Addicted to Abcourt

By : David Bond

Editor

The Wallace Street Journal

By David Bond, Editor

The Silver Valley Mining Journal

(Note: We had promised readers that we’d publish a detailed review of our visit to Abcourt Mines a week ago, but like a kitten with a ball of yarn dangled in front of it, we got distracted by silver prices and out popped an unrelated screed. Here is the promised rant.)

Wallace, Idaho – In this business there are people plays and there are property plays. It’s said, wisely, that good managers can work a miracle out of a marginal property. It’s said also, and equally wisely, that bad managers can ruin even the best of properties.

So, see a great property, investigate it carefully. Find great people, play them. Not often does one get the both in the same lot. Enter Abcourt Mines (ABI.V), or as they say in Quebec, Mines Abcourt: a property play and a people play. And unlike a lot of the offerings out there, Abcourt is not just a one-trick pony. By this time next year they’ll be producing silver and zinc from their Abcourt-Barvue open-cast operations near Val-d’Or, Quebec, a stone’s toss north of the Cadillac Fault.

Underground development of the Vendome-Barvallee silver-zinc mine from an already-driven ramp just to Abcourt-Barvue’s west, and deep-level exploration from Abcourt’s Elder gold mine’s 2,500-foot shaft an hour’s highway drive west near Rouyn-Noranda will be funded from earnings from the Abcourt-Barvue pit. Three mines (one entering production in 2Q 2007) and three overlapping metals. That’s not a one-trick pony: it’s a hat-trick.

David Zurbuchen, a fellow silver writer, recently crunched Abcourt’s reserve numbers and came up with this: each share of Abcourt (trading around 80 cents U.S. right now) represents reserves of 15.2 pounds of zinc, a half ounce of silver, and .004 ounce of gold. (You can see David’s math, and his comparison of Abcourt’s numbers to those of the popularly-traded Yukon Zinc, here.)

However, in terms of reserves and resources there’s much more to the story. It gets better. Abcourt’s currently published numbers of 21 million ounces of silver and 300,000 tons of zinc from an orebody of 2.393 million tons grading 3.69 percent zinc and 2.02 opt silver are based on an NI 43-101-compliant feasibility study performed by Roche of Montreal in 1999 and based on 1999 mid-level price projections and 1999 exploration data. Back then, zinc was running 53 cents a pound and silver was optimistically forecast to hit $7. Nevertheless Roche found a profitable operation. And the report obviously didn’t reflect the results of last year’s extensive 46-hole diamond-drilling program along the 1.6-mile-long Abcourt-Barvue vein.

Abcourt has recalculated its reserve figures based on current silver and zinc prices and the new diamond-drill data, and shipped them off for 43-101 compliance review. Once that’s done the new figures can be made public; expect a press release by month’s end. Can you guess which direction their legally-reportable reserves of zinc and silver are going to go? We can. So the ensuing updated feasibility study will be a no-brainer.

Let’s add another component as well. Abcourt doesn’t need to buy anything to fire back up. Rather than dumping their LHDs, haul trucks and other heavy equipment, they cleaned the stuff up and mothballed it. All any of those giant rigs needs to fire back up is a tank of diesel and a battery. The value of the company’s on-site mining equipment, including a since-installed 350-horse double-drum hoist at the Elder, is roughly equivalent to their current market cap.

Operationally, Abcourt will presently begin de-watering the original pit, which first produced zinc for the U.S. government under contract from 1952 to 1957 by a predecessor, and then zinc and silver as an underground operation from 1985-1990 by Abcourt Mines, serving up 2.67 million ounces of silver and 34,850 tons of zinc in that latter period. Also this summer, stripping of 30 feet or less of overburden will commence along the 1.6-mile vein structure preparatory to an additional five pits down the road. First-year production will be on the order of 1,800 metric tons per day grading 3.5 percent zinc and between 2 and 3 ounces of silver. Deduct mining and processing costs and you’re looking at net income of about 40 cents per share next year – on an 80-cent stock! (Although don’t expect a dividend cheque just yet: that money will be going back into the ground to bring the Elder and its adjacent Tagami gold claims up to snuff with an eye toward doubling that mine’s current reserves of 700,000 tons grading 0.2 opt gold.)

Those are the ponies. Now meet the jockeys.

We caught up with Abcourt President and CEO Renaud Hinse on a sunny day at the Elder Mine late in March, bent intently over engineering and geological maps of Abcourt’s properties, calculator and pencil at hand, checking his own math one more time before the 43-101 guys in Montreal got hold of it. He possesses the expansive persona of the vindicated miner, the man of faith who has held on when others might have lost their grip, kept his equipment and properties up and running when the temptation was strong to let go, who grew and harvested trees just to keep the taxes and the assessments paid up.

The Quebec native’s five decades as a hard-rock miner cover the gamut, beginning with degrees in mining engineering at Laval University in Quebec City and the metallurgical sciences at the Royal Technical College in Glasgow, Scotland. Hinse can trace his roots back to pilgrims kidnapped from Massachusetts and hauled to Canada for ransom in the 18^th Century, and to a Lewis & Clark Expedition-era guide for whom a river in Idaho, the Bruno, is named.

Seeing that there might be life after retirement, Renaud Hinse (he is Mister or Monsieur Hinse to his associates, even well beyond earshot) began during the later years of his career acquiring properties and companies; Abcourt separately from the Elder. In the post-1990 down times he repaired to his home outside of Montreal for two weeks out of the month, then drove the eight hours up to Rouyn-Noranda to spend two weeks babysitting his mines and their equipment, finding ways to raise the $100,000 a year necessary to keep everything together without watering the company’s stock.

Along the way Monsieur Hinse developed a working relationship with 49-year-old geologist Yves Gagnon, a bearded engineer and professional geologist and fellow Quebecois. Gagnon formerly was president of Geospex Sciences, Inc., which consulted to such companies in the region as Barrick and specialized in geology, mining, environmental and project management. To Renaud Hinse’s reserve, Gagnon is a firebrand, a racehorse straining at the reins. Earlier this year, Hinse named Gagnon Abcourt’s vice-president, ensuring a line of succession in the company. Gagnon will be in charge of day-to-day operations of Abcourt Mines. Breakfast with the pair of them is a study of intensity: they have thought this thing out.

Now, lastly, to the racetrack. Abcourt’s three properties are located along Quebec’s Cadillac Fault in the Val-d’Or District in misnomered northwest Quebec. We say misnomered because it’s actually southwestern Quebec, not far from the U.S. and Ontario borders. With the possible exception of certain parts of Nevada, this is the most mining-friendly district in North America – so mining-friendly, for example, that if you want to extend your underground mining operations to opencast, the nearby town will gladly relocate to get out of your way. The province of Quebec provides huge tax incentives for exploration, and should times get tough, will allow you a tax-loss carry-forward to mothball your workings and mill. Several big players are there, either producing or developing, including Agnico-Eagle, Cambior, Century, Richmont, Breakwater and Falconbridge. There is ample milling and smelting capacity in the region to render transportation costs negligible. Would we go mining there? You betcha.

As a final caveat: This writer owns no shares in Abcourt Mines, nor has he ever. But ask us in a few weeks, after all that 43-101 stuff becomes compliant, and the answer may well be different. Meantime, Abcourt shares appear to be hugely popular in Europe and Australia. Only North America hasn’t caught on. Can we help that?

By

David Bond, editor

The Silver Valley Mining Journal