Blue Lagoon Resources; the next gold-silver producer in B.C. Canada? And, high-grade!

Blue Lagoon Resources (CSE: BLLG) / (OTCQB: BLAGF) is making steady progress towards getting 7,000+ tonnes of high-grade, stockpiled, mineralized material from its nearly 19k hectare Dome Mountain Gold-Silver mine toll-milled at Nicola Mining’s Merritt B.C. Mill. This should generate ~$1.4M in cash this Summer. The Company’s sitting on $3M cash, and has $5M of in-the-money warrants.

Led by CEO Rana Vig, and backed by friends, family & mgmt., who combined own ~20% of the Company, this is a mgmt. team & board with a meaningful history of success in multiple sectors.

Step #2 will be getting a ~25,000 tonne stockpile at the Company’s 100%-owned, 4,400 hectare Pellaire property toll-milled. This should net another ~$2.4M by March of next year. Step #3 will entail mining Dome Mountain at ~100 tonnes/day, growing to ~200 tpd in 1h 2022. Once amendments on key permits are received in coming months, management will be allowed to operate at up to 75,000 tonnes/yr.

At a mining rate of ~200 tpd, > 22,000 Au Eq. ounces would be produced, potentially generating ~$10–$12M in cash flow/yr., net to Blue Lagoon. Now things are getting interesting — especially as the Company’s Enterprise Value [“EV”] {market cap + debt – cash} is just $36M.

The key to really unleashing this story comes in Step #4. Cash from toll-milling + mining will be used for aggressive exploration & development at Dome. Since the mid-1980s, > $100M (in today’s $$) has been invested by companies incl. Noranda & Timmins.

Dome has a very high-grade Indicated + Inferred resource totaling ~191k oz. at ~10.2 g/t Au Eq. Management sees a clear path to 1M high-grade oz. sometime next year.

A million ounces could be just the tip of the iceberg. There are 15 additional high-grade, unexplored vein systems (20 km of geological strike) at Dome. Discovering sizable new zones of high-grade mineralization is the endgame here. If management is correct on the first million ounces, investors will be more confident in the prospects for a multi-million ounce [high grade] project.

In my opinion, with aggressive self-funded drilling, a multi-million ounce resource could be on the table in 2023. Between now & then, zero new shares need be issued. Booked ounces are especially valuable because mgmt. can start exploiting them this year. 

Blue Lagoon holds both an Environmental Management Act Permit, and a Mining Permit that, (with routine amendments), will allow for up to a 75k tonne/yr. operation. Neither permit has an expiration date. In just a few months, Dome could be the next gold-silver mining operation in B.C.

No guarantees, but line of sight to a multi-million ounce deposit

A number of high-grade projects I’m tracking trade at an average EV/oz. ratio of $72. NONE of the juniors on the list below will be free cash flow positive anytime soon.

Blue Lagoon could end up near the top of this list, especially if its deposit(s) remain close to 10 g/t Au Eq. as it grows. Assuming a resource of 1M ounces, the Company would be trading at $28/oz. At 2M ounces, $14/oz., 3M ounces, $9/oz….

Toll-milling will begin in earnest next month. A trial truckload of mineralized material was sent to Nicola’s Mill without incident. The trucking company is pleased with the route & logistics.

Management believes ~2,400-2,500 Au Eq. ounces could be poured, with net cash flow to Blue Lagoon (after costs & profit sharing) of ~$1.4M (assumes US$1,800/oz. Au). Notably, there’s a considerable amount of silver at Dome, estimated at 4 oz. Ag per 1 oz. Au.

Cash from 2 stockpiles getting toll-milled is nice, but not the BIG story

Soon after finishing shipping the last of Dome’s material in August, management hopes to begin toll-milling mined, broken ore from Pellaire, which is expected to take up to five months. Since the Mill has routine downtime in the 4th qtr., toll-milling will stretch into 2022.

The first phase of the Company’s 20,000 m 2021 drill program at Dome is finished. A total of 7,176 m was drilled. Phase 1 was designed to test mineralization at depth and on the eastern end of the Boulder vein.

This year’s work follows successful 2020 holes like DM-20-139 — drilled vertically to a depth of 596 m. It intercepted the Boulder vein at 338 m (by far the deepest mineralization found so far), returning 3.1 m @ 17.7 g/t Au + 70 g/t Ag {Au Eq. = ~18.7 g/t}. Hole DM-20-114 intersected 107 g/t Au + 278 g/t Ag over 1.4 m {Au Eq. = ~111.2 g/t}, incl. 165.3 g/t Au + 398 g/t Ag over 0.7 m.

