Teuton Royalties in the Sulphurets Hydrothermal System
The Sulphurets Hydrothermal System (“SHS”) is “elephant country”—meaning it is a region in which very large and/or very high-grade deposits have already been found. It has been described as one of “the greatest hydrothermal systems in the world”. It is also the most heavily mineralized part of British Columbia’s famous Golden Triangle and home to both Pretium Resources’ Brucejack-Snowfield property and Seabridge Gold’s KSM property. This large mineralized system spans a distance of some 30 km and is marked by an abundance of prominent “gossans”—bright yellow, red and orange zones of alteration created by intense hydrothermal activity
Teuton owns royalties in ten different areas within this prolific region. Teuton’s 10 royalty areas lie both in the northern third of the system (Treaty Creek property) and in the southern third (King Tut, Tuck, High North, Orion, Delta and Fairweather properties). The center of the system covers BC’s newest gold mine, the Valley of the Kings, and what has been termed one of the world’s largest reserves of copper and gold in the various KSM deposits owned by Seabridge Gold. The Valley of the Kings gold mine was recently put into production at a cost of $1 billion dollars and currently has a reserve of 3.2 million ounces.
NOTE: In March of 2021, Teuton moved one step closer to realizing its goal of obtaining royalty revenue. A large resource was established within the Goldstorm/Copper Belle zones in the Treaty Creek property: The Goldstorm/Copper Belle zones host Measured and Indicated Resources of 19.4 Million Gold Eq. Ounces (815.7 Million Tonnes grading 0.74 g/t Au Eq.). In addition, there are Inferred Resources of 7.22 Million Gold Eq. (311.7 Tonnes grading 0.79 g/t Au Eq.). See here for details. Exploration aimed at expanding the resources will continue in 2021.
Important Markers in the Sulphurets Hydrothermal System
Studies by the British Columbia Geological Survey have shown that all of the five Seabridge Gold KSM deposits discovered to date lie along an important geological contact known as “Kyba’s Red Line”. They are also all spatially related to a prominent thrust fault, the “Sulphurets”. Both the Red Line and the Sulphurets thrust fault pass northeastward from the KSM property into the Treaty Creek property continuing onward for kilometres. Although exploration at Treaty Creek has been minor compared to the hundreds of millions of dollars spent to date at the neighbouring KSM and Snowfield-Brucejack properties, resources have already been defined at the “Copper Belle” and “Goldstorm” zones (see above). Drill intersections containing gold mineralization up to a 1,000+ meters in length have been obtained at the Goldstorm. The Copper Belle and Goldstorm, along with three other zones–Perfect Storm, Northeast and Eureka–will be targeted for additional gold resources in a large drill program soon to begin in 2021.
The same Red Line and Sulphurets Fault also pass southward into and along Teuton’s royalty areas located in the southern third of the System. Although drilling in this area has been minimal to date, a single hole drilled into the King Tut zone in 2012 intersected 222 metres of 0.88 g/t gold demonstrating that gold mineralization continues to the south.
The ten royalty areas can be seen on the attached map. For details on any particular area, press the Royalty Areas button located on the right hand side.
“Royalties”—Valuable or Not??
Teuton’s royalties in the SHS vary from 0.49% to 2.5%, averaging 2.0% Could such numbers bring value to the Company?
Yes. These percentages hold potential to bring significant future value to Teuton Shareholders and are one of the cornerstones of the Prospector Generator strategy.
Case Study #1: What would a 1% NSR be worth on the Seabridge Gold Snowfield deposit?
Answer: About $476 million
Case Study #2: What would a 2% NSR be worth on Pretium’s Valley of the Kings deposit?
Answer: About $176 million.
Assumptions: We anticipate that 90% of the gold in a resource will be recoverable. Of that remaining 90% we then deduct an estimated 10% for cost of transportation of concentrate to smelter and smelting costs. These are the only significant deductions allowed when calculating an NSR. Other items such as cost of mining, cost of milling, operating expenses, administrative expenses, capital cost, payment of interest, etc. —all these are not deductible from a typical NSR.
