Canada’s Monarch Gold (TSX: MQR) is selling its Fayolle property in western Quebec to fellow miner IAMGOLD Corporation (TSX: IMG) (NYSE: IAG) in a cash and share deal valued at $11.5 million.
The Montreal-based company said the transaction will see IAMGOLD issuing $9.7 million in common shares to Monarch and a $0.3 million cash payment once ownership of the asset has been transferred.
IAMGOLD will also give Monarch $1.5 million in cash 90 days after the initial transport of ore from the Fayolle deposit.
Monarch will use the funds to advance its flagship Wasamac gold project, also in western Quebec
Monarch president and chief executive, Jean-Marc Lacoste, said the move was a “profitable short-term transaction.” It would allow the company to strengthen its financial position without dilution, he said. He also highlighted the potential for appreciation of IAMGOLD shares.
Funds from the transaction will allow the mine developer to advance its flagship Wasamac gold project, also in western Quebec, at a faster pace, Lacoste said.
With proven and probable mineral reserves of 21.46Mt at an average grade of 2.56g/t of gold, the Wasamac project is expected to churn out between 100,000 and 200,000 ounces of gold annually during a 11-year mine life.
Monarch filed a project notice with Quebec’s Ministry of the Environment and the Fight Against Climate Change last November. That is the first step in the mining permit application process, which generally takes 18 to 24 months.
Monarch signed last month a memorandum of understanding (MOU) with Glencore Canada. The agreement could see the mine developer using the major’s plant near Timmins to process ore from its Wasamac property, also in western Quebec.
“[The MOU] has raised the outlook of our 2.6-million-ounce gold flagship project, which includes 1.8 million ounces of reserves,” Lacoste said.
Monarch is bringing its flagship Wasamac project into production and has been looking at toll milling options in Quebec and Ontario
Monarch is evaluating an upgrade on part of Glencore’s concentrator as part of a plan that involves shipping ore by rail from the Wasamac property for processing into doré bars. The company is expected to finish the upgrading study by Dec. 31.
If both parties agree the results of the study are in each other’s interests, Monarch and Glencore will then negotiate a toll milling agreement by March 30, 2021.
Monarch would also agree to fund upgrades to the concentrator and any related infrastructure by July 2023.
Potentially, the first shipments of ore from Wasamac could arrive by December 2023.
Glencore’s Metallurgical Site (Met Site), near Timmins, Ontario, was built in 1966 with numerous upgrades performed over the years. With a capacity to process 12,500 tonnes daily, the concentrator currently handles metal ore to produce copper and zinc concentrates.
