Analyst's Notes: Wallbridge Mining

Executive Summary

Wallbridge Mining (“Wallbridge”)(TSX:WM)(OTCQX:WLBMF) is advancing the Fenelon and Martiniere properties on the Detour-Fenelon Gold Trend in Quebec. Wallbridge also owns 19.9% of Archer Exploration Corp that holds a portfolio of nickel assets.

In December 2021 Wallbridge declared total resources of 2.67 million ounces (“Moz”) in the Indicated category and 1.72 Moz in the Inferred category. Fenelon and Martiniere, lie within an approximately 830 km2 exploration portfolio.

The exploration results show how Wallbridge started by defining small, narrow, very high-grade gold structures in the northeast of Fenelon (at the Gabbro Zone). Over time, more consistent gold structures were identified as exploration expanded to the south and west (Tabasco, Area 51, Ripley-Reaper)

An analysis of cross-sections and plans provided by Wallbridge raises concerns about the consistency and economic viability of gold mineralisation a Fenelon. Crux Investor observed an evolution in drill result reporting by Wallbridge. Images that started off in great detail are now presented with much a broader-brush. In news releases the grades selected and highlighted by Wallbridge are good. What is less clear is the correlation of grades between drillholes. Close inspection of sections shows good intersections are often close to drillholes above and below that are either almost barren or with very spotty mineralisation. It makes the reader wonder what the overall grade would be for a block around the highlighted results?  

Research into the resource statement, published on 23 December 2021 (prepared by external consultancy group, InnovExplo) was revealing. The Technical Report notes that high-grade zones represent mineralized structures based mainly on gold grade. By omission this means that geology does not guide interpolation. And the cross-sections showed that mineralisation is inconsistent across drillholes. Accordingly, there is a distinct risk the wireframes used in the resource do not reflect the reality of geology and mineralisation.  

Wallbridge Mining could allay concerns by making its full drill database publicly available or by publishing a series of detailed cross-sections. The litmus test will be the presence (or lack thereof) of wide intervals of potential economical grades that are vertically and laterally consistent. Currently Wallbridge only highlights good intervals for selected drillholes without placing these into the context of adjacent holes and adjacent cross-sections.

More information please. Until then, Caveat Emptor; Buyer Beware.

Introduction

Wallbridge Mining stated in 2016 that it aims to “create value through the acquisition, discovery, development, and production of metals”.  In the same year, 2016, Wallbridge bought the 10.5 km2 Fenelon property from Balmoral Resources Limited (”Balmoral”). Fenelon contained a tiny but very high-grade deposit with some existing underground development. It was considered ready for underground production.

A 2017 feasibility study, showed that Fenelon would only yield C$6.6 M cash flow over 1½ years life of mine (“LOM”). Clearly too small for a listed company, Wallbridge started to explore around Fenelon in earnest. Work since 2017 has included drilling from surface, dewatering the old mine, bulk sampling and underground development and drilling. Outside the main high grade area called the Gabbro Zone, new structures were found to the southwest. Named areas include Area 51; Tabasco Zone and Cayenne Corridor; and further south Ripley-Reaper. Ripley-Reaper covers a major shear zone, the Sunday Lake Deformation Zone (“SLDZ”), deemed prospective for gold. In May 2020 Wallbridge bought Balmoral for C$158.1 M to consolidate title and tenure in the area, growing the area held to 85 km2.

Figure 1 shows the original Gabbro Zone beneath the legend, with the Tabasco Zone and the Cayenne Corridor running along the northeast of Area 51. These were all in the original Fenelon property. The Ripley-Reaper zones were part of the wider Balmoral tenement portfolio.

Through the Balmoral acquisition Wallbridge also gained control of the Martinière deposit 30 km to the west and with declared mineral resources in March 2018 of 0.64 million ounces.

An updated mineral resource estimate was published 9 November 2021. The estimate was based on almost 358,000m drilling. It identified at Fenelon total open pit and underground mineral resources of 2.13 Moz in the Indicated category at an average grade of 1.84 g/t Au. Total Inferred resources amount to 1.47 Moz at an average grade of 1.57 g/tAu. The same exercise defined 0.54 Moz in the Indicated category at Martinière and 0.26 Moz in the Inferred category. The discovery cost, to Wallbridge, of these resources, both through equity and hard cash is shown below.

The key takeaway from Table 1 is that Wallbridge spent almost C$20 M on operations and invested almost C$123 M to arrive at these resources, ignoring the value of shares issued to acquire Balmoral. The cash outlays of ~C$143 M imply that the discovery cost for the 2.13 Moz gold in Indicated Resources at Fenelon is C$67/oz.

In line with the wider gold sector Wallbridge has had a tough couple of years. While the share price graph looks very much like every other gold stock in the sector, Crux Investor has annotated the price graph with key announcements. The mineral resource was released into an already falling gold market and only served to accelerate the decline.

