With more than 70 past producing gold mines and no less than five gold deposits of 1 million plus ounces, it is little wonder Japan is attracting interest from the mining sector. But the fact that almost all the country's gold mines were closed during the Second World War, means the full potential has not been fully assessed or realized.
Japan Gold Corp (TSXV:JG) (OTCMKTS:JGLDF) is hoping to change all that. In 2020, the group struck an extensive exploration tie-up with mining titan Barrick Gold Corp (NYSE:GOLD) (TSE:ABX) for 29 of Japan Gold's 31 projects. We caught up recently with CEO John Proust (JP) and asked him how the company has evolved and where it is now.
PROACTIVE: It is well documented that you are a first mover in Japan. Can you briefly outline your history and the scale of the opportunity you believe you have?
John Proust: Japan Gold is a unique mineral exploration and development company. Our goal is to reactivate the gold mining industry in Japan, a country with very low geopolitical risk, which has been under-explored and inactive since the government-imposed closure of all gold mines in 1943 during the Second World War. A 2012 change in the mining law in Japan allowed foreign companies the ability to conduct activities in Japan and we were the first company in the world enter based upon this change. To be clear, we were there four and a half years before another company came in and acquired prospecting rights.
We were able to access the full country database and evaluate all the gold provinces in Japan specifically focusing on the 64 closed gold mines that had been closed by the government in 1943 -and never re-opened. That allowed us to look at those 64 mines and determine the specific type of each gold mine and the potential of the surrounding areas.
We were looking specifically for one type of historic gold mine, low sulphidation epithermal gold mines. Simply put, those are mines with quartz veins that contain gold and alluvium. The analogy that we were looking at was the only active gold mine in Japan today, Sumitomo Metal Mining’s’ Hishikari Gold Mine. The Hishikari Gold Mine was discovered more recently in 1981 by the Metal Mining Agency of Japan, a Japan Government agency which was the only explorer in Japan at that time. Hishikari is one of the highest grade, tier one, gold mines in the world operating today and has produced, since starting operations in 1985, over 8 million ounces of gold at an average grade of between 30 and 40 grams per tonne (g/t) with significant reserves remaining. Japan Gold is looking for similar opportunities.
For the first two years, we were able to study the gold provinces of Japan and the closed mines. Through that same time period we were also able to provide input to the Japanese government on the permitting process as they were designing the new permitting process; fortunately, they included all our suggestions. By the end of our first two years in Japan we had evaluated the prospective areas of the country and we had a permitting process that was one of the best permitting processes in the world. From there, we went ahead to apply for key areas that we had identified and currently we have acquired 31 projects across Japan, dominating the major gold provinces in the country.
Because of our aggressive activities in Japan, we started attracting the attention of the global mining community and several large mining companies and mid-tier producers took a detailed look at the gold mining opportunity in Japan and evaluated the Japan Gold portfolio.
The first mining company that became involved with Japan Gold was Goldcorp. Goldcorp had independently come up with the idea that Japan would be a good exploration destination and when they determined Japan Golds prominent position, they acquired an equity stake in Japan Gold and were granted the right of first refusal to be our joint venture partner on two of our 31 projects.
Shortly thereafter, Newmont acquired Goldcorp. Newmont already had a relationship with Japan Gold and recognized the Japan opportunity, so they were very pleased to inherit the Goldcorp agreement. Newmont currently owns 13% of Japan Gold and inherited those joint venture rights of first refusal. So that was our first corporate transaction with a major mining company.
Subsequently, we realized that we would need large partners to advance all 31 projects. So just over a year and a half ago we initiated a competitive process for a countrywide alliance partner. Five companies competed for that spot, Newmont, Barrick and three other companies and ultimately, we selected Barrick to be our alliance partner.
PROACTIVE: Can you outline what the Barrick Alliance is and what it means for the company's development?
JP: Three important points in the Barrick Alliance. First, we have the freedom to release news when we deem it appropriate regarding the Barrick Alliance activities or results, which is very important for a junior exploration company. The second point is that Barrick is looking at all 29 projects, the other two being excluded because of the relationship with Newmont. The third point is we wanted Barrick to solely fund the evaluation and advancement of all 29 projects.
Another important term of the Barrick Alliance is that Barrick only has 2 years, commencing on February 23, 2020 to complete their initial evaluation of the 29 projects.
Unfortunately, the COVID 19 pandemic occurred shortly after the formation of the Barrick Alliance. Japan Gold quickly designed a COVID 19 operating plan, and we have strictly adhered to it since without incident.
Fortunately, Japan Gold is fully operational in Japan with our own geologists, field assistants, permitting group and drilling division with 4 company owned diamond core drill rigs. Barrick really appreciated this capability, with Japan Gold being fully operational in Japan they did not need to build their own teams from scratch. This in country operational capability has allowed the Barrick Alliance to complete our substantial work programs, pandemic notwithstanding and come up with meaningful results.
PROACTIVE: How are you evaluating all these projects?
JP: The Barrick Alliance is completing two very large regional programs that impressed investors due to the sheer size as they cover the 29 projects totaling approximately 1,900 square kilometers. The regional programs consist of two components. The first is geochemistry, where our teams are walking up all the streams and catchments and collecting stream sediment samples and rock samples. These samples are then assayed for gold and multiple elements. We also do BLEG analysis, which stands for Bulk Leach Extractible Gold analysis, where we identify the naturally occurring background level of gold in all the 29 projects so that we can find areas within the projects where there is anomalously high gold.
