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Gold supply is getting tighter, deposits of quality are getting rarer and the project development timeline is getting longer. Enter Canada. The Canadian Shield still offers the possibility of break-out discoveries, says PearTree Securities analyst Eric Lemieux. The recent spate of M&A activity points to the potential of the region, and Lemieux discusses several companies that are well positioned to add value.
Canadian Shiled (shades of red)
The Gold Report: In the month since the Prospectors & Developers Association of Canada convention (PDAC), the markets have been holding steady. Has the “PDAC curse”—where mining equities fall after the PDAC convention—been broken?
Eric Lemieux: I hope so, although it really is still too early to say. Perhaps at this stage, with the drop in copper prices and gold in the $1,240/ounce range, we’re in a gray zone. However, there’s a certain sense of optimism based on the fact that we’re in the last amplitudes of a bottom. Certainly medium fundamentals look interesting. Gold supply is getting tighter, deposits of quality are getting rarer, and there is a lengthening timeline for the development of projects because of more stringent permitting and social acceptability elements.
TGR: What is going on with merger and acquisition (M&A) activity in Quebec and Ontario?
EL: There has been a recent flurry of M&A activity in Quebec and Ontario. One could almost say it is the flight to the old parents. . .comfort in stability, access to know-how and the realization that there is still much to discover in the ‘old’ Archean greenstone belts of the Canadian Shield, a geological province that covers the heart of Canada. It is notorious for being very well endowed with different commodities.
The merger announced last week between Adventure Gold Inc. (AGE:TSX.V) and Probe Metals Inc. (PRB:TSX.V) is a terrific fit. The combination of two strong exploration teams that merge good Québec and Ontario expertise, as well as project know-how, sets the stage for advancements in exploration. The combined company should continue to unlock value within Adventure’s portfolio of ~20 projects. Goldcorp Inc. (G:TSX; GG:NYSE), with a 17.7% stake in Probe, will invest an additional $2.9 million ($2.9M). Probe will have a treasury of ~$22M, well positioned to finance a portfolio of projects.
Indeed Ontario saw much activity in 2016 as Tahoe Resources Inc. (TAHO:NYSE; THO:TSX) merged with Lake Shore Gold Corp. (LSG:TSX) for a foothold in West Timmins; Kirkland Lake Gold Inc. (KGI:TSX) acquired St Andrew Goldfields Ltd. (SAS:TSX) and its East Kirkland assets; Wesdome Gold Mines Ltd. (WDO:TSX) expanded its Moss Lake land package in northwestern Ontario; and, finally, BonTerra Resources Inc. (BTR:TSX.V, BONXF:OTCMKTS, 9BR1:FSE) is acquiring ground in the Kirkland Lake-Virginiatown area via an agreement with Kerr Mines Inc. (KER:TSX).
All this suggests that there remains excellent geological potential in Québec and Ontario. With distressed assets because of the lack of cash—good assets with no monies to advance—inside quality jurisdictions and with relative proximity to infrastructure, the M&A of certain issuers should keep on pace.
TGR: Would you talk about some of the companies you follow that are active in the area?
EL: Integra Gold Corp. (ICG:TSX.V; ICGQF:OTCQX) is advancing the Triangle zone. Integra’s Gold Rush Challenge was a success and showed that the company has matured and grown. Integra hosted the Gold Rush Finale at the PDAC Convention after making available over 6 terabytes of digital mining and exploration data from Sigma-Lamaque in Val-d’Or. The Gold Rush Challenge has given Integra a wealth of enticing information and interpretation of targets. The new platform should incite mining companies, governments and mining financiers to go beyond traditional thinking, share information and consider disruptive technology as a means to captivate a new generation of industry professionals.
Integra is in a drill campaign with eight drill rigs with over 52,000 meters of drilling. Recent infill drilling at Triangle has targeted the C1 and C2 structures, providing more confidence in the current resource estimate. The company released a fourth round of drill results from its fall/winter drill program on March 31; results were highlighted by good intercepts from the C1/C2 structures located near surface.
Sigma/Lamaque Map, Courtesy of Integra Gold
Integra’s announcement of a friendly $6M strategic investment in Eastmain Resources Inc. (ER:TSX) was a surprise. Eastmain’s flagship project, the Clearwater project in the James Region, Québec, has had six mineral resource estimates since 2002 and is seeing a preliminary economic assessment being completed. Although Eastmain received the 2015 Discovery of the Year award from the Association de l’exploration minière du Québec (AEMQ), it’s really important that management work at a reasonable pace and keep some momentum. Eastmain was certainly shaken into action by the proxy battle launched by Columbus Gold Corp. (CGT:TSX; CBGDF:OTCQX) on March 28; Columbus had now withdrawn its slate of board directors. Integra’s investment represents 9.9% of Eastmain’s shares and is conditional on the election of a new slate of Eastmain Board nominees, composed of four new directors that would join some of Eastmain’s existing independent directors.
TGR: What is another company advancing in Quebec?
EL: Balmoral Resources Ltd. (BAR:TSX; BAMLF:OTCQX) released a maiden resource estimate on March 7 for its 100%-owned and royalty-free Grasset nickel-copper-PGE deposit. This discovery received AEMQ’s 2014 Prospector of the Year award. The combined Indicated resource is 3.45 million tonnes nickel equivalent. It’s important to remember Grasset is still open; it’s an ultramafic complex that hasn’t been explored that much, so there might be other pearls in that string of potential deposits.
Balmoral location map. Courtesy of Balmoral Resources.
Balmoral has the whole Detour Trend project land package to continue to pursue gold discoveries. It has gold optionality with Martiniere, Bug Lake and Lac du Doigt, and I suspect it will have other discoveries. Balmoral is another example of being well positioned at the right moment with the financial capacity and will to advance assets.
TGR: Any parting thoughts?
EL: The spotlight is on the Canadian Shield right now; it still has a lot of potential and we could see some new world-class deposits emerge. When I was at PDAC a few weeks ago, and also when I was at the Cambridge House conference in Vancouver in the beginning of the year, there were a lot of things going on up in Northern Canada, including Agnico Eagle Mines Ltd.’s (AEM:TSX; AEM:NYSE) Amaruq deposit near Meadowbank. Other companies are also working in Northern Canada, mostly on what I would consider greenstone belts, many of which have not been worked a lot. These jurisdictions are safe and stable, so they do hold an attraction for major companies.
TGR: Eric, thank you for your time.
Eric Lemieux is a consulting technical advisor to Peartree Securities Inc. of Toronto. Previously he was a mining analyst with Laurentian Bank Securities. He worked for nine years as a consultant responsible for applying Regulation NI 43-101. He has worked at the Montreal Exchange, and prior to that managed exploration projects for Cambior, Noranda and Soquem. He holds two master’s degrees, in mineral economics from the Colorado School of Mines and in metamorphic-structural geology from Laval University.
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Source: Patrice Fusillo of The Gold Report
Disclosure:
1) Patrice Fusillo conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report and is an employee of Streetwise Reports. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Integra Gold Corp., Balmoral Resources Ltd., Columbus Gold Corp. and Tahoe Resources Inc. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Eric Lemieux: I own, or my family owns, shares of the following companies mentioned in this interview: Adventure Gold Inc., Agnico Eagle Mines Ltd., Balmoral Resources Ltd., Eastmain Resources Inc., Integra Gold Corp., Goldcorp Inc. and Lake Shore Gold Corp. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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