The share price had fallen to C$0.18 by mid-November. At this price the market capitalisation of Wallbridge was C$185 million and the diluted Enterprise Value C$174 million when the tax credit and value of the stake in Archer Exploration are excluded.

The Enterprise Value converts to US$47/oz if only Indicated resources are considered. This looks like a very low valuation, enough to attract Crux Investor’s attention and decide to look deeper into Wallbridge.

Geology and Mineralisation of the Fenelon Project

Fenelon sits within one of the famous Abitibi granite-greenstone belts. Mineralised zones such as Gabbro and Tabasco-Cayenne are within varied sedimentary and volcanic and intrusive rocks that broadly strike NW to SE. Area 51 is associated with the Jéremie Pluton (denoted in pink in Figure 2), which is loosely-speaking the ‘granite’ part of the belt. To the south, striking broadly E-W is the Sunday Lake Deformation Zone, and the Ripley-Reaper mineralisation.

Structural zones that developed within or along the margins of the intrusive rocks (the gabbro and the granite) are linked with better gold grades. In the Gabbro Zone gold is present in narrow, but very high-grade structures. Between the Gabbro Zone and Area 51 are a number of northwest-southeast trending gold bearing structures that have been named, the most important being Tabasco.

Evolution of Drill Results at Fenelon

Crux Investor has observed an evolution in drill result reporting by Wallbridge. Images started off in great detail, and are now much broader-brush. Remember that mineralisation has largely been delineated from the initial Gabbro Zone in the northeast towards the south and west overtime.

The Gabbro Zone consists of seven discrete mineralised zones. Preferentially located at inflection points on structure, there have been no detailed illustrations of the Gabbro Zone since 2018. News releases reveal that the very high grades are confined to shoots with very limited strike extent as can be seen in the longitudinal sections for Naga Viper (top) and Chipotle (bottom) in Figure 4. The coloured outlines for Naga Viper indicate approximately 20 m strike and for Chipotle 15 m. Highlighted (better) thicknesses range from 1-5 m, and it is to be expected that the average would be closer to 1 m than 5 m.

The extremely limited size potential for the Gabbro Zone mineralisation explains why Wallbridge started to focus elsewhere. The cross-section in Figure 5 is from a press release dated May 2019 showing the Cayenne Zone and Tabasco Zone relative to the Gabbro Zone structures and the mineralisation in Area 51. The main Gabbro Zone is within the blue box, top right.

Figure 6 contains a plan view of the Fenelon area dated 28 November 2019. This shows that the vein sets in the Gabbro Zone and Tabasco zone are subparallel to each other running NW-SE. Note that the veins in Area 51 are also subparallel to each other, but that they trend NE-SW. Drilling to intersect both sets of vein orientations is best done north-south and this is what Wallbridge has done. What drilling N-S means, however, is that the vast majority of drill intercepts are slightly oblique along strike, as well as being oblique at depth (if the structures are sub-vertical). This in turn means that all of the true widths of mineralisation will be less than reported intersection thicknesses. If it looks skinny on the page, it will be even skinnier in real life.

The footnotes to tables with results for Area 51 and Tabasco state that true widths are 50-80% of the reported core length. This must be kept in mind when reviewing cross-sections and reported assays.

Another aspect of Figure 6 that stands out are the well-defined discrete structures identified by Wallbridge. Note this is a figure from 2019. Mining these veins as discrete developments would require average resource grades in the range of >10 g/t gold for 2-3 metres.  

Illustrations Change Over Time

Another approach would be to mine in bulk, in which case the key is the average grade of the lower-grade material between the veins. It is with this in mind that we should look at the drill results provided just before the mineral resource estimate close-out date of 10 September 2021. Crux Investor has gone back to a press release dated 29 June 2021 as a data source. Figure 7 shows the mineralisation in plan view. Crux Investor has marked the locations of cross-sections shown in Figures 8-9 with black arrows.

Incidentally, compare the gold structures in the Tabasco-Cayenne Corridor and Area 51 shown in Figures 6 and 7. Two years on and the widths of the Tabasco-Cayenne have dramatically increased in width compared to Figure 5 and the detail on the vein sets in Area 51 have been removed.  

Section 4.1.1.1 of the Technical Report (23 Dec 2021) describes complex mineralisation within the Cayenne and Tabasco structures. Simplistically, gold is not present uniformly in a well-defined zone, but in narrow structures with complex geometries. The image from 2019 (Figure 6) feels more accurate than the image from 2021 (Figure 7) in its representation of the mineralisation and geology.

