X-Terra Resources Inc. (XTT:TSX.V; XTRRF:OTCMKTS; XTR:FSE) has been flying under the radar, but critical events culminating in two imminent drill programs are coming to fruition. Add to that the fact that the current gold price is like rocket fuel. A strong gold property or project at $1,261/ounce (average price from 2014–2019) is spectacular at $1,916/ounce (oz).
Companies that were able to assemble and keep gold assets between 2014—2019 are in good shape now. Management teams skillful enough to have meaningfully advanced projects have seen their share prices soar—Canadian companies like Great Bear Resources Ltd. (GBR:TSX.V; GTBDF:OTCQX), Kirkland Lake Gold Inc. (KL:TSX; KL:NYSE), Skeena Resources Ltd (SKE:TSX.V) and Victoria Gold Corp. (VGCX:TSX; VITFF:OTCMKTS).
X-Terra's share price has bounced nicely off of a COVID-19-induced selloff in March, but remains at the same level it was 18 months ago. This, despite having not one, but two, high-impact, fully funded drill programs (with no correlation to each other) starting in the next two months.
Grog and Northwest (NB on map)
The company secured an option to earn a 70% interest in the Grog and Northwest properties, (covering ~245 square kilometers [sq. km]), in April 2019 when the gold price was approx. $1,280/oz. The company's other primary asset, Troilus East, was secured in Q4/2015, when gold was briefly under $1,100/oz. More on Troilus East later; first the recent important news on Grog and Northwest.
X-Terra is earning into a 70% interest in the Grog property and the Northwest property group, (comprising the former Rim, Dome and Bonanza properties) in northwestern New Brunswick, Canada. The company completed due diligence on the properties, confirming the potential for a large disseminated gold system at Grog.
The highest gold values from historical samples were at Northwest, including 1,205 g/t, 150 g/t and 50.6 g/t gold at the Rim, Bonanza and Dome showings, respectively. The technical team also sampled the Rim vein at regular intervals over 19.9 meters, returning an average of 125.4 g/t gold of nine surface samples.
In 2012, a 16-tonne bulk sample of the Bonanza vein reportedly averaged 24.4 g/t gold (~$1,500/tonne in-situ gold value at spot price).
On Sept. 21, X-Terra announced the results of geochemical sampling and additional induced polarization (IP) ground geophysics, further validating targets for their second drill program on the Grog and Northwest properties. These results and other recent fieldwork is also helping facilitate first-ever drilling at the high-grade Rim vein target.
This important news comes after a new gold-bearing structure was discovered on the Grog property in May. Hole GRG-20-012 identified mineralization over a notable width, the headline interval was 0.46 g/t gold over 31 meters (31m), including 7.6 g/t over 0.6m, at a vertical depth of 81m. The ~1,500m drilled covered only a small fraction of the target. Hitting this significant, shallow mineralized zone was an important milestone.
According to the press release, "While the combination of gold results from the new survey to that of the survey completed in 2017 is somewhat incompatible for gold, due to the different methodologies applied, the combination of other indicators like arsenic and antimony (As, Sb) fit not only with bedrock structures mapped in the field but also with the geophysics. When all is taken into account, the overall Grog footprint now extends 5 km north-south by 2 km east-west."
Michael Ferreira, president and CEO, stated, "The correlation obtained during this phase of work between low mag, high resistivity and gold-arsenic-anomaly at the margin is a significant step up in our understanding of the Grog system. Not only was the kilometric strike length of the known gold system reached and confirmed by a common signature, our hypothesis was validated that there are two parallel trends of the same orientation and thickness."
The considerable amount of work done at Grog and Northwest points to one thing—a larger drill program! Originally, 11 holes were planned. Now, management will drill 20 (16 at Grog [150–300m depth] + four 100m holes at the high-grade Rim target).
High-grade Rim vein at Northwest to see first-ever drilling
Excitement over the Rim target is growing by the day. If any of the four holes intersect meaningful high-grade mineralization, that would open up not just Rim, but other Northwest showings to high priority drilling later this year.
The Rim vein showing on the Northwest property group has been targeted for a maiden drill test. Chip sampling in 2018 returned from 4.5 g/t to 1,205 g/t gold. The drill plan includes four shallow holes of 100m each to test the down dip projection of soil anomalies and identify additional gold-bearing veins.
Troilus East project borders industry darling Troilus Gold
Switching gears, X-Terra's other primary project, Troilus East, is shown in the map above. The property is situated in north-central Quebec, about 160 kilometers northeast of Chibougamau, in the Frotet-Evans greenstone belt and comprises 182 mining claims covering ~93 sq. km.
The Frotet-Evans belt has seen limited exploration compared to the Abitibi greenstone belt. X-Terra's footprint, in yellow, borders Troilus Gold's project, and is <3 kilometers from Inmet Mining Corp.'s (IMN:TSX) open pit mine (1996–2010, production of 2 million ounces of gold + 254 million pounds copper).
I mentioned that Troilus East was secured in 2015. It has been an integral part of X-Terra longer than Troilus Gold Corp.'s (TLG:TSX; CHXMF:OTCQB) flagship project has been a part of Troilus Gold. This speaks to the substantial potential value of Troilus East as it has not been drill-tested.
