Skeena Resources, Geologists Could Find 1 mm Ozs Gold

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Peter Epstein, CFA  @peterepstein2 Note: Please see Terms of Use for Applicable Disclosures

Skeena Resources (SKE.V) (SKREF) is one of a number junior gold companies in Canada, but one with a secret weapon.

Its Chairman, Ron Netolitzky, happens to be one of the foremost geologists in the world, especially so in the Golden Triangle of northwest British Columbia. Mr. Netolitzky is one of the primary developers behind the Snip Mine and Eskay Creek mines. For these achievements, among many others, Mr. Netolitzky received the Prospector of the Year award from the PDAC, and Developer of the Year award from the BC & Yukon Chamber of Mines. Add to the list Netolitzky’s induction into the Canadian Mining Hall of Fame just a few weeks ago.

Please see this video clip describing Netolitzky’s prolific achievements.

In addition, on January 11, 2015, the Northern Miner profiled Mr. Netolitzky in this two page article. Not only is Mr. Netolitzky the Chairman, but he’s also the second largest shareholder, having invested $2 million of hard cash over the years. Make no mistake, with Netolitzky as Chairman, Skeena Resources is as well placed to find additional resources suitable for an economically viable mine as any junior in Canada.

Skeena Resources is lucky to have a strong team around Netolitzky, including Rupert Allan B. Sc., P. Geol.Vice-President, Exploration & Director, Walter Coles, Jr., President & CEO, Wendy T. Chan, B. Sc., MBA and Michael Cathro, M. Sc.,P. Geo. Skeena therefore has not one, but three very accomplished geologists on board, virtually unheard of for a company of this size.

The Company’s Spectrum project already has an historical, non NI 43-101 compliant, resource of high grade (12.3g/t) material containing an estimated 243,600 ounces of gold. In addition, Skeena has an extensive and valuable database of historic data including geological mapping, geochemical sampling, trenching and more than 100 diamond drill holes (>12,000 m). With a highly experienced team and armed with ample historical data, Skeena hopes to delineate 1 million ounces of NI 43-101 compliant Indicated & Inferred gold resources within 12 months and subsequently up to 2-3 million ounces. A key takeaway is the results of the company’s first 9 drill holes, drilled in 2014, which are discussed below.

The following interview of Mr. Netolitzky took place by phone and email between January 30th and February 2nd. I, Peter Epstein, interviewed Mr. Netolitzky and I own shares in the company that I paid for myself. I have no prior or existing business relationship with Skeena or any company named in this interview. Skeena is a highly speculative investment opportunity. Readers should conduct their own due diligence and consult with their own investment advisors.

Mr. Netolitzky, thank you for taking the time with me for this interview, can we please start with a description of Skeena Resources?

Skeena Resources is most focused on advancing its Spectrum gold & copper exploration property located in the, “Golden Triangle” in northwest British Columbia. Our 3,580 hectare property is approximately 37 km west of Imperial Metals’ Red Chris mine and 16 km west-northwest of the NGEx/Teck GJ deposit.

The Spectrum resource appears to be a high-grade deposit that has extensive historical data, including geological mapping, geochemical sampling, trenching, more than 100 diamond drill holes (>12,000 m), and one small underground adit (278m of drift and crosscuts). The majority of this valuable data dates back to Columbia Gold Mines work from 1990-1992. At the time, an ‘inferred’ non NI 43-101 compliant resource of 614,000 tonnes grading 12.3 g/t Au containing 243,600 oz. was estimated to a projected depth of approximately 150 meters. Given our recent successful drill campaign, and ample historical data, we hope to establish a NI 43-101 resource of 1 million ounces of gold within the next 12 months.

Skeena has put out two press releases regarding drill results on a total of 9 holes, were the results as good as hoped for? 

We are very pleased with the results of our 9 hole drill campaign last year. Highlights can be found in the two press releases, first 5 holes  last 4 holes

[NOTE: For convenience, highlights from the two press releases are reprinted here] 23.84 g/t over 6.5 m, including 40.43 g/t over 3.5 m in 14-SP-00310.63 g/t over 27.0 m, including 66.00 g/t over 2.0 m and 20.4 g/t over 2.0 m, 9.2 g/t over 2.0 m; 8.0 g/t over 2.0 m; and 22.7 g/t over 2.0 m in 14-SP-00418.60 g/t over 2.0 m, 3.19 g/t over 4.0 m, 7.32 g/t over 2.0 m, and 6.88 g/t over 2.0 m in 14-SP-005; 43.80 g/t over 2.0 m in 14-SP-006; 9.50 g/t over 2.0m in 14-SP-007; 4.58 g/t over 9.0 m in 14-SP-008; 13.70 g/t over 4.0 m and 254.50 g/t over 2.0 m in hole 14-SP-009. Importantly, this last intercept represents the deepest intersection of significant mineralization obtained to date (from 285 m to 287 m) and the deposit remains open on strike and at depth. Intercepts averaged 50 m beneath historic intersections, and exhibited excellent vertical continuity, suggesting high-grade mineralization may extend to significant depths.

