It's remarkable to see how larger companies are falling back to safer
regions to explore for and to mine gold. Kinross, for instance, spent
billions and billions of dollars on gold projects in second-tier countries,
and the acquisition of Aurelian Resources and Red Back Mining aren't really
successes. Keeping that in mind, the company's most recent $610 million
($610M) acquisition was the Bald Mountain and 50% of the Round Mountain mine
in Nevada. This shows how even the companies that weren't afraid to take some
geopolitical risks are now trying to do business in first-tier mining
countries again.
But, of course, the acquisition targets will have to come from somewhere,
and senior producers are still pretty much depending on exploration-focused
companies to discover new gold deposits in those safe regions. One of those
companies that definitely deserves to be highlighted is BonTerra
Resources Inc. (BTR:TSX.V, BONXF:OTCMKTS, 9BR1:FSE) with ounces in the
ground in both Québec and Ontario, Canada. Today, BonTerra no longer is the
BonTerra it used to be, as not only is it continuously enjoying exploration
successes at Gladiator, it also acquired almost 1 million ounces in the
ground for a total consideration of less than CA$5M. This resulted in renewed
investor interest and the average daily trading volume have been edging up in
the past few trading days and weeks.
One-third of the fully funded 25,000-meter drill program has now been
completed
BonTerra has owned the Gladiator gold project for quite a while now, and
back in 2012 it became clear the company was sitting on a high-grade gold
project. Unfortunately, BonTerra was also hit by the turmoil on the gold
market, and the company switched into 'hibernation' mode from 2013 until late
2014.
Most companies would have suffered a tragic death, but BonTerra Resources
surprised the market and did the opposite of what other junior exploration
companies were doing: It was investing in its human capital. BonTerra
appointed Dale Ginn (ex-Harmony Gold Mining Co., HudBay Minerals Inc. and the
founder of San Gold Corp.) to its board of directors in 2015, followed by an
'upgrade' to vice president of exploration.
BonTerra didn't waste any time, and after a successful summer drill
program where the assay results returned almost 8 meters (8m) of 7+
grams/tonne (7+ g/t) gold, several other high-grade gold intercepts confirmed
that the mineralized zones were still expanding.
The company was extremely encouraged by this and after tapping the market
to raise CA$3.4M in an oversubscribed financing (adding Delbrook Resource
Opportunities Fund to the list of insiders), BonTerra announced it would
complete at least 25,000m of drilling at Gladiator, making it one of the
largest exploration programs in Québec these days. And the nicest thing of
all? The entire drill program is fully funded!
As of the date of the most recent update from Gladiator, BonTerra has
already completed 8,300m of the anticipated 25,000m in 19 holes. And we dare
say the drill program is already a huge success, as no less than 16 of the 19
completed holes have intersected visible gold!
Assay results are confirming Gladiator's high-grade nature
It's great to have visible gold in the drill core but a company obviously
has to wait for the assay results to really know how good an intercept is.
Earlier this week, BonTerra released a batch of five drill holes to the
market, and the lab results are confirming the visual inspection of the drill
core.
How does 5m of almost half an ounce of gold per tonne of rock at a
downhole depth of just 80m sound? Or 3.3m at 29 g/t (yes, that's almost an
entire ounce!)? Indeed, that's pretty amazing and this will have a positive
impact on two different fronts.
First of all, it's not unlikely the average grade of the resources will
increase. BonTerra already has completed an Inferred resource estimate for
the Gladiator project, and using the base case cut-off grade of 4 g/t,
Gladiator contains 273,000 ounces (273,000 oz) at an average grade of 9.37
g/t. That's great, but the new ultra-high-grade intervals might boost the
average grade of the resource toward the 10 g/t mark or even higher. This
could also allow BonTerra to rethink the cutoff grade it will use in the next
resource estimate.
A higher average grade is nice, but what the market will really care about
is resource expansion. Sitting on 273,000 oz gold in the mining-friendly
Québec is obviously very nice, but the critical mass-level hadn't been
reached yet. A resource of 273,000 oz was too small to be developed
independently and in the best-case scenario, BonTerra's Gladiator zone would
have acted as a satellite deposit from where the nearby Windfall project
could source additional ore.
But that's the past, as the 2015 and 2016 drill programs have been real
game changers and eye-openers. The company has been able to increase the size
of the deposit at depth and toward the west, and there's very little doubt
the resource estimate could easily be doubled, and very likely will end up
anywhere between 700,000 oz and 1 million ounces.
Et voilà, there is your critical mass. Of course, a lot more work
will have to be done to complete the viability of Gladiator as a standalone
project, but the company will be in a much better position with 750,000
ounces of gold rather than the 273,000 ounces it was sitting on. And don't
discount BonTerra's large (and expanding) land package. The total size of the
broader Gladiator project is almost 76 square kilometers (after having
increased the size by 170% in the past weeks and months) and BonTerra has an
inventory of exploration targets it will want to follow up on.
The acquisition of Larder: the next stepping stone
Owning an exciting exploration project is very nice, but thanks to the
connections of Dale Ginn, BonTerra was able to negotiate and sign a deal with
Kerr Mines Inc. to acquire Kerr's Larder property in Ontario.
This is a major step forward for BonTerra, as not only is this project
located close to existing infrastructure (there's a powerline and a highway
running through the property), it also comes with an existing (historical)
resource estimate containing almost 1 million ounces of the yellow metal at
this past-producing mine that is located just a few kilometers from the
well-known Kerr-Addison mine, which produced in excess of 10 million ounces
of gold.
And the total consideration for these 950,000 ounces (with the potential
to increase the resource estimate)? Just CA$1.15M in cash and 10 million
shares of BonTerra, which will make Kerr Mines a 15% owner. Based on the
share price right before this deal was announced, the total cost per ounce is
less than CA$6/oz, a true bargain! No shareholder is approved on either side,
and both companies are now just waiting for the exchange to sign off on the
deal before closing it. And you shouldn't worry about the overhang either, as
Kerr has entered into a voting lock-up agreement with BonTerra Resources
whereby Kerr will be voted with the BonTerra management team in the next 24
months.
The acquisition of Larder isn't just adding cheap ounces to the inventory,
it also provides BonTerra with 'optionality.' Instead of 'having' to focus on
Gladiator, BonTerra now has two exciting exploration projects where it could
add more ounces rapidly and cheaply.
Conclusion
Just one year ago, BonTerra was one of the so many Québec-focused
exploration companies with a small resource estimate. A lot can change in
just six months, and BonTerra's recent high-grade exploration results at the
Gladiator project have put this company on a lot of radar screens.
And if that isn't enough, with the acquisition of the Larder gold property
from Kerr Mines, BonTerra is now also providing optionality with two gold
projects with NI-101-43-compliant resource estimates for a total of in excess
of 1.2 million ounces (with more ounces to be added!).
Thibaut Lepouttre is the editor of the Caesars
Report, a newsletter and mining portal based in Belgium that covers
several junior mining companies with a special focus on precious metals and
base metals. Lepouttre has a Bachelor of Law degree and two economics masters
degrees that have forged his analytical approach to the mining sector.
Considered a number cruncher, Lepouttre focuses on the valuations of
companies and is consistently on the lookout for the next undervalued mining
company.