Chad Williams talks like an analyst.
He sums up his reasons for joining Victoria Gold, a mining company hoping to dig for gold near Mayo, in cold, calculated candour.
“The risk/reward balance was very favourable,” said Williams.
That’s not the way most people might describe a career change, but then again, Williams was scouted by one of the world’s biggest gold companies to prepare a mine for operation.
He’s not a man who takes stupid risks.
The chance to lead Victoria Gold came three years ago, when Williams was working as a successful gold price expert for Blackmont Capital Incorporated in Vancouver.
That’s when he got a call from Kinross, Canada’s third biggest gold company, and a minority shareholder in Victoria.
“When I was approached by Kinross, I did three months of due diligence,” he said.
He studied the ore in the ground, the projected gold prices and the local conditions for opening a mine.
“I liked the assets so much, I took an 85 per cent pay cut,” said Williams.
He’s now president and CEO of Victoria Gold, part of Kinross’ exploration empire.
“I saw the opportunity as phenomenal,” he said.
“We would have the support of a major gold company like Kinross and all the upsides of a junior company.”
Williams was part of a new team brought in to revitalize Victoria Gold.
Victoria Gold came into the Kinross fold when Kinross bought a company called Bema for $3 billion in 2006.
Bema held minority shareholder positions in 30 different junior companies, including 19 per cent of Victoria Gold’s shares.
When Kinross came in, it eliminated Bema and acquired the juniors’ shares itself.
Williams was joined on a recent trip through Whitehorse with another executive meant to rev up Victoria, John McConnell, the executive vice-president.
“We turned the company around,” said Williams.
McConnell worked for 12 years at the Nanisivik zinc and lead mine on Baffin Island and more recently at Snap Lake diamond mine in the Northwest Territories.
“I’ve spent my whole career north of 60,” said McConnell.
After spending the last few years shepherding Victoria through the exploration phase, they’re on the cusp of building a gold mine near Mayo.
The mine site is called the Eagle Gold Project, a tiny fraction of the company’s Dublin Gulch property.
The open pit mine would produce 1.25 million ounces of gold over eight years, starting in 2013, according to a recent pre-feasibility report.
Victoria Gold is hoping to put a mine construction proposal before the Yukon Environmental and Socio-economic Assessment Board by December.
The Dublin Gulch property has changed hands many times in the last two decades, but was owned most recently by Stratagold.
Victoria Gold bought Stratagold last year.
The Dublin Gulch, a 30-kilometre by 14-kilometre stretch of land, quickly became one of Victoria Gold’s most promising sites.
Victoria Gold also owns several properties in Nevada, including the Cove mine, which, alongside the Eagle project, is supposed to be one of Victoria Gold’s first producing mines.
They were several factors that put the Yukon property ahead of the pack, said Williams.
The known deposits under Dublin Gulch continue to grow, he said.
The company has gone from estimating 2.7 million ounces of gold lies under Dublin Gulch to 4.3 million ounces in one year.
The mine is building a year-round exploration camp to keep looking for ore while the Eagle project preps for construction.
“That will make us unique in the Yukon,” said Williams.
Exploration would slow down in the winter, he said.
But, “we’ll be the first ones in and the last ones out,” he said.
Victoria Gold also wants to plow ahead with a mine because of the construction of Mayo B hydro plant and the connection of both Yukon power grids, allowing for hydro power produced in the south to go to the northern grid where Mayo is served, said Williams.
The mine would need 14 megawatts.
“All the previous economics were done with diesel prices,” said Williams.
It’s not clear how prepared the Yukon Energy Corporation, the territory’s main power generator, is for the Eagle project mine.
The corporation is projected to run out of extra hydro power in 2013, even with Mayo B online.
Yukon Energy is planning to use more of its diesel generators when that happens.
Victoria Gold has met with Yukon Energy on a preliminary basis to discuss a power-purchase agreement, but nothing has been set in stone.
On the other hand, the future of the gold price gives the mine great potential, said Williams.
It’s projected to cost $503 to produce one ounce, and the current price for an ounce of gold is $900, leaving plenty of room for profits, according to the prefeasibility report.
William’s past as an analyst shines when he talks about the cost of gold.
“The gold price has a lot higher to go before this cycle is over,” he said.
He has the economics of the gold price down to a recipe.
“The reality is gold is not a commodity, it’s a financial asset,” he said.
“And it goes up when other financial assets lose volume.
“So the US dollar gold price will continue to rise as long as US financial assets in general lose value.
“US financial assets lose value as long as the US economy continues to struggle,” he said.
But there’s another factor.
“The key is short-term interest rates,” he said.
“As long as short-term interest rates stay low, the price will have a tendency of rising.
“It’s that simple.”
He doesn’t take his knowledge for granted.
“Trust me, it took me 20 years to figure that out,” he said.
Another factor that will pump up the price is the shortage of highly skilled geologists and mining engineers.
“It’s going to guarantee, in fact, the mine supply will continue to fall,” he said.
Victoria Gold has done the customary community meetings in Mayo, said McConnell.
But there were fears about cyanide heap-leaching, a process that involves leaching gold off of ore by letting it sit in pools of cyanide.
So Victoria Gold flew 14 members of the First Nation of Na-Cho Nyak Dun to Fairbanks, Alaska, and then drove them to Fort Knox where another Kinross enterprise uses heap leach.
The company held an open house at their new Whitehorse office on Tuesday evening.
“It’s time to have a presence,” said McConnell.
Contact James Munson at
jamesm@yukon-news.com