold has just wrapped up a 2,000 m drill program at the property, mainly aimed at confirming the results of these historic holes.

He explained how previous operator Westmin Resources in the 1990s had considered shipping ore from Johnson 900 miles away to its Premier mill in British Columbia to be mixed with another project’s ore in a bid to get Johnson producing as quickly as possible.

But in doing so Westmin had ignored other exploration opportunities near the project itself, says Green.

Other opportunities

When the other project was shut and the gold market went quiet for about a decade, Johnson Tract reverted back to the native corporation and no further exploration work was done.

"We see a much bigger opportunity that's really been left completely untested," says Green about Johnson, adding that HighGold’s aim is to potentially double, triple or quadruple the existing mineral resource (which currently does not conform to current reporting standards and stands at between 500,000 and 600,000 ounces of gold equivalent, based on historic drilling).

Green hopes to have an updated resource sometime in early 2020 with plenty of drill results news flow before then.  "That's going to be our game plan," he says.

And far from being a remote, 'middle of nowhere', type asset in Alaska, Johnson significantly sits just 15 km from the coast near Tidewater, which is good access for a mining project by any standards.

A road will need to be built but the short distance means low potential trucking costs.

Access to the sea and a port means that shipping base metal concentrates to smelters in Asia or Seattle will be easy too. The local landownership structure means it is written into law that road access and port easement must be granted to support mining, explains Green.

Indeed, Alaska's land ownership model is unique and means that since the land claim disputes were settled in the late 1970 and 1980s, the state has been carved up into 12 regional native corporations, in which the native people are shareholders.

Johnson Tract sits in Lake Clark National Park and is owned by one of these such corporations - the Cook Inlet Region Inc (CIRI), which in turn is owned by around 9,000 Alaskan native shareholders.

The ten-year lease terms agreed between HighGold and CIRI means they are partners in the project, with HighGold required to spend US$10 million on exploration. That is followed by a five-year development term to achieve a decision on whether to build a mine or not, then production for as long as a commercial operation can be maintained.

On completion of a feasibility study and a decision to construct a mine, CIRI has a one-time right to back-in to the project and take a maximum 25% stake. It will also receive net smelter royalties (NSR) of 2% to 3% on base metals and a gold price adjusted NSR royalty of between 2.5% and 4%.

A win-win situation

"We see it as win-win all the way across the board," says Green, who added that the Alaska regional corporations were "sophisticated" and "fantastic" groups to work with.

"I don't think you can do better in terms of social license than working with the native peoples on their lands to develop natural resources to the benefit of the native peoples."

Partnering in this way means the mining industry benefits the local people by providing them with money and jobs, he suggests, pointing to the success of other successful projects on Native Corporation Alaskan land like Red Dog -  one of the world's biggest zinc mines.

The Red Dog project, expected to run until 2031, was developed through an operating agreement between the major Teck Resources and the land-owner NANA. Another is Donlin Gold -  one of the largest, undeveloped gold deposits on the planet.

This security concerning land tenure and clarity on business tie-ups mean that projects in Alaska don't usually suffer the same issues that affect those in other parts of the world, where assets can be appropriated by governments.

That said, there have been problem cases, such as when environmental, and or permitting issues come to the fore, where the mining industry meets the natural world.

But Green isn't really expecting to encounter any problems like that at Johnson, which looks to be a modest underground operation with a small footprint.

It is worth noting that despite the current work focus at Johnson Tract,  HighGold isn't a one-trick pony and has another package of exciting North American projects in its portfolio - at Canada's premier gold camp: Timmins in Ontario.

Here the firm has three assets, including the Munro Croesus property, which spans 355 hectares and is home to the past-producing Croesus mine, which generated some of the highest grade gold mined in Ontario at the beginning of the 20th century. 

The firm also has the 8,000 hectare Golden Mile property and the 12,000 hectare Golden Perimeter project.

The aim is to do some groundwork in Ontario between now and Christmas ahead of potential drilling early next year. At the same time, HighGold aims to seek partners it can joint venture with for exploration on the Golden Mile and Golden Perimeter projects.

"It's a really nice project to be able to roll right into as we wrap up our summer program at Johnson," Green noted.

So newly formed HighGold has plenty of irons in the fire and some exciting workflow ahead. It could well be a resource company to watch over the coming year amid a bullish gold market.

Quick facts: HighGold

Price: 1.16 CAD

TSX-V:HIGH
Market: TSX-V
Market Cap: $46.4 m
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