Contributed Commentaries
Area Play: The Val d’Or, Quebec Camp in Canada is Heating Up
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
In the early 20th century, the discovery of the Cadillac Fault ushered in the Abitibi-Témiscamingue Gold Rush and the geological anomaly continues to have a major impact on Quebec’s mining history. The massive fault is roughly 160 kilometers long and extends from the town of Val d’Or, in Quebec, to Kirkland Lake, in Ontario. Its name derives from the township of Cadillac, where it was first discovered.
Although its name in French means “valley of gold,” there is no valley in Val d’Or, however, there is still plenty of gold remaining in the surrounding area. The town of roughly 32,000 inhabitants was founded by miners in 1934 and its economy depends chiefly on mining gold, zinc, lead, molybdenum, and copper. The lumber business is also important to the economy of Val-d'Or, as the forests of the Abitibi region provide 65% of the lumber produced in Québec.
Even after a century-long history of mining over one hundred million ounces of gold, the Cadillac Break is far from being depleted. In fact, Quebec’s entire Abitibi region has been experiencing a revival in exploration, development, and production activity since the secular gold bull market began at the turn of the century.
In a recent Northern Miner article, Claude Potvin, a spokesperson for Quebec’s Ministry of Natural Resources and Energy, said mining is a government priority. “Quebec was recently named [by the Fraser Institute] as the world’s fourth best mining jurisdiction,” Potvin said in a phone interview. “We want to make it number one.” Potvin would not commit to a specific date, but said that new measures could be announced later this year.
Just as the Northern Miner article appeared in mid-May, a few juniors located in the Eastern Cadillac Break region began to experience interest from larger mining firms. The increased interest in the region began with Osisko Mining’s (OSK.TO) new spin-out company O3 Mining (OIII.V), then known as Chantrell Ventures Corp., making a takeover bid for junior developer/explorer Alexandria Minerals (AZX.V) at C$0.04 per share on May 14th.
Then a month later on June 14th, senior gold miner Agnico Eagle Mines (AEM), who already owns a 5.6% stake in Alexandria, stepped in with a higher bid for AZX.V at an offer price valuing the stock at C$0.05 per share. The Agnico offer subsequently began a bidding war for the Quebec junior when Chantrell/Osisko announced a new and much higher bid for Alexandria Minerals a few weeks later, with an offer price valuing the stock at C$0.07/share.
In a span of a couple of months, the market cap of Alexandria Minerals has gone from roughly C$12.5 million, to now about C$35 million. It has been quite some time since the gold sector has experienced a bidding war for a micro-cap junior, which exemplifies the potential gains that are possible in so many extremely undervalued junior gold exploration stocks which continue to trade at bargain basement share prices.
Moreover, the newly formed O3 Mining also announced on July 2nd that it will purchase Chalice Gold Mines (CGMQ) East Cadillac and Kinebik Gold Projects in Quebec. The East Cadillac Project is located next door to developer/explorer Cartier Resources (ECR.V) Chimo Mine Project, who’s share price has since moved up over 15% since the Chalice Gold property sale was announced. Agnico Eagle Mines also holds 17% of Cartier’s stock.
I recently attended a site visit of Cartier’s Chimo Mine Project and the company showed me where they had recently drilled numerous holes which originated from the Chalice claims next door to Chimo. In Quebec, the right to extract minerals belongs to the holder of a lease but the government controls all surface rights.
Meanwhile, the share price of developer/explorer Bonterra Resources (BTR.V), another junior in the Eastern Cadillac Break area, has nearly doubled since the beginning of June. Bonterra’s high-grade Barry and Gladiator Gold Projects are located approximately 150km northeast of Val d’Or and lie just below Osisko Mining’s (OSK.TO) Windfall Lake Project. Last November, the company completed a 1 for 10 share roll-back along with a total management overhaul.
However, the share price of Bonterra did not begin its recent move until just after the release of the highly anticipated NI 43-101 Mineral Resource Estimates for its Gladiator, Barry, and Moroy deposits at the end of May. The estimate came in with a total Indicated Resource of 643,000 ounces of gold at an average grade of 6.43 g/pt, along with a total Inferred Resource of 1,405,000 ounces of gold at an average grade of 7.04 g/pt.
Bonterra owns the only mill in the Urban-Barry camp and the company is in the process of increasing its existing capacity from 800 to 2,400 tpd. The company currently has five drills operating on the Bachelor and Urban-Barry properties, which are testing a combination of resource expansion and earlier stage exploration targets.
Global miner Kirkland Lake Gold has accumulated a 9.9% position in both Osisko Mining and Bonterra Resources and it has been my contention, since March of 2017, that the Urban-Windfall district in Quebec may eventually be tied up by a global miner.
When the gold price made a quarterly close above the $1400 last month, the move verified a critical multi-year base breakout. Since this technical breakout in bullion has taken place while most fund managers and big money traders are on summer vacation, many of the juniors are still lagging the miners. Most may continue to do so until the larger players in the space return to their respective trading desks toward the end of August.
Once the market feels there is a solid $1400 gold floor, speculators who remain cautious and skeptical of bullions breakout should also return to investing into the late and early stage juniors. If you require assistance in choosing the best quality juniors to invest, please stop by my website and check out the subscription service at http://juniorminerjunky.com/
Full Disclosure: I have purchased shares of ECR.V and BTR.V in the open market and have also recommended them both to my subscribers.
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