Case Study #1 calculation: Seabridge Gold’s Snowfield property currently has a resource of 25.9 million ounces of gold (1,370 million tonnes at 0.59 g/t gold). Assuming 90% of this gold is recoverable, we are left with 23.3 million ounces. Subtract 10% of this for typical NSR deductions: that leaves 21.0 million ounces, of which 1% or 210,000 ounces is payable to the royalty owner. Value at the current gold price of $2,268 CDN is $476 million.
Case Study #2 calculation: Pretium’s Valley of the Kings gold mine has produced 1,430,644 ounces of gold from start-up in 2017 until the end of 2020. Assuming 90% of this was payable as an NSR, the 2% NSR holder would have earned 25,752 ounces, worth $58.4 million at current prices. The resource as of January 1, 2020 at Valley of the Kings is 3.2 million oz. (11.5 million tonnes grading 8.7 g/t gold). Assuming 90% of this is recoverable, and 90% of that is payable as an NSR, a 2% NSR would earn 51,800 ounces worth $117.5 million at current prices. Total payout, past and future, would be $175.9 million. This sum does not include silver credits, nor gold discovered by ongoing exploration.
Cautionary Note: These numbers are cited here solely for educational purposes, to give the reader an idea of the potential value of a royalty in a SHS deposit As one can see, these numbers are quite significant. However, at this stage of exploration at Treaty Creek or other Teuton royalty properties, they represent only a potential, as no positive feasibility study has yet been established. Although the recent resource calculation at the Goldstorm zone marks an important step forward, one cannot guarantee that the property will progress to production. The similarity and proximity of deposits on either Pretium’s Brucejack-Snowfield property or Seabridge Gold’s KSM property is not necessarily indicative of the gold mineralizaton on any of Teuton’s royalty properties.
The Beauty of NSRs—No Risk
The most successful companies in the “gold space” are the royalty companies. Once they acquire a royalty, that is the end of their financial commitment. A producer may mine gold for many years and never recoup its capital costs, yet it would still be required to pay a royalty to the NSR holder. Remember–the most important aspect of an NSR is: the company which owns it risks nothing!
Area 1—Treaty Creek Property: Core Claims
This core section of the Treaty Creek property is presently being explored by Tudor Gold, a company headed up by Walter Storm, the German financier who made a fortune as one of the early investors in Osisko Gold. Tudor has spent about $37 million on the property to date with an additional $9 million having been spent by earlier optionees. According to the terms of the Treaty Creek Joint Venture agreement, Tudor is the operator and is responsible for funding all costs on the property until such time as a production decision is made. Current partners in the joint venture are Teuton-20%, American Creek – 20%, and Tudor Gold – 60%.
Ken Konkin, one of the co-winners of British Columbia’s Spud Huestis award, signed on in early 2019 as Tudor Gold’s Exploration Manager. Mr. Konkin previously worked for many years heading exploration of Pretium Resources’ Valley of the Kings gold mine. The Valley of the Kings is the first of many deposits in the Sulphurets Hydrothermal System to see production. Other gold deposits in the area include Seabridge Gold’s Kerr, Deep Kerr, Sulphurets, Mitchell and Iron Cap deposits as well as the giant Snowfield gold deposit (recently sold to Seabridge Gold by Pretium)..
What used to be Pretium’s Snowfield deposit (it has now been sold to Seabridge Gold) is located a few kilometers south of the border with the Treaty Creek property and currently has a measured and indicated .resource of 25.9 million ounces of gold (1,370 million tonnes at 0.59 g/t gold). After visiting the Treaty Creek property in 2018 and examining some of the drill core, Mr. Konkin stated: “I was impressed as to the similarity of some of the mineralization seen at Copper Belle and that of the Snowfields Gold zone. Although the rocks were very similar between the two, the alteration was much stronger within the specific mineralized zones at Copper Belle as well the level of pyritization was also stronger. This broad-type of alteration and mineralization is commonly associated with intrusive-related hydrothermal fluid systems from regional events. In other words, these systems tend to part of large regional events such as those found at the neighboring Seabridge and Pretium properties rather than smaller localized events.”
