Gold exploration
The need for consolidation
The past several months have not been favorable for junior share valuations. Though the price of gold rose in response to Russia’s invasion of Ukraine, a looming sentiment of uncertainty has led to a broader pullback in investment into mining exploration, which is deemed high risk. There is no simple solution to the current downturn, nor is it necessarily alarming – observers of the industry are well aware of its cyclical nature. That said, some industry experts believe consolidation may be part of the answer.
“There are too many juniors out there with too many projects with limited funding. As an industry, we need to consolidate either geographically, by commodity, or by focus to create critical mass,” said Normand Champigny, CEO of Quebec Precious Metals, whose flagship project Sakami is located in the Eeyou Istchee James Bay territory. “In today’s world, if you don’t have a market cap of C$15 million, you are not on the radar of any significant institutions, leaving you at the mercy of retail investment.”
Retail investment in Québec’s junior sector is largely done in the form of flow-through shares that provide tax benefits to investors but can ultimately end up hurting the exploration companies themselves, which have witnessed the effects of retail investors selling their shares without hesitation, thereby putting pressure on share price and pushing it further down. This perpetuates the cycle; less exploration leads to less funding and ultimately a depletion of the resource bases of producers.
Similarly, companies with too much on their plate may find it strategically beneficial to streamline their story for investors. Exploration companies have finite resources at their disposal, and knowing how and where to allocate capital is part of the game. Fury Gold Mines is a great example. The company raised C$5.5 million in 2021 from key supporters. At this stage, Fury recognized it would be better off to sell its Homestake Ridge gold-silver asset to Dolly Varden Silver, receiving in return not only an additional C$5 million and 76.5 million shares, but also a much more simplified strategy. “At this point, we became a lot more attractive to new investors which enabled us to raise C$11 million in April 2022,” said CEO Tim Clark. “This shifted Fury into a position of strength, and shortly thereafter we were able to start our 2022 drilling program.”
The Osisko legacy lives on
In June 2014, Agnico Eagle and Yamana Gold acquired the old Osisko Mining for C$4.3 billion, gaining ownership of its Canadian Malartic mine and indirectly leading to the creation of various spinout companies to live on in Osisko’s legacy. After a merger in 2015 of five companies that resulted in the re-uniting of the executive management team of the original Osisko Mining, the new Osisko Mining Corporation was born.
Located within the traditional territory of the Cree First Nation of Waswanipi, situated within Eeyou Istchee James Bay around 200 km northeast of Val-d’Or, lies Osisko Mining’s flagship Windfall project. Osisko is racing to bring Windfall into production by 2025. As one of the fastest advancing projects in Canada, the company has been drilling for the past five years in the hopes of turning Windfall into the largest high-grade gold deposit ever discovered in the province. So far, it is on track; Osisko’s recent NI 43-101 report stated 3.2 million oz Au in the measured and indicated category grading 10.5 g/t Au and 3.6 million oz Au in the inferred category grading 8.6 g/t Au, and the company has finished drilling to update its mineral resource estimate that will form the basis of the Windfall feasibility study, which president Mathieu Savard hopes to have completed by the end of 2022. The feasibility study, in turn, will form the basis of Windfall’s production decision.
Savard is optimistic that Osisko’s other regional exploration projects – Windfall is part of a 2,400 square km contiguous land package – may help it transition to being a district-scale player. “Golden Bear’s recent discovery located less than 1 km from Windfall confirms the favorable environment could potentially host additional gold deposits in the area,” he commented. “We believe that over time, we will find additional deposits as was done in comparable mining districts such as Val-d’Or or Timmins, which have each produced over 100 million ounces of gold over time.”
Another spinout of the old Osisko that has carved out a name for itself is O3 Mining, a gold explorer and developer focused on its Marban and Alpha properties with the aim to be in production at the former by 2026. At Alpha, O3 is conducting advanced exploration in two main areas of the property, including the Bulldog zone, where it is working towards a new resource. The company has also been drilling the Omega sector close to Eldorado’s Lamaque mine and on the eastern side of the property at the Akasaba sector, close to Agnico Eagle’s Akasaba West project.
