“In our business, you make it taking shots.”
Ron Netolitzky, 2014 Canadian Mining Hall of Fame inductee
Prospector Ron Netolitzky found his footing exploring for uranium in the northern Saskatchewan muskeg while oil patch consulting on the side, but it was in the mountains of northwestern British Columbia that he found his fortune.
In the late 80s, the geologist discovered the rich Snip and Eskay Creek mines in northwestern B.C.’s Golden Triangle, sparking both a staking rush on the ground and a trading frenzy on the old Vancouver Stock Exchange. Here—through a junior called Delaware Resources—Netolitzky and his partners optioned the Snip property from Cominco, who had held it for around twenty years but had never drilled it.
“We had enough money in the company to do the first drill program. We didn’t have enough for the second phase of the same year. Thank goodness, the holes ran,” Netolitzky recalls.
As did Delaware’s stock price. The company—and its 40% interest in Snip—was taken over by Pezim and rolled into Prime Resources. The mine eventually produced about a million ounces for Cominco, then Barrick, at grades averaging 25 g/t.
After Delaware, Netolitzky turned his attention to nearby Eskay Creek, a prospect he secured through a company called Consolidated Stikine Resources. His partners at Eskay were John Toffan, George Oughtred, Larry Nagy, and Marguerite Mackay. Eskay had previously been staked in the 1930s by prospector Tom Mackay and drilled by several majors, but with no success. Netolitzky’s group ran out of money to drill, though, so they went to Pezim, who invested $900,000 through Calpine Resources.
And when Hole 109 hit 682 feet averaging 25 g/t gold and 27 g/t silver, Netolitsky told us it was game on.
By the time a bidding war between players like Canadian mining legends Pezim and Ned Goodman had come to an end, shareholders of penny stock Consolidated Stikine sold for $67 a share to International Corona.
Eskay went on to churn out 3.3 million ounces of gold at 49 g/t and 160 million ounces of silver at 2,400 g/t for Homestake and Barrick, and Netolitzky left the discoveries a multi-millionaire.
“I guess I could say I got lucky in northern B.C.,” Netolitzky said.
Now Netolitzky, who was inducted into the Canadian Mining Hall of Fame earlier this year, has his sights set on a third Northwestern BC discovery.
Netolitzky has consolidated the Spectrum gold property due west of Imperial Metals’ Red Chris copper-gold mine in his Skeena Resources (TSXV:SKE), where he serves as chairman. After a promising drill program last summer, Skeena raised $8.1 million for a 10,000-metre-plus summer drill program that is now underway. Turns out the rich Snip and Eskay Creek strikes didn’t dampen Netolitzky’s enthusiasm for the treasure hunt, or for the Golden Triangle.
As he put it twenty-five years ago in a Report on Business magazine feature: “I guess it’s like the lottery—we’ve won twice. Now we’re going for a third time. You must think we’re crazy.”
But unlike the quick wins at Snip and Eskay Creek, securing the Spectrum property would require persistence. Over the next twenty-five years, Netolitzky’s bid for Strike No. 3 in the gold-rich mountains was continually derailed by a combination of events that began with a political earthquake.
In October 1991, after sixteen years of pro-development Social Credit party rule, B.C. residents elected the left-wing New Democrats. The political shakeup and resulting land-use changes carried implications for the B.C. mining industry, and for the Spectrum property Netolitzky was eyeing.
Provincial park and right-of-way issues made exploration of Spectrum—located in the shadow of dormant volcano Mount Edziza—all but impossible. The property was eventually picked up by a Milwaukee-based businessman who didn’t spend a dime on it, says Netolitzky, so he left the province to explore other parts of the world.
“What struck us with that property, it was a similar style to the other discoveries. It was essentially left sitting there from 1990 to 1991, lost in the paperwork, lost in people’s files, lost. And the owner was not the kind of guy who was easy to find,” Netolitzky said.
But Spectrum’s park and right-of-way issues were eventually resolved, and Netolitzky tracked down the owner and was able to negotiate a 20% stake in the property through a private company.
Last year, Skeena acquired 100% of the property through an agreement that sees the prior owner retain a 24% ownership stake in the company.
Netolitzky was back in the game.
