Executive Summary
Tudor Gold Limited (“Tudor Gold”)(TSX.V:TUD)(OTC:TDRRF)(Frankfurt:H56) is a company that is focused on the exploration and development of precious and base metals properties in the Golden Triangle area of British Columbia, Canada. Its main mineral property is called Treaty Creek in which it acquired a 60% interest in May 2016 through the acquisition of 31% of the shares of American Creek Resources Limited (“ACR”), which held a 51% stake, and a 29% interest from Teuton Resources Corporation (“Teuton”), which held a 49% interest. As part of the deal, a joint venture agreement was entered into with Tudor Gold holding a 60% interest and AMC and Teuton each holding a 20% interest. The Treaty Creek property is Tudor Gold’s sole holding.
Since 2016 the company has been consistently drilling a target in the Treaty Creek area now referred to as the Goldstorm deposit. In February 2024 the latest mineral resource estimate (“MRE”) was published with a gold content in the Indicated category of 21.7 million ounces (“Moz”), 128.7 Moz silver and 1.3 million tonnes (“Mt”) copper. These numbers are impressive allowing management to boast that it is “one of the largest gold discoveries in the last 30 years with significant expansion and exploration potential”. Unfortunately, the technical report for the 2024 MRE is not yet available and Crux had to refer to the earlier reports to understand the critical issues.
The Goldstorm deposit is interpreted as a northeast extension of the established trend of porphyry deposits located along the regional-scale Sulphurets Thrust Fault, a trend that includes the five very large deposits of Seabridge Gold Incorporated (“Seabridge”).
The mineralisation at Goldstorm is related to porphyritic activity and occurs in six domains each with different characteristics. Of these six domains, three account for almost 85% of the contained gold in the 2023 MRE. The fourth largest contributor to gold in resources (11.7%) is outside any domain and is classified as ‘External’. Three of the six domains together circumscribe only a minor (3.6%) portion of the gold in the resource. Remember that Domains are the building blocks of any Mineral Resource Estimate. It is a significant cause for concern that a large percentage of the gold in the resource statement comes from a source that is not defined in a domain, the ‘External’ category. Perhaps these issues will be addressed in the forthcoming Technical Report. Crux Investor views these issues as critical.
This review has found it hard to get a good impression of the continuity of the domains. The technical report does not properly substantiate the criteria used to define the domains. Company illustrations only muddle the picture. A review of the illustrations that are provided shows that potentially economic grades above 0.5 g/t Au occur over relatively short distances. The high grades are often only the length of the 1.5 m composite value itself. The reported drill results, however, averaged these higher grades over much longer intervals giving the impression of wide consistent mineralisation. Where the illustrations are sufficiently clear, the cross-sections illustrate considerable smearing of grade in blocks extending along- and also between- holes. There is at least one instance where the intersection of two drillholes has very different grades for each hole.
Another area of concern within the MRE is the methodology and inputs used to calculate cut-off grades. For example, the external consultants JDS use an “internal mill’ cut-off grade excluding mining cost to drop the open pit cut-off grade. This is conceptually invalid as the mining cost will have to be incurred to make the material available for treatment. Furthermore, JDS uses open-pit and underground mining costs and processing costs that are unrealistic in the current operating environment. Accordingly, Crux Investor believes that the cut-off grades assumed by JDS for open pit and underground mining are far too low. JDS uses an open-pit cut-off grade of 0.4 g/t Au and Crux Investor calculates that 0.64 g/t Au is more appropriate. For underground resources, JDS uses 0.6 g/t Au and Crux Investor calculates 0.72 g/t Au.
The 2024 MRE shows that the total resources have not increased in tonnage, but have 9% more gold because of a grade that is 9% higher at 0.94 g/t Au. Where there is a major change is the 87% reduction of mineral resources tonnage in the conceptual pit. The mineral resources now include 91.4% of the contained gold as underground resources.
Overall, Crux Investor has significant concerns about the cut-off grades being used, and the way the resource estimate has been calculated. Even if the concerns about the resource estimate are assuaged in the forthcoming Technical Report the deposit is still a difficult proposition.
Economically there are three main problems with the defined resources:
- Depth. The mineralisation is deep
- Grade. The mineralisation is relatively low grade
- Mineralogy. The mineralisation is refractory
The relatively deep occurrence quickly results in excessive waste stripping when extracted through open pit extraction. The low grade requires very low operating costs for the deposits to be economical. The refractory nature results in low recoveries when using conventional processing routes. To overcome the metallurgical recovery problems Tudor Gold suggests oxidising the sulphide concentrate under high pressure and temperature (“POX”) before subjecting it to cyanide leaching. This is a solution, but it comes at the price of very much higher capital and operating costs. Remember that the word ‘refractory’ is a catch-all term referring to the metals locked up in minerals that need additional treatment (at additional cost) to be recovered.
Crux Investor has made rough estimates of the prospective cash margins for mining the open pit and underground resources and arrives at negligible cash margins that can never redeem the upfront investments.
At the share price of C$0.88 on 19 March 2024, the Enterprise Value is just above US$149 million, placing a value of 149 / 0.6 = US$249 million on the Goldstorm deposit. This is extremely generous for a project that has only progressed to mineral resource estimation and has very little in terms of studies to demonstrate economic viability. Crux Investor’s assessment shows that there is almost no prospect of advancing the Goldstorm deposit to production. Avoid.
Introduction
Tudor Gold Limited (“Tudor Gold”)(TSX.V:TUD)(OTC:TDRRF)(Frankfurt:H56) is a company that is focused on the exploration and development of precious and base metals properties in the Golden Triangle area in British Columbia, Canada. Its main mineral property is called Treaty Creek in which it acquired a 60% interest in May 2016 through the acquisition of 31% of the shares of American Creek Resources Limited (“ACR”), which held a 51% stake, and a 29% interest from Teuton Resources Corporation (“Teuton”), which held a 49% interest. As part of the deal, a joint venture agreement was entered into with Tudor Gold holding a 60% interest and AMC and Teuton each holding a 20% interest. As part of the agreement, Tudor Gold committed to spend a minimum of C$1.0 million in exploration expenditures on the Treaty Creek Property during 2016.
In 2016 Tudor had also optioned the Electrum claims from ACR, which included the Crown Project immediately south of the Brucejack mine. Tudor undertook drilling trenching and rock sampling, including a 3.8-tonne bulk sample from the Crown Project. The results were such that continuity was not obvious and the mineral property was placed into a subsidiary company Goldstorm Metals Corporation and spun out on 10 November 2022.
Exploration results at Treaty Creek were considered promising with the discovery of the Copper Belle deposit that was subsequently renamed Goldstorm deposit. This report uses Treaty Creek and Goldstorm and associated satellites and extensions interchangeably. Naming the deposit Goldstorm is confusing, given that Goldstorm Metals Corp would later be spun out with the Crown Project as its flagship. Drilling campaigns at Treaty Creek have been consistently carried out since 2016 with an initial mineral resource estimate (“MRE”) declared in March 2021, an updated MRE in March 2023, and updated again in February 2024. The declared metal content in Indicated Mineral Resources of 21.7 million ounces (“Moz”) gold, 128.7 Moz silver, and 1.3 million tonnes (“Mt”) copper is impressive. Management rightly boasts in the latest corporate presentation dated February 2024 that the discovery is “one of the largest gold discoveries in the last 30 years with significant expansion and exploration potential”.
At the current share price of C$0.88 the market capitalisation of Tudor Gold is only US$149 million. Considering the 60% beneficial shareholding the deposit is valued at 153 / 0.60 = US$249 million, which converts to a value of US$9.0/oz AuEq given the 27.9 Moz AuEq metal content. This is a low valuation. Why is the valuation so low? Crux Investor investigates…
Figure 1_1 shows the share price performance of Tudor Gold since May 2016 when it first got involved in Treaty Creek.
The graph shows that the initial discoveries did not excite the market. In February 2020 the price started a move from C$0.40 to C$3.88 only six months later. The rise coincided with announcements of drills intersecting hundreds of metres of >1 g/t AuEq grades and P&E Mining Consultants (“P&E”) rendering an opinion that the gold mineralisation showed long-range continuity in three dimensions. P&E recommended drill spacing of 200 m as sufficient to provide a confidence level for declaring Indicated resources. The rise also coincided with the great gold equities spike of 2020, related to the Covid pandemic.
Like so many other gold companies, since August 2020 the Tudor Gold share price has been on a downward trend. This downward trend has been despite Tudor Gold expanding the discovery and releasing MRE’s that showed steadily more metal content. Crux Investor looks at the technical merits of the resources in the following sections.
Historical Operating and Financial Performance
Table 2_1 shows the financial performance since 1 April 2017, the first year since getting involved in the Treaty Creek project.
Table 2_1 shows that Tudor Gold’s financial performance:
- The company has spent a total of C$14 million on operational expenses and C$105 million on investments to advance its projects, predominantly Treaty Creek.
- The annual burn rate in the last 3 ½ years is between C$25 million and C$30 million (cash).
- Funding has been exclusively through equity placements.
- With a cash balance of C$2.1 million on 30 September 2023 it was clear the company required another equity placement, a substantial one if it desired to keep up the pace of exploration and studies.
- On 14 February Tudor announced an At-The-Market Equity Program (“ATM Program”) that allows Tudor to issue and sell, at its discretion, to the public common shares of Tudor that would have an aggregate sales amount of up to C$20 million. The sale would be effected through an agent: Research Capital Corporation.
Review of the Treaty Creek Project
Background
Unless specifically stated otherwise, the text and all information and illustrations presented in this section are derived from an NI 43-101 compliant technical report in support of an initial mineral resource estimate (“MRE”), dated 23 April 2021 by P&E Consultants Incorporated (“P&E”) and an NI 43-101 compliant technical report on an updated MRE, dated 28 April 2023 by JDS Energy & Mining Incorporated (“JDS”). The technical report on the updated MRE announced on 20 February 2024 is not yet available.
The Treaty Creek property is located in northwestern British Columbia, approximately 80 km north-northwest of the Town of Stewart, and approximately 275 km northwest of Smithers (see Figure 3.1_1).
The project is at a good address since it borders Seabridge Gold Incorporated’s (“Seabridge”) KSM Property to the southwest and Newcrest Mining Ltd.’s (now Newmont) Brucejack Mine property to the southeast. The past-producing Eskay Creek Mine lies 12 km to the west.
Road access from Highway 37 to the property is currently under development by Seabridge Gold to service their proposed tailings management facility in the neighbouring North Treaty Creek and Teigen Creek valleys. This road will pass 17 km to the east of the lower camp on the Treaty Creek property. Additional seasonal accessibility has been achieved with a winter snow route from the Newcrest Brucejack Lake-Knipple Glacier Road that allows early-season heavy equipment mobilisation to site while winter conditions exist.
