Heliostar Metals (HSTR) - Focus is Back on Alaska High-Grade Gold

Matt Gordon caught up again with Charles Funk, CEO of Heliostar Metals, a Canadian junior gold and silver company. When we last spoke with Funk in November 2021, the CEO was outlining the upside potential for the company at their Alaskan and Mexican properties. This time, Funk spoke about some disappointing drilling results that the company encountered in Mexico as well as the continued progress being made at Unga, the company’s flagship project.

Company Overview

Based in Vancouver, British Columbia, Heliostar is in the business of building reserves in high-quality gold and silver jurisdictions in Alaska and Mexico.  The company invests in both mining and exploration opportunities, particularly focusing on those that have significant upside potential.

Company Projects

Heliostar Metals has four main projects. The Unga Project in Alaska, and three projects in Mexico: Oso Negro, La Lola, and Cumaro. All of these are gold and silver opportunities adjacent to producing or formerly producing mines. 

The Unga Project, representing Heliostar’s core focus, is a high-grade gold project with claims covering the Aleutian Islands of Unga and Popof.  The gold is hosted within a suite of hydrothermally altered porphyries and adjacent rocks, giving rise to a diversity of target types. 

Unga includes two historic high-grade gold mines – Sitka and Apollo. These mines closed around 1922 after the free-milling gold ore was depleted. Unga currently includes five main exploration areas: SH-1, Apollo-Sitka, Centennial, Orange Mountain, and Zachary Bay. Over 25 targets have been mapped. 

Update on Mexican Activities

The recent drilling results at Cumaro were a bit disappointing. The company was evaluating a surface mineralization zone that it hoped would persist at depth. Unfortunately, the drill bit indicated that the hypothesised highly mineralized vein system that was targeted was less mineralized at depth. 

As it turned out, the high–quality host rock for mineralization seen at the surface was not present at the target depth. Instead, a rock with poor vein-forming attributes was found, forcing the shutting down of this particular test. 

Nevertheless, this first drill site was one of five targets that the company has on the books at the property. As disappointing as it was to miss on the first test of its drilling program, Heliostar still has plenty of opportunities at Cumaro and believes that it will have its next results in about six to eight weeks. 

Indeed, Funk indicated that, although he expects better results during the remainder of this drilling campaign, he is not wedded to the project forever. In the event of a series of poor results, he believes that joint-venture deals are possible because, as he put it, “There are a lot of parties that would be interested in that ground”. 

What Should Investors Think?

Funk was clear that investors might be wondering why there is a continued focus on Mexico given that Unga represents the real value for the company and its shareholders. He answered this concern with a discussion about three main points: (1) Unga remains the company flagship, (2) Mexico represents an upside potential that needs to be evaluated, and (3) One drilled hole is insignificant statistically. 

Regarding Unga, the company had been delivering good results during 2021 but not getting rewarded for it. He indicated that Heliostar delivered everything that it said it would deliver in Alaska last year: It drilled great holes, made a new discovery, and penetrated multiple gold intercepts. Yet, the cost of capital to continue there would have been extremely dilutive last year. 

Secondly, Cumaro has fantastic surface mineralization, suggestive of continued quality at depth. Funk made the business decision that this project could help the company in the short term. The cost of the test there was very cheap, so for a very little amount of money, Heliostar could stand to make a very significant step change. Funk knew that Heliostar wouldn’t be the long-term owner of Cumaro, but it could potentially give a reward in Heliostar’s share price and then lower the cost of capital to fully unlock Unga. 

Finally, the statistics that govern exploration drilling need to be understood. Sure, everyone would like a big score on the first hole drilled, but so many times this is not the case. Funk indicated that if the company had drilled that first target ten times, four times it would have worked, two or three times it would have been a tease, and three times it would have been disappointing. The company was on the wrong end of those statistics with the first hole, but those same chances apply to the other targets at Cumaro. 

Funk’s View on the Gold and Silver Market

The gold market has been on a wild ride since 2020.  The heady period in 2020 fueled rising share prices of gold exploration companies and capital was easier to come by for projects. By 2021, particularly in the second half, the tide had turned and funding was harder to come by.  

Now in 2022 the gold price is up again but so are costs. Fuel, supplies such as cyanide, and labour expenses have risen dramatically and margins have been squeezed, even for major companies. 

Markets dictate what prices explorers’ shares trade. Right now, the market doesn’t have a strong appetite for exploration companies, said Funk, which is a hard thing for him to get his head around because he is the CEO of an exploration company. After due consideration, what he is left with is one of two choices: Sticking to one’s guns, and waiting the cycle out while operating in a capital-constrained industry, or looking to make moves to situations and places that the market is prepared to fund. 

Unga: Moving the Flagship Forward

Unga is, in Funk’s opinion, an example of a very rare opportunity. It’s got high-grade mineralization in many locations and numerous open gold intercepts.  With 340,000 oz coming from high-grade 13.8 g/t gold ore already on the books at the SH-1 site, Funk is confident that it can grow the overall resource. The Unga land package, four times the size of the island of Manhattan, is a target-rich environment. According to Funk, it just needs the time and the money. 

Heliostar plans to continue its drilling operations at Unga in July 2022. Earlier in January, it was locked in a rig. The plan is to follow up on all those open intercepts that it found during last year’s campaign, and basically get ready for a diamond drill program. If the market turns, the company can drill all the way to December and then deliver that resource next year. How aggressively the company pushes is a bit market-dictated, but that’s definitely the direction that Heliostar is headed and where it plans to take Unga this year.

The company is even looking into an intriguing option – that of dewatering the old Apollo mine, and actually going down to the levels and sampling there. It’s a little out of the box but Funk thinks it could work. There are three water-filled shafts, two at Apollo and one at Sitka. The dewatering project is estimated to cost some $2M to $3M. 

Next Steps

Funk advised shareholders to stay tuned for the next announcement regarding drilling results in Mexico in about two months or less. Importantly, they should also keep abreast of news flow coming out of Unga, where follow-up on open intercepts and some new ideas may greatly expand the currently known resource there. 

For additional background information, be sure to review our earlier conversation with Funk, available on the Crux site.

To find out more, go to the Heliostar Metals website