Headwater Gold strategy positions young explorer to make progress in any market
Tue Sep 12 2023
Sometimes you have a discussion with an executive and think, “Everyone needs to hear this — it’s the voice of experience with a roadmap for success.” That’s the feeling one gets speaking with Caleb Stroup.
As President and Chief Executive Officer of Headwater Gold Inc. (CSE:HWG, OTCQB:HWAUF), Stroup and his team have patiently put together a portfolio of projects that all meet very specific parameters, the idea being to minimize risk while maximizing not only potential upside but the number of chances to realize that upside. It’s only one approach to succeeding in the junior exploration industry, but certainly a sound one.
Stroup spoke with Proactive about the process of constructing Headwater’s portfolio, how the company allocates resources among the portfolio’s components and the outlook for the company and the mining industry as a whole.
Proactive: Headwater Gold has a total of 11 projects in Nevada, Idaho and Oregon. Talk to us about how a small company goes about putting together a property portfolio of this size.
Stroup: The portfolio approach has always been a fundamental component of our business model: exploring relatively early stage projects and looking to make new, high-impact discoveries in the western United States. We recognized from the beginning that to have a reasonable probability of success, you need a portfolio of projects and a lot of shots on goal.
So, that was a focus early on for us, building that portfolio. We spent about two and a half years as a bootstrapped private company putting these projects together, following one very specific targeting criteria: looking for high-grade, epithermal veins. We chose one deposit type, of which there are many world class examples in this jurisdiction. And we set out to find opportunities that either had not been tested at all with drilling or had not been drilled to the appropriate depth.
These were very conscious decisions, and the strategy has worked out quite well for us. We were able to put together a portfolio of good properties, and now we have the ability to explore multiple projects at any given time, like we are doing right now with four drilling programs going on this year.
How do you stay on top of it all to make sure that the right project is getting moved forward at the right time?
That’s another special thing about our group. We’re a very technical team from top to bottom, from the board of directors to our great technical team on the ground here in the US. We constantly go through an exercise in real time of prioritizing projects and targets and doing our best to allocate all of our resources — time, money and everything else — toward the ones that have the best chance of meaningful success.
It's a difficult answer to give in a concise way, but it’s just an ongoing effort to scrutinize every decision, first from a technical point of view, and then from a big swing homerun point of view to give our shareholders the best chance of success.
Which of the projects would you rate as your favourites, and why are they high on your list?
That’s always kind of hard. It’s kind of like choosing which of your children is your favourite. Right now, the four projects we are drilling are at the top of the list. At least in order of exploration maturity and targeting, they are at a point where we feel confident in the targeting work to allocate dollars toward drilling. At the moment, that kind of biases my decisions on my favourite.
Spring Peak certainly is one where we’ve had good success and de-risked it a lot. We are drilling out there with three rigs right now. This is a project where we have already shown that we can target and find high grades. We have discovered multiple new high-grade veins at this project, and we are now going through the exercise of drilling off these discoveries and trying to build some scale. So, this one is very exciting in the short term.
Another one, kind of at the opposite end of the spectrum, that we are going to be drilling this year is Midas North. This is immediately north of the famous Midas Mine in Nevada. Same district, same geology, same structure, but it has never been drilled. It is a different stage of opportunity relative to Spring Peak but one where nobody has ever drilled any holes into it, and we think we have some really compelling targets. These are the opportunities you really look for as an explorationist — to be the first people to drill great targets in a world class jurisdiction. Much earlier stage, but tremendous upside.
What is your feeling of the environment right now? It is a challenging market, so how do you best operate in these conditions, and how do challenging times influence strategy?
From the beginning, we have focused on what we call a hybrid approach, where we are not conducting all of this drilling self-funded out of money we have raised in the market. We have done a number of deals to help fund exploration, most notably partnering with Newcrest Mining, which has earn-in agreements on four of our projects, three of which we will be drilling this year.
So, a lot of the drilling will be funded externally without any dilution at the corporate level. That has shown itself to be a really smart model, especially in a market like this where valuations are low across the board and financings are difficult to get across the line. We can really be selective as to when and at what price we raise money but still keep a pace of activity that surpasses most, if not all, of our Nevada peers.
What do you see for the company as you consider the balance of 2023 and the early part of 2024?
We are in a results-driven business on the exploration side and will have four active drill programs this fall that will result in a lot of short-term catalysts. Our decision-making into 2024 will largely be driven by successes on these projects, but we expect to continue to do what we do best: running active drilling and exploration programs.
In the short term, we have multiple drill programs that are funded and underway. There will be a lot of news flow in the next six to nine months, and we will very likely see continued announcements of future programs based on those results. I think that puts us in a great position relative to our peers, and with this hybrid model, we have been able to keep the share count low and optionality high, all while delivering short-term value for our shareholders.
Can you tell us about your background? You are a leader of the NewQuest Capital group as well and clearly have a lot of experience in management roles.
I’m a geologist. I have spent about 50% of my career with the majors and 50% in the junior world. I really enjoyed my time working with majors, especially seeing how decision-making takes place at that level. But my heart was always really in the junior mining and capital markets side. This is where I landed, with Headwater Gold being my primary day job — it is 95% of my focus. But we also have early stage incubating things happening under the NewQuest Capital umbrella.
Last question and it’s an open one — your concluding thoughts.
We touched on the difficulty in the markets right now. I think a lot of the investment community is very cautious, and for good reason. But the way we have structured things, we have the ability to ride out a long period of downturn.
The majors are still hungry for assets — gold is strong and has been between US$1,800 and $2,000 for a long time now — and the demand for more advanced projects has increased, especially in stable jurisdictions such as the western US.
And that has always been our primary value proposition. That if we can make these discoveries in the western US, there will be a market for it, and I think we are still seeing that, and the fundamentals are sound. So, if you take a slightly longer view, things actually look pretty good.
Source: https://www.proactiveinvestors.com/