The Treaty Creek property consists of The Property consists of 47 contiguous mineral rights totalling 17,966 ha, with a footprint of 16,664 ha after accounting for claim overlap. The Mineral Resource Estimate reported in Section 14 of this Technical Report is located within mineral tenure title numbers 251229 and 251231.
Figure 3.1_2 shows the outline and extent of the tenement area with the areas with declared mineral resources indicated by a red arrow.
The core mineral tenures that comprise the Goldstorm Deposit mineral resources are subject to 0.98% Net Smelter Return (“NSR”) payable to Teuton Resources. Certain other surrounding mineral tenures are subject to two royalties: 0.49% NSR payable to Teuton Resources Corporation and a 2% NSR with a 1% buyback at $1 million payable to St. Andrews. The remaining peripheral mineral tenures are subject to 0.49% NSR payable to Teuton Resources Corporation.
Geology and Mineralisation
The Goldstorm deposit at Treaty Creek is interpreted as a northeast extension of the established trend of porphyry deposits located along the regional-scale Sulphurets Thrust Fault, a trend that includes the five deposits of Seabridge. Figure 3.2_1 shows the geology of the Goldstorm deposit area. Unfortunately, the discussion in the technical report is very unclear and the description of the lithological units is in terms of geological age and does not directly link to the descriptions used for the geological model for the MRE.
Porphyry deposits are of magmatic-hydrothermal origin in which the ore mineralisation is derived from temporally and genetically related intrusions. Magmas saturated with metal and sulphur-rich fluids form large protrusions upwards and complex. Polyphase systems develop within and above intrusive stocks, which subsequently interact with meteoric fluids which can remobilise and concentrate the metals. Meteoric fluids are derived from surface precipitation and subsequent infiltration.
At Goldstorm several variants of deposits related to porphyries have been identified. Figure 3.2_2 shows the six mineralised domains identified by Tudor Gold with annotations by Crux Investor on how the gold occurs. Remember that for resource estimation a ‘domain’ is a spatial volume with consistent geology and a single grade population.
Domains are really important. They are the building blocks for any resource estimate. Crux Investor has identified significant problems with the domains at Treaty Creek, but more on that later.
The description and outlining of the domains are poorly substantiated in the text of the technical reports with little in terms of cross-sections substantiating their outlines. The lack of information on the domains is a cause of concern for Crux Investor.
Mineral Resources
Introduction
The Treaty Creek Project drill hole database used for the 2023 mineral resource model consists of 228 drill holes (158,656 m), which were drilled in seven campaigns as of 2016. The first 200-300 m was drilled as HQ core, followed by NQ core. PQ, HQ, NQ, BQ are all descriptions of the diameter of the drill bit and associated core that is brought to surface, in decreasing diameter. A simple way to remember the relative size of the drill core, runs: Papa Core, Heavy Core, Normal Core, Baby Core. PQ is usually only drilled to extract material for metallurgical and / or geotechnical test work.
For the MRE, information from 201 diamond drill holes was used covering 148,474 m.
Figure 3.3.1_1 shows a plan view of the drill hole collar locations and traces through the Goldstorm deposit projected to the surface.
Unfortunately, the holes generally deflected away from the drill fence coordinates which had a great impact on presenting results along cross sections with individual holes only shown over part of their length. Also apparent is the fact that many holes are drilled from the same drill platform.
A geological model was generated comprising eight main lithologies and a code for fault structures. Figure 3.3.1_2 shows a cross-section of the geological model, which Crux Investor has annotated to make the various lithological units and fault names readable by using a larger font size in the same colour as used by Tudor Gold.
The section shows that the Treaty Thrust Fault represents the hanging wall (TTF1) and footwall (TTF2) of the deposit. The Intermediate Fragmental Volcanics and CS-600 Diorite host the predominant mineralised units as is shown in Figure 3.3.1_3.
Once the solid models for the various mineralised domains were finalised. As noted above, the technical report does not explain what criteria were used to define and outline such domains in a way that was clear to Crux Investor. Yes, section 7.4 of the Technical Report provides a qualitative description of the various domains, but it does not show the specific criteria used. Normally the criteria such as grade, lithology, density of veining, etc, are quantified.
Nevertheless, the domains were used to code the drill hole assays and composites for subsequent statistical and geostatistical analysis. The solid zones were utilised to constrain the block model, by matching assays to those within the zones. Plotting of assay results across domain borders indicates a sharp change in grade indicating that such borders should be treated as “hard”. With hard borders, grades within such a domain are not used to inform block grades outside the domain.
JDS chose to use a composite length of 1.5 m as this was the most frequently used sample length. Considering the bulk nature of the target resources, this is a very short composite length.
High-grade outlier thresholds were chosen by domain and are based on an analysis of the breaks in the cumulative frequency plots for each of the mineralised domains. However, Crux Investor records that the graph for all gold composite grades in the technical report (reproduced in Figure 3.3.1_4) does not show a log-normal distribution, which would express itself as being one straight line.
Either the gold distribution is not log-normal, or there are several lognormal populations applicable at Goldstorm, a low-grade, medium-grade, and high-grade population. This is another cause for concern.
The statistics provided in the report for the grade distribution for the various domains show that cutting outliers results in the coefficient of variance (“CV” = standard deviation / mean) dropping to well below 2, which is excellent for grade estimation by ordinary kriging.
The technical report does not present graphical results for the variography, only tables with nugget effect values and search ranges. The reader can't determine whether or not the variographs are well-defined and robust. The search ranges for the various domains are very extensive, being typically hundreds of metres, with up to 500 m used for the CS-600 domain. It means that the composite grades over 1.5 m inform block grades very far away.
Cut-Off Grades
Table 3.3.2_1 shows the derivation of the cut-off grades for open pit and underground mining to come to resources that have a “reasonable prospect of economic extraction”. The cells highlighted in yellow contain the values suggested in the technical report. Crux Investor has calculated the cut-off grades ignoring any contribution by silver and copper to simplify the calculation. Contrary to the technical report the impact of the royalty was accounted for by Crux Investor.
The table shows the large differences between calculated cut-off grades and used cut-off grades. Crux Investor calculates a cut-off grade of 0.64 g/t Au and 0.72 g/t Au for open pit and underground resources respectively. This contrasts with the calculated JDS cut-off grades of 0.50 g/t Au and 0.70 g/t Au for open pit and underground resources respectively.
The assumptions for open pit mining ignore any contribution from copper. JDS includes a silver credit in its calculations but the contribution of silver is less than 5% of the value of the gold. Even allowing for a marginal adjustment for the silver credit, the differences between the Crux Investor and the JDS cut-off grade estimates are unexplained. JDS goes however one step further by using an “internal mill’ cut-off grade excluding mining cost to drop the open pit cut-off grade by another 20% to 0.40 g/t Au. Whereas this is mathematically invalid, it is also conceptually invalid as the mining cost will have to be incurred to make it available for treatment. Finally, the mining cost used be JDS of C$2/t is not deemed credible by Crux Investor. A more realistic benchmark cost would lie between C$3.0/t and C$3.5/t.
The Crux Investor opinion is that the cut-off grade assumed by JDS for open pit mining is far too low.
For underground mining, Crux Investor acknowledges there are both silver and copper credits that will help lower the gold cut-off grade. In dollar terms, the contribution for copper would be around C$21/t. The combined copper and silver by-product credits would help to drop the cut-off grade from 0.72 g/t Au to 0.53 g/t Au. However, JDS assumes a mining cost rate of C$7.0/t is which an absurd figure. A rate of C$7.0/t for underground mining too low even for block caving, the cheapest underground mining method which nowadays is benchmarked at around C$27/t. Even assuming very low mining cost, a rate of C$30/t is more realistic for the Treaty Creek deposits. Using an underground mining cost of C$30/t, and taking into account the contributions from copper and silver, the Crux Investor cut-off grade is 0.78 g/t Au.
The Crux Investor opinion is that the cut-off grade assumed by JDS for underground mining is far too low.
Domains
Table 3.3.3_1 shows the mineral resources declared by Tudor Gold (and signed off by JDS), effective 28 April 2023.
The table shows that the great majority of gold is in the Indicated category and open pit resources account for almost 62% of the contained gold. The gold grade is not particularly high in any category being between 0.71 g/t to 0.91 g/t Au. The copper grade is highest in the resources associated with the CS60 domain underground.
In the Technical Report dated 28 April 2023, the Minerals Resource Statement is reported in Table 14-1. Interestingly, on the same page is Table 14-2 which is another Mineral Resource Statement that reflects the gold contained within the Domains. At risk of swamping the reader with technical information, Table 14-2 has been reproduced below as Table 3.3.3_2. It is so important that it needs to be included as well.
Detailed reading of these two tables provides two crucial pieces of information.
The first key piece of information is that the amount of gold shown in the resource statement Table 3.3.3_1 is greater than the amount of gold shown in Table 3.3.3_2. The difference between the declared resources and the sum of the resources for individual domains is 103,000 oz. Having such a material difference between the two totals raises questions about the rigor of the estimation exercise.
Not only that but a closer look at Table 3.3.3_2 shows in the second last row a category – or a domain marked ‘External’. Buried in the footnote #6 in the technical report is the following comment:
“a mineral estimate of the material within the defined pit that exists outside of the outlined mineral domains was completed and is included within the Inferred Mineral Resource, and listed “In Pit, External”.
Really? Wow. Look at the total gold that is in the ‘external’ category: 2.8 million ounces, comprising 11.7% of the total gold in the domains. This category far exceeds the gold contained in the R66, NS STK, and Copper Belle domains. After all of the maps and descriptions, it becomes apparent that R66 and NS STK and Copper Belle domains are immaterial for the total resources. Together these three domains only contribute 3.6% of the total gold. Remember that domains are the building blocks of a mineral resource estimate. Domains that do not contain relevant amounts of gold and non-domains that DO contain relevant amounts of gold are a major concern.
Crux Investor acknowledges that a new Technical Report will be issued soon. It is to be hoped that all of these issues regarding resource estimation and domaining will be resolved in the next report iteration. As it stands, the entire resource estimate must be viewed with caution.
Moving on, this review has found it very difficult to get a good impression of the continuity of the domains. The technical report does not properly substantiate the methods used, nor provide illustrations to support continuity. For example, Figure 3.3_5 shows cross-sections through the block model with the drill hole intersections showing the grade not only in colour, but also as bars, which is unnecessary and actually muddies the diagram. An over-busy slide obscures whether or not grades can be interpolated between holes and what the correlation is between intersection grade and block grade.
The illustrations do show that potential economic grades above 0.5 g/t Au (orange), above 1.0 g/t Au (in red), above 2.0 g/t (in purple), etc. occur over relatively short distances, often the length of the 1.5 m composite. The reported drill results averaged these higher grades over much longer intervals giving the impression of wide consistent mineralisation.
