Wallbridge Mining Case Study

Junior resource companies generally follow an S-curve over their lifetimes, and are recognized to have two distinct stages that provide the most opportunity for rapid growth, and hence profitability for investors.

As seen on the illustration below, the first opportunity for rapid growth in share price and investor value is during the exploration phase. It is during this time when news releases of large ore bodies or high- grade drill assays can cause investor sentiment to rise, and bring in speculators seeking to trade the momentum created. At this stage timing is critical, this is a speculation not an investment and has potential for high returns but carries high risk as well.

And typically, after that initial boost to share prices in the exploration stage, interest in the company tends to drop off as they enter the long process of taking a discovery through the process of defining a resource, developing a PFS, obtaining financing, and finally the construction of a mine. (9)

It can take a long time for these things to get accomplished, if they even do, and often take a total of ten years or longer. And as investor interest fades, after the short- term traders exit and the more impatient investors leave or forget about their investment the project often enters a period sometimes identified as an “orphan stage” where it is waiting for some catalyst to bring it to its full value. This is the second opportunity for high growth, high return with somewhat reduced risk when compared to the exploration stage.

Although Wallbridge Mining (WM) does have some properties earlier in the development stage, its primary focus is “Building for Sustainable Production and Exploration Driven Growth” (1), and its lead project focus at the present time is the Fenelon Project.

Wallbridge’s Fenelon Gold property is located in northwestern Quebec proximal to the Sunday Lake Deformation Zone (SDLZ) which hosts the Detour Gold Mine in Ontario, and Balmoral Resources’ gold deposits at Martiniere. The 1,052 hectare Fenelon Gold property hosts the Discovery Zone gold deposit and surrounding four km strike length of a gold-hosting secondary splay of the SDLZ.

Wallbridge is currently exploring and developing its high-grade Fenelon Gold Property in Quebec. At Fenelon Gold, in 2017, Wallbridge completed a positive prefeasibility study (“PFS”) and successive surface exploration programs that has demonstrated the resource expansion potential of the project.

The Fenelon Project is a perfect example of a project coming out of the “orphan stage”.  Wallbridge purchased the Fenelon Project from Balmoral Resources Ltd. In August, 2016. The terms of the purchase were a price of $3.5 million in cash and 200,000 shares of WM stock.

To illustrate the orphaned condition of the project, here is a photo of the small sample pit from the Balmoral ownership period at the time of purchase. (photo from PFS)

At the time of the purchase the Fenelon Project was well beyond the original discovery phase. As reported by Wallbridge at the time of purchase, Balmoral had previously done extensive drilling and sampling of the property,

 “A total of over 50,000 metres of drilling has been completed on the property and, significantly, two bulk samples have been mined and processed from the Discovery Zone deposit. In 2001, a 13,835 tonne bulk sample mined from a small open pit at the Discovery Zone was test milled at the Camflo mill in Malartic and returned 132,039 grams (4,245 ounces) of gold giving a reconciled head grade of 9.84g/t gold using a calculated recovery of 97%. A second bulk sample, mined from underground and also milled at Camflo was comprised of 8,169 tonnes and returned 80,731 grams (2,596 ounces) of gold giving a reconciled head grade of 10.7 g/t gold.” (2)

As part of their pre-purchase due diligence Wallbridge had reviewed the previous work done by Balmoral, and hired Innovexplo, Inc. to develop a PFS and 43-101 document.  Subsequent to the purchase Wallbridge immediately filed the 43-101, at that time the 43-101 listed Measured and Indicated Resource of 91,100 tonnes of ore at 12.97 g/T gold, containing a total of 38,000 oz of gold. (3)

Wallbridge proceeded to initiate a drilling program throughout 2017 while working on de-watering the flooded pit and early sample ramp system. The results of the 2017 drilling were summarized in a news release in December of 2017.

“Results from this initial year’s exploration drilling program have exceeded expectations and resulted in an expanded exploration target for the area near existing infrastructure and above 150 metres depth. Additional surface and underground exploration drilling as well as a 35,000 tonne underground bulk sample are planned for 2018. Mobilization for the underground program will be initiated upon receipt of final permits, which are expected this month.

