The Gold Report: Canada recently elected a majority Liberal
government under Justin Trudeau. Will that government's promise to bring
"credibility" back to environmental impact assessments have an
effect on mining projects in Québec?
Eric Lemieux: The federal government has a platform of ensuring
that decisions are based on science, facts and evidence. I look forward to
that coming to fruition nationally. In Québec there is BAPE, the Bureau
d'audiences publiques sur l'environnement, a provincial agency that brings
credibility to environmental reviews and permitting. Investors shouldn't have
any reason to be anxious about environmental impact assessments and the
incoming government of Prime Minister Justin Trudeau.
TGR: You just returned from some site visits in the Abitibi,
specifically the Val-d'Or and Rouyn-Noranda regions of Québec. What's your
sense of the health of mining exploration in these camps compared to other
years when you've been there?
EL: These regions are struggling because of the low commodity price
environment. You can see that the area is less vibrant and the impact is
probably greatest among the mining service providers like drillers and assay
labs. But that means the cost of drilling has gone down and the wait times for
assay data are not as long. Some companies are taking advantage and going
full speed ahead with their projects. This is a great time to explore, if the
company has the capacity.
TGR: Against that backdrop, what are some companies that are having
success? And what do they have in common?
EL: They typically have a healthy cash position and the capacity to
raise more money, even in this market. Their financial position allows them
to continue project development or explore, which is not the case for many of
the issuers.
TGR: Tell us more about your recent visits. What got you excited?
EL: I started with a visit to the NioGold Mining
Corp. (NOX:TSX.V; NOXGF:OTCPK) offices in Val-d'Or, Québec. NioGold is
advancing its Marban project near Dubuisson on the western side of Val-d'Or,
not far from the Canadian Malartic mine, now owned by Agnico Eagle Mines Ltd.
(AEM:TSX; AEM:NYSE) and Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE).
NioGold should be coming out with a resource update and it's a project that
will likely move forward given its proximity to the Canadian Malartic open
pit.
Our next stop was to see Canadian Malartic from afar. It is at the fourth
or fifth bench level of depth. It is a world-class mining operation.
Finally, we went west to Rouyn Noranda where the first thing one sees is
the Horne smelter complex, and the Falco Resources
Ltd. (FPC:TSX.V) offices are smack in the middle of it. It was nice to
see a well-executed brownfield project. Projects near old mining sites
sometimes hold pleasant surprises.
TGR: Robert Wares, the CEO of NioGold, helped discover Canadian
Malartic by rethinking the approach to that deposit. Could Marban be another
high-grade, open pit?
EL: Yes. Robert Wares is a geologist and the technical person who
was really the thinking behind Canadian Malartic initially because it took
somebody to think outside the box and say, "With all these underground, high-grade
past-producers, maybe a lower-grade, higher-tonnage gold operation would work
in this camp." Now Robert Wares has the Marban deposit. The Marban
mineralization would be quite suitable for the Canadian Malartic mill, which
is about 17 kilometers (17km) away by road, and could eventually be trucked
there. It's actually higher grade than Canadian Malartic.
TGR: Is there sufficient continuity of grade at Marban to become an
open-pit mine?
EL: My understanding of the Marban deposit is that there is good
grade continuity and NioGold envisions an open pit without too much
stripping. Most importantly, the metallurgy is simple enough that it could
act as good mill feed.
TGR: Agnico Eagle and Yamana Gold have a new discovery at Canadian
Malartic. Tell us about that.
EL: The Barnat Extension and the Norrie and Jeffrey gold zones are
northeast and east of the current operations. The company could eventually
displace Highway 117 to get at that Barnat Extension resource. Some good
underground intercepts in the Odyssey and Norrie zones indicate that it's a
little higher grade than what is being mined at Canadian Malartic and
amenable to an underground bulk tonnage scenario. Perhaps with further work,
the company will find other elements surrounding that World-Class deposit. I
think Norrie and others will ultimately go into the mining plan.
TGR: The people behind Falco are also associated with Canadian
Malartic.
EL: The people behind Falco are the pillars of the original Osisko
Exploration and the development of Canadian Malartic. Confirmation drilling
on the Horne 5 project has essentially confirmed the historical database that
was accumulated by Noranda Inc. over 60 years of mining and drilling. There
is an opportunity there deep underground. With work progressing at Horne 5,
Falco is now seeking a Horne 5+ by delineating a near-surface resource that
could easily fall into a mining plan.
TGR: What would it mean if Falco could outline some near-surface
tonnage?
EL: There's the possibility to generate cash flow sooner as it
works its way down to Horne 5, the flagship operation. In the scope of a
mining operation, it could go down with a portal, do some raises and other
work, and that infrastructure will ultimately serve the flagship Horne 5 mine
later on. Any potential near-surface resource is just gravy on the greater
story. That's the attraction: Falco can get access to smaller deposits near
surface and generate some early cash flow. It doesn't take much in terms of
size if it has an overall plan to go to greater depths to get to Horne 5.
TGR: What are some other developments in the Val-d'Or camp?