Where the illustrations do allow comparison between drill hole grades and block grades (e.g. the bottom right of both diagrams) it is evident that extrapolations have been made over hundreds of metres. The blue bars are for copper grade.
Where drilling was relatively sparse, such as at Copper Belle, similar cross sections indicate smearing of grade (refer to Figure 3.3.3_2). The illustration does not show wide consistent intervals of mineralisation.
Crux Investor has annotated the cross-section above by adding a circle around the intersection of two drillholes with very different grades and adding a quadrant where a short relatively high-grade interval has been smeared to inform block grades much deeper.
The overall impression is that the mineral resources should be approached with much caution.
Crux Investor reproduces in Table 3.3.3_3 the MRE effective 20 February 2024 without the benefit of being able to review the assumptions and input parameters used. Crux Investor shows in the three bottom rows the changes from the 2023 MRE.
The table shows that the total resources have not increased in tonnage, but have 9% more gold because of a grade that is 9% higher at 0.94 g/t Au. Where there is a major change is the 87% reduction of mineral resources tonnage in the conceptual pit. The underground resources now contain 91.4% of the total contained gold in mineral resources.
The higher grade can be explained by the application of much higher cut-off grades: 0.70 g/t Au for open pit resources and 0.75 g/t for underground. Given the very much higher values, it is surprising that the average grade has not improved more. Crux Investor records that the relation between cut-off grade and average grade points to a gross cash margin at best being: (1.03 - 0.7) / 1.03 = 32%. Remember that cut-off grade represents the gross profit breakeven level.
The Economic Potential of the Mineral Resources
Introduction
The Treaty Creek project has not progressed beyond the estimation of mineral resources and no cash flow model can be generated. However, there is sufficient information to determine whether or not cash operating profits could be gained from treating these resources.
Metallurgical Characteristics
Very little metallurgical testwork has been carried out until now with only three programmes: one in 2020 by Bureau Veritas on Copper Belle and 300 H material, another in 2023 by SGS also including material from the CS-600 and DS-5 domains, and the latest in 2024 by Blue Coast Research Limited (“BCR”). No full report for the BCR results is available, just summary conclusions in the 20 February 2024 press release.
Despite having a gold content of 0.92 g/t which is close to the average resource grade for Copper Belle and 300H, the Bureau Veritas samples were subsequently deemed highly unrepresentative given the sphalerite (ZnS) content between 12.2% and 24.7%. Not too much weight can be given to the conclusions of this test work, except for the findings that the material is hard (i.e. Bond index of 15 kWh/t) and the precious metals are refractory, meaning that these are locked up in sulphide minerals that need to be oxidised to make gold and silver amenable to cyanide leaching. The sulphide minerals responded well to concentration by flash flotation but realised large losses in the cleaning flotation stages.
The SGS metallurgical tests were performed on composites made from 165 samples with each of the four domains having a Low-, Mid- and High-grade selection. A review of the table with composite characteristics shows that the “High” grade selections are close to the average resource grade at just under 1.0 g/t Au and for the important CS-600 domain at 0.61 g/t Au, which is well below resource grade.
Pyrite is by far the most dominant sulphide mineral with chalcopyrite significant for the CS-600 domain.
Gravity separation using a heavy medium density of 2.9 proved unsuccessful in giving a satisfactory separation.
The results of the SGS flotation tests reinforced the results that were seen in the Bureau Veritas test work program where a high recovery can be achieved using flotation, but at a high mass pull due to the sulphides in the feed. The gold is distributed through the sulphides, which resulted in lower recovery when the mass was reduced in the cleaning stage.
Leaching of the concentrates and high-grade composites gave unsatisfactory recoveries because of the refractory nature of the mineralisation. For this reason, a new set of leaching tests were performed after using pressure oxidising (“POX”) of the material. Given the high mass pull when concentrating using flotation (26% - 42%), any future process plant including such a circuit will need a very high capacity POX section.
The technical report suggests recoveries of 90% for gold and silver from cyanide leaching after POX and 80% for copper from the flotation of a chalcopyrite concentrate with an estimated content of 25%. Crux Investor records that the copper concentrate grade has not been substantiated by test work.
The BCR tests focused on producing a copper concentrate from CS-600 material through flotation which gave a 20% Cu concentrate (not very high) at 79.5% recovery and 25 g/t Au at 65% recovery. The other results were in line with SGS’s.
Prospective Revenue
Given the indicative metallurgical performance numbers, which need to be used with much caution as the test work has shown large differences in the type of mineralisation, the potential revenue has been derived in Table 3.4.3_1. Without the latest numbers available for the CS-600 domain Crux Investor had to refer to the 2023 MRE grades.
The table shows that prospective revenue at current metal prices is between C$88/t treated and C$93/t treated. The average grade of the 2024 MRE is less than 10% higher and does not materially change the above conclusion.
Prospective Operating Cost
In Table 14-15 (with parameters for the pit optimisation) of the 2023 MRE technical report an average waste strip ratio is given of 8.6. As the overall pit slope angle has been assumed to be a very aggressive 50 degrees, this ratio must be seen as optimistically low. The 2024 MRE press release does not give such a ratio but assumes a much more reasonable overall slope angle of 45 degrees. Crux Investor has guestimated a strip ratio of 4 for the much smaller pit.
Table 3.4.4_1 derives the life of mine (“LOM”) cash operating cost for open pit and underground mining.
Crux Investor does not accept the suggested mining cost of C$2.50/t for open pit mining based on its own benchmarking exercises and totally rejects the underground mining cost of C$8.50/t. Even the cheapest underground mining method, block caving (which cannot be used here) has been benchmarked above C$20/t. Ignored in the table are mine development expenditures to access new stopes underground.
The cost rate for POX has been given to the author by a very experienced process engineer.
Concluding Remarks
Based on the estimated revenue and operating cost, treating the current resources at current metal prices would give very little in terms of cash generation before sustaining capital expenditure. As a rule of thumb mining operations need a gross margin of at least 50% to give an acceptable rate of return. This applies to mining operations with typical capital expenditure intensity. Capital expenditure for the Treaty Creek project would however be extra high as a very large POX plant needs building. This would probably double the capital cost of the process plant.
Crux Investor concludes that currently, the Treaty Creek project has no prospect of being built.
The Enterprise Value of Tudor Gold On 19 March 2024
At the share price of C$0.88 on 19 March 2024 and with 228.6 million shares issued, the market capitalisation of Tudor is C$201.2 million, or US$148.2 million.
On 30 September 2023 the company had 14.1 million warrants outstanding at exercise prices between C$1.28 and C$2.80. All are therefore far out of the money. On the same date Tudor had 19.1 million options outstanding with exercise prices between C$0.30 and C$3.14. An estimated total of 7.2 million options are in the money at an average exercise price of C$0.56.
The company had no debt and net current assets of C$0.7 million.
Based on the above an Enterprise Value for Tudor is derived as shown in Table 4_1.
The Enterprise Value of C$203 million (US$149 million) is extremely generous for a company with as its main asset a 60% stake in a project that has only progressed to mineral resource estimation and has very little in terms of studies to demonstrate economic viability. Crux Investor’s assessment shows that there is almost no prospect of advancing the Treaty Creek to production.
Executive Summary
Tudor Gold Limited (“Tudor Gold”)(TSX.V:TUD)(OTC:TDRRF)(Frankfurt:H56) is a company that is focused on the exploration and development of precious and base metals properties in the Golden Triangle area of British Columbia, Canada. Its main mineral property is called Treaty Creek in which it acquired a 60% interest in May 2016 through the acquisition of 31% of the shares of American Creek Resources Limited (“ACR”), which held a 51% stake, and a 29% interest from Teuton Resources Corporation (“Teuton”), which held a 49% interest. As part of the deal, a joint venture agreement was entered into with Tudor Gold holding a 60% interest and AMC and Teuton each holding a 20% interest. The Treaty Creek property is Tudor Gold’s sole holding.
Since 2016 the company has been consistently drilling a target in the Treaty Creek area now referred to as the Goldstorm deposit. In February 2024 the latest mineral resource estimate (“MRE”) was published with a gold content in the Indicated category of 21.7 million ounces (“Moz”), 128.7 Moz silver and 1.3 million tonnes (“Mt”) copper. These numbers are impressive allowing management to boast that it is “one of the largest gold discoveries in the last 30 years with significant expansion and exploration potential”. Unfortunately, the technical report for the 2024 MRE is not yet available and Crux had to refer to the earlier reports to understand the critical issues.
The Goldstorm deposit is interpreted as a northeast extension of the established trend of porphyry deposits located along the regional-scale Sulphurets Thrust Fault, a trend that includes the five very large deposits of Seabridge Gold Incorporated (“Seabridge”).
The mineralisation at Goldstorm is related to porphyritic activity and occurs in six domains each with different characteristics. Of these six domains, three account for almost 85% of the contained gold in the 2023 MRE. The fourth largest contributor to gold in resources (11.7%) is outside any domain and is classified as ‘External’. Three of the six domains together circumscribe only a minor (3.6%) portion of the gold in the resource. Remember that Domains are the building blocks of any Mineral Resource Estimate. It is a significant cause for concern that a large percentage of the gold in the resource statement comes from a source that is not defined in a domain, the ‘External’ category. Perhaps these issues will be addressed in the forthcoming Technical Report. Crux Investor views these issues as critical.
This review has found it hard to get a good impression of the continuity of the domains. The technical report does not properly substantiate the criteria used to define the domains. Company illustrations only muddle the picture. A review of the illustrations that are provided shows that potentially economic grades above 0.5 g/t Au occur over relatively short distances. The high grades are often only the length of the 1.5 m composite value itself. The reported drill results, however, averaged these higher grades over much longer intervals giving the impression of wide consistent mineralisation. Where the illustrations are sufficiently clear, the cross-sections illustrate considerable smearing of grade in blocks extending along- and also between- holes. There is at least one instance where the intersection of two drillholes has very different grades for each hole.
Another area of concern within the MRE is the methodology and inputs used to calculate cut-off grades. For example, the external consultants JDS use an “internal mill’ cut-off grade excluding mining cost to drop the open pit cut-off grade. This is conceptually invalid as the mining cost will have to be incurred to make the material available for treatment. Furthermore, JDS uses open-pit and underground mining costs and processing costs that are unrealistic in the current operating environment. Accordingly, Crux Investor believes that the cut-off grades assumed by JDS for open pit and underground mining are far too low. JDS uses an open-pit cut-off grade of 0.4 g/t Au and Crux Investor calculates that 0.64 g/t Au is more appropriate. For underground resources, JDS uses 0.6 g/t Au and Crux Investor calculates 0.72 g/t Au.
