Vol. 260 - Ethos Capital and The White Gold District
March 26, 2012
If you own shares in any company operating in the Yukon, and specifically the White Gold District, you need to read this report.
It's almost that time of year again - when winter's grasp unwillingly lets go to the optimism of spring. For the miners and calculated risk takers who have tucked away Yukon or Northern Canadian mining plays, it has been a long winter. However, for a few prospectors/explorers and hundreds of investors, the warmer weather could bring new discoveries and robust profits.
These successes will lift up the other well positioned miners as they benefit from increased activity and the long awaited drilling season of the far north. The staking rush has long past in the Yukon as the more mature phase of 'discovery' is now in full-effect. In the future, we will look back on this modern-day gold rush as one of the most significant in modern time.
Last year, over $300 million was spent in exploration in the Yukon, most significantly, in the White Gold District. This area was made famous by Underworld's Golden Saddle discovery and the subsequent buyout by Kinross. The world famous prospector, Shawn Ryan, was credited with the discovery and is behind the majority of all claims and work being done in this region.
It seems every year the ante is upped as millions of dollars are driven into the ground through drilling - in hopes to uncover the next big discovery. Surely the summer of 2012 will see another record year in spending in the White Gold District of the Yukon. Gold continues to weather all selling storms as it remains near record highs, despite its recent pullback. One would assume that it's only a matter of time until another major gold discovery is made in the Yukon.
Movers and Shakers in The White Gold District
The two most advanced companies within or near the White Gold District are Western Copper and Gold and Kaminak. Western Copper's Casino Deposit is a world class resource with 4.5 billion lbs of Copper, 494 million lbs of molybdenum, 60.6 M oz silver and 8.3 million ounces of gold. Kaminak was the darling of the White Gold District a few years ago and it continues to garner much respect and anticipation as it advances its multi-million ounce Coffee Deposit. Our Featured Company and client in the White Gold District continues to be Ethos Capital (ECC:TSXV), whose board recently approved a $7.3 million 2012 exploration program, focussed on its Betty Gold Property.
Look at the below map and the proximity of Ethos Capital to Kaminak's Coffee discovery, but more importantly, Ethos' proximity to Western Copper and Gold's Casino Deposit.
When it comes to the White Gold District, investors are all looking forward to the next drill results and the next great new land package. However, our team wants more. We want the playing field opened. We want to see a multi-million dollar commitment in infrastructure. This commitment needs to be made by a major company, or by territorial or federal government- which brings us to our next point...
Western Copper has proposed a massive all weather, year round road to its Casino Property located in the heart of the White Gold District. The below is taken from Western Copper's NI 43-101 Technical Report Pre-Feasibility Study Update released in May of last year:
"The region is serviced by excellent paved all-weather roads connecting the town of Carmacks,Yukon with Whitehorse and the Port of Skagway Alaska. With the completion of the 132 km Casino access road (Figure 1.7-1), the project will have an all-weather access route through.
Carmacks to Whitehorse (approx. 380 km) and to the Port of Skagway (550km). The Port of Skagway has existing facilities to store and load-out concentrates as well as facilities to receive bulk commodity shipments, fuels and connection to the Alaska Marine Highway. The Port of Skagway is developing plans to expand these facilities to better serve the expanding mining activity in the Yukon and Alaska. Figure 1.7-4 shows a conceptual rendering of the proposed port facilities.
The City of Whitehorse is the government, financial and commercial hub of the Yukon with numerous business and service entities to support the project and represents a major resource to staff the project. Whitehorse has an international airport and provides commercial passenger and freight service for the region."
Ethos Capital's Betty Project
Ethos Capital's Betty Project returned soils up to 7.3 g/t gold and trench results of 7.3 g/t gold over 50 m and 2.9 g/t over 45 m. With 14,500 m of drilling planned for 2012, Ethos is playing for keeps. With its property lines running up against Kaminak's Coffee Deposit, which has returned the best drill results on a consistent basis in the White Gold District to date, it should be a very telling season for Ethos.