Meanwhile, its connected neighbor to the north has drilled 80,500 meters in the past 2.5 years. Troilus Gold is a single project company. Its CA$150 million (CA$150M) market cap is entirely tied to the 8.1 million ounces it has delineated so far. I would be surprised if there's not a gold deposit on X-Terra's property, situated so close as it is to that globally-significant resource.
The question is, how big a deposit might X-Terra be sitting on, and how much might it cost to find out?
Kenorland Minerals (in bright green) recently announced an intercept of 2.7m of 33.7 g/t gold, including 1.0m of 76.9 g/t gold. That comes after the company's major discovery hole (29.1m at 8.5 g/t Au). Kenorland is going public via a reverse takeover of Northway Resources (NTW:TSX.V) and is concurrently raising CA$12M to drill.
Unbelievable exploration successes, just a few kilometers from X-Terra
Combined, Troilus Gold and Kenorland could drill perhaps 30–40,000 meters over the next six months alone, and double that amount in the next year—all within 10 kilometers of X-Terra's property! Yet, X-Terra's footprint, in the heart of it all, is valued at just CA$5.5M (assuming Troilus East is about half the total value of the company and Grog/Northwest the other half).
Two and a half years of exploration, 80,500 meters of drilling, delivered an incremental 5.36 million ounces of Indicated + Inferred gold for Troilus Gold. This resource growth rate, (for a junior with >1 million ounces to start in 2017¬–18), has been one of the best in Canada.
Each meter drilled, at an all-in cost of <$200/m, delivered 67 ounces to the mineral resource estimate. That's a finding cost of just $3/oz. Does Troilus Gold's outstanding exploration success bode well for X-Terra?
I think that it could. The geology is similar, but management will need to demonstrate more than a few attractive drill holes. Investors require evidence of good continuity across a sizable patch of land. Readers should note that Troilus's flagship project (8.1 million ounces and counting) is hosted on a surface footprint of +/- 10 sq. km!
Troilus Gold recently released a summary of its preliminary economic assessment (PEA). While the net present value (NPV) and internal rate of return (IRR) were impressive, they're probably not comparable to X-Terra's much earlier stage project. However, I find it encouraging that the project's capital intensity (upfront capex divided by ounces produced) is in the best decile of Canadian-listed companies.
Unlike British Columbia's Golden Triangle, with dozens of pre-construction juniors—most pre-maiden resource estimate—there are only five or six players (with most or all of their gold assets in northern Quebec) near Troilus's project.
Yet mid-tier and majors in Quebec/Ontario include Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE), Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE), Newmont Corp. (NEM:NYSE), Eldorado Gold Corp. (ELD:TSX; EGO:NYSE), IAMGOLD Corp. (IMG:TSX; IAG:NYSE), Kirkland Lake, New Gold Inc. (NGD:TSX; NGD:NYSE.MKT), Barrick Gold Corp. (ABX:TSX; GOLD:NYSE), Alamos Gold Inc. (AGI:TSX; AGI:NYSE) and McEwen Mining Inc. (MUX:TSX; MUX:NYSE ). X-Terra will have a lot of eyeballs on it if they drill some good holes.
Promising update on Troilus East exploration; full steam ahead
In July, X-Terra completed the first geological reconnaissance and prospecting campaign on its wholly owned Troilus East property, located on the Frotet-Evans greenstone belt in James Bay, Quebec. Troilus East is adjacent to Troilus Gold's 8.1-million-ounce (Measured + Indicated + Inferred) gold-copper project and also adjacent to properties held by UrbanGold Minerals Inc. (UGM:TSX.V) and Kenorland Minerals.
For two weeks, X-Terra's exploration crew, supported by Technominex of Rouyn-Noranda, collected 451 chip samples from outcrops, boulders and channel sampling. The sampling was mostly directed up ice from previously identified gold-in-till anomalies.
In the prior till survey, 72 of 78 samples tested positive for gold grains. Of 283 gold grains, 25% (71) were classified as pristine. This typically means that the location of the samples from which the pristine gold grains were taken is <500m from the source of the gold sample.
CEO Ferreira stated, "This program delivered everything we could've expected from a first exploration campaign. We are looking forward to the upcoming assay results and related interpretation of the mineralization system. We will continue updating the market as we move this project forward towards the second phase of exploration. . ."
Conclusion
X-Terra has a tiny market cap of just CA$11M = US$8.3M, yet it has two potential company-making gold-heavy projects. Both will see drilling (at least 20 more holes) this year. Both are open to new discoveries. The projects are surrounded by dozens of larger junior, mid-tier and major precious metals companies that could be interested in joint venture and farm-in opportunities.
Not many gold companies the size of X-Terra Resources have two high-impact, funded drill programs starting by October or November at the latest. Neighboring properties/projects are seeing very significant drill programs this year and next. Good news for one will be good for all.
Readers have a lot of gold juniors to choose from, but not all are in safe jurisdictions, or have strong management teams and technical advisors. Not all have compelling valuations (many, companies are already up 500%+ from COVID-19 lows). Not all juniors have near-term catalysts and the cash to make things happen. Readers should consider taking a closer look at X-Terra Resources.
Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University's Stern School of Business.
[NLINSERT]Disclosures: The content of the above article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about X-Terra Resources, including commentary, opinions, views, assumptions, reported facts, calculations, etc., is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, professional trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of X-Terra Resources are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.
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Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he's diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts and financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events and news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.
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