EL: I did not visit Integra Gold Corp. (ICG:TSX.V; ICGQF:OTCQX) but I've been
on site previously. Integra has been putting out some very interesting news.
It's drilling its Lamaque-South gold project and recently received its
underground and bulk sampling permits for the Triangle Zone. It's probably
one of the most active explorers/developers in Québec.
TGR: Will Integra be able to continue to raise money to develop
these assets?
EL: If it takes it step by step, I think so. The Triangle Zone is
the first mouthful and it is palatable and feasible. In one of the latest
press release, Integra said that it's slowly developing the underground
portal to conduct underground exploration and take a bulk sample.
Sigma-Lamaque is a past producer, and Integra owns the entire mining complex
and land package. The Sigma-Lamaque deposit might have some opportunities
either laterally or at depth. That's probably the reason for Integra's Gold
Rush Challenge, to make accessible all the historical drilling data and have
people pore through them. Perhaps the Sigma-Lamaque complex turns out to be a
Red Lake District in its own right. That might be an attractive proposition
for a major player.
TGR: What would you consider the Top 3 mineral discoveries in
Quebec in the last three or four years?
EL: At the Association Exploration Minière du Québec (AEMQ)
convention in early October in Montreal, the Discovery of the Year award
(previously termed the Prospector of the Year award) was given to Eastmain
Resources Inc. (ER:TSX) for its Eau Claire project. People might say that
wasn't a discovery but the association wanted to highlight the fact that even
though this is a project that has been worked for the last decades, the pace
of progress has accelerated over the last year, and there have been some
little incremental discoveries along the way that have greatly improved the
geological model and steadily advanced the project.
The 2014 winner of that award was Balmoral
Resources Ltd. (BAR:TSX; BAMLF:OTCQX), with the Grasset
nickel-copper-platinum group elements (PGE) discovery. And the 2013 winner
was Balmoral's Martiniere/Bug Lake gold discovery.
Another noteworthy discovery is Oban Mining
Corp.'s (OBM:TSX) Windfall Lake project, somewhat in-line with Eastmain
Resources Eau Claire project as a project that has steadily advanced and seen
recently the pace of progression accelerate.
TGR: Balmoral has put out a number of drill results on Grasset now.
What does that look like to you?
EL: I still envision an 8 million ton (8 Mt) deposit, with the
possibility of it being even bigger. It's not a world-class deposit just yet,
but there are some interesting ingredients that suggest that Grasset has
merit. The fact that metallurgical studies suggest that the high-grade
mineralization doesn't have too many deleterious elements is a positive. The
maiden resource estimate should come out eventually before Q1/16, but a
ballpark figure of 10 Mt is not bad for a project that is well located.
CEO Darin Wagner and his team have maintained good relationships with the
nearby First Nations communities. It's about 65km from the railhead at
Matagami and it's in Québec, which has good mining legislation. All in all,
it's a project for either an acquisition or to bring to another level. There
is always potential for other deposits in that ultramafic complex.
TGR: What are some other noteworthy discoveries that could become
perhaps more noteworthy with further drilling?
EL: The whole Québec Detour Trend might hold other surprises. It is
a well-endowed structure that remains a hotspot. We talked about Balmoral,
but there are other players there. Adventure Gold
Inc. (AGE:TSX.V) recently partnered with SOQUEM Inc., a Quebec Crown
corporation, to explore its Lower Detour land package. Midland Exploration
Inc. (MD:TSX.V) is also partnered with SOQUEM on the Casault project and
has assembled a large land package.
Detour
Gold Corp. (DGC:TSX) recently got drilling results from its Zone 58 North
along the lower Detour Deformation Zone. The Zone 58 North appears to be a
different type of mineralization from that being mined at the Detour Gold
open pit. That zone is turning out to be an important discovery that will
likely have ramifications on both sides of the Quebec/Ontario border. There's
some ripe fruit out there that is not being worked because of the state of
the market. That could be a catalyst for more mergers and acquisitions.
TGR: What do you make of Adventure's Pascalis project?
EL: Again, this is a brownfield project near Val d'Or. The
underground Beliveau mine was mined by Cambior on this property in the early
1990s. And with the success of Canadian Malartic, more companies are looking
at past-producing underground mines that could have open-pit potential or
extensions laterally or at depth. Pascalis is about 40km east of Val-d'Or,
road accessible, and close enough to town to attract a knowledgeable
workforce. Adventure has shown that there are low-dipping, east-west vein
structures that were overlooked in the past and could serve as the basis for
an open pit. It certainly merits more drilling. The grade at Pascalis is
relatively robust, at almost 2 grams/ton. With SOQUEM working on its lower
Detour acreage permits, Adventure can refocus on Pascalis and advance it to
the next level. My expectation is that the company will work on a preliminary
economic assessment (PEA) in 2016.
TGR: What are some companies that have money to work their
projects?
EL: Midland Exploration recently did a deal with the Québec Inc.