At the time of the quote, the entire gold zone drilled by Tudor Gold from 2015 to 2018 was referred to as the Copper Belle. Subsequent studies have shown that the northern portion is a separate system, one now known as the Goldstorm zone. This northern zone appears to more continuous and well-mineralized, and is the part referred to in the comparison to the Snowfield deposit. Mr. Konkin’s early comparison has been largely borne out by drilling at the Goldstorm in the three years leading up to 2021. Many outstanding intersections were obtained during that time, some reaching lengths of over 1,000 metres.
Highlights of drilling in 2020 include: Drill hole GS-20-57 which cut an enriched interval averaging 1.40 gpt AuEq over 217.5 meters (544.5 to 762.0 meters) with the entire intercept running a composite average of 0.845 gpt AuEq over 973.05m (34.50 to 1077.55 meters), and; Drill Hole GS20-65 had a remarkable 348 meter intercept of 2.120 gpt AuEq within a larger 930 meter intercept of 1.161 gpt AuEq. Subsequently, drill hole GS-20-73 on Section 110+00 NE cut 775.5 metres (29.0m to 804.5 m) averaging 0.932 gpt AuEq containing an enriched portion that averaged 1.506 gpt AuEq over 229.5 meters (519.5m to 749.0 m). Hole GS-20-75 on Section 114+00 NE averaged 0.741 gpt AuEq over 1152.0 metres (112.0-1264.0 m) containing an enriched portion of 121.5 meters (232.0-353.5 m) that averaged 1.561 gpt AuEq.
A maiden resource was calculated for the Goldstorm/Copper Belle in March of 2021 containing a measured and indicated 19.4 Million Gold Eq. Ounces (815.7 Million Tonnes grading 0.74 g/t Au Eq.). In addition, there are Inferred Resources of 7.22 Million Gold Eq. (311.7 Tonnes grading 0.79 g/t Au Eq.). See here for details. Exploration aimed at expanding the resources will continue in 2021.
Currently, Area 1 represents Teuton’s best chances of establishing a royalty in a known deposit within the Sulphurets Hydrothermal System. Royalty rate for this area is just under 1% at 0.98%. There is no buyback on this royalty. Teuton also has a 20% ownership and carried interest in the Treaty Creek property as a whole, carried until such time as a production decision is made.
Alongside the Copper Belle and Goldstorm zones there are several other targets within the core property that have significant potential to host large gold deposits. These center on large geophysical anomalies and/or gossanous zones which have not seen extensive exploration to date.
Area 2—Treaty Creek Property: Peripheral Claims
This area constitutes all of the surrounding claims to the core of the Treaty Creek property in Area 1. It also includes some of the Treaty Creek claims lying between Seabridge’s Iron Cap deposit (which lies 800m from the KSM-Treaty Creek property border) and the southwestern end of the nunatak hosting the Copper Belle and Goldstorm deposits. Some large scale magnetotelluric anomalies lie within this ground as well as some magnetic anomalies. The progression of deposits starting from Kerr to Sulphurets to Mitchell to Iron Cap to Copper Belle and Goldstorm suggests there may be room for another deposit within this space. There is also room for discovery northeast of the core group beyond the limits of Area 1. Several gossanous areas are evident in this section.
The peripheral claims occupy the southwest extension of the Perfect Storm zone toward the boundary with Seabridge Gold as well as the northeastward extension of the Northeast zone.
Primary royalty rate for this area is just under 0.49%. However, Teuton also owns a buyback right on half of a 2.0% NSR owned by St. Andrew Goldfields in this peripheral area. Teuton can acquire an additional 1.0% royalty at any time up to six months from the commencement of commercial production. If it were to do so it would own a 1.49% royalty in these peripheral claims. Teuton has not given a buyback on either of these two royalty segments.