The 2024 MRE shows that the total resources have not increased in tonnage, but have 9% more gold because of a grade that is 9% higher at 0.94 g/t Au. Where there is a major change is the 87% reduction of mineral resources tonnage in the conceptual pit. The mineral resources now include 91.4% of the contained gold as underground resources.
Overall, Crux Investor has significant concerns about the cut-off grades being used, and the way the resource estimate has been calculated. Even if the concerns about the resource estimate are assuaged in the forthcoming Technical Report the deposit is still a difficult proposition.
Economically there are three main problems with the defined resources:
- Depth. The mineralisation is deep
- Grade. The mineralisation is relatively low grade
- Mineralogy. The mineralisation is refractory
The relatively deep occurrence quickly results in excessive waste stripping when extracted through open pit extraction. The low grade requires very low operating costs for the deposits to be economical. The refractory nature results in low recoveries when using conventional processing routes. To overcome the metallurgical recovery problems Tudor Gold suggests oxidising the sulphide concentrate under high pressure and temperature (“POX”) before subjecting it to cyanide leaching. This is a solution, but it comes at the price of very much higher capital and operating costs. Remember that the word ‘refractory’ is a catch-all term referring to the metals locked up in minerals that need additional treatment (at additional cost) to be recovered.
Crux Investor has made rough estimates of the prospective cash margins for mining the open pit and underground resources and arrives at negligible cash margins that can never redeem the upfront investments.
At the share price of C$0.88 on 19 March 2024, the Enterprise Value is just above US$149 million, placing a value of 149 / 0.6 = US$249 million on the Goldstorm deposit. This is extremely generous for a project that has only progressed to mineral resource estimation and has very little in terms of studies to demonstrate economic viability. Crux Investor’s assessment shows that there is almost no prospect of advancing the Goldstorm deposit to production. Avoid.
Introduction
Tudor Gold Limited (“Tudor Gold”)(TSX.V:TUD)(OTC:TDRRF)(Frankfurt:H56) is a company that is focused on the exploration and development of precious and base metals properties in the Golden Triangle area in British Columbia, Canada. Its main mineral property is called Treaty Creek in which it acquired a 60% interest in May 2016 through the acquisition of 31% of the shares of American Creek Resources Limited (“ACR”), which held a 51% stake, and a 29% interest from Teuton Resources Corporation (“Teuton”), which held a 49% interest. As part of the deal, a joint venture agreement was entered into with Tudor Gold holding a 60% interest and AMC and Teuton each holding a 20% interest. As part of the agreement, Tudor Gold committed to spend a minimum of C$1.0 million in exploration expenditures on the Treaty Creek Property during 2016.
In 2016 Tudor had also optioned the Electrum claims from ACR, which included the Crown Project immediately south of the Brucejack mine. Tudor undertook drilling trenching and rock sampling, including a 3.8-tonne bulk sample from the Crown Project. The results were such that continuity was not obvious and the mineral property was placed into a subsidiary company Goldstorm Metals Corporation and spun out on 10 November 2022.
Exploration results at Treaty Creek were considered promising with the discovery of the Copper Belle deposit that was subsequently renamed Goldstorm deposit. This report uses Treaty Creek and Goldstorm and associated satellites and extensions interchangeably. Naming the deposit Goldstorm is confusing, given that Goldstorm Metals Corp would later be spun out with the Crown Project as its flagship. Drilling campaigns at Treaty Creek have been consistently carried out since 2016 with an initial mineral resource estimate (“MRE”) declared in March 2021, an updated MRE in March 2023, and updated again in February 2024. The declared metal content in Indicated Mineral Resources of 21.7 million ounces (“Moz”) gold, 128.7 Moz silver, and 1.3 million tonnes (“Mt”) copper is impressive. Management rightly boasts in the latest corporate presentation dated February 2024 that the discovery is “one of the largest gold discoveries in the last 30 years with significant expansion and exploration potential”.
At the current share price of C$0.88 the market capitalisation of Tudor Gold is only US$149 million. Considering the 60% beneficial shareholding the deposit is valued at 153 / 0.60 = US$249 million, which converts to a value of US$9.0/oz AuEq given the 27.9 Moz AuEq metal content. This is a low valuation. Why is the valuation so low? Crux Investor investigates…
Figure 1_1 shows the share price performance of Tudor Gold since May 2016 when it first got involved in Treaty Creek.
The graph shows that the initial discoveries did not excite the market. In February 2020 the price started a move from C$0.40 to C$3.88 only six months later. The rise coincided with announcements of drills intersecting hundreds of metres of >1 g/t AuEq grades and P&E Mining Consultants (“P&E”) rendering an opinion that the gold mineralisation showed long-range continuity in three dimensions. P&E recommended drill spacing of 200 m as sufficient to provide a confidence level for declaring Indicated resources. The rise also coincided with the great gold equities spike of 2020, related to the Covid pandemic.
Like so many other gold companies, since August 2020 the Tudor Gold share price has been on a downward trend. This downward trend has been despite Tudor Gold expanding the discovery and releasing MRE’s that showed steadily more metal content. Crux Investor looks at the technical merits of the resources in the following sections.
Historical Operating and Financial Performance
Table 2_1 shows the financial performance since 1 April 2017, the first year since getting involved in the Treaty Creek project.
Table 2_1 shows that Tudor Gold’s financial performance:
- The company has spent a total of C$14 million on operational expenses and C$105 million on investments to advance its projects, predominantly Treaty Creek.
- The annual burn rate in the last 3 ½ years is between C$25 million and C$30 million (cash).
- Funding has been exclusively through equity placements.
- With a cash balance of C$2.1 million on 30 September 2023 it was clear the company required another equity placement, a substantial one if it desired to keep up the pace of exploration and studies.
- On 14 February Tudor announced an At-The-Market Equity Program (“ATM Program”) that allows Tudor to issue and sell, at its discretion, to the public common shares of Tudor that would have an aggregate sales amount of up to C$20 million. The sale would be effected through an agent: Research Capital Corporation.
Review of the Treaty Creek Project
Background
Unless specifically stated otherwise, the text and all information and illustrations presented in this section are derived from an NI 43-101 compliant technical report in support of an initial mineral resource estimate (“MRE”), dated 23 April 2021 by P&E Consultants Incorporated (“P&E”) and an NI 43-101 compliant technical report on an updated MRE, dated 28 April 2023 by JDS Energy & Mining Incorporated (“JDS”). The technical report on the updated MRE announced on 20 February 2024 is not yet available.
The Treaty Creek property is located in northwestern British Columbia, approximately 80 km north-northwest of the Town of Stewart, and approximately 275 km northwest of Smithers (see Figure 3.1_1).
The project is at a good address since it borders Seabridge Gold Incorporated’s (“Seabridge”) KSM Property to the southwest and Newcrest Mining Ltd.’s (now Newmont) Brucejack Mine property to the southeast. The past-producing Eskay Creek Mine lies 12 km to the west.
Road access from Highway 37 to the property is currently under development by Seabridge Gold to service their proposed tailings management facility in the neighbouring North Treaty Creek and Teigen Creek valleys. This road will pass 17 km to the east of the lower camp on the Treaty Creek property. Additional seasonal accessibility has been achieved with a winter snow route from the Newcrest Brucejack Lake-Knipple Glacier Road that allows early-season heavy equipment mobilisation to site while winter conditions exist.
The Treaty Creek property consists of The Property consists of 47 contiguous mineral rights totalling 17,966 ha, with a footprint of 16,664 ha after accounting for claim overlap. The Mineral Resource Estimate reported in Section 14 of this Technical Report is located within mineral tenure title numbers 251229 and 251231.
Figure 3.1_2 shows the outline and extent of the tenement area with the areas with declared mineral resources indicated by a red arrow.
The core mineral tenures that comprise the Goldstorm Deposit mineral resources are subject to 0.98% Net Smelter Return (“NSR”) payable to Teuton Resources. Certain other surrounding mineral tenures are subject to two royalties: 0.49% NSR payable to Teuton Resources Corporation and a 2% NSR with a 1% buyback at $1 million payable to St. Andrews. The remaining peripheral mineral tenures are subject to 0.49% NSR payable to Teuton Resources Corporation.
Geology and Mineralisation
The Goldstorm deposit at Treaty Creek is interpreted as a northeast extension of the established trend of porphyry deposits located along the regional-scale Sulphurets Thrust Fault, a trend that includes the five deposits of Seabridge. Figure 3.2_1 shows the geology of the Goldstorm deposit area. Unfortunately, the discussion in the technical report is very unclear and the description of the lithological units is in terms of geological age and does not directly link to the descriptions used for the geological model for the MRE.
Porphyry deposits are of magmatic-hydrothermal origin in which the ore mineralisation is derived from temporally and genetically related intrusions. Magmas saturated with metal and sulphur-rich fluids form large protrusions upwards and complex. Polyphase systems develop within and above intrusive stocks, which subsequently interact with meteoric fluids which can remobilise and concentrate the metals. Meteoric fluids are derived from surface precipitation and subsequent infiltration.
At Goldstorm several variants of deposits related to porphyries have been identified. Figure 3.2_2 shows the six mineralised domains identified by Tudor Gold with annotations by Crux Investor on how the gold occurs. Remember that for resource estimation a ‘domain’ is a spatial volume with consistent geology and a single grade population.
Domains are really important. They are the building blocks for any resource estimate. Crux Investor has identified significant problems with the domains at Treaty Creek, but more on that later.
The description and outlining of the domains are poorly substantiated in the text of the technical reports with little in terms of cross-sections substantiating their outlines. The lack of information on the domains is a cause of concern for Crux Investor.
Mineral Resources
Introduction
The Treaty Creek Project drill hole database used for the 2023 mineral resource model consists of 228 drill holes (158,656 m), which were drilled in seven campaigns as of 2016. The first 200-300 m was drilled as HQ core, followed by NQ core. PQ, HQ, NQ, BQ are all descriptions of the diameter of the drill bit and associated core that is brought to surface, in decreasing diameter. A simple way to remember the relative size of the drill core, runs: Papa Core, Heavy Core, Normal Core, Baby Core. PQ is usually only drilled to extract material for metallurgical and / or geotechnical test work.
For the MRE, information from 201 diamond drill holes was used covering 148,474 m.
Figure 3.3.1_1 shows a plan view of the drill hole collar locations and traces through the Goldstorm deposit projected to the surface.
Unfortunately, the holes generally deflected away from the drill fence coordinates which had a great impact on presenting results along cross sections with individual holes only shown over part of their length. Also apparent is the fact that many holes are drilled from the same drill platform.
A geological model was generated comprising eight main lithologies and a code for fault structures. Figure 3.3.1_2 shows a cross-section of the geological model, which Crux Investor has annotated to make the various lithological units and fault names readable by using a larger font size in the same colour as used by Tudor Gold.