In 2017 and since acquisition, Wallbridge has completed 33 drill holes totalling 6,348 metres in three surface exploration drilling campaigns at Fenelon. Drilling significantly extended existing zones and discovered several new parallel zones. Previously announced highlights included

FA-17-07 intersected three zones including 141.16 g/t gold over 7.06 metres in the Viper Zone;

FA-17-17 intersecting four zones including 311.08 g/t gold over 3.06 metres, also in the Viper Zone;

FA-17-26 intersecting two zones including 260.44 g/t gold over 7.02 metres, also in the Viper Zone; and

FA-17-27 intersecting 80.42 g/t gold over 4.73 metres in the Habanero Zone.” (4)

By the end of 2017, the Fenelon Project and drill results were outlined as shown

The focus of the Fenelon Project during 2018 was the development of a ramp system to access the mineralized zones, obtain and process a 35,000 tonne bulk sample (sample is trucked to the Camflo Mill at a cost of 1 gram/tonne) and the development of an exploration drift to allow for further drilling of the remaining target zones.

In December 2018 the company issued an update on the bulk sample program, including a 3D graphic of the underground development. As can be seen the access ramp infrastructure is well along, and several possible production stopes have been identified during the sample process. (5)

The results of the bulk sample were updated in February of 2019 (6) and the sample information is summarized in this table below

As can be seen in the table, the remaining ore from the 2004 sample was used to optimize the milling process, recovery rates on the first two mill runs were only 80%, but at the end of the 2^nd run and subsequent runs the recovery rates were in excess of 98% which is an outstanding rate.

Total ore processed from the 35,000 tonne sample is estimated to be between 21,000 and 24,000 oz of gold by the time the mill runs are completed.

“To the end of 2018, approximately 1,500 meters of underground development were completed, establishing four mining horizons and infrastructure required for exploitation of the first 100 vertical meters of the known deposit. The extensive development program was designed to establish all of the infrastructure required to reflect real operating conditions for a 400 tonne per day operation with the goal of de-risking the project and future operations. Further to understanding operating conditions and costs, establishment of this infrastructure up front allows for lower cost of capital in the subsequent phases” (8).

The Fenelon Project is an exciting pre-production phase project and continues to expand. On February 21^st ,2019 they released news that they had discovered a new zone beyond the previously known mineralization areas.

“Toronto, Ontario — February 21, 2019 — Wallbridge Mining Company Limited (TSX:WM, FWB: WC7) (“Wallbridge” or the “Company”) is pleased to announce continued positive drill results that have extended a known gold zone and have identified an entirely new gold zone with many similarities to the main deposit at its 100%-owned Fenelon Gold Property (“Fenelon” or the “Property”).”

With the first drill core of the 2019 drilling program Wallbridge announced on March 25^th that they had intersected 6 contacts containing visible gold in the new area 51 exploration drilling.

Toronto, Ontario — March 25, 2019 — Wallbridge Mining Company Limited (TSX:WM, FWB: WC7) (“Wallbridge” or the “Company”) is pleased to announce that the first hole of its 2019 surface drill program has intersected multiple visible gold-bearing shear zones and other abundant mineralized veins over an approximately 275 metre core length.  These multiple structures and gold occurrences confirm the recently-announced Area 51 discovery (see Wallbridge Press Release dated February 21, 2019) as a significant size target which increases the ultimate size potential of the gold system at its 100%-owned Fenelon Gold property (“Fenelon” or the “Property”).  Assay results are pending and will be reported when received. In addition, Wallbridge continues to achieve positive results from the underground drill program targeting the extensions of the other known zones at Fenelon. In the news release they have a new cross section of Fenelon Project, including the area 51 drill holes.

Of particular interest is the small area of the bulk sample (upper right corner) in relation to the entire project area, keeping in mind that each of the indicated shear zones extends up to 1 to 2 km along strike.

Wallbridge has announced 2019 plans that they have submitted a request for an additional large-scale sample to be processed, and they have initiated a drilling program of between 50,000 and 75,000 meters of drilling both underground as in-fill to further define the known zones, and above ground drilling to further expand the resource area.

