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Will Sabina Gold & Silver be the Next Major Take-Over?

Commentaries & Views

Major miner Agnico-Eagle (AEM) has big plans for Nunavut, which is the largest, and northernmost territory in Canada. Nunavut comprises a major portion of Northern Canada, and most of the Canadian Arctic Archipelago. Its vast territory makes it the fifth-largest country subdivision in the world, as well as North America's second-largest (after Greenland).

AEM acquired the Meadowbank gold project in the Kivalliq region of Southwestern Nunavut from Cumberland Resources in 2007. Three years later, the ribbon was cut on Agnico’s $700-million foray into mining in the Canadian Arctic. At that time, Meadowbank was also the only mine operating in Nunavut, and it was the first to be developed on land belonging to the local Inuit community. Since 2010 the Meadowbank mine has produced on average 350,000 oz per year with total cash costs below C$715 per oz in 2016. However, mining at the Meadowbank deposit is expected to wind down in 2018.

In February of this year, Agnico Eagle's board of directors gave the go-ahead for construction of the nearby Meliadine and Amaruq gold mines in Nunavut. The company says it expects to invest $1.2 billion in the new mine sites as they continue to build out their Nunavut platform.

I was in attendance last month at the 2017 PDAC awards when AEM was given the Bill Dennis award for the discovery of the Amaruq gold deposits in the Amer Lake Basin in Nunavut. It is truly a remarkable achievement to build and operate  large-scale operations in such a severe climate.

At the rim of the Arctic Circle in Canada, AEM knows first-hand how tough it is to operate in a remote region with temptingly large, high-grade, but frustratingly inaccessible, reserves of precious and base metal minerals. There is virtually no infrastructure in Nunavut, an 810,000 sq mile (2 million sq km) expanse of rock and ice twice the size of Western Europe. Dotted across the territory is a largely unskilled aboriginal Inuit population of only 33,000.

However, the Canadian Arctic has now become a niche market where mineral exploration companies with a serious tolerance for risk and adversity are attempting to develop a handful of high-grade major deposits.

Sabina Gold & Silver (SBB.TO) is one of those companies as it controls the largest deposit in Nunavut currently owned by a junior developer.

In 2011, Sabina sold Hackett River to Xstrata Canada Corporation for C$50 million in cash and retained a significant silver royalty on the deposit. Hackett River is located 45 km west of the company's Back River gold project in Nunavut. Back River is a world class, high-grade discovery with a current mineral estimate (October 21, 2014) consisting of a Measured Mineral Resource of 10.3 million tonnes grading 5.3 g/t for a contained 1.7 million ounces Au, an Indicated Mineral Resource of 18 million tonnes grading 6.2 g/t for a contained 4 million ounces Au and an Inferred Mineral Resource of 7.8 million tonnes grading 7.4 g/t for a contained 1.9 million ounces Au. The property is contained in a district scale land package of an 80km belt and is the only 5 g/t gold project with a major open pit component.

The final major permitting hurdle for the Back River Project is the Nunavut Impact Review Board’s (NIRB) decision on the Final Environmental Impact Statement (FEIS). The NIRB issues the updated Final Hearing Report for the Back River Project proposal in July 2017.

I was asked about my thoughts on Sabina when I was interviewed by Kitco at PDAC in Toronto earlier this March. Since that time, the stock chart of SBB.TO has formed the handle of a 6-month cup & handle pattern which it began to break out of on strong volume this week.

Earlier this week, AEM CEO Sean Boyd told European Gold Forum attendees “(Nunavut) is clearly a place you can do business…’s one of these rare places in the world where you have that unique combination of an ability to do business, and huge mineral potential”. Boyd then stated “(In Nunavut) 10 years ago we were at 40,000 hectares and now we are at 440,000 hectares while we will continue to add to that position”.

I believe AEM can ill-afford to have another global miner set up shop by developing a rival operation in Southwestern Nunavut. If I were CEO Sean Boyd, I would not wish to have another major miner come in and threaten my company’s monopoly on Nunavut production and exploration.

On March 27th, AEM announced that it has agreed to issue and sell 5,003,412 common shares directly to an institutional investor in the United States for gross proceeds of US$220m. Hmmmm……

Full disclosure: I own shares in Sabina Gold & Silver which I purchased in the open market and added to the position earlier this week. Please do your own due diligence before purchasing shares in any of the companies listed in this article.

On a personal note, I launched my new website last week which contains archived links to my previous Kitco articles. Please stop by and sign up for my mailing list which will deliver my weekly Kitco missives directly to your inbox.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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