To get an idea of how many players are operating in this region, we've included another map courtesy of the Yukon Geological Survey.
Could you imagine the economic benefits for companies operating in the region, if the proposed Casino road is built? It would be transformational. Transportation costs for many of the players in the region would be cut significantly. From our research, many of the Yukon plays are only feasible at $1000 to $1200 gold, some as high as $1500. An infrastructure build-up, including a reliable road, could change the cost structure dramatically.
Going even further: Western Copper has outlined the economic benefits of a mine and infrastructure build-up to the Yukon and to Canada in a recent press release which is worth considering.
Western Copper and Gold Corporation announced the results of a study on the potential economic impact of the Casino project on Yukon and Canada recently completed by MNP LLP. The next two paragraphs are an excerpt from its press release on February 23, 2012:
The report highlights the impressive cumulative economic effect that developing Casino will have on Yukon and Canada during the project's construction and operation. The Casino project is estimated to contribute $9.8 billion to Canada's Gross Domestic Product ("GDP"), create 55,000 full-time equivalent positions ("FTE"), and generate $2.8 billion in wages and salaries.
"There is no doubt that the development and operation of Casino will have a monumental effect on the Yukon," said Dale Corman, Chairman and CEO of Western Copper and Gold.
The numbers speak for themselves. Our team believes there is simply too much metal in the ground and that a large scale infrastructure project will eventually develop in the White Gold District. When it does, the companies set to benefit will be those with the best location in proximity to the infrastructure. The big players in the White Gold District at the moment are Western Copper and Kaminak. Ethos Capital, as you can see from the first map in this report, finds itself almost smack dab in the middle of these two leaders.
Ethos Capital in 2012
Ethos' 2012 exploration program primarily consists of a planned 16,000 meters of drilling, using two drills and the collection of 10,000 soil samples. What is important to remember when it comes to Ethos is that it has working capital of approximately $14 million and is fully funded for 2012. This immediately separates it from the vast majority of juniors with similar market caps in the Yukon (and abroad for that matter). Ethos Capital is the opposite of being distressed or pressured for immediate results. This lack of pressure (from a treasury standpoint) will benefit Ethos in a tough market, just as it did last year. Ethos did not rush to drill in the summer of 2011, but instead conducted one of the largest soil sampling programs in the history of the Yukon, led by none other than Shawn Ryan. More than 33,000 soil samples were taken to define Ethos' 2012 drill program. This kind of patience and control only occurs when a company has two things:
* Time on its side - which Ethos has due to its healthy treasury balance and a gold market which we believe will remain hot for a number of years.
* Experienced management - who know how to explore for gold and approach a gold anomaly methodically. Gary Freeman and Head Geologist Peter Tallman understand this.
Ethos Capital is a company who pinched its pennies through the winter and meticulously planned its follow up exploration and drill program in the Yukon. The company has caught up and now surpassed many of its peers. Work is expected to begin with drilling in May, followed by soil sampling and other ground field work in June.
Initial exploration in 2011 on the Betty Property discovered the Mascot Creek gold target. The Mascot Creek target is comprised of a 17 square kilometer gold-in-soil anomaly that yielded gold in prospecting rock grab samples up to 24.8 g/t Au (see October 6, 2011 news release by clicking here)
Gold intervals in trench pits with the best result averaging 7.3 g/t Au over 50 meters (see October 27, 2011, November 15, 2011 and January 18, 2012 news releases by clicking on the respective dates).
Shawn Ryan and his company have completed much of the exploration work on Ethos' claim blocks thus far, including its flagship asset the Betty Property, on which the Mascot Creek gold target is located.
As most of you know, it was last year when our team selected Ethos Capital as our cover story and Featured Company for the modern day Yukon gold rush. Aside from the company's large treasury balance and aggressive work plans, we chose Ethos because of its leader, Gary Freeman (President and CEO). Gary's reputation in the industry speaks for itself. He was the President and CEO of Pediment Gold, until it was acquired by Argonaut Gold for $137 million in January 2011.