Spectrum has an existing historical resource that is non-compliant with NI 43-101 regulations. To firm up the resource, Skeena completed a limited drill program last summer that yielded some of the hits that the Golden Triangle has become renowned for. Those included intercepts of 23.8 g/t gold over 6.5 metres, 10.6 g/t over 27 metres, and 254 g/t over 2 metres.
But then came the hard part: raising money for a substantial 10,000-metre drill program in a junior resource financing wasteland.
“I’ve spent a lot of my career raising money for little companies,” Netolitzky told us. “It’s something you had to do. I’m always happier if somebody else does the job that I don’t like doing and lets me do what I like to do, which is spot drill holes.”
That “somebody else” is Walt Coles Jr., Skeena’s president and CEO. Coles, a native Virginian, came to Skeena after a decade on Wall Street working as an equity and research analyst for both UBS and hedge fund Cadence Investment Partners.
While Netolitzky prefers jeans and a rock hammer, Coles—at 43, a generation younger than Netolitzky—is comfortable with a suit and briefcase. More importantly, his relationships with institutional investors played a significant role in Skeena’s $8.1 million financing, which turned heads in the junior mining world. Cash-rich Boss Power, another Netolitzky play, also chipped in $1.5 million.
While gold is their goal, it was uranium that brought the unlikely duo together.
Coles’ family owns a swath of Virginia farmland that hosts a large uranium deposit, which was developed by a Venture-listed play called Virginia Energy Resources. Coles Jr., Virginia’s executive vice-president, recruited Netolitzky as a director.
Though that project floundered, the veteran geologist and the young analyst established a strong working relationship that persists today. Coles’ institutional connections have proved vital for Skeena in a landscape that is unrecognizable compared to the retail-focused markets where Netolitzky was comfortable raising money.
“When institutions start showing up, that’s when we’re all exiting stage left. That’s our win, right?” said Netolitzky. “If we needed to try to get the kind of money that’s now been raised on a retail basis, there’s just no way people like me would ever be able to find it.”
In a business all about taking shots, Skeena also structured the financing in a way that gives retail investors a shot at share price appreciation. There were no warrants attached to the deal—a move that encourages long-term shareholders who believe in the story and are willing to give the company reasonable time to deliver, and discouraged “flippers” who rent capital for four months, then sell and get a free ride on the warrants.
“Too often, investors are trained to wait for private placements so they can receive a half-warrant or warrant. The problem is when they want to sell, they’re going to go to the open market to sell,” said Coles. “But if every investor is waiting for a private placement to buy so they get the warrant, it’s a toxic structure that never lets a share price go up.”
Two drills are turning as part of the Skeena program, which should yield regular drill results over the coming months, and—hopefully—some positive surprises.
“These are areas where you can get pleasantly surprised instead of unpleasantly surprised,” Netolitzky says of the Golden Triangle, where vein systems can go down thousands of metres.
The goal of the summer drill program is to establish continuity and trace the systems down. “Prove the theory,” as Netolitzky puts it. Skeena will also continue its metallurgy work, following its initial studies that showed gold recoveries over 90% from combined gravity recovery tests and cyanide leaching.
Skeena aims to come out of the summer drill program with a one million ounce resource. Another underground drill program next summer is a possibility as well, Netolitzky said.
Eventually, “we think we’ve got a shot at a couple million ounces” of high-grade gold, he told us.
It’s been a wild ride for Netolitzky, who describes himself as a “prairie-type geologist” more used to flatlands and muskeg than the steep, snowy slopes of northwestern B.C., where mountain goats and grizzlies roam.
“I actually get vertigo on a stepladder,” he quipped.
Skeena has solidified good relationships with Tahltan First Nation, having gone through a Tahltan company for a recent archeological impact assessment that uncovered no archeological sites in the proposed drilling areas.
“Spectrum’s biggest challenge might be mother nature treating us right,” Netolitzky remarked.
“It’s interesting, when you look at ore bodies and deposits—some of them treat you real good and don’t hurt you. Other deposits give you a lot of work, and you almost make it, but you never really get a good deposit out of it. This one looks like it’s going to treat us right.”
CEO.CA is proud to announce Skeena Resources President and CEO Walter Coles will be presenting at our October 8, 2015 Subscriber Summit in Vancouver. He’ll be talking about Skeena’s ongoing summer drill program, with assay results expected August 2015 through January 2016.
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