In September 2017, Metallic Minerals entered into an option agreement to acquire a 100% interest in 26 miles (36.4 km2) of creek and bench mining rights (the “Property”) along the Australia Creek drainage, in the Klondike gold district near Dawson City, Yukon. In January 2023, the Company announced the signing of a production royalty agreement on 5 ½ miles of alluvial gold claims at its Australia Creek property with Little Flake mining, a company owned and operated by Parker Schnabel of Discovery Channel‘s top-rated television series, “Gold Rush”. Little Flake will be granted exclusive rights to extract gold from the Australia Creek property, with Metallic Minerals receiving a percentage of the production as a royalty, with production targeted to begin by June.
Under the terms of the agreement, The companies will be working together closely to ensure a rapid and successful start-up for the partnership. Under the terms of the Australia Creek property agreement, Little Flake agreed to a $1 million minimum annual work commitment and pay Metallic Minerals an annual advance royalty plus a variable royalty on all gold production.
This partnership will combine Metallic Minerals’ expertise in mineral exploration and Little Flake’s experience in gold mining to maximize production and profitability for both groups in the region. Mr. Schnabel is recognized as a highly experienced miner and, in December 2022, was awarded the Robert E. Leckie Award for Excellence in Environmental Stewardship by the Yukon Government for reclamation work in the Klondike goldfields.
Australia Creek is part of the historic Klondike gold district that is estimated to have produced over 20 million ounces of gold since its discovery in 1898. Despite extensive mining activity nearby, Australia Creek itself was never historically mined due to its importance as a source of water and hydro-electric power for supporting the broad scale, floating dredge operations that were being conducted in the area by Yukon Consolidated Gold Company (YCGC) which operated in the Klondike Region between 1920s and 1960s. The dams on Australia Creek have been removed with only the historic diversion channels now remaining. YCGC did limited exploration churn drilling at the mouth of Australia Creek, but no further exploration up the drainage. The mouth area is being actively mined at present and auger drill holes on Lower Australia Creek have returned values in the gravels similar to other parts of the area, with initial test pits in 2015 to 2017 confirming the presence of alluvial gold.
The opportunity for Metallic Minerals will be to build a portfolio of production royalties from its holdings in the Klondike region, which can potentially generate internal cash flow from royalty payments that can be used towards the Company’s exploration activities in the Keno Silver and McKay Hill Projects. The first production royalty on Lower Australia Creek covers just a fraction of the remaining total Australia Creek holdings and the Company expects to secure additional production royalty agreements with other experienced alluvial mining companies over time.
1Yukon Geological Survey (“YGS”) Yukon Placer Mining Industry Report 2010-2014