The section shows that the Treaty Thrust Fault represents the hanging wall (TTF1) and footwall (TTF2) of the deposit. The Intermediate Fragmental Volcanics and CS-600 Diorite host the predominant mineralised units as is shown in Figure 3.3.1_3.
Once the solid models for the various mineralised domains were finalised. As noted above, the technical report does not explain what criteria were used to define and outline such domains in a way that was clear to Crux Investor. Yes, section 7.4 of the Technical Report provides a qualitative description of the various domains, but it does not show the specific criteria used. Normally the criteria such as grade, lithology, density of veining, etc, are quantified.
Nevertheless, the domains were used to code the drill hole assays and composites for subsequent statistical and geostatistical analysis. The solid zones were utilised to constrain the block model, by matching assays to those within the zones. Plotting of assay results across domain borders indicates a sharp change in grade indicating that such borders should be treated as “hard”. With hard borders, grades within such a domain are not used to inform block grades outside the domain.
JDS chose to use a composite length of 1.5 m as this was the most frequently used sample length. Considering the bulk nature of the target resources, this is a very short composite length.
High-grade outlier thresholds were chosen by domain and are based on an analysis of the breaks in the cumulative frequency plots for each of the mineralised domains. However, Crux Investor records that the graph for all gold composite grades in the technical report (reproduced in Figure 3.3.1_4) does not show a log-normal distribution, which would express itself as being one straight line.
Either the gold distribution is not log-normal, or there are several lognormal populations applicable at Goldstorm, a low-grade, medium-grade, and high-grade population. This is another cause for concern.
The statistics provided in the report for the grade distribution for the various domains show that cutting outliers results in the coefficient of variance (“CV” = standard deviation / mean) dropping to well below 2, which is excellent for grade estimation by ordinary kriging.
The technical report does not present graphical results for the variography, only tables with nugget effect values and search ranges. The reader can't determine whether or not the variographs are well-defined and robust. The search ranges for the various domains are very extensive, being typically hundreds of metres, with up to 500 m used for the CS-600 domain. It means that the composite grades over 1.5 m inform block grades very far away.
Cut-Off Grades
Table 3.3.2_1 shows the derivation of the cut-off grades for open pit and underground mining to come to resources that have a “reasonable prospect of economic extraction”. The cells highlighted in yellow contain the values suggested in the technical report. Crux Investor has calculated the cut-off grades ignoring any contribution by silver and copper to simplify the calculation. Contrary to the technical report the impact of the royalty was accounted for by Crux Investor.
The table shows the large differences between calculated cut-off grades and used cut-off grades. Crux Investor calculates a cut-off grade of 0.64 g/t Au and 0.72 g/t Au for open pit and underground resources respectively. This contrasts with the calculated JDS cut-off grades of 0.50 g/t Au and 0.70 g/t Au for open pit and underground resources respectively.
The assumptions for open pit mining ignore any contribution from copper. JDS includes a silver credit in its calculations but the contribution of silver is less than 5% of the value of the gold. Even allowing for a marginal adjustment for the silver credit, the differences between the Crux Investor and the JDS cut-off grade estimates are unexplained. JDS goes however one step further by using an “internal mill’ cut-off grade excluding mining cost to drop the open pit cut-off grade by another 20% to 0.40 g/t Au. Whereas this is mathematically invalid, it is also conceptually invalid as the mining cost will have to be incurred to make it available for treatment. Finally, the mining cost used be JDS of C$2/t is not deemed credible by Crux Investor. A more realistic benchmark cost would lie between C$3.0/t and C$3.5/t.
The Crux Investor opinion is that the cut-off grade assumed by JDS for open pit mining is far too low.
For underground mining, Crux Investor acknowledges there are both silver and copper credits that will help lower the gold cut-off grade. In dollar terms, the contribution for copper would be around C$21/t. The combined copper and silver by-product credits would help to drop the cut-off grade from 0.72 g/t Au to 0.53 g/t Au. However, JDS assumes a mining cost rate of C$7.0/t is which an absurd figure. A rate of C$7.0/t for underground mining too low even for block caving, the cheapest underground mining method which nowadays is benchmarked at around C$27/t. Even assuming very low mining cost, a rate of C$30/t is more realistic for the Treaty Creek deposits. Using an underground mining cost of C$30/t, and taking into account the contributions from copper and silver, the Crux Investor cut-off grade is 0.78 g/t Au.
The Crux Investor opinion is that the cut-off grade assumed by JDS for underground mining is far too low.
Domains
Table 3.3.3_1 shows the mineral resources declared by Tudor Gold (and signed off by JDS), effective 28 April 2023.
The table shows that the great majority of gold is in the Indicated category and open pit resources account for almost 62% of the contained gold. The gold grade is not particularly high in any category being between 0.71 g/t to 0.91 g/t Au. The copper grade is highest in the resources associated with the CS60 domain underground.
In the Technical Report dated 28 April 2023, the Minerals Resource Statement is reported in Table 14-1. Interestingly, on the same page is Table 14-2 which is another Mineral Resource Statement that reflects the gold contained within the Domains. At risk of swamping the reader with technical information, Table 14-2 has been reproduced below as Table 3.3.3_2. It is so important that it needs to be included as well.
Detailed reading of these two tables provides two crucial pieces of information.
The first key piece of information is that the amount of gold shown in the resource statement Table 3.3.3_1 is greater than the amount of gold shown in Table 3.3.3_2. The difference between the declared resources and the sum of the resources for individual domains is 103,000 oz. Having such a material difference between the two totals raises questions about the rigor of the estimation exercise.
Not only that but a closer look at Table 3.3.3_2 shows in the second last row a category – or a domain marked ‘External’. Buried in the footnote #6 in the technical report is the following comment:
“a mineral estimate of the material within the defined pit that exists outside of the outlined mineral domains was completed and is included within the Inferred Mineral Resource, and listed “In Pit, External”.
Really? Wow. Look at the total gold that is in the ‘external’ category: 2.8 million ounces, comprising 11.7% of the total gold in the domains. This category far exceeds the gold contained in the R66, NS STK, and Copper Belle domains. After all of the maps and descriptions, it becomes apparent that R66 and NS STK and Copper Belle domains are immaterial for the total resources. Together these three domains only contribute 3.6% of the total gold. Remember that domains are the building blocks of a mineral resource estimate. Domains that do not contain relevant amounts of gold and non-domains that DO contain relevant amounts of gold are a major concern.
Crux Investor acknowledges that a new Technical Report will be issued soon. It is to be hoped that all of these issues regarding resource estimation and domaining will be resolved in the next report iteration. As it stands, the entire resource estimate must be viewed with caution.
Moving on, this review has found it very difficult to get a good impression of the continuity of the domains. The technical report does not properly substantiate the methods used, nor provide illustrations to support continuity. For example, Figure 3.3_5 shows cross-sections through the block model with the drill hole intersections showing the grade not only in colour, but also as bars, which is unnecessary and actually muddies the diagram. An over-busy slide obscures whether or not grades can be interpolated between holes and what the correlation is between intersection grade and block grade.
The illustrations do show that potential economic grades above 0.5 g/t Au (orange), above 1.0 g/t Au (in red), above 2.0 g/t (in purple), etc. occur over relatively short distances, often the length of the 1.5 m composite. The reported drill results averaged these higher grades over much longer intervals giving the impression of wide consistent mineralisation.
Where the illustrations do allow comparison between drill hole grades and block grades (e.g. the bottom right of both diagrams) it is evident that extrapolations have been made over hundreds of metres. The blue bars are for copper grade.
Where drilling was relatively sparse, such as at Copper Belle, similar cross sections indicate smearing of grade (refer to Figure 3.3.3_2). The illustration does not show wide consistent intervals of mineralisation.
Crux Investor has annotated the cross-section above by adding a circle around the intersection of two drillholes with very different grades and adding a quadrant where a short relatively high-grade interval has been smeared to inform block grades much deeper.
The overall impression is that the mineral resources should be approached with much caution.
Crux Investor reproduces in Table 3.3.3_3 the MRE effective 20 February 2024 without the benefit of being able to review the assumptions and input parameters used. Crux Investor shows in the three bottom rows the changes from the 2023 MRE.
The table shows that the total resources have not increased in tonnage, but have 9% more gold because of a grade that is 9% higher at 0.94 g/t Au. Where there is a major change is the 87% reduction of mineral resources tonnage in the conceptual pit. The underground resources now contain 91.4% of the total contained gold in mineral resources.
The higher grade can be explained by the application of much higher cut-off grades: 0.70 g/t Au for open pit resources and 0.75 g/t for underground. Given the very much higher values, it is surprising that the average grade has not improved more. Crux Investor records that the relation between cut-off grade and average grade points to a gross cash margin at best being: (1.03 - 0.7) / 1.03 = 32%. Remember that cut-off grade represents the gross profit breakeven level.
The Economic Potential of the Mineral Resources
Introduction
The Treaty Creek project has not progressed beyond the estimation of mineral resources and no cash flow model can be generated. However, there is sufficient information to determine whether or not cash operating profits could be gained from treating these resources.
Metallurgical Characteristics
Very little metallurgical testwork has been carried out until now with only three programmes: one in 2020 by Bureau Veritas on Copper Belle and 300 H material, another in 2023 by SGS also including material from the CS-600 and DS-5 domains, and the latest in 2024 by Blue Coast Research Limited (“BCR”). No full report for the BCR results is available, just summary conclusions in the 20 February 2024 press release.
Despite having a gold content of 0.92 g/t which is close to the average resource grade for Copper Belle and 300H, the Bureau Veritas samples were subsequently deemed highly unrepresentative given the sphalerite (ZnS) content between 12.2% and 24.7%. Not too much weight can be given to the conclusions of this test work, except for the findings that the material is hard (i.e. Bond index of 15 kWh/t) and the precious metals are refractory, meaning that these are locked up in sulphide minerals that need to be oxidised to make gold and silver amenable to cyanide leaching. The sulphide minerals responded well to concentration by flash flotation but realised large losses in the cleaning flotation stages.
The SGS metallurgical tests were performed on composites made from 165 samples with each of the four domains having a Low-, Mid- and High-grade selection. A review of the table with composite characteristics shows that the “High” grade selections are close to the average resource grade at just under 1.0 g/t Au and for the important CS-600 domain at 0.61 g/t Au, which is well below resource grade.
Pyrite is by far the most dominant sulphide mineral with chalcopyrite significant for the CS-600 domain.
Gravity separation using a heavy medium density of 2.9 proved unsuccessful in giving a satisfactory separation.
The results of the SGS flotation tests reinforced the results that were seen in the Bureau Veritas test work program where a high recovery can be achieved using flotation, but at a high mass pull due to the sulphides in the feed. The gold is distributed through the sulphides, which resulted in lower recovery when the mass was reduced in the cleaning stage.