(which includes Québec funds such as SODEMEX, SIDEX and FTQ) and currently
has over $17 million in working capital. It's now one of the bigger players
in the greater scope of things because it has the financial capacity and is probably
very well positioned to replicate André Gaumond's wonderfully successful
story with Virginia Mines Inc.
TGR: Midland is a prospect generator. Which prospect is its
flagship?
EL: There is no flagship. But in light of this current market, it's
sometimes better to have this business model than have a flagship that is not
moving because there's no wind. Midland has a set of projects that are
partnered with some major companies that are advancing them. And Midland has
some other properties at 100% ownership that it can continue to advance
because it now has money. Those properties will eventually be taken out by
some other party or re-partnered with another entity.
TGR: What approach is Midland taking to build the value of the
company?
EL: Midland is applying the same model that André Gaumond did with
Virginia. If you recall, Gaumond had an important portfolio of projects.
Before he made the Éléonore discovery, he didn't necessarily have a flagship
project. The strength of Virginia was that it had a portfolio of projects
that it was always advancing at different levels. Gaumond eventually sold
Éléonore to Goldcorp
Inc. (G:TSX; GG:NYSE) in 2004 for about $500M.
TGR: Eastmain made a second discovery at Eau Claire that could make
that asset more appealing. What are your thoughts on Eau Claire redux?
EL: Eastmain recently discovered the 850 West Zone and some other
prospects not too far from the original Eau Claire 450 West Zone. Eastmain
has committed to a PEA in 2016. It will be a noteworthy catalyst because it
will provide a better sense of what it can do with this high-grade, open-pit
project. I tip my hat to President and CEO Don Robinson and his team for
persevering and advancing this project slowly but surely. It's been able to
show, with Eau Claire specifically, the confluence of east-west quartz
tourmaline veins and the lower-grade alteration zones. When you have this
combination of structures, you get these potential pods and Eastmain has
modeled that. The company still has a huge land package and eventually it
will be able to apply that model to the whole land package and make this a
very interesting play. My long-term thesis is that the Eau Claire deposit,
which is relatively proximal to the Éléonore mine, could fall into the
general mine plan at Éléonore.
TGR: What is Quebec's next mine?
EL: It is Stornoway Diamond Corp.'s (SWY:TSX) Renard diamond mine.
My understanding is that things are advancing on time and under budget.
Renard is looking to start production in mid-2017, which is not far away.
It's a sizable project and taking into account the Inferred resources and the
target for future exploration, I expect this mine could produce for more than
35 years.
TGR: Are there others?
EL: We're in an evolving economy where there's pressure to build
cleaner, sustainable products. The one that is likely to have the biggest
impact on the mining sector is electric automobiles, like those being made by
Tesla Motors Inc. (TSLA:NASDAQ). Quebec is a well-endowed mineral province.
In addition to gold and base metals there is lithium, rare earth elements and
graphite, all of which are used in electric cars.
I was on the field in late October at Nouveau Monde
Mining Enterprises Inc.'s (NOU:TSX.V) Matawinie graphite property in the
Saint-Michels-des-Saints area, about 130km north of Montreal. Graphite is not
my specialty but I was able to appreciate the quality of the graphite flakes
at this project. And given that it's an industrial mineral, the timeline to
production at Matawinie may be a lot quicker than some other projects in
Québec.
TGR: What are three or four pieces of news that you're eagerly
anticipating from these companies over the next couple of months and into
2016?
EL: The first is more results from the Zone 58 North on the Lower
Detour Deformation Zone. That's Detour Gold's project. If the company starts
to go underground, that means that it's really on to something. That would
percolate for the rest of the players working along the Detour Trend—Midland,
Adventure Gold, Balmoral and Tri Origin Exploration (TOE:TSX.V) on the Ontario side.
If this becomes an area play, that would be most interesting.
The second is Integra coming out with a resource estimate by year's end.
The current resource is under 0.5 million ounces. Integra will probably double
that. The Triangle Zone is growing and the company has committed to doing a
PEA by Q2/16, but it's already setting the stage by preparing some
underground work.
The third is the Eastmain Resources' Eau Claire PEA in 2016. I've been
covering Eastmain since 2008 and have been lobbying for a PEA since maybe
before 2010. Obviously, Eastman has been active over that timeframe and has
improved its geological understanding of the Eau Claire project. It may have
even cracked the geological code there.
The last one would be Balmoral's maiden resource for the Grasset
nickel-PGE discovery, which should be published by year's end. That may be a
catalyst for some major company to say, "This is a camp-scale discovery,
and we are going to make a bid."
TGR: Parting thoughts?
EL: PearTree Securities realizes that a mine is not built in a
month or six months. It takes time. As an exempt market dealer, one of the
roles of PearTree Securities is to work with Canadian mining exploration
companies to arrange and close Flow Through Share Donation financing
placements, a valuable novel source of capital for many firms. Exploration
mining companies can realize attractive premiums to their current market
prices and minimize the dilution. They also gain the opportunity to attract
global investment that might not otherwise be available with traditional
financing, with a common theme of long term appreciation.
TGR: Thank you for your insights, Eric.