Why do you think that you might be successful in finding an economic deposit in a basin that’s been actively explored for decades?

That’s an excellent question. The simple answer is that our 3,580 hectare property hasn’t been systematically explored, (except directly on the Central Zone), especially using modern techniques. The property was inactive for 22 years due to government issued right-of way restrictions, recently resolved, allowing the project to move forward. Further, the vendor of the property to Skeena was difficult to deal with.  I spent years trying to cut a deal with him before he relented. This opportunity is in my sweet spot, a high-grade zone(s) occurring within a broader halo of low-grade porphyry-style Au-Cu mineralization about 50 m wide and about 600 m strike length. The kind of high-grade, low cap-ex prospect that, if it reaches 1.0 million ounces with good continuity, will very likely become a mine.

Please tell us about the East Creek Zone and its potential importance? 

The East Creek Zone, some 1.5 kilometers further to the north of the Central Zone, is a north-trending, 5 m wide silicified zone with gold, pyrite, arsenopyrite, chalcopyrite and sphalerite, traced at surface for a 600 m strike length. A trench sample yielded 58.4 g/t Au over 2.6 m. The East Creek Zone has only been tested with 3 drill holes to date. Two of those drill holes yielded 1 to 2 g/t over less than 2 m, while the third hole yielded 34.45 g/t over 2.6 m. Apart from a single drill hole to the north of the Central Zone Fault, most of the intervening 1.5 km section between the Central and East Creek Zones has not been drill tested and provides an attractive exploration target. If we find continuity between the Central Zone and the East Creek Zone, we could have a very significant deposit with multiple millions of ounces.

Can we get a snapshot of your capital structure? Is there any debt? 

As of February 2nd, Skeena has 163 million shares outstanding [89,102,207 shares are subject to Exchange escrow, 360,000 options are escrowed, and 180,000 warrants are escrowed]. Additionally, 80,000,000 of the escrowed shares are further subject to a Pooling Agreement, managed by Mr. Netolitzky, Chairman of Skeena], plus approximate 42 million warrants at $0.10 (essentially at-the-money) and 16 million at-the-money $0.10 stock options. Fully diluted, including at-the-money shares = 221 million. Currently we have no debt. We will probably raise $3-$4 million for the 2015 drilling and for general corporate purposes.

After raising new capital, how long will that fund the company for?

This important capital raise will largely fund us for 2015 and into 2016. Interest in the project has been high. We raised $3 million in Q4 of 2014, which in this particularly inhospitable financing environment is a strong vote of confidence in the technical merit of the Spectrum project and the strong management team.  Frankly, the drill results from our first 9 holes were better than we expected. As such, we are optimistic that we will continue to be able to raise capital to advance this very rare high grade gold project. Nevertheless, we plan on maintaining at least $1.0 million of cash on our balance sheet to withstand market uncertainties.

Do you have contact with any First Nations groups, if so, how are your relations with them?

An Archaeological Impact Assessment was undertaken on the in September, 2012 in conjunction with Rescan and a JV company of the Tahltan First Nation, without any significant archaeological issues being uncovered. Skeena looks forward to working with the Tahltan First Nation and other local stakeholders in order to advance a profitable, financially stable, project that the Company hopes will create value for all stakeholders and lasting economic and social benefits for the region.

Please describe in what ways Skeena’s property is like and is different from other Golden Triangle operating mines and/or exploration projects.

The property contains more than 10 different showings of high-grade sulphide-gold mineralization, spatially associated with steeply-dipping fracture zones contained within a broad area. This is the same type of geological setting as many of the major copper-gold deposits in the Golden Triangle area of northwest British Columbia except that Spectrum has demonstrated much higher gold grades.

Skeena’s corporate presentation says that your property is near critical infrastructure and resources, please explain.

First and foremost we have excellent access to roads [paved Highway No. 37] and power [the new hydro line into the Red Chris Mine], each built or upgraded in the past decade. Furthermore, an experienced labor force is available in the region. The port of Stewart is also available to us. We’re not shipping a bulk commodity like coal, so the overall logistics aren’t particularly onerous.

What’s Skeena’s exit plan, will you go into production or advance the Spectrum property enough to try to sell it?

We strongly believe that a great deal of the upside in a junior exploration company comes from discoveries, followed by resource reports, followed by infill drilling to better delineate the resource, followed by building a detailed model of what might be there, followed by more drilling and modeling to compile a Preliminary Economic Assessment, “PEA.” At that stage, my experience has been that suitors start to take a serious look sometime after 1.0 million ounces have been defined in a NI-43-101 compliant resource and/or after the subsequent PEA. If Skeena has what I think it does, namely high-grade gold with relatively low cap-ex and operating costs, then it will be an attractive takeover target.

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