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Crescat Uses Lassonde Curve, Insider Expertise in BC’s Golden Triangle

September 28, 2021 (Investorideas.com Newswire) In part two of a two-part look at investing in junior precious metals equities, Denver-based Crescat Capital CIO Kevin Smith discusses the Lassonde Curve and how he uses it in combination with Geologic and Technical Director Dr. Quinton Hennigh’s hands-on knowledge to invest in what they believe are the best opportunities in the gold and silver space.

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The best opportunity to find outsized returns in the gold and silver space is on the discovery and exploration side of the market because that’s where you can accurately time the macro cycle for gold, says Crescat Capital Chief Investment Officer Kevin Smith.

“If (large-cap gold producers) are going to replace their depleting reserves, they are going to have to come in and buy up the new deposits or the companies that control the new deposits,” Smith explains. “Not the leftover low-grade deposits that are never going to become a mine in any environment but the truly big new discoveries. So, that’s where we’ve been working with Quinton.”

Dr. Quinton Hennigh is a geologist who Smith first met 26 years ago when he moved to Colorado while Hennigh was busy finishing his PhD in geology/geochemistry at the Colorado School of Mines.

Smith followed Hennigh’s career as he started with Homestake Mining.

Homestake was later acquired by Barrick Gold Corp. (ABX:TSX; GOLD:NYSE). Hennigh also worked for Newcrest, Australia’s largest gold miner, and Newmont Corp. (NEM:NYSE), now the world’s largest gold miner.

He left Newmont, Smith says, due to a lack of grassroots exploration funding.

That’s when Hennigh decided to work with smaller precious metals companies.

Hennigh was a geologist with Kirkland Lake Gold Inc. (KL:TSX; KL:NYSE) when the company decided to merge with Newmarket Gold Inc. and its high-grade Fosterville gold mine in Australia, which has proven to be one of the most profitable gold mines in the world. Kirkland Lake now has a US$11.3 billion market cap, up from about US$90 million when the deal was signed.

In August, Hennigh was appointed as Crescat’s full-time Geologic and Technical Director.

“I invited him in two years ago (as a consultant) to help advise us on our portfolio,” Smith tells Streetwise. “And that’s when the light really went on that the opportunity in gold and silver exploration is on the left-hand side of the Lassonde Curve.”

The Lassonde Curve is essentially an arc that tracks the three lifecycle stages of a junior mining company: the exploration and discovery phase, development phase, and production phase.

The Y axis is the stock prices, while the X axis is time. A company goes steeply up the curve during the exploration and discovery phase if there are successful drill results and proof of a significant discovery.

Smith says that phase is followed by the “Valley of Death,” or the development phase where a company must do the hard yards of mine permitting and raise the necessary capital to reach production before getting to the production phase, when the stock price usually starts to move up again.

“That’s the right-hand side of the Lassonde Curve where a lot of money is made, again, as a company transitions from development to production. And in the early years as (the company) starts producing,” Smith tells Streetwise. “But I think a lot of people in the gold and silver mining investment business tend to focus on either the development phase (value) or production phase, while the discovery and exploration phase is forgotten. But for a mining company, that is the phase where, if the company is successful, a lot of value is created.”

Crescat’s approach goes something like this: Take a position in a company at a low valuation and essentially buy gold and silver ounces in the ground for a few pennies on the dollar. Crescat rides those companies up the left-hand side of the Lassonde Curve and sells them for around 20 cents on the dollar as they prove up those new deposits with drill results.

Smith says two such investments were 15 baggers.

He considers some other factors, too.

Smith scores potential investments on different dimensions. Management is a key factor, but Smith says the number one factor is grade.

“We have a management score, a technical team score; we have a target for the number of gold-equivalent ounces that the company is on to through its initial geophysics and geochemistry data,” Smith explains.

“Our portfolio has over 300 million gold-equivalent ounces in our targets. And we score when we think they’re going to hit the peak of that left-hand side of the Lassonde Curve.”

Jurisdiction is also important.

In the U.S., Smith likes Nevada, Alaska, and Arizona, while Australia and Finland top his list outside of North America. He also likes most Canadian provinces, but British Columbia in particular.

One company in which Crescat has a position is Eskay Mining Corp. (ESK:TSX.V), where Hennigh is also a director. Eskay controls more than 52,000 hectares in the Golden Triangle region in north-central British Columbia.

