Japan Gold (TSX-V:JG) Corporation revealed that Barrick Gold Corporation has selected six projects from the Barrick Alliance portfolio to advance to the Second Evaluation Phase under the strategic alliance agreement struck between the two companies in February 2020.
In addition, the Canadian mineral exploration company said Barrick will be continuing the initial evaluation for three project areas that were added to the Barrick Alliance following its formation.
Japan Gold will continue to support and manage the included projects under the Barrick Alliance.
READ: Japan Gold starts drilling at Saroma prospect at its Ikutahara project in Hokkaido
In a statement, Barrick Vice President Exploration, Asia-Pacific, Marian Moroney said: "The Barrick team is excited that the country-wide screening program has been successful in defining multiple projects which will now receive more focused work programs in order to progress them to the next stage.”
"The programs are likely to include geophysical surveys and drilling on the best targets, as we continue the search for world-class orebodies in Japan."
Meanwhile, Japan Gold Chairman and CEO John Proust said the Japan Gold team has completed an enormous amount of work over the past two-and-a-half years evaluating the 29 Barrick Alliance projects to demonstrate to Barrick the high quality of the Japan Gold project portfolio and its prospectivity.
“We are highly encouraged that Barrick has selected six projects with the potential to host Tier 1 or Tier 2 ore bodies and we look forward to aggressively advancing these projects," added Proust.
As part of the Alliance Agreement, Barrick agreed to:
- Sole fund a two-year Initial Evaluation Phase of all 29 projects initially included in the Barrick Alliance;
- As well as a two-year Initial Evaluation Phase on projects subsequently acquired by Japan Gold and included in the Barrick Alliance, starting on their acquisition date;
- And sole fund a subsequent three-year Second Evaluation Phase on projects which meet their criteria.
In February this year, Japan Gold granted Barrick a six-month extension to August 31, 2022, to complete the Initial Evaluation Phase on the original project portfolio, due to travel restrictions caused by the pandemic.
Barrick requires projects to have the potential to host either a Tier 1 or Tier 2 ore body, to advance under the Barrick Alliance. Tier 1 ore bodies are defined by Barrick as having 5 million ounce, or greater potential with annual production of at least 500,000 ounces of gold for 10 years.
On the other hand, Tier 2 ore bodies are defined as having 3 million ounce, or greater potential with annual production of 300,000 ounces of gold for 10 years.
Barrick picked the following projects after a comprehensive field and data review completed by senior Barrick and Japan Gold personnel:
- Aibetsu, Tenyru, Hakuryu, Togi, Ebino and Mizobe, included in the Barrick Alliance at the time of its original formation, will advance to the program's Second Evaluation Phase;
- Buho Extension - Nakanosawa, Aibetsu East Extension, and Togi Extension were added to the Barrick Alliance following its formation and as such will continue under the Initial Evaluation Phase which end within a year.
"With the thorough evaluations completed by the Barrick Alliance, the company now holds a comprehensive data set on Japan's epithermal-gold districts and is well-positioned to advance areas of high-prospectivity which don't fit Barrick's criteria but may still host large high-grade gold deposits,” said Proust.
He added that Japan Gold is internally evaluating projects that Barrick didn’t select which offer exploration potential to determine which to advance independently or by bringing in partners.
Strong endorsement
Meanwhile, investment bank Hannam and Partners, said the move represents “a strong endorsement of Japan Gold’s portfolio.”
“Within the Barrick Alliance, we assume a 70% chance of a 1Moz discovery, a 25% chance of a 2Moz discovery and a 5% chance of a Hishikari-style 10Moz discovery, with first gold production assumed in 2027 and JG freely-carried on a 25% stake up to a BFS,” said the analysts at Hannam and Partners.
“We assign a value to each of these scenarios plus an independently developed 1Moz scenario using a conceptual DCF model (with gold at ~US$1,850/oz and a 5% WACC), and apply our probability-weightings.”
As a result, Hannam and Partners said it was “confident to leave its valuation unchanged at C$1.08 a share, which is approximately 4.7x the current share price.”
“We derive a Dec’22E target price of C$1.08/share, implying 370% upside. Whilst we leave these probabilities unchanged, this announcement increases confidence in our estimated target price,” said the analysts.
Key catalysts include further drill results from independent projects in the coming months, alongside Barrick Alliance news flow, according to Hannam and Partners.
Japan Gold is focused on gold exploration across the three largest islands of Japan: Hokkaido, Honshu, and Kyushu. It has a country-wide alliance with Barrick Gold to jointly explore and mine certain gold mineral properties.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive
— Updates with analyst comments from Hannam and Partners —