Leaching of the concentrates and high-grade composites gave unsatisfactory recoveries because of the refractory nature of the mineralisation. For this reason, a new set of leaching tests were performed after using pressure oxidising (“POX”) of the material. Given the high mass pull when concentrating using flotation (26% - 42%), any future process plant including such a circuit will need a very high capacity POX section.
The technical report suggests recoveries of 90% for gold and silver from cyanide leaching after POX and 80% for copper from the flotation of a chalcopyrite concentrate with an estimated content of 25%. Crux Investor records that the copper concentrate grade has not been substantiated by test work.
The BCR tests focused on producing a copper concentrate from CS-600 material through flotation which gave a 20% Cu concentrate (not very high) at 79.5% recovery and 25 g/t Au at 65% recovery. The other results were in line with SGS’s.
Prospective Revenue
Given the indicative metallurgical performance numbers, which need to be used with much caution as the test work has shown large differences in the type of mineralisation, the potential revenue has been derived in Table 3.4.3_1. Without the latest numbers available for the CS-600 domain Crux Investor had to refer to the 2023 MRE grades.
The table shows that prospective revenue at current metal prices is between C$88/t treated and C$93/t treated. The average grade of the 2024 MRE is less than 10% higher and does not materially change the above conclusion.
Prospective Operating Cost
In Table 14-15 (with parameters for the pit optimisation) of the 2023 MRE technical report an average waste strip ratio is given of 8.6. As the overall pit slope angle has been assumed to be a very aggressive 50 degrees, this ratio must be seen as optimistically low. The 2024 MRE press release does not give such a ratio but assumes a much more reasonable overall slope angle of 45 degrees. Crux Investor has guestimated a strip ratio of 4 for the much smaller pit.
Table 3.4.4_1 derives the life of mine (“LOM”) cash operating cost for open pit and underground mining.
Crux Investor does not accept the suggested mining cost of C$2.50/t for open pit mining based on its own benchmarking exercises and totally rejects the underground mining cost of C$8.50/t. Even the cheapest underground mining method, block caving (which cannot be used here) has been benchmarked above C$20/t. Ignored in the table are mine development expenditures to access new stopes underground.
The cost rate for POX has been given to the author by a very experienced process engineer.
Concluding Remarks
Based on the estimated revenue and operating cost, treating the current resources at current metal prices would give very little in terms of cash generation before sustaining capital expenditure. As a rule of thumb mining operations need a gross margin of at least 50% to give an acceptable rate of return. This applies to mining operations with typical capital expenditure intensity. Capital expenditure for the Treaty Creek project would however be extra high as a very large POX plant needs building. This would probably double the capital cost of the process plant.
Crux Investor concludes that currently, the Treaty Creek project has no prospect of being built.
The Enterprise Value of Tudor Gold On 19 March 2024
At the share price of C$0.88 on 19 March 2024 and with 228.6 million shares issued, the market capitalisation of Tudor is C$201.2 million, or US$148.2 million.
On 30 September 2023 the company had 14.1 million warrants outstanding at exercise prices between C$1.28 and C$2.80. All are therefore far out of the money. On the same date Tudor had 19.1 million options outstanding with exercise prices between C$0.30 and C$3.14. An estimated total of 7.2 million options are in the money at an average exercise price of C$0.56.
The company had no debt and net current assets of C$0.7 million.
Based on the above an Enterprise Value for Tudor is derived as shown in Table 4_1.
The Enterprise Value of C$203 million (US$149 million) is extremely generous for a company with as its main asset a 60% stake in a project that has only progressed to mineral resource estimation and has very little in terms of studies to demonstrate economic viability. Crux Investor’s assessment shows that there is almost no prospect of advancing the Treaty Creek to production.
Executive Summary
Tudor Gold Limited (“Tudor Gold”)(TSX.V:TUD)(OTC:TDRRF)(Frankfurt:H56) is a company that is focused on the exploration and development of precious and base metals properties in the Golden Triangle area of British Columbia, Canada. Its main mineral property is called Treaty Creek in which it acquired a 60% interest in May 2016 through the acquisition of 31% of the shares of American Creek Resources Limited (“ACR”), which held a 51% stake, and a 29% interest from Teuton Resources Corporation (“Teuton”), which held a 49% interest. As part of the deal, a joint venture agreement was entered into with Tudor Gold holding a 60% interest and AMC and Teuton each holding a 20% interest. The Treaty Creek property is Tudor Gold’s sole holding.
Since 2016 the company has been consistently drilling a target in the Treaty Creek area now referred to as the Goldstorm deposit. In February 2024 the latest mineral resource estimate (“MRE”) was published with a gold content in the Indicated category of 21.7 million ounces (“Moz”), 128.7 Moz silver and 1.3 million tonnes (“Mt”) copper. These numbers are impressive allowing management to boast that it is “one of the largest gold discoveries in the last 30 years with significant expansion and exploration potential”. Unfortunately, the technical report for the 2024 MRE is not yet available and Crux had to refer to the earlier reports to understand the critical issues.
The Goldstorm deposit is interpreted as a northeast extension of the established trend of porphyry deposits located along the regional-scale Sulphurets Thrust Fault, a trend that includes the five very large deposits of Seabridge Gold Incorporated (“Seabridge”).
The mineralisation at Goldstorm is related to porphyritic activity and occurs in six domains each with different characteristics. Of these six domains, three account for almost 85% of the contained gold in the 2023 MRE. The fourth largest contributor to gold in resources (11.7%) is outside any domain and is classified as ‘External’. Three of the six domains together circumscribe only a minor (3.6%) portion of the gold in the resource. Remember that Domains are the building blocks of any Mineral Resource Estimate. It is a significant cause for concern that a large percentage of the gold in the resource statement comes from a source that is not defined in a domain, the ‘External’ category. Perhaps these issues will be addressed in the forthcoming Technical Report. Crux Investor views these issues as critical.
This review has found it hard to get a good impression of the continuity of the domains. The technical report does not properly substantiate the criteria used to define the domains. Company illustrations only muddle the picture. A review of the illustrations that are provided shows that potentially economic grades above 0.5 g/t Au occur over relatively short distances. The high grades are often only the length of the 1.5 m composite value itself. The reported drill results, however, averaged these higher grades over much longer intervals giving the impression of wide consistent mineralisation. Where the illustrations are sufficiently clear, the cross-sections illustrate considerable smearing of grade in blocks extending along- and also between- holes. There is at least one instance where the intersection of two drillholes has very different grades for each hole.
Another area of concern within the MRE is the methodology and inputs used to calculate cut-off grades. For example, the external consultants JDS use an “internal mill’ cut-off grade excluding mining cost to drop the open pit cut-off grade. This is conceptually invalid as the mining cost will have to be incurred to make the material available for treatment. Furthermore, JDS uses open-pit and underground mining costs and processing costs that are unrealistic in the current operating environment. Accordingly, Crux Investor believes that the cut-off grades assumed by JDS for open pit and underground mining are far too low. JDS uses an open-pit cut-off grade of 0.4 g/t Au and Crux Investor calculates that 0.64 g/t Au is more appropriate. For underground resources, JDS uses 0.6 g/t Au and Crux Investor calculates 0.72 g/t Au.
The 2024 MRE shows that the total resources have not increased in tonnage, but have 9% more gold because of a grade that is 9% higher at 0.94 g/t Au. Where there is a major change is the 87% reduction of mineral resources tonnage in the conceptual pit. The mineral resources now include 91.4% of the contained gold as underground resources.
Overall, Crux Investor has significant concerns about the cut-off grades being used, and the way the resource estimate has been calculated. Even if the concerns about the resource estimate are assuaged in the forthcoming Technical Report the deposit is still a difficult proposition.
Economically there are three main problems with the defined resources:
- Depth. The mineralisation is deep
- Grade. The mineralisation is relatively low grade
- Mineralogy. The mineralisation is refractory
The relatively deep occurrence quickly results in excessive waste stripping when extracted through open pit extraction. The low grade requires very low operating costs for the deposits to be economical. The refractory nature results in low recoveries when using conventional processing routes. To overcome the metallurgical recovery problems Tudor Gold suggests oxidising the sulphide concentrate under high pressure and temperature (“POX”) before subjecting it to cyanide leaching. This is a solution, but it comes at the price of very much higher capital and operating costs. Remember that the word ‘refractory’ is a catch-all term referring to the metals locked up in minerals that need additional treatment (at additional cost) to be recovered.
Crux Investor has made rough estimates of the prospective cash margins for mining the open pit and underground resources and arrives at negligible cash margins that can never redeem the upfront investments.
At the share price of C$0.88 on 19 March 2024, the Enterprise Value is just above US$149 million, placing a value of 149 / 0.6 = US$249 million on the Goldstorm deposit. This is extremely generous for a project that has only progressed to mineral resource estimation and has very little in terms of studies to demonstrate economic viability. Crux Investor’s assessment shows that there is almost no prospect of advancing the Goldstorm deposit to production. Avoid.
Introduction
Tudor Gold Limited (“Tudor Gold”)(TSX.V:TUD)(OTC:TDRRF)(Frankfurt:H56) is a company that is focused on the exploration and development of precious and base metals properties in the Golden Triangle area in British Columbia, Canada. Its main mineral property is called Treaty Creek in which it acquired a 60% interest in May 2016 through the acquisition of 31% of the shares of American Creek Resources Limited (“ACR”), which held a 51% stake, and a 29% interest from Teuton Resources Corporation (“Teuton”), which held a 49% interest. As part of the deal, a joint venture agreement was entered into with Tudor Gold holding a 60% interest and AMC and Teuton each holding a 20% interest. As part of the agreement, Tudor Gold committed to spend a minimum of C$1.0 million in exploration expenditures on the Treaty Creek Property during 2016.
In 2016 Tudor had also optioned the Electrum claims from ACR, which included the Crown Project immediately south of the Brucejack mine. Tudor undertook drilling trenching and rock sampling, including a 3.8-tonne bulk sample from the Crown Project. The results were such that continuity was not obvious and the mineral property was placed into a subsidiary company Goldstorm Metals Corporation and spun out on 10 November 2022.
Exploration results at Treaty Creek were considered promising with the discovery of the Copper Belle deposit that was subsequently renamed Goldstorm deposit. This report uses Treaty Creek and Goldstorm and associated satellites and extensions interchangeably. Naming the deposit Goldstorm is confusing, given that Goldstorm Metals Corp would later be spun out with the Crown Project as its flagship. Drilling campaigns at Treaty Creek have been consistently carried out since 2016 with an initial mineral resource estimate (“MRE”) declared in March 2021, an updated MRE in March 2023, and updated again in February 2024. The declared metal content in Indicated Mineral Resources of 21.7 million ounces (“Moz”) gold, 128.7 Moz silver, and 1.3 million tonnes (“Mt”) copper is impressive. Management rightly boasts in the latest corporate presentation dated February 2024 that the discovery is “one of the largest gold discoveries in the last 30 years with significant expansion and exploration potential”.