Figure 8 shows cross-section 9900E, focused on Area 51. Remember that Figure 6 highlighted many short and small vein sets. In Figure 8, black circles have been added to indicate the absence of any assay values in adjacent holes. The dashed red lines in the legend (“Area 51 Mineralized Trends”) are where Wallbridge feel that there are continuous gold bearing structures. The Crux Investor annotations are not comprehensive. On closer inspection there are several more examples where continuity of gold mineralisation from hole to hole is tenuous. Have a look for yourself:

Note also that the recent depictions of the gold-bearing structures in the Tabasco Corridor shown in plan (Figure 7)and in section (Figure 8) have dramatically increased in width compared to the earlier depiction (Figure 6). Furthermore, in the recent plan view (Figure 8), the vein sets in Area 51 have been replaced with an amorphous colour representing ‘Gold Mineralized Zone Area 51’. Contrast these recent broad-brush depictions with what we know from old news releases about the generally narrow intersections at shallow levels of the Gabbro, Tabasco and Cayenne zones. The widths of the mineralised zones presented in the cross-section is misleading, particularly in the upper portions. With depth the frequency of intersections with gold grade increases, in particular between 400 m and 800 m below surface.

Another cross-section from 2021 provides more detail on the drill results from Tabasco (Figure 9, cross-section 9975E). From 500 - 750 m depth, the Tabasco zone structures were drilled, yielding numerous high-grade intercepts in close proximity. Crux Investor has added an enlarged view of a part of the cross-section where Wallbridge highlights 3.61 g/t Au over 3.80 m and 2.23 g/t over 31.05 m.

The grades are good. What is less clear is the correlation of grades between drillholes. Look closely at that good intersection of 2.23g/t Au over 31.05 m. The drillhole above is almost barren and the drillhole below has a large interval without gold. It makes the reader wonder what the overall grade would be for a block around the highlighted results?  

More information please, especially drill data and cross-sections

Unfortunately, Wallbridge does not provide enough information to calculate grade continuity in blocks. Drillhole numbers are only provided for selected holes. The cross-sections raise doubts about continuity and consistency. And without continuity and consistency, legitimate concerns over the economic potential of the mineralisation arise.

The detectives among you can look at this link to Cross-section 10125E and see the same problems there as well. In some places grade does not carry into adjacent holes. In some places the ‘sketched’ mineralised trends cross holes with no gold grades at the intersection.

Crux Investor, with publicly available information, struggles to see how the consultancy group InnovExpl has arrived at the large resource numbers it has defined (see Table 2). The correlation between grade intervals is not straight forward and the mineralisation does not appear to have well-defined geological controls. These concerns led to a bit of digging into the Resource Estimation process. And a look at the methodology behind the geological model in the Technical Report (section 14.1.3, p.148) is quite revealing.

Grade Used Over Geology in the Resource Model (Not a Good Thing)

At Fenelon, 60 high-grade zones were defined (≥2 m @≥2 g/t Au) and the vein solids extend to a radius of up to 50 m between other high-grade zones, or to 25 m if the adjacent “intercept … does not meet the minimum grade criterion”. That is a concern because 50 m and 25 m are large distances along strike of a mineralising vein with highly variable grade x thicknesses (from the publicly available information).

Even more worrying is the statement that “these high-grade zones represent mineralized structures based mainly on gold grade”. By omission this means that geology does not guide interpretation. And the cross-sections show that mineralisation is inconsistent across drillholes. Accordingly, there is a distinct risk the wireframes used do not reflect the reality of geology and mineralisation.  

It was exactly this approach to the resource estimation of the Phoenix Gold Project of Rubicon Minerals Corporation (“Rubicon”) that resulted in the failure of the company. Rubicon had to revise its resources down by 90% upon starting mining. Successive resource estimations by different companies (i.e. Geoex, AMC and SRK) had extrapolated high grades purely on the basis of grade without proper geological guidance. There was some lithological control identified but the high-grade interpolations within these units were purely based on connecting high grade intercepts. Once mining started, it became apparent there was no such continuity.

After having reviewed the publicly available drill results and cross-sections, Crux Investor is surprised by the high overall grade for the resources, both open pit and underground, as shown in Table 2, below.

Any economic viability of these underground resources at a grade of around 3.0 g/t gold is yet to be established. Even in Quebec low grade underground resources need large, very wide blocks that can be bulk mined using ultra low cost methods. The open pit resources have an attractive grade provided the strip ratio is moderate. And provided the resource is sufficiently robust. The technical report does not demonstrate that aggregating the individual intercepts over large width would yield grades >1.3 g/t gold in successive cross-sections. More information please.

Wallbridge Can Allay Concerns by Providing More Data

Wallbridge Mining could allay concerns by making its full drill database publicly available or by publishing a series of detailed cross-sections. The litmus test will be the presence (or lack thereof) of wide intervals of potential economical grades that are vertically and laterally consistent. Currently Wallbridge only highlights good intervals for selected drillholes without placing these into the context of adjacent holes and adjacent cross-sections.  

As an aside, the Martinière resource are modelled with 59 high grade zones (≥3 m @ ≥1 g/t Au) which points to a similar approach.

Caveat Emptor

In conclusion; Caveat Emptor, Buyer Beware. Crux Investor does not reject the resource numbers outright, but it is up to Walbridge to give comfort in the form of more information.  

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If you are a Family Office investor, or an Institutional investor, and you would like the full report behind this article, please contact matthew@cruxinvestor.com

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