Ethos Capital Stock
The market crash of 2011, which began in the second half of summer, flattened most TSX Venture companies. The TSX Venture exchange lost roughly 40% of its value and has yet to recover very much of the loss. During the crash, Ethos wasn't spared, which proved to be an amazing opportunity as the stock has shot up as much as 200% since bottoming in October. Aside from its flagship asset, we attribute this robust 6 month performance to the strength of Ethos' management and the company's strong treasury balance. It's amazing what a stock can do when the market knows the company doesn't have immediate needs to raise capital(avoiding destructive dilution).
2012 is a pivotal year for Ethos Capital. It is about to embark on a massive work program. The company's Board has approved a $7.3 million 2012 exploration program focussed on the Betty Gold Property. The 2012 exploration program primarily consists of a planned 16,000 meters of drilling using two drills and the collection of 10,000 soil samples. This is a big year for the company and the results of its program will likely determine which direction its stock price goes in the month's ahead.
Ethos Capital has one of the largest land packages in the White Gold District which is documented on the first map above. It has returned some of the best results in the area from a soil sampling and trenching standpoint.
As the snow begins to melt and crews hit the ground back on the hunt for the Klondike Gold in the Yukon, Ethos will be one of the main players in the region. We look forward to updating you on Ethos' results from its budgeted $7.3 million work program.
All the best with your investments,
Disclaimer and Information on Forward Looking Statements: Please read carefully. All statements in this report, other than statements of historical fact should be considered forward-looking statements. These statements relate to future events or future performance. Forward-looking statements are often, but not always identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. Much of this report is comprised of statements of projection. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Risks and uncertainties respecting mineral exploration companies are generally disclosed in the annual financial or other filing documents of those and similar companies as filed with the relevant securities commissions, and should be reviewed by any reader of this article. In addition, with respect to any particular company, a number of risks relate to any statement of projection or forward statement.
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Maximus Strategic Consulting inc., owner of PinnacleDigest.com, its officers, directors, employees, and consultants shall not be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of its products or services, including this article. Maximus Strategic Consulting Inc, owner of PinnacleDigest.com, its employees, consultants and affiliates are not responsible for any claims made by any of the mentioned companies or third party writers. You should independently investigate and fully understand all risks before investing. We want to remind you again that PinnacleDigest.com is often paid editorial fees for its writing and the dissemination of material. The clients (including Ethos Capital Corp.) represented by PinnacleDigest.com are typically development-stage companies that pose a much higher risk to investors. When investing in speculative stocks of this nature, it is possible to lose your entire investment over time. Set forth below is our disclosure of compensation received from our clients mentioned in this newsletter and an explanation as to which companies we own shares in:
Maximus Strategic Consulting Inc., owner of PinnacleDigest.com, has been paid $60,000 Canadian dollars plus hst for online advertisement coverage on Ethos Capital Corp. for a pre-paid six month online marketing agreement. The company (Ethos Capital Corp.) has paid for this service. The service includes but is not limited to the creation and distribution of reports authored by PinnacleDigest.com about Ethos Capital Corp, as well as display advertisements about the company on our website. At the time our first report on Ethos Capital was released to our subscribers (1pm pacific standard time on June 1, 2011) we (Maximus Strategic Consulting Inc and employees and consultants) did not own any shares in Ethos Capital Corp. However, following the release of our first report on Ethos Capital to our subscribers, we (Maximus Strategic Consulting Inc and employees and consultants) bought shares in the company. We (Maximus Strategic Consulting Inc., its employees and consultants) have sold shares of Ethos Capital since our coverage began, but employees of Maximus Strategic Consulting Inc. still own shares in the company. We (Maximus Strategic Consulting Inc., its employees and consultants) intend to sell every share we own of Ethos Capital Corp. for our own profit and without notice to our subscribers. We may purchase more shares of Ethos Capital without notice to our subscribers. Remember, we (employees of Maximus Strategic Consulting Inc.) currently own shares in Ethos Capital Corp.
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