Upon completion of the 2019 drilling and sampling programs an updated Resource and Economic Analysis is planned to support a production decision (TBD early 2020). If they proceed with production, they can continue to use local mills on a tolling basis without delaying production while a mill is commissioned.

Wallbridge is in a unique position among junior resource companies with their Fenelon Project. As they proceed with the bulk sample program, they are slowly building a ramp and stope system that can be placed into production as soon as permitting is obtained for production. The cash flow from the sample program is funding further resource definition.

One issue some investors may have with the company is the number of shares outstanding. The share count as of Feb 28, 2019 was 465.3 million shares (fully diluted). A private placement with Eric Sprott through his holding company was announced on February 20, 2019. (7) That placement is scheduled to take place in May 2019, and will add some operational funding for the company for 2019 drilling and operations.

Although the share count is reasonably high, it is held in large part by insiders with only about 50% held by retail investors so the share price is less volatile than it may be otherwise.

In my opinion they are positioned very nicely as a pre-production junior resource company.

“Fenelon Gold is an advanced stage project with potential for near-term production as drill intersections suggest considerable potential for resource expansion. Wallbridge has updated the resource at Fenelon Gold to incorporate additional drilling by the previous operator, completed a positive prefeasibility study, and completed surface exploration programs with very positive results. A 35,000-tonne Bulk Sample program commenced in the first quarter of 2018 and included significant underground exploration drilling. The Bulk Sample targeted gold grades ranging from 11 to 38 grams per tonne. Additionally, there was more than 16,000 metres of underground and surface exploration drilling planned which together with the planned ounces of gold production from the Bulk Sample has returned positive results to date. The extensive exploration program in 2019 is expected to increase our estimate of mineable material as well as mineral resources not only to the depths of 350 to 400 metres from surface but also along the four kilometres strike length of the gold-bearing structure at Fenelon Gold. An updated resource and a production decision are expected following successful results of the 2019 exploration program. The Company is well positioned to complete its planned 2019 program.” (8)

References

• March 2019 Corporate Presentation

https://www.wallbridgemining.com/i/pdf/3_Wallbridge-March-2019-FINAL.pdf

• August 2, 2016 News Release

https://www.wallbridgemining.com/s/press-releases.asp?ReportID=757871&_Type=Press-Releases&_Title=Wallbridge-Mining-Signs-Definitive-Purchase-Agreement-for-Fenelon-Gold-Make…

• August 4, 2016 News Release

https://www.wallbridgemining.com/s/press-releases.asp?ReportID=758174&_Type=Press-Releases&_Title=Wallbridge-Mining-Files-NI-43-101-Technical-Report-for-Fenelon-Mine-Propert…

• December 13, 2017 News Release

https://www.wallbridgemining.com/s/press-releases.asp?ReportID=810138&_Type=Press-Releases&_Title=Wallbridge-Identifies-New-Upside-at-Fenelon-Gold

• December 13, 2018 News Release

https://www.wallbridgemining.com/s/press-releases.asp?ReportID=841992&_Type=Press-Releases&_Title=Wallbridge-Provides-2018-Update-on-Fenelon-Bulk-Sample-and-Exploration-Prog…

• February 7, 2019 News Release

https://www.wallbridgemining.com/s/press-releases.asp?ReportID=844867&_Type=Press-Releases&_Title=Wallbridge-Produces-Over-13300-Ounces-To-Date-From-Fenelon-Bulk-Sample

• February 20, 2019 News Release

https://www.wallbridgemining.com/s/press-releases.asp?ReportID=845580&_Type=Press-Releases&_Title=Wallbridge-Announces-7M-Private-Placement-with-Eric-Sprott

• March 22, 2019 MD&A for year ending December 31, 2018

https://www.sedar.com/CheckCode.do

• https://www.karlschempp.com/documents/How%20to%20profit%20from%20buying%20mining%20stocks.pdf
•  March 25, 209 News release

https://www.wallbridgemining.com/s/press-releases.asp?ReportID=847440&_Type=Press-Releases&_Title=Wallbridge-Intersects-Multiple-Structures-with-Gold-Mineralization-in-New-A…

Disclosure: Author is long WM at time of publishing and may buy or sell at any time without notice. 

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