Contributed Commentaries
Area Play: M&A on the Abitibi Greenstone Belt in Quebec
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-Larder Lake Fault Zone (CLLFZ) ushered in the Abitibi-Témiscamingue Gold Rush and the geological anomaly continues to have a major impact on Quebec’s mining history. The massive CLLFZ is a regional-scale strike fault and/or shear zone and is one of the most important structural controls on the gold mineralization in the Abitibi Greenstone Belt (AGB), which has produced 190 million ounces of