Dakota Gold Corp. is a company focused on the exploration and development of gold properties in the historic Homestake District of South Dakota, USA.
Jon, you have managed to raise more than $600 million of funding for various companies in the natural resources sector. Given that experience, how easy do you find it, if at all, to attract capital for a junior like the Dakota Gold nowadays?
The word "easy" in mining is not appropriate because mining is a very challenging, long-term, and cyclical business. I have been able to raise money by being a principal, having skin in the game, and investing alongside my investors. A good product, project, people, and jurisdictions are key to attracting capital. My last company, Gold Standard Ventures, raised over $250 million in nine years and is now in the permitting process to become a mine. It is a very long-term business, as seen with the Lundin family, who started their project in the late 90s, showing that even the best in class families take decades to develop projects.
Mining projects are often in challenging jurisdictions, whether at high altitudes with no water or in countries with difficult governments. Having a vision and strategy that investors buy into, along with alignment and quality projects and people, really allows capital to flow. It is a demanding commitment, but the right approach and persistence can attract the necessary funds.
There exists a notorious disconnect between gold prices and stock prices of gold mining companies. What explains that for you?
This is the biggest disconnect I have seen in over 20 years, worse than 2008. Metal prices are high, yet investors are capitulating. To attract more money into the space, we need several quarters of major producers generating significant free cash flow. When companies like Agnico release strong earnings, it helps, but we need more discipline in executing strategies and avoiding destructive M&A. Companies need to focus on long-term optimization and pass synergies to shareholders through additional exploration, share buybacks, dividends, and reinvestment.
Operation failures, like those at Victoria Gold and SSR Mining, highlight the challenges. Uncertainty around the Fed's rate cuts also impacts investor confidence. Strong gold prices and physical demand are positive signs, but until funds see consistent inflows, the sub-$500 million exploration space will struggle with liquidity. The capital available for mining has decreased over the years, making it more competitive. It is a capital-intensive, long-term business requiring deep-pocketed partners who understand its cyclical nature.
What explains the great retreat of institutional investors from the sector?
Institutional investors have reduced their exposure to exploration and development names, focusing instead on companies generating free cash flow and increasing dividend yields. Where fund managers might have dedicated 25% of their portfolio to these sectors, it might now be less than 10%. They prefer getting paid to wait for new mines to come online.
The pool of capital for exploration and development has shrunk, but there are more companies competing for it. Increasingly challenging operating environments and governments demanding a bigger piece of the pie have also turned off investors. It is all about perception; if investors are turned off by the risk or difficulty, they simply will not write the check.
Can you tell us what you do to attract capital? What is your take on the growing importance of retail investors?
Our biggest shareholder is Orion Mine Finance, a top three private equity firm in mining with $12-13 billion in assets. Orion's business model supports management teams, good assets, and good jurisdictions. They provided significant funding to Skeena Resources and my previous company, Gold Standard Ventures, helping to build mines with a combination of equity, stream, debt, and royalty. Orion's understanding of the cyclical nature of the business and their willingness to be patient make them a valuable partner.
Regarding retail investors, they are essential for liquidity and support when good news is announced. Institutions tend to buy large blocks of shares at a discount, while retail investors drive stock prices up. Retail brokers can be as significant as institutions.
Let's talk about Dakota Gold's operations. You are about to revitalize the historic Homestake District in South Dakota. Tell us about your project's potential and your timelines.
The historic Homestake Mine, which operated from 1876 to 2001, was the largest single gold mine in US history, producing 40 million ounces of gold. When it shut down in 2001 when the price of gold was around $300 an ounce, it went into Barrick's closure group. In March 2020, I pitched the concept of revitalizing the district to Barrick's CEO, Mark Bristow, who was very supportive. We acquired several assets from Barrick over an 18-month period, starting with the Maitland project, which is contiguous with the old mine.
The Maitland project has significant mineralized intercepts and a discovery called the North Drift Discovery. We have a solid starting point with promising geology and data. The project is on private ground, making it easier to manage. Revitalizing the Homestake District has the potential to tap into an extensive gold resource and bring new life to a historic mining area.
Do you think the Homestead District could once again become the largest gold mine in the States?
I do not think it will be a single asset like Cortez Pipeline Gold Rush or Carlin, which produce nearly a million ounces annually. However, we could see several deposits in the district reaching significant production levels. With success, deposits like Richmond Hill and Maitland, combined with the remaining historical resources, could yield 600,000 to 800,000 ounces annually. This is significant in any jurisdiction, especially in South Dakota, which is an excellent place to do business. Compared to Nevada, South Dakota may be a better jurisdiction to operate in, with less competition and more community support.
We know that to this day, mining has a bad reputation. What could you tell us about your efforts in mining sustainably?
The world is waking up to the need to decarbonize and electrify, which ironically requires more mining. Base metals like copper are essential, but gold is also used in many technologies. The only way to achieve this transition is through safe and responsible mining. At Dakota Gold, we emphasize strong local partnerships and stewardship of the environment. Our Chief Operating Officer, Gerald Aberle, a local resident andlast mine manager at Homestake Mine, is deeply committed to environmental responsibility.
Our team lives in the local communities, fostering strong social ties. We are active in the community, hosting events each month and town halls where we can address concerns promptly. For example, we received complaints about dust from road access, so we now water the roads to minimize the impact. Taking a partnership approach with the community ensures we maintain a social license to operate. Without this, we would not be able to function sustainably. This long-term, collaborative approach is essential for responsible mining.
