Precipitate Gold Corp. holds district-scale land positions in Newfoundland and the Dominican Republic. The company is a junior gold exploration company focused on assets in both the Dominican Republic and Newfoundland, Canada. The company’s strategic and prospective project portfolio provides exposure to landholdings in active and desirable regions, including two projects adjacent to prominent operations.
Matt Gordon caught up with Jeffery R. Wilson, President, CEO, and Director, Precipitate Gold. Jeff has 25 years of experience in the mineral exploration and mining investment industry. Mr. Wilson brings to Precipitate Gold a wealth of contacts throughout the investment community including institutional investors, retail brokers, investment bankers, mining analysts, and private investors. During his career, Mr. Wilson has been involved in numerous equity financings, ranging from IPOs to private placements and syndicated brokered financings. He began his career in the early 1990s as an Investor Relations Manager and eventual Director of two public companies, namely Welcome Opportunities Ltd. (which was bought out by Endeavour Mining Capital in 2002) and Aquiline Resource Ltd. (which was bought out by Pan American Silver in 2009). In 2005, Mr. Wilson was involved in the formation of Silver Quest Resources Ltd., which was bought out in 2012 by New Gold Inc. Prior to Precipitate Gold, Mr. Wilson was Vice President of Corporate Communications at Geologix Explorations Inc.
Company Overview
Precipitate Gold Corp. has assets in Newfoundland, Canada, and the Dominican Republic. In Canada, the company owns the Motherlode asset that features 11 historical mineral occurrences, including 8 gold showings with grab samples up to 25g/t gold within the Burin Peninsula of southern Newfoundland. In the Dominican Republic, the company has the Pueblo Grande asset, which is located adjacent to the world-class Barrick Gold-operated Pueblo Viejo mine, along with the Ponton assert and the Juan de Hererra asset. The company owns all its property assets 100% or via option rights to acquire 100% ownership. It is listed on the Toronto Stock Exchange (TSX-V: PRG), and the OTC Markets (OTCQB: PREIF). It was founded in 2011 and is headquartered in Vancouver, Canada.
The Barrick Gold Agreement
In May 2022, Precipitate Gold received US$5M cash and 3% NSR (Net Smelter Return) from Barrick Gold Corp. for relinquishing non-core areas of the Pueblo Grand Project in amendment to the ongoing exploration earn-in agreement. In order to earn a 70% interest in Precipitate’s Pueblo Grande Project, which is surrounded by Barrick Gold’s Pueblo Viejo mine site, Barrick would need to spend $10M over six years and provide a PFS (Preliminary Feasibility Study) at the end of the six-year term. According to Precipitate gold, this is a highly aggressive spend and commitment in a relatively short amount of time for any major company to get to a PFS. Notably, Barrick Gold’s Pueblo Viejo is one of the top five largest gold mines in the world.
There are annual thresholds where Barrick Gold would need to spend a certain amount of money each year of the agreement. Precipitate Gold anticipates that Barrick Gold is going to fulfill the current year’s obligations which would entail spending an additional $1.5M between now and the spring of 2023. This is expected to include some drilling as well. Precipitate Gold is currently awaiting the full details of the plan and execution. So far, all the indications show that Barrick Gold will go ahead and fulfill the current obligations of the agreement and continue to explore the project, moving it forward.
Notably, the $10M can be expended in multiple ways. The only stipulation is the minimum meterage in terms of drilling at 7,500m, but outside of that, the funds can be spent in different ways. Based on conversations with major mining companies, Precipitate Gold anticipates bringing the project to a PFS would require significantly more capital than $10M. If Barrick Gold takes the project to the full extent of the agreement and executes on earning a 70% stake, the project will see a significantly higher expenditure than the $10M. If Barrick Gold takes the project to the PFS stage, it would demonstrate that the asset has significant potential. This would provide 30% interest for Precipitate Gold, which according to the company is great value.
If there is a 70/30 agreement, Precipitate Gold will have some leverage. As part of the agreement, Precipitate Gold has the right to call upon Barrick to arrange the 30%. That money would be paid back out through either production or operations. This protects Precipitate Gold against unnecessary dilution. The company is taking a strategic approach where if the asset has the potential to be bigger than previously anticipated, it will execute on the 30%.
The Political Landscape
In recent months, Precipitate Gold’s representatives have been meeting with some of the government officials in the Dominican Republic. The company is waiting to see if its neighbors can get permitted and start operations. This will open up the door for all the parties to continue spending money and working on the assets.
Precipitate Gold has all the permits and concession rights to advance Juan de Hererra and Ponton assets. The company is taking a strategic approach where once the neighbors acquire the exploration permit, working on the asset would offer a better return on investment.
The $5M Barrick Gold transaction equipped Precipitate Gold with the cash flow that negates the need to raise additional capital from the market. It can spend money on the assets if it's deemed beneficial and accretive. The company owns the drill and permits and is currently waiting for clarity on the political environment. It is fully equipped to commence operations.