Further along at Marban, situated 12 km from Canadian Malartic and eight km from Wesdome’s Kiena mine, O3 completed a PFS in early September 2022. Since publishing the PEA in 2022, the company has released an updated resource estimate now having 2.3 million oz Au in the measured and indicated category in addition to conducting metallurgical test work that increased the gold recovery in the Marban Pit.
While currently focusing on the exploration of near-surface targets, CEO Jose Vizquerra is confident both Marban and Alpha have the potential to go underground, particularly given Marban’s proximity to nearby mines such as Goldex, Kiena, Lamaque, and LaRonde that have underground deposits descending up to three km in depth. “Currently, drilling at Marban has only gone 500 meters below the surface, but we are confident there is potential for Marban to go underground,” said Vizquerra.
Brownfield exploration in the Abitibi greenstone belt
The Abitibi greenstone belt is a tier-one mining district with a rich history of proven endowment. From 2003 to 2006, no less than 10 mines were brought into production in the region. Among them ran a striking similarity: none were new discoveries. Canadian Malartic, a shining example, was the combination of four past-producing mines turned open pit. It is this time-honored consistency that attracts resource companies and investors alike, who see brownfield projects in the Abitibi as low-risk alternatives to fresher prospects in less explored regions. After all, many believe the best place to find a mine is in the shadow of an old operation.
Cartier Resources president and CEO Philippe Cloutier hopes his company’s flagship Chimo project will be another triumph of the strategy for exploration companies to pursue advanced-stage gold projects. Chimo had produced in the mid-1960s and mid-1980s before being sold to a final operator who mined it until 1997 before shutting it down. “Chimo ceased production not for lack of ore but because of the price of gold at the time and the negative light the Bre-X scandal cast on the mining industry,” explained Cloutier. “Yet its endowment did not go anywhere, and we were thrilled to acquire it.”
In acquiring the property, Cartier also gained access to a database of 4,000 drill holes and 60,000 assays, enabling the company to kickstart a robust exploration program. To further its efforts, Cartier is conducting a full year, C$6 million drill program at Chimo.
In addition to advancing its Springpole project in northwest Ontario, one of the largest undeveloped open pit gold deposits in Canada, First Mining Gold is making significant moves in the Abitibi region based on a shared enthusiasm for historic projects that have significant data but have been overlooked in recent years. The company’s Duparquet gold project consists of several properties, including a 25% interest in Beattie, which had been the largest producing gold mine in Québec in the 1930s. The site had 260,000 m of drilling done in the early 2000s, and had up to a pilot plant scale metallurgical test program completed. “They were able to crack the code, but this was after 2013 when the equity markets were on a downturn,” explained CEO Dan Wilton. “Since then, people forgot about the fundamental work done here at the last end of the cycle, making it an incredibly advanced-stage project completely off the radar.”
First Mining Gold announced it will consolidate ownership of the Duparquet project, including the Beattie mine, to take its portfolio to the next level: “This acquisition closed in September 2022, and we now have more than nine million oz indicated and another 3.4 million oz inferred, which will be one of the largest resource bases of any developer in the gold sector."
“There are several geologic similarities between Douay and Canadian Malartic (Canada’s largest gold mine) and the footprint of the known resource areas as currently defined is also nearly identical.”
Matthew Hornor, President & CEO, Maple Gold Mines
Through its 50/50 JV with Agnico Eagle, Maple Gold Mines gained access to the Joutel project, part of a past producing high-grade mine complex that closed in 1993 after operating for 19 years. For its part, Maple Gold Mines contributed to the joint venture its Douay gold project, which has over 3 million oz Au currently defined and approximately 15,000 m not included in the resource update. With the support of the largest operator in Québec as its partner, Maple Gold Mines plans to conduct step out and deep drilling at Douay, testing the depth potential up to 1,500 m.
