Heliostar Metals (HSTR) - 1Moz Resource is Path to Permitting

We met 37 year old CEO Charles Funk, a geologist with industry experience covering both mid-ties and major mining companies. Most notably Newcrest, where he was involved in a number of Copper discoveries. Last year Charles was VP for Vizsla Silver and is currently the director there. In 2016, he moved to Canada and started working for Evrim (now Origin Royalties) but got jaded by the business model, so set out to build Heliostar.

Company Overview

Heliostar Metals was the result of a merger with Red Star Gold in August 2020. Their DNA is around exploration success with projects in North and South America and aim to become a major mining company. They got together private funding in 2019 and picked up early-stage projects in Mexico. Their robust shareholder base is focused on advancing the district scale, high-grade gold project on Unga and neighbouring Popof Island in the Aleutian Arc, Alaska.

How Much Has Management Invested?

$1.5M was invested into Heliostar, some coming from Charles, allowing him to hold 3.5% of the company. The rest was raised with the support of High Net Worth Investors (HNWIs). With the last raise, looking at the management team, it’s come in at just under 20%. With this significant ownership, it is easy for Heliostar to show their alignment. 

Who’s The Management Team?

Heliostar has acquired a strong board, especially for a new company of their size. The range includes Jacques and George R. Ireland, who have had a lot of investment banking institutional experience. On the technical side, there is Charles Funk, Alan Wilson and Ken Booth. Alan may not be a commercial name compared to others on this list but has a great track record. He has only ever worked for major mining companies: BHP, Rio and Newcrest, and most recently the head of exploration for Antofagasta. Most notably, Sam Anderson joined the company after 17-years with Newmont. With a board like this, Charles’ long-term goal is for the company to become a producer.

Share & Corporate Structure

Heliostar sits at over $1, just under the $40M market cap. With last year’s small raise of $5.6M, the company went up to 37M shares. They started out with 15 HNWIs backed by private companies, and when the merger was completed, Eric Sprott, a major shareholder of Red Star, still remains as a shareholder. The management team has also brought in some more institutional names to support the company. This includes Phoenix Gold Fund, K2 and Cresscap who came in the last couple of fundraising rounds. As this is still an early-stage story, they are balancing the retail-institutional as much as they can. 

The Numbers & Development Plans

The company’s flagship project Unga has a rich history. There was a last dispersed underground Goldmine which produced 130,000oz at around 10g/t. Mining stock began in the early 1920s and into the 1930s, however the project got lost over the next 50 years. In the 1980s it saw a rush of work, with 3 different companies owning 3 separate pieces that Charles believed needed to be together. They found a new resource named SH-1 Zone at this time. However, with the Gold price of the 1980s, the project never reached critical mass. Finally it got lost in the Tennessee Oil and Gas company for 20 years, until the late 2000s. Full Metal Minerals then picked up the Unga project which was then JV’d to Red Star. During 2015-16, Red Star got funding and conducted good drilling programmes.  

For SH-1 they did a bulk of the drilling and a 43-101 compliant resource, but most of the project hasn’t seen significant exploration for 40 years. Based in the Aleutian Islands in Alaska, Unga is a unique project that can be explored for 9 months of the year, and ultimately, all year round. The site gives a high Gold grades of 13.8g/t. With 3 rigs to exploit this opportunity, it will be easier to get traction.

How is the G&A looking?

G&A is tight at about $1.2M/year, including marketing spend. As explorers, the money is put into the ground. This is Heliostar’s focus and will continue to be in the future. The asset holds a big district, with 10x14km of porphyry targets, bulk tonnage-Gold targets, with high grade veins. This initially attracted Charles and the management team to the site; it could and be even bigger. They believe they can comfortably achieve 1Moz, and this is their goal. At 100,000/year for 10 years with these margins will be a profitable endeavour that is straightforward to finance.

What’s the Approach to the Business Plan 

The nature of discoveries requires a high amount of drilling, generally low capex to put it into production which are often high-margin. Heliostar plans to bring in greater amounts of capital to it by raising $7M in August 2020 and $5.6M this year, to bring more funding into the asset.

They have identified 4 key targets that will help reach the initial 1Moz, and ultimately grow beyond this. These include: an open high-grade resource, the Aquila discovery last year, an old mine called Apollo, and a non-compliant resource. As exploration targets go, they enable high-probability drill targets. They placed 3 rigs to start, 2 of which are RC rigs, which are common in Nevada and Australia but not in Alaska. They are following this route to rapidly test and get a lot of holes into their targets, and with 30 holes in the programme this year, it is working. The diamond rig is systematically stepping out in the resource area, providing growth potential in the 500,000oz-1Moz range. This will enable Heliostar to reach their 1Moz target towards the end of summer 2022. 

Details on Alaskan Drilling

The Alaskan project is on 2 islands in the Aleutians. The main island of Unga is about 20x 35km. In terms of infrastructure, the fishing town Sandpoint provides a major airstrip, providing ease when servicing the projects. The RC goes with 1 shift and the diamond is 2x 12-hour shifts, which is the industry norm. 

2022 Plans & Strategies

Currently the focus is on the resource area, however other targets include the Apollo mine and the discovery of Aquila. The plan is to step out on those open intersections to allow for high probability exploration. At the close of the last raise, Heliostar had $8.5M, $6M of that will be spent on Unga this summer. This will provide the re-rating needed before returning to raise additional capital to conduct a formal resource drill-out. 

Overview of Mexican Projects

There are 3 projects in Mexico and Sonora. $600k was put into the earliest stage projects at the start of 2021. Final results from the La Lola final drill are expected soon. Oso Negro has delivered great surface results on continuous high-grade Silver. It is a really good target of 360m of strike going 420g Silver equivalent.

Unga is more advanced and is Heliostar’s flagship. Mexico will be left for a couple of months before returning to them to bring earlier stage projects up to the standards currently held in Mexican assets. The methodical process to do this will cover: prospecting, systematic sampling and drilling. 

What are the Main Company Goals?

From a strategy perspective, once 1Moz is reached, the company will have a clear permitting process to build the mine back into production. Whilst going through the permitting and study process, they hope to expand to find the next 2-3Mozs.

Heliostar has started to build relationships with the DNR Fishing and Game, the Army Corps of Engineers in Alaska to understand needs, so they are not behind in providing these from a timeline perspective. The first goal is to lift the resource, then look at the studies and trade-off options to ultimately lead to the construction decision.

To find out more, go to the Heliostar Metals Website