Area 3–King Tut and Tuck Properties
This area encompasses the region south of the Valley of the Kings gold mine that was subsequently sold by Teuton to Pretium in 2015. When Teuton owned the claims they were known as the “King Tut” and “Tuck” properties. A single hole drilled by Teuton in 2012 on the King Tut (see pictures) intersected 222m grading 0.88 g/t gold demonstrating the gold values persist in this part of the SHS. No follow-up drilling took place to test the depth at which the mineralization was encountered, however prospecting in an area south of the drill collar showed good gold grades between 4.8 and 63.0 g/t gold and between 18 and 86 g/t silver.
On the Tuck claims ablation of snow and ice revealed an extensive alteration zone in 2014. This zone is marked by strong sericite alteration, strong quartz stockwork, strong jarosite staining, anomalous arsenic with gold values, and abundant pyrite associated with the gold values (see photo). In 2019 Pretium drilled five holes into the zone in 2019 and reported results as follows: “The Tuck Zone is located 7 kilometers south of the Brucejack Mine. A bed of intensely quartz-sericite-pyrite altered andesitic volcanics of the Unuk River Formation hosts low grade gold in pyrite. The showing is part of a linear trend that includes Snowfield, Brucejack, and Bridge Zone along the eastern margin of the Brucejack Fault. Five drill holes completed in 2019 tested a 400-meter-long section of the zone, all of which intersected a flat lying bed of intensely altered volcanics that contained low grade gold associated with pyrite.”
Teuton has a royalty of 2.0% in this region. There is no buyback on this royalty.
Area 4—IC2 Claim
This small property was originally acquired by Teuton by a third party and subsequently sold to Pretium. Not much is known about its potential, but it is well situated between the Sulphurets and Brucejack Faults.
To begin with a 1.5% NSR is payable to the original owner, and a 0.5% NSR is payable to Teuton. After $500,000 is paid to the original owner, the NSR payable to Teuton increases to 2.0%. There is no buyback on this royalty.
Area 5—High North Property
This is a high altitude, rugged property which nevertheless has significant potential for hosting deposits as found immediately to the north on Seabridge Gold’s KSM property. Jeff Kyba’s “Red Line”—the contact between rocks of the Triassic age Stuhini Group and Jurassic age Hazelton—passes southward from the KSM property throughout the High North. The important Sulphurets Fault also passes through 5km of the High North property.
As reported in the Norther Miner, “Geologists Jeff Kyba and Joanne Nelson from the British Columbia Geological Survey may have unlocked the secret to world-class porphyry and intrusion related gold-copper deposits in northwestern B.C.
They’ve discovered that most of the major deposits in the region occur within 2 km of a regional stratigraphic contact, and, according to Kyba, there are lithological and structural clues to narrow that window even further.
“If you’re near that red line, and there’s a clastic sequence coupled with large-scale faults then you might be in the neighborhood of B.C.’s next big deposit,” he says. “And knowing that is a big game-changer for explorers in the region because it’ll get them closer to making a discovery.” [Excerpted from the May 1,2015 Edition of the Northern Miner]
Speaking specifically about the KSM and neighbouring Brucejack properties, Kyba also stressed the importance of the Sulphurets fault, which he believes to be an important second key to locating mineralization. More of the Northern Miner article, follows:
But a change in lithology across the contact isn’t the only thing Kyba suggests is a useful proxy to finding “nation-building” ore deposits.
Brucejack and KSM are both encased in a large halo of a highly deformed, quartz-sericite-altered host rock. Immediately to the east is a large, Cretaceous-aged thrust fault called “Sulphurets” that caps the altered ore-host.
Kyba reckons that it’s no coincidence the prominent fault is so close to the deposits.