Matthew Hornor, the company’s president and CEO, is excited about the potential the project holds given the geologic similarities he notes between Douay and Canadian Malartic, Canada’s largest gold mine. According to Hornor: “The scale, age of rocks, and type of geology that host the resource are all similar to Malartic. The Malartic JV recently defined an additional 6 million ounces at over three grams gold down to nearly 2 km depth. This is similar to what we are chasing in our deeper drilling campaign.”
A half hour car ride northeast of Val-d’Or sits the Beaufor mine. Production activities were suspended at Beaufor in June 2019, and the mine was placed under care and maintenance. Two years later, Monarch Mining announced its plans to reopen the mine by summer 2022. Right on schedule, the company announced the production of its first bar of gold in July.
Monarch Mining, created as a spinoff of some assets held by Monarch Gold prior to its 2021 acquisition by Yamana Gold, has four advanced properties and the Beacon Mill. The company’s operations center around the past producing Beaufor mine, which previously produced 1.2 million oz Au over the course of three decades and, as of July 2022, had nearly 24,000 tons of ore averaging 4.76 g/t Au currently stockpiled and ready to be processed. According to the company’s president and CEO Jean-Marc Lacoste, Monarch is currently looking at different ways to exploit the mine via a ramp and a shaft. “From the two entrances to the mine, we will be able to produce significantly more tonnage per day, which we have the milling capacity to take on,” Lacoste explained, referencing the fact that Beacon is the only mill in the eastern part of the Abitibi with current capacity. “This paves the way for many good years to come at the Beaufor mine, hopefully at a much higher tonnage rate than what has been produced over the last 30 years.”
95 km south of Rouyn-Noranda, Vior is advancing its flagship Belleterre gold project. The property includes the past producing high-grade Belleterre gold mine, which produced over 750,000 oz Au between 1936 and 1959 but is part of a sector that has been underexplored since. Vior designed its phase I and II drill campaigns to better understand the geological framework of the historic mine trend, and executive vice president Laurent Eustache commented that the company is liking what it is seeing thus far: “The mineralized system appears to widen and become more complex at depth, which is exactly what one is looking for when exploring for economic gold mineralization.”
110 km north of Rouyn-Noranda, Amex Exploration continues to advance its flagship Perron gold project with its significant drilling activities; the company plans to complete 100,000 m of drilling to support the release of an NI 43-101 resource calculation and a PEA by the end of 2022, as well as an additional 100,000 m in 2023. Victor Cantore, president and CEO, acknowledged these timelines remain flexible as the company continues to build out its resource and economic study to decide whether to take Perron into production or sell it. “We keep making new discoveries and want to bring out the biggest maiden resource possible,” said Cantore.
“James Bay is like the Abitibi region back 100 years ago. Although gold has been known here for some time, it has not been systematically explored using modern exploration methods.”
Normand Champigny, CEO, Quebec Precious Metals
New opportunities for discovery
Though popular, brownfield exploration is not the only strategy of choice in Québec. In 2020, Kenorland Minerals made a significant greenfield discovery in the Frotet-Evans greenstone belt that the company has been aggressively advancing alongside its JV partner, Sumitomo Metal Mining. The Frotet project, located an hour’s drive north of the town of Chibougamau, is exemplary of the company’s strategy to advance greenfield exploration work by partnering with major mining companies. “Greenfield exploration is extremely high risk, and it takes a significant amount of time and money to advance a project from a vast area of moose pasture to drill targets, with the odds of success approaching zero,” said Zach Flood, the company’s CEO. “As part of our risk-mitigated approach, Kenorland prefers to partner with major mining companies which have larger budgets and longer times to explore.”
In this way, his company dilutes at the project level to limit shareholder dilution at the corporate level. It is in partnering with the likes of Sumitomo, Newmont, Barrick, Centerra Gold, and Antofagasta that Kenorland will manage C$23 million in exploration expenditures in 2022, of which C$3 million is funded from their own treasury.
Image courtesy of Agnico Eagle