How many pre-PEA projects on the planet have 100+ g/t Au Eq. intercepts of over > 1.0 meter? By grade alone, this is a top 5% project in the world. Moreover, how many projects are also located in top-tier mining jurisdictions with easy access to existing infrastructure & water? Not many.

Drill Results from 2020-21 looking very good….

Blue Lagoon recently announced results of another assay on the eastern end of the Boulder vein. Hole DM-21-160, hit 3.0 m (from 88.0-91.0 m) @ 24.1 g/t Au + 128 g/t Ag {Au Eq. = ~26.0 g/t}. That intercept was the farthest east that the Boulder vein system has encountered to date. Hole DM-21-157 showed two strong intervals, the best; 1.0 m (from 13.0 m) @ 49.8 g/t Au + 61 g/t Ag {Au Eq. = ~50.7 g/t}.

Three more notable holes, of 10 announced on May 13th, incl.; hole DM-21-164 — 0.98 m (from 159 m) @ 36.7 g/t Au + 580 g/t Ag {Au Eq. = ~45.4 g/t}, hole DM-21-165 — 4.1 m (from 133 m) @ 11.1 g/t Au + 34 g/t Ag {Au Eq. = ~11.6 g/t} and DM-21-168 — 1.45 m (from 66 m) @ 25.8 g/t Au + 74 g/t Ag {Au Eq. = ~26.9 g/t}

The initial 2 of 3 holes targeting the Forks area hit gold, but not the high-grade encountered in the past. More holes will be drilled this Summer, as this remains a very attractive target. Readers may recall that the Forks area (located 500 m south of the Boulder Vein) includes an historic, non 43-101 compliant resource of 20,000 tonnes @ 23.6 g/t Au, based on 23 holes drilled by Noranda in 1985.

Two other promising projects; Big Onion & Pellaire could be monetized

In addition to the flagship Dome Mountain mine, Blue Lagoon has two very promising properties, both 100%-owned — Big Onion & Pellaire. The 4,810 hectare Big Onion property is a copper-moly porphyry project with an historical Indicated (91%) + Inferred (9%) resource of 750M pounds grading 0.31% Cu Eq.

Big Onion was acquired when copper was less than half today’s level. Peer company pounds in the ground are valued at $0.01-$0.03.

At this grade & modest resource size, Big Onion might be worth $0.01/lb. or $7.5M. However, mgmt. believes there’s potential to grow the resource by up to five times. Then, the owner of Big Onion could increase the cut-off grade, and perhaps have a ~1.5 billion pound resource at ~0.45% Cu Eq.

A project like that might be worth $0.02/lb., or $30M. Management is in no rush, but is considering monetizing Big Onion. With copper the 2nd best performing metal this year-to-date (+32%), interest should be high.

In the Summer of 2019, 210 surface samples were collected at the 7,120 hectare, past producing Pellaire property. Gold values ranged from immaterial to 300 g/t, and silver from trace to 1,200 g/t. There are 10 known mineralized gold-silver veins with strike lengths of 100 – 300 m & thicknesses of 0.3 to 7.3 m.

There have been some {historical, non NI 43-101 compliant} resource estimates on portions of the Property and on individual veins. None showed blockbuster tonnage, but it’s worth noting the grades, ranging from 17.6 to 45.6 g/t Au. Pellaire is a high-potential brownfields project with a 20 person camp, cabins, cook house, etc.

Conclusion

A lot of gold juniors have sold off in recent months, Blue Lagoon has not been spared. However, this Company has a lot more going for it than most peers. It has two key permits (in the process of being amended) to mine at up to 75,000 tonnes/yr. Blue Lagoon is one of the very few that has mineralized stockpiles (not tailings) that can be monetized in the near-term.

Mining at 200 tpd, and getting that ore toll-milled, would generate ~$10-$12M/yr. in cash. That’s a lot for a Company with an EV of $36M. Amazingly, this is not the most important part of the story, it’s merely a stepping stone to potentially delivering a multi-million ounce, very high-grade gold / silver resource at its 19k hectare Dome Mountain Mine.

Millions of high-grade ounces in a great location like B.C., could be worth up to $100/oz. in the ground to a motivated buyer. On top of that, Blue Lagoon (CSE: BLLG) / (OTCQB: BALGF) has two valuable assets in Big Onion & Pellaire, each of which could be worth in the tens of millions of dollars upon further exploration / development. Best of all, this entire portfolio is well funded, the Company need not issue a single new share.

Near-term [high-grade] production & meaningful cash flow, initially from stockpiled mineralized material, followed by mining at Dome Mountain — all within nine months — makes for a very strong investment opportunity.

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