A nearly 900-square-kilometre position in the Timmins Gold District puts GFG Resources at an unusual intersection of major-company interest, high-grade exploration and discovery potential.

By Ellis Martin, The Ellis Martin Report | Money Talk Radio

When a company the size of Barrick signs an earn-in agreement on a junior explorer’s property, I want to know what it sees that the market may not yet fully appreciate. That was the starting point for my recent conversation with Brian Skanderbeg, President and CEO of GFG Resources Inc. (TSX-V: GFG; OTCQB: GFGSF).

GFG has spent years assembling a district-scale position in Ontario’s Timmins Gold District. The company now controls roughly 900 square kilometres across Goldarm, Pen and Doré. Pen alone covers approximately 475 square kilometres west of Timmins, while Goldarm – GFG’s flagship exploration package east of the city – encompasses approximately 263 square kilometres.

The scale matters. As Skanderbeg told me, “We are the second-largest landholder in one of the most productive belts in the world.”

That land position has now attracted Barrick to Pen. Under the strategic earn-in, Barrick can earn an initial 60% interest through up to C$1.2 million in cash payments, C$17.68 million in exploration and project expenditures, and delivery of an NI 43-101 technical report establishing at least 1.5 million ounces of gold or gold equivalent within six years. Barrick can increase its interest through subsequent economic and feasibility milestones.

I asked Skanderbeg the question that naturally follows: if Pen represents roughly half of GFG’s Ontario land package and Barrick can ultimately earn as much as 80%, at what point does the arrangement stop looking like funded exploration and start looking like GFG giving up control of its largest property?

His answer was about capital allocation. GFG had already spent roughly C$12 million to C$15 million exploring Pen over about seven years, while management was becoming increasingly excited about Goldarm. Rather than divide its own capital across both large packages, GFG could keep its focus on Goldarm while allowing a major to fund Pen.

“If we can partner with groups like Barrick on ground and still have exposure to their capital going in the ground,” Skanderbeg said, while advancing Goldarm with 100% control, “I think that’s a good balance.”

There is another dimension to the deal that I found more interesting: the 1.5-million-ounce threshold may sound substantial for a junior explorer, but it is not necessarily a Barrick-sized endgame.

I put that directly to Skanderbeg. Barrick is not coming into 475 square kilometres simply hoping to find 1.5 million ounces. What does Barrick believe could ultimately be there?

“They need to see potential for Barrick-sized systems,” he said. He pointed to deposits such as Côté and Borden as examples of the scale major producers seek. “Their vision is much, much larger than that.”

The structure also gives GFG an interesting fallback. Skanderbeg explained that the 1.5-million-ounce threshold was designed so that a discovery that might be too small for Barrick could still have substantial value to GFG. Timmins has extensive existing processing infrastructure, creating potential strategic options for deposits that do not meet a global major’s size threshold.

In other words, Pen does not have to become a giant to matter to GFG. But Barrick is there because the geological opportunity offers the possibility of something much larger.

While Barrick advances Pen, GFG retains full ownership of Goldarm. That is where some of the company’s most compelling recent exploration work is taking place.

At the Aljo target, Skanderbeg highlighted high-grade drilling including 23 grams per tonne gold over 7 metres and 16 grams per tonne over 11 metres, along with individual assays exceeding 200 grams per tonne. GFG is also advancing the Nahanni discovery, a greenfield target where first-pass drilling encountered high-grade mineralization beneath relatively shallow cover.

“As interesting as that is, it’s more about the system,” Skanderbeg said of Nahanni, pointing to broad alteration, anomalism, intrusive rocks and what management considers the right geological setting.

That distinction is important in exploration. A spectacular interval can attract attention, but a mineralized system with scale is what creates the possibility of a meaningful discovery.

GFG’s corporate relationships add another layer. Alamos Gold holds approximately 10.8% of the company. Skanderbeg said Alamos originally entered as a strategic shareholder and has continued to support the company. Fresnillo and Eldorado also appear in the shareholder structure through prior transactions.

I asked whether the presence of multiple major and mid-tier mining companies could eventually create an acquisition scenario. Skanderbeg was careful not to describe GFG as a project generator. He calls it a consolidator and explorer, with partnerships used when management believes they are the appropriate way to advance a particular asset.

But he was equally clear about what has historically happened to meaningful discoveries in the Timmins camp.

“Discoveries are exceedingly rare these days, and discoveries get bought,” he told me.

Skanderbeg cited Probe, Trelawny and Lake Shore Gold as examples of discoveries in the district that ultimately moved into the hands of larger producers. GFG’s management team has operating experience – Skanderbeg himself has served as both COO and CEO of producing companies – but the company is not building its strategy around the assumption that it must construct and operate every mine it discovers.

That brings the investment thesis back to exploration. GFG currently has a large share count – roughly 304 million shares outstanding was discussed in our interview – but Skanderbeg argues that a significant portion is held by long-term, sophisticated investors and strategic shareholders. He said the company had roughly C$4 million, plus or minus, on its balance sheet at the time of our conversation, with any future financing largely aimed at funding 2027 exploration.

Over the next six to twelve months, investors should be watching activity on both sides of the portfolio. At Pen, Skanderbeg expects Barrick to move aggressively through geophysical work, target generation and drilling as it begins pursuing the earn-in objectives. At Goldarm, GFG plans continued work at Aljo, follow-up at Nahanni and testing of new greenfield targets.

“We’re going out there in the next three, six, nine, twelve months to drive discoveries on our own,” Skanderbeg said, while also advancing projects through partnerships.

For me, that is the central GFG story. The company has created two distinct exploration engines in the same world-class district: one funded and advanced with Barrick at Pen, and another controlled 100% by GFG at Goldarm.

There are no guarantees in mineral exploration. Most targets do not become mines, and even strong geological indications must ultimately be proven with drilling, resources, engineering and economics. But GFG has assembled something increasingly difficult to replicate: scale in a proven gold camp, multiple active targets, major-company participation and the ability to continue making discoveries on ground it still owns outright.

The question I began with was what Barrick sees in Pen. After speaking with Skanderbeg, I think the more complete question for investors is what GFG can accomplish while Barrick is spending its own capital trying to answer that question.

About GFG Resources Inc.

GFG Resources Inc. is a North American precious metals exploration company focused on district-scale gold projects in tier-one mining jurisdictions. The company operates three gold projects within the prolific Timmins Gold District of Ontario, Canada.

Company Contact

GFG Resources Inc.

Brian Skanderbeg, President & CEO

Marc Lepage, Vice President, Business Development

Phone: 306-931-0930

Email: info@gfgresources.com

Website: www.gfgresources.com

TSX Venture Exchange: GFG

OTCQB: GFGSF

About the Author

Ellis Martin is the host and producer of The Ellis Martin Report and a broadcaster with Money Talk Radio. He interviews executives, entrepreneurs and industry leaders with a focus on natural resources, mining, technology and capital markets.

Disclosure

The Ellis Martin Report and Money Talk Radio have been compensated by GFG Resources Inc. for the production and distribution of the underlying interview and related media coverage. This article is sponsored content and is not investment advice. Readers should conduct their own due diligence and consult a qualified financial professional before making investment decisions.