“When the Stikine was compressed, all the prospective structures bounding these old basins were slippery because of the alteration associated with the porphyries. So they were the first to fail, and became reactivated as younger, prominent thrust faults.” [Excerpted from the May 1,2015 Edition of the Northern Miner]
The property has been optioned to Tudor Gold and Teuton owns a 2.5% NSR in the High North property. There is no buyback on this royalty.
Area 6—Orion Property
This very large property lies to the south of Teuton’s High North property and covers the southern end of the McTagg anticlinorium, a regional structure which hosts all of the various copper-gold deposits of the KSM property to the north. The western half of the property occupies a substantial portion of the Eskay rift.
The prominent feature of the eastern part of the property is a nunatak (rock island surrounded by ice) which rises out of the upper reaches of the Frank Mackie glacier, broadening to the north. Much of the nunatak is gossanous. It is composed of extensive felsic volcanics overlain by fine, carbon-rich sediments, both mapped as of Jurassic age.
Prospecting carried out in 2018 disclosed an area marked by abundant sulfur, much like that previously discovered at Sulphur Knob on the Treaty Creek property. Just to the west of this occurrence is a large magnetotelluric (“MT”) anomaly detected at depth during a survey conducted in 2016. Another MT anomaly occurs on the eastern side of the nunatak. Neither anomaly has been drill-tested.
The property is currently under option to Tudor Gold with a 2.5% NSR. There is no buyback on this royalty.
Area 7—Delta East Property
In 1985 prospecting on the Delta East property disclosed an area of highly anomalous heavy metal stream sediments, ranging from 1,255 to 6,500 pbb gold and from 20.0 to 141 ppm silver, occurring within an altered zone partially composed of sericite schists. The property was subsequently optioned to Canarc Resources which carried out property wide geochemical surveys as well as minor geophysics. A Canarc geologist stated: “Geophysical IP anomalies in the vicinity of the J Zone indicate the possible presence of metal sulfides near a rhyolite-argillite contact. Some potential exists for Eskay Creek-type gold rich massive sulfide deposits on the Delta Property”.
After the property was returned to Teuton, some minor prospecting and drilling was carried out on targets in the Feld Gossan area. Although some substantial gold values were obtained in surface sampling, from 0.74 to 47.8 g/t gold, the limited drilling that took place encountered only narrow gold intersections. Another small drill program intersected narrow intervals of what appeared to be massive sulfide type mineralization.
Over $1 million has been spent on the property to date
The Delta East property is currently under option to Tudor Gold. Teuton owns a 1.5% NSR with no buyback.
Area 8—Delta West Property
This is a relatively unexplored section of the geology lying east of Kyba’s redline. Currently under option to Tudor Gold, Teuton retains a 2.5% NSR (no buyback).
Area 9—Fairweather East Property
The Fairweather East property adjoins the Delta East property to the south and is underlain by a continuation of the Jurassic age rock formation underlying Pretium’s Brucejack property.
In 1987 geologist Ken Konkin discovered a pyritic, quartz brecciated conglomerate zone on the Fairweather which was trenched and yielded an average grade of 4.04 g/t gold over 7.0 metres. A similar zone was sampled uphill from this occurrence, returning anomalous gold values of 720, 780 and 1045 ppb (grabs). Exposure in the area was quite poor with deep overburden in places. The next year the site was revisited but limited follow-up work failed to reach bedrock. Although the zone was recommended to be tested by a series of shallow holes, such work is yet to be done. A cluster of soil geochem gold anomalies lies downhill from the occurrence.
In 2018, Ken Konkin revisited the property and discovered an exhalative horizon which he believes has potential for hosting VMS-style mineralization.
The Delta East property is currently under option to Tudor Gold. Because of pre-existing royalties, Teuton’s royalty in this property is lower at 1%. There is no buyback on this royalty.
Area 10—Fairweather West Property
This is a relatively unexplored section of the geology lying east of Kyba’s redline. Currently under option to Tudor Gold, Teuton retains a 2% NSR.