At the current share price of C$0.88 the market capitalisation of Tudor Gold is only US$149 million. Considering the 60% beneficial shareholding the deposit is valued at 153 / 0.60 = US$249 million, which converts to a value of US$9.0/oz AuEq given the 27.9 Moz AuEq metal content. This is a low valuation. Why is the valuation so low? Crux Investor investigates…
Figure 1_1 shows the share price performance of Tudor Gold since May 2016 when it first got involved in Treaty Creek.
The graph shows that the initial discoveries did not excite the market. In February 2020 the price started a move from C$0.40 to C$3.88 only six months later. The rise coincided with announcements of drills intersecting hundreds of metres of >1 g/t AuEq grades and P&E Mining Consultants (“P&E”) rendering an opinion that the gold mineralisation showed long-range continuity in three dimensions. P&E recommended drill spacing of 200 m as sufficient to provide a confidence level for declaring Indicated resources. The rise also coincided with the great gold equities spike of 2020, related to the Covid pandemic.
Like so many other gold companies, since August 2020 the Tudor Gold share price has been on a downward trend. This downward trend has been despite Tudor Gold expanding the discovery and releasing MRE’s that showed steadily more metal content. Crux Investor looks at the technical merits of the resources in the following sections.
Historical Operating and Financial Performance
Table 2_1 shows the financial performance since 1 April 2017, the first year since getting involved in the Treaty Creek project.
Table 2_1 shows that Tudor Gold’s financial performance:
- The company has spent a total of C$14 million on operational expenses and C$105 million on investments to advance its projects, predominantly Treaty Creek.
- The annual burn rate in the last 3 ½ years is between C$25 million and C$30 million (cash).
- Funding has been exclusively through equity placements.
- With a cash balance of C$2.1 million on 30 September 2023 it was clear the company required another equity placement, a substantial one if it desired to keep up the pace of exploration and studies.
- On 14 February Tudor announced an At-The-Market Equity Program (“ATM Program”) that allows Tudor to issue and sell, at its discretion, to the public common shares of Tudor that would have an aggregate sales amount of up to C$20 million. The sale would be effected through an agent: Research Capital Corporation.
Review of the Treaty Creek Project
Background
Unless specifically stated otherwise, the text and all information and illustrations presented in this section are derived from an NI 43-101 compliant technical report in support of an initial mineral resource estimate (“MRE”), dated 23 April 2021 by P&E Consultants Incorporated (“P&E”) and an NI 43-101 compliant technical report on an updated MRE, dated 28 April 2023 by JDS Energy & Mining Incorporated (“JDS”). The technical report on the updated MRE announced on 20 February 2024 is not yet available.
The Treaty Creek property is located in northwestern British Columbia, approximately 80 km north-northwest of the Town of Stewart, and approximately 275 km northwest of Smithers (see Figure 3.1_1).
The project is at a good address since it borders Seabridge Gold Incorporated’s (“Seabridge”) KSM Property to the southwest and Newcrest Mining Ltd.’s (now Newmont) Brucejack Mine property to the southeast. The past-producing Eskay Creek Mine lies 12 km to the west.
Road access from Highway 37 to the property is currently under development by Seabridge Gold to service their proposed tailings management facility in the neighbouring North Treaty Creek and Teigen Creek valleys. This road will pass 17 km to the east of the lower camp on the Treaty Creek property. Additional seasonal accessibility has been achieved with a winter snow route from the Newcrest Brucejack Lake-Knipple Glacier Road that allows early-season heavy equipment mobilisation to site while winter conditions exist.
The Treaty Creek property consists of The Property consists of 47 contiguous mineral rights totalling 17,966 ha, with a footprint of 16,664 ha after accounting for claim overlap. The Mineral Resource Estimate reported in Section 14 of this Technical Report is located within mineral tenure title numbers 251229 and 251231.
Figure 3.1_2 shows the outline and extent of the tenement area with the areas with declared mineral resources indicated by a red arrow.
The core mineral tenures that comprise the Goldstorm Deposit mineral resources are subject to 0.98% Net Smelter Return (“NSR”) payable to Teuton Resources. Certain other surrounding mineral tenures are subject to two royalties: 0.49% NSR payable to Teuton Resources Corporation and a 2% NSR with a 1% buyback at $1 million payable to St. Andrews. The remaining peripheral mineral tenures are subject to 0.49% NSR payable to Teuton Resources Corporation.
Geology and Mineralisation
The Goldstorm deposit at Treaty Creek is interpreted as a northeast extension of the established trend of porphyry deposits located along the regional-scale Sulphurets Thrust Fault, a trend that includes the five deposits of Seabridge. Figure 3.2_1 shows the geology of the Goldstorm deposit area. Unfortunately, the discussion in the technical report is very unclear and the description of the lithological units is in terms of geological age and does not directly link to the descriptions used for the geological model for the MRE.
Porphyry deposits are of magmatic-hydrothermal origin in which the ore mineralisation is derived from temporally and genetically related intrusions. Magmas saturated with metal and sulphur-rich fluids form large protrusions upwards and complex. Polyphase systems develop within and above intrusive stocks, which subsequently interact with meteoric fluids which can remobilise and concentrate the metals. Meteoric fluids are derived from surface precipitation and subsequent infiltration.
At Goldstorm several variants of deposits related to porphyries have been identified. Figure 3.2_2 shows the six mineralised domains identified by Tudor Gold with annotations by Crux Investor on how the gold occurs. Remember that for resource estimation a ‘domain’ is a spatial volume with consistent geology and a single grade population.
Domains are really important. They are the building blocks for any resource estimate. Crux Investor has identified significant problems with the domains at Treaty Creek, but more on that later.
The description and outlining of the domains are poorly substantiated in the text of the technical reports with little in terms of cross-sections substantiating their outlines. The lack of information on the domains is a cause of concern for Crux Investor.
Mineral Resources
Introduction
The Treaty Creek Project drill hole database used for the 2023 mineral resource model consists of 228 drill holes (158,656 m), which were drilled in seven campaigns as of 2016. The first 200-300 m was drilled as HQ core, followed by NQ core. PQ, HQ, NQ, BQ are all descriptions of the diameter of the drill bit and associated core that is brought to surface, in decreasing diameter. A simple way to remember the relative size of the drill core, runs: Papa Core, Heavy Core, Normal Core, Baby Core. PQ is usually only drilled to extract material for metallurgical and / or geotechnical test work.
For the MRE, information from 201 diamond drill holes was used covering 148,474 m.
Figure 3.3.1_1 shows a plan view of the drill hole collar locations and traces through the Goldstorm deposit projected to the surface.
Unfortunately, the holes generally deflected away from the drill fence coordinates which had a great impact on presenting results along cross sections with individual holes only shown over part of their length. Also apparent is the fact that many holes are drilled from the same drill platform.
A geological model was generated comprising eight main lithologies and a code for fault structures. Figure 3.3.1_2 shows a cross-section of the geological model, which Crux Investor has annotated to make the various lithological units and fault names readable by using a larger font size in the same colour as used by Tudor Gold.
The section shows that the Treaty Thrust Fault represents the hanging wall (TTF1) and footwall (TTF2) of the deposit. The Intermediate Fragmental Volcanics and CS-600 Diorite host the predominant mineralised units as is shown in Figure 3.3.1_3.
Once the solid models for the various mineralised domains were finalised. As noted above, the technical report does not explain what criteria were used to define and outline such domains in a way that was clear to Crux Investor. Yes, section 7.4 of the Technical Report provides a qualitative description of the various domains, but it does not show the specific criteria used. Normally the criteria such as grade, lithology, density of veining, etc, are quantified.
Nevertheless, the domains were used to code the drill hole assays and composites for subsequent statistical and geostatistical analysis. The solid zones were utilised to constrain the block model, by matching assays to those within the zones. Plotting of assay results across domain borders indicates a sharp change in grade indicating that such borders should be treated as “hard”. With hard borders, grades within such a domain are not used to inform block grades outside the domain.
JDS chose to use a composite length of 1.5 m as this was the most frequently used sample length. Considering the bulk nature of the target resources, this is a very short composite length.
High-grade outlier thresholds were chosen by domain and are based on an analysis of the breaks in the cumulative frequency plots for each of the mineralised domains. However, Crux Investor records that the graph for all gold composite grades in the technical report (reproduced in Figure 3.3.1_4) does not show a log-normal distribution, which would express itself as being one straight line.
Either the gold distribution is not log-normal, or there are several lognormal populations applicable at Goldstorm, a low-grade, medium-grade, and high-grade population. This is another cause for concern.
The statistics provided in the report for the grade distribution for the various domains show that cutting outliers results in the coefficient of variance (“CV” = standard deviation / mean) dropping to well below 2, which is excellent for grade estimation by ordinary kriging.
The technical report does not present graphical results for the variography, only tables with nugget effect values and search ranges. The reader can't determine whether or not the variographs are well-defined and robust. The search ranges for the various domains are very extensive, being typically hundreds of metres, with up to 500 m used for the CS-600 domain. It means that the composite grades over 1.5 m inform block grades very far away.
Cut-Off Grades
Table 3.3.2_1 shows the derivation of the cut-off grades for open pit and underground mining to come to resources that have a “reasonable prospect of economic extraction”. The cells highlighted in yellow contain the values suggested in the technical report. Crux Investor has calculated the cut-off grades ignoring any contribution by silver and copper to simplify the calculation. Contrary to the technical report the impact of the royalty was accounted for by Crux Investor.
The table shows the large differences between calculated cut-off grades and used cut-off grades. Crux Investor calculates a cut-off grade of 0.64 g/t Au and 0.72 g/t Au for open pit and underground resources respectively. This contrasts with the calculated JDS cut-off grades of 0.50 g/t Au and 0.70 g/t Au for open pit and underground resources respectively.
The assumptions for open pit mining ignore any contribution from copper. JDS includes a silver credit in its calculations but the contribution of silver is less than 5% of the value of the gold. Even allowing for a marginal adjustment for the silver credit, the differences between the Crux Investor and the JDS cut-off grade estimates are unexplained. JDS goes however one step further by using an “internal mill’ cut-off grade excluding mining cost to drop the open pit cut-off grade by another 20% to 0.40 g/t Au. Whereas this is mathematically invalid, it is also conceptually invalid as the mining cost will have to be incurred to make it available for treatment. Finally, the mining cost used be JDS of C$2/t is not deemed credible by Crux Investor. A more realistic benchmark cost would lie between C$3.0/t and C$3.5/t.
The Crux Investor opinion is that the cut-off grade assumed by JDS for open pit mining is far too low.