The Dominican government is supportive of mining operations. However, there are some people in the local community that are obstructing it. The company needs to get the local community on its side. It would need to address the local concerns, a common occurrence in mining operations around the world.
The Motherlode Gold Project
The Motherlode Project is located in the southeastern region of Newfoundland’s Burin Peninsula, approximately 3.5 hours by road from Gander ad St.John’s. The asset features excellent year-round road access along with a robust logistical infrastructure. The project has high-power electrical lines running through it and is located near the Atlantic Ocean ports. The asset is a highly-prospective exploration project within an estimated 16.5km long exploration trend hosted in late Proterozoic-age Burin Group volcanic and ultramafic rocks. It features 11 historical mineral occurrences, including 8 gold showings. The major northeast-trending, sub-vertical dipping shear fault zones are up to 30m wide.
Precipitate Gold acquired the Motherlode Gold Project a year ago. In the first phase, the company completed a 2,700m drill program. It was successful in expediting the permitting process. The weather conditions have been highly favorable as well. The drill operations were initiated through late fall into November. The company drilled 2,700m across 12 holes. Most of the holes were drilled at a relatively shallow depth of 200m-300m. One of the holes targeted a slightly deeper chargeability anomaly that was identified through ground geophysics and the IP (Induced Polarization) program.
The company has identified the high chargeability at depth, which is situated directly beneath the surface mineralization. In this area, the grab samples and rock samples were found to have rich mineralized outcropping with grades of over 25g/t gold. Notably, past operations had never drilled into the chargeability anomaly that was identified at depth. The samples are in the labs for analysis and the assay results for the drilling program are expected in Q1 of 2023. Based on the results, the company will determine a strategy going forward.
The company has a fiscally responsible approach towards mining, where the least expensive methodology is used. It has carried out airborne geophysics, surface work, and sampling to identify some anomalous zone that was known to feature at surface gold mineralization. Following this, the company ran large cables spanning hundreds of meters in length. A charge was injected into the ground and the subsurface ability to hold the charge indicates the presence of material in the rock that has the potential to host sulphides. The sulphide presence often indicates the existence of gold. The final test is to drill the areas and get assay readings. The company is currently awaiting the assay results.
When certain bodies within the geophysical anomaly hold gold, the company tests the areas. Following this, it can step out along strike length to further test the continuity of the mineralization. The analysis helped in developing a proof of concept that allows the same kind of work to be carried out along the strike length.
Cash Position
Precipitate Gold has approximately CAD$7M in current cash flow. Late last year, the company raised some capital through flow-through funds which were deployed into Newfoundland. Due to the flow-through component, the money was raised at a premium.
The CAD$7M is mostly hard dollars, and the company has discretion on the spending. The Dominican Republic assets are wholly owned by Precipitate Gold and there are no underlying option payments or work commitment obligations associated with it.
A future strategy will be dictated in part by the results from the Motherlode asset. At the same time, the company has spent a significant portion of the last six months looking at new opportunities and ideas. It is looking to determine better ways to leverage the existing cash flow into something that is either transformational or accretive.
M&A Considerations
Precipitate Gold has been looking at a lot of new assets for potential M&A (Mergers and Acquisitions) opportunities. Despite having a strong team and robust projects, companies can find themselves in challenging financial situations due to circumstances. The current market cycle has been tough from a timing perspective and access to capital.
The company is in a position where it can be selective with a future strategy. The Newfoundland asset has played out in its favor so far. The Dominican Republic's assets were restrictive, which is part of the reason that the company expanded its operations into Canada. The Newfoundland asset was highly favorable as a result of the geology, jurisdiction, and policies along with access to capital. The company is currently awaiting the assay results to determine whether Motherlode is going to deliver the gold mineralization.
Precipitate Gold isn’t looking to expand its presence in Newfoundland. It is independently looking at gold and copper assets in Canada and the United States. If something fits the skillset, the company is open to acquiring assets to prove unidentified opportunities. Choosing a jurisdiction also entails determining whether it matches the company’s skillset along with hiring considerations and past operating experience in the region. This is one of the main reasons why the company is seeking opportunities largely in the US or certain parts of Canada.
Targets 2022 and Beyond
Precipitate Gold is looking forward to the next quarter. Going into 2023, it is hoping to get some of the assay results from the Motherlode drilling. The results will dictate the strategy going forward.
The company anticipates that Barrick Gold is going to start ramping up for the next phase of work. It is expected to be fairly active in Q1 and Q2 of next year. The company has a threshold in terms of committed expenditure, which could dictate a fair bit of work on the Pueblo Viejo asset.
Depending on the permitting and operations with Precipitate Gold’s neighbors, the company will determine whether to drill aggressively with the existing permits on the Juan de Herrera asset. At the same time, the company is looking for additional projects that could change its valuation and dimension going forward.
