Recently, I traveled to the Aleutian Islands off the coast of Alaska. I visited a company that’s on a real treasure hunt — looking for high-graded gold. They’ve gotten some very tantalizing results and could be on the trail of something big.
This is a gold explorer, so it carries much more risk than a gold producer.
The company is Heliostar Metals Ltd. (TSX-V: HSTR, OTCQX: HSTXF), and it’s looking for gold on the island of Unga.
Unga is a volcanic island, and multiple eruptions have reshaped it numerous times over millions of years, laying down structures and trends of metallic ore, some of which are miles long. Some of that ore is gold, and the gold found on Unga is so high-grade — historical grades of 10 grams per ton — that Alaska’s first underground gold mine, the Apollo Mine, started there in the late 1880s. Mining continued until the 1920s.
The ore was pulled out of the ground by blasting and digging, then sent to a stamp mill — a machine that crushed the ore into small enough bits that gold could be removed through chemical processes.
Why’d they stop? Metallurgy changed. Base metals were mixed in with the gold, ruining recoveries using the stamp mill.
But technology has changed dramatically over the decades, not only in milling technology and ore recovery but also in exploration. Now, magnetic surveys, 3D modeling and a deeper understanding of geology have all combined to once again make Unga a great place to search for gold.
It’s like a treasure hunt. Heliostar Metals spent this summer with three drills — one diamond drill and two Reverse Circulation (RC) drills — working on four primary targets. The company has dozens of other targets across what may be a new gold district, including the old Apollo Mine and various targets on Unga and neighboring Sand Point.
Here’s the scoop from Heliostar’s CEO, Charles Funk:
The drill results from the summer program are beginning to arrive. They include 65 grams of gold per metric ton over 10.67 meters, 10.2 g/t over 1.52 meters, 9.81 g/t over 1.52 meters and 7 g/t gold over 1.52 meters. Nice grades!
And more results will be coming in soon from the remaining eight completed boreholes. Now, the race is on to try to prove this “treasure” is as big as they believe.
And the reason the company believes it may have discovered a new gold district is due to Unga’s geology. In the next video, Heliostar’s VP of Exploration, Sam Anderson, explains the island’s geology, what they’re finding and what they plan to do next.
Anderson knows what he’s talking about. Before joining Heliostar, he spent 17 years with Newmont Corp. (NYSE: NEM) in exploration and geology, and he’s amassed more degrees than you can shake a stick at.
Unga seems remote, and sure, it’s on an island. But a successful gold mine operated there before, and there is excellent water access and an airport on the neighboring island. If enough gold is there — especially high-grade gold — it will substantiate construction of a new mine.
So, should you buy this stock? Let’s go over a few things before I answer that.
First, here’s a weekly chart:
Heliostar has spent nearly a year coiling up, creating a flag pattern as price action consolidates. A big move is coming one way or another. If you’re bullish, it’s smart to buy near the bottom of that lower trendline.
The company had $2.3 million in cash at the end of last quarter. In May, it issued 5.35 million shares at C$1.05 a share, raising another C$5.6 million (US$4.5 million).
The interesting thing about the most recent offering was who the buyers were, including Haywood Securities and Sprott Inc. (NYSE: SII).
In fact, a Sprott analyst was on the same tour I was. While I don’t know what he was thinking, I can tell you that Sprott has deep pockets and will put up more money if they think a project is worth it. I can see why Sprott is interested in Heliostar and Unga’s high-grade, district-scale potential.
Importantly, I can see that Heliostar will have to raise money again, probably in early to mid-2022. All that drilling costs moolah. Until we see more results, and importantly, an idea of what the company will do in its next exploration season, there’s no compelling reason to buy this stock right now.
On the other hand, if you wanted to tuck away 10,000 shares or so, forget about it and see what happens … that might lead to some real excitement and potentially outsized rewards.
After all, if one of the big boys decides Heliostar found a new, high-grade gold district, I’d expect them to come calling checkbook in-hand.
I like Heliostar, I think the potential at Unga is tremendous and I’m definitely going to follow this story.
When it comes time to move, subscribers to my Gold and Silver Trader will hear about it first. If you’re doing this on your own, be careful about anything you buy.
All the best,
Sean