For underground mining, Crux Investor acknowledges there are both silver and copper credits that will help lower the gold cut-off grade. In dollar terms, the contribution for copper would be around C$21/t. The combined copper and silver by-product credits would help to drop the cut-off grade from 0.72 g/t Au to 0.53 g/t Au. However, JDS assumes a mining cost rate of C$7.0/t is which an absurd figure. A rate of C$7.0/t for underground mining too low even for block caving, the cheapest underground mining method which nowadays is benchmarked at around C$27/t. Even assuming very low mining cost, a rate of C$30/t is more realistic for the Treaty Creek deposits. Using an underground mining cost of C$30/t, and taking into account the contributions from copper and silver, the Crux Investor cut-off grade is 0.78 g/t Au.
The Crux Investor opinion is that the cut-off grade assumed by JDS for underground mining is far too low.
Domains
Table 3.3.3_1 shows the mineral resources declared by Tudor Gold (and signed off by JDS), effective 28 April 2023.
The table shows that the great majority of gold is in the Indicated category and open pit resources account for almost 62% of the contained gold. The gold grade is not particularly high in any category being between 0.71 g/t to 0.91 g/t Au. The copper grade is highest in the resources associated with the CS60 domain underground.
In the Technical Report dated 28 April 2023, the Minerals Resource Statement is reported in Table 14-1. Interestingly, on the same page is Table 14-2 which is another Mineral Resource Statement that reflects the gold contained within the Domains. At risk of swamping the reader with technical information, Table 14-2 has been reproduced below as Table 3.3.3_2. It is so important that it needs to be included as well.
Detailed reading of these two tables provides two crucial pieces of information.
The first key piece of information is that the amount of gold shown in the resource statement Table 3.3.3_1 is greater than the amount of gold shown in Table 3.3.3_2. The difference between the declared resources and the sum of the resources for individual domains is 103,000 oz. Having such a material difference between the two totals raises questions about the rigor of the estimation exercise.
Not only that but a closer look at Table 3.3.3_2 shows in the second last row a category – or a domain marked ‘External’. Buried in the footnote #6 in the technical report is the following comment:
“a mineral estimate of the material within the defined pit that exists outside of the outlined mineral domains was completed and is included within the Inferred Mineral Resource, and listed “In Pit, External”.
Really? Wow. Look at the total gold that is in the ‘external’ category: 2.8 million ounces, comprising 11.7% of the total gold in the domains. This category far exceeds the gold contained in the R66, NS STK, and Copper Belle domains. After all of the maps and descriptions, it becomes apparent that R66 and NS STK and Copper Belle domains are immaterial for the total resources. Together these three domains only contribute 3.6% of the total gold. Remember that domains are the building blocks of a mineral resource estimate. Domains that do not contain relevant amounts of gold and non-domains that DO contain relevant amounts of gold are a major concern.
Crux Investor acknowledges that a new Technical Report will be issued soon. It is to be hoped that all of these issues regarding resource estimation and domaining will be resolved in the next report iteration. As it stands, the entire resource estimate must be viewed with caution.
Moving on, this review has found it very difficult to get a good impression of the continuity of the domains. The technical report does not properly substantiate the methods used, nor provide illustrations to support continuity. For example, Figure 3.3_5 shows cross-sections through the block model with the drill hole intersections showing the grade not only in colour, but also as bars, which is unnecessary and actually muddies the diagram. An over-busy slide obscures whether or not grades can be interpolated between holes and what the correlation is between intersection grade and block grade.
The illustrations do show that potential economic grades above 0.5 g/t Au (orange), above 1.0 g/t Au (in red), above 2.0 g/t (in purple), etc. occur over relatively short distances, often the length of the 1.5 m composite. The reported drill results averaged these higher grades over much longer intervals giving the impression of wide consistent mineralisation.
Where the illustrations do allow comparison between drill hole grades and block grades (e.g. the bottom right of both diagrams) it is evident that extrapolations have been made over hundreds of metres. The blue bars are for copper grade.
Where drilling was relatively sparse, such as at Copper Belle, similar cross sections indicate smearing of grade (refer to Figure 3.3.3_2). The illustration does not show wide consistent intervals of mineralisation.
Crux Investor has annotated the cross-section above by adding a circle around the intersection of two drillholes with very different grades and adding a quadrant where a short relatively high-grade interval has been smeared to inform block grades much deeper.
The overall impression is that the mineral resources should be approached with much caution.
Crux Investor reproduces in Table 3.3.3_3 the MRE effective 20 February 2024 without the benefit of being able to review the assumptions and input parameters used. Crux Investor shows in the three bottom rows the changes from the 2023 MRE.
The table shows that the total resources have not increased in tonnage, but have 9% more gold because of a grade that is 9% higher at 0.94 g/t Au. Where there is a major change is the 87% reduction of mineral resources tonnage in the conceptual pit. The underground resources now contain 91.4% of the total contained gold in mineral resources.
The higher grade can be explained by the application of much higher cut-off grades: 0.70 g/t Au for open pit resources and 0.75 g/t for underground. Given the very much higher values, it is surprising that the average grade has not improved more. Crux Investor records that the relation between cut-off grade and average grade points to a gross cash margin at best being: (1.03 - 0.7) / 1.03 = 32%. Remember that cut-off grade represents the gross profit breakeven level.
The Economic Potential of the Mineral Resources
Introduction
The Treaty Creek project has not progressed beyond the estimation of mineral resources and no cash flow model can be generated. However, there is sufficient information to determine whether or not cash operating profits could be gained from treating these resources.
Metallurgical Characteristics
Very little metallurgical testwork has been carried out until now with only three programmes: one in 2020 by Bureau Veritas on Copper Belle and 300 H material, another in 2023 by SGS also including material from the CS-600 and DS-5 domains, and the latest in 2024 by Blue Coast Research Limited (“BCR”). No full report for the BCR results is available, just summary conclusions in the 20 February 2024 press release.
Despite having a gold content of 0.92 g/t which is close to the average resource grade for Copper Belle and 300H, the Bureau Veritas samples were subsequently deemed highly unrepresentative given the sphalerite (ZnS) content between 12.2% and 24.7%. Not too much weight can be given to the conclusions of this test work, except for the findings that the material is hard (i.e. Bond index of 15 kWh/t) and the precious metals are refractory, meaning that these are locked up in sulphide minerals that need to be oxidised to make gold and silver amenable to cyanide leaching. The sulphide minerals responded well to concentration by flash flotation but realised large losses in the cleaning flotation stages.
The SGS metallurgical tests were performed on composites made from 165 samples with each of the four domains having a Low-, Mid- and High-grade selection. A review of the table with composite characteristics shows that the “High” grade selections are close to the average resource grade at just under 1.0 g/t Au and for the important CS-600 domain at 0.61 g/t Au, which is well below resource grade.
Pyrite is by far the most dominant sulphide mineral with chalcopyrite significant for the CS-600 domain.
Gravity separation using a heavy medium density of 2.9 proved unsuccessful in giving a satisfactory separation.
The results of the SGS flotation tests reinforced the results that were seen in the Bureau Veritas test work program where a high recovery can be achieved using flotation, but at a high mass pull due to the sulphides in the feed. The gold is distributed through the sulphides, which resulted in lower recovery when the mass was reduced in the cleaning stage.
Leaching of the concentrates and high-grade composites gave unsatisfactory recoveries because of the refractory nature of the mineralisation. For this reason, a new set of leaching tests were performed after using pressure oxidising (“POX”) of the material. Given the high mass pull when concentrating using flotation (26% - 42%), any future process plant including such a circuit will need a very high capacity POX section.
The technical report suggests recoveries of 90% for gold and silver from cyanide leaching after POX and 80% for copper from the flotation of a chalcopyrite concentrate with an estimated content of 25%. Crux Investor records that the copper concentrate grade has not been substantiated by test work.
The BCR tests focused on producing a copper concentrate from CS-600 material through flotation which gave a 20% Cu concentrate (not very high) at 79.5% recovery and 25 g/t Au at 65% recovery. The other results were in line with SGS’s.
Prospective Revenue
Given the indicative metallurgical performance numbers, which need to be used with much caution as the test work has shown large differences in the type of mineralisation, the potential revenue has been derived in Table 3.4.3_1. Without the latest numbers available for the CS-600 domain Crux Investor had to refer to the 2023 MRE grades.
The table shows that prospective revenue at current metal prices is between C$88/t treated and C$93/t treated. The average grade of the 2024 MRE is less than 10% higher and does not materially change the above conclusion.
Prospective Operating Cost
In Table 14-15 (with parameters for the pit optimisation) of the 2023 MRE technical report an average waste strip ratio is given of 8.6. As the overall pit slope angle has been assumed to be a very aggressive 50 degrees, this ratio must be seen as optimistically low. The 2024 MRE press release does not give such a ratio but assumes a much more reasonable overall slope angle of 45 degrees. Crux Investor has guestimated a strip ratio of 4 for the much smaller pit.
Table 3.4.4_1 derives the life of mine (“LOM”) cash operating cost for open pit and underground mining.
Crux Investor does not accept the suggested mining cost of C$2.50/t for open pit mining based on its own benchmarking exercises and totally rejects the underground mining cost of C$8.50/t. Even the cheapest underground mining method, block caving (which cannot be used here) has been benchmarked above C$20/t. Ignored in the table are mine development expenditures to access new stopes underground.
The cost rate for POX has been given to the author by a very experienced process engineer.
Concluding Remarks
Based on the estimated revenue and operating cost, treating the current resources at current metal prices would give very little in terms of cash generation before sustaining capital expenditure. As a rule of thumb mining operations need a gross margin of at least 50% to give an acceptable rate of return. This applies to mining operations with typical capital expenditure intensity. Capital expenditure for the Treaty Creek project would however be extra high as a very large POX plant needs building. This would probably double the capital cost of the process plant.
Crux Investor concludes that currently, the Treaty Creek project has no prospect of being built.
The Enterprise Value of Tudor Gold On 19 March 2024
At the share price of C$0.88 on 19 March 2024 and with 228.6 million shares issued, the market capitalisation of Tudor is C$201.2 million, or US$148.2 million.
On 30 September 2023 the company had 14.1 million warrants outstanding at exercise prices between C$1.28 and C$2.80. All are therefore far out of the money. On the same date Tudor had 19.1 million options outstanding with exercise prices between C$0.30 and C$3.14. An estimated total of 7.2 million options are in the money at an average exercise price of C$0.56.
The company had no debt and net current assets of C$0.7 million.
Based on the above an Enterprise Value for Tudor is derived as shown in Table 4_1.
The Enterprise Value of C$203 million (US$149 million) is extremely generous for a company with as its main asset a 60% stake in a project that has only progressed to mineral resource estimation and has very little in terms of studies to demonstrate economic viability. Crux Investor’s assessment shows that there is almost no prospect of advancing the Treaty Creek to production.
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