The second component is geophysics. In Japan, a type of geophysics that you can do from the ground, called gravity, is very successful. Many of the major past producing mines, and the currently producing Hishikari mine are found on the edge of a gravity high. We are completing geophysics – gravity surveys - across all 29 projects.
When you overlay these large geochemical and geophysical data sets, and identify gold anomalous areas coincident with gravity highs, those become prospective areas of high priority. That leads to making new discoveries.
What I am very pleased and proud about is that as operator of the Barrick Alliance, our Japan Gold team has been incredibly efficient and effective over the last 14 months covering many of the projects with geochemistry and geophysics. We plan to have all projects covered by geochemistry in July, with the final geophysical gravity surveys to follow. With the geophysical gravity surveys, we use outside international contractors but due to the pandemic we had to pivot and use domestic contractors Sumitomo and JX Nippon and they are doing an excellent job.
The speed and efficiency with which Japan Gold has been able to evaluate the Barrick Alliance property portfolio across the major gold provinces of Japan, has not gone unnoticed. Barrick has commented that Japan Gold is one of the very best junior companies that has been able to operate efficiently through the pandemic, safely meet our work programs and come up with meaningful results.
PROACTIVE: What can investors expect this year?
JP: Two things. Number one, the Barrick Alliance. Japan Gold will regularly report on the progress of the Barrick Alliance projects evaluation. We are well into the second year of the Barrick Alliance 2-year evaluation phase and by the end of the second year Barrick must select which projects they are going to advance. If a project does not meet the Barrick criterion there are several other mining companies that would potentially like to be the partner on those projects and Japan Gold can use the data collected in the Barrick Alliance to advance new potential partnerships.
This year the Barrick Alliance is completing the evaluation of 29 projects and this is essentially a free 'look-see' across our portfolio that allows Japan Gold to better understand our assets. We look forward to the evaluation being completed and the Barrick selection going forward. The next stage of the Barrick Alliance advanced exploration should include comprehensive drilling programs and potentially making discoveries.
If Barrick decides to advance a project, they earn a 51% interest when they fund and complete a pre-feasibility study and when they fully fund and complete a bankable feasibility study, they can earn a 75% interest in the project. Japan Gold is fully carried through the completion of a bankable feasibility study. Japan gold would retain a 25% stake in the project and then consider working with Barrick to identify the financing for our 25% share of the mine build or seeking the financing elsewhere.
Number two. Japan Gold has two projects that are not included in the Barrick Alliance, as Newmont has the right of first refusal to be our joint venture partner on those projects. Those two projects are our most advanced projects in the country. We have done a lot of work on the two projects with input from a technical committee we have with Newmont and we have spent approximately $16 million to date. We have achieved with very good results, identifying many prospects and demonstrating that there is great potential on both of those projects.
So, we are at a point now, where we are considering the joint venture route. This would have a joint venture partner spending their capital to earn an interest in our projects. Regardless of how we proceed, this year we will go ahead with very active, focused exploration programs advancing prospects with the drill bit, with the drilling starting in June.
PROACTIVE: How do you bring modern exploration techniques to these areas in Japan?
JP: We made the decision early on to become fully operational in Japan. We have our own geologists with significant in-country and international experience, field assistants, permitting group and a drilling division of 22 people utilizing 4 company owned diamond core drill rigs. We can move ahead on our own schedule with cost effective exploration programs. We also have a relationship with three universities in Japan and key outside contractors, to help us advance. So that's how we could be very nimble and cost effective.
PROACTIVE: You mentioned earlier that you felt you dealt nimbly and effectively with the coronavirus (COVID-19) pandemic?
JP: Yes, we designed a protocol plan right at the very beginning of the COVID-19 pandemic, got good input from Barrick and strictly adhere to the plan. We have had no issues and have completed our programs and where we have had to, modified our activities to fit the pandemic requirements.
PROACTIVE: Is there a specific message about the company you want to get out there to investors?
JP: The market appetite for junior explorers is generally focused on the immediacy of the drill bit. We recognize that, but Japan Gold is unique. We have gone into Japan with a thesis of evaluating a whole country that has been under-explored. We have assembled a property portfolio of over 2,000 square kilometers of the best mineral rights across all the main gold provinces. In order to come up with the best results, we have advanced in a very careful, methodical way, with significant input from the two largest gold producers in the world. Our goal is to restart the gold mining industry in Japan.
We have a technical committee with Barrick. We have a technical committee with Newmont. And while it may be taking us a little bit longer, the prospects and the opportunity for Japan Gold are as good or better than anything else in the world in terms of a company at our stage. In addition, given the geopolitical safety and prospectivity that the Japan setting provides with the intersection of tectonic plates, of volcanic activity and faulting, and the fact that one of the highest-grade tier one gold mines in the world is located there, makes investing in Japan Gold compelling.
PROACTIVE: Are you a potential acquisition target?
JP: We are capable of exploring, developing and mining in Japan. We have significant Japanese representation on our board and senior management team, with representatives having previously held senior positions at Sumitomo Corporation and Sumitomo Metal Mining Co Ltd. Japan Gold will likely become a pipeline of projects where some will proceed with Barrick, others advance with additional joint venture partners and some we may develop ourselves. In amongst all of that, I could certainly see a large mining company trying to make a bid for us because there is just too much opportunity in Japan. The Japan Gold portfolio offers a nice addition to large mining companies by providing geopolitical safety and high-grade gold mining potential.