So far Crescat has participated in three rounds of financing in Eskay and, if it exercised all of its warrants, it would own about 14.3% — its largest position in any junior.

To date, Eskay has finished more than 19,000 meters of diamond drilling in 86 holes, and the junior will drill roughly 30,000 meters this year.

“There’s going to be a lot of drill results coming out over the next four or five months on this one,” Smith says.

“We want to be with this one for the long term. It’s one we score with the highest probability that they are going to be on to a major high-grade discovery,” he adds.

John DeDecker, Eskay’s lead exploration geologist, did his post-doctorate work under Thomas Monecke, an economic geologist on Eskay’s geological advisory team, who is largely credited with the discovery and deep understanding of volcanogenic massive sulphide deposits (VMS) — basically high-grade, multi-metallic gold systems.

The now defunct Eskay Creek gold-silver mine, which sits just north of Eskay Mining’s land package, was a VMS deposit and the most profitable gold mine ever mined in North America. It’s the reason Barrick bought Homestake and remained profitable in a low gold price environment at the turn of the century.

“We really believe that Quinton, DeDecker, and Tom Weis, former head geophysicist for Newmont, have found the extension of the original Eskay Creek high-grade deposit and we think it’s on Eskay Mining’s ground. Our goal is to prove that.”

Goliath Resources Ltd. (GOT:TSX.V; GOTRF:OTCQB; B4IF;FSE) is another company that Crescat has supported in the Golden Triangle through two rounds of private investments in public equity (PIPE) investments.

It’s not a VMS deposit but rather a porphyry sheet of gold mineralization that was discovered in an outcrop near the edge of a cliff.

“Quinton said you guys need to take a position in this company and help fund the drill program,” Smith recalls “You can look at pictures of the drill hanging out over the edge of this cliff. They’re drilling it, and the results have been very encouraging so far.”

Crescat’s other position near the Golden Triangle is Blackwolf Copper & Gold Ltd. (BWCG:TSX).

The Robert McLeod-led junior is exploring a high-grade copper, silver-gold VMS deposit on the northwestern edge of the Golden Triangle.

McLeod was the vice-president of exploration with Underworld Resources when it was acquired by Kinross Gold Corp. (K:TSX; KGC:NYSE) and President and CEO of IDM Mining, which was acquired by Ascot Resources Ltd. (AOT:TSX.V).

“(McLeod) comes from a famous mining family and is one of the CEOs that we really like because of his experience, and he’s someone that Quinton really gets along with,” Smith says.

“Blackwolf is onto a big, high-grade copper, silver gold VMS system. It’s a super high-grade multi metallic mine,” he added.

He concluded: “It’s another exciting name that we think is really undervalued, and we’ve got a significant position in this in this company.”

Disclosures:

1) Brian Sylvester compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He and members of his household are paid by the following companies mentioned in this article: None. His company has a financial relationship with the following companies referred to in this article: None

2) Dr. Quinton Hennigh is Crescat Capital’s full-time Geologic and Technical Director. Kevin Smith is Crescat’s Chief Investment Officer. You should assume that as of the publication date, Kevin Smith and Dr. Quinton Hennigh have a position in the securities discussed and therefore stands to realize significant gains in the event the price of security moves.

3) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of E2Gold Inc. and Cabral Gold Inc., companies mentioned in this article.

Important Crescat Disclosures Provided by Crescat Capital

Please read Crescat’s important disclosures.

Nothing herein should be construed as personalized investment advice or a recommendation that you buy, sell, or hold any security or other investment or that you pursue any investment style or strategy.

Case studies are included for informational purposes only and are provided as a general overview of Crescat’s general investment process, and not as indicative of any investment experience. There is no guarantee that the case studies discussed here are completely representative of Crescat’s strategies or of the entirety of its investments.

Crescat has compiled its research in good faith and while it uses reasonable efforts to include accurate and up-to-date information, it is provided on an “as is” basis with no warranties of any kind. Crescat does not warrant that the information on this site is accurate, reliable, up to date or correct. In no event will Crescat be responsible or liable for the correctness of any such research or for any damage or lost opportunities resulting from use of its data.

You should assume that as of the publication date, Crescat has a position in the securities discussed and therefore stands to realize significant gains in the event the price of security moves. Following the publication date, Crescat intends to continue transacting in the securities, and may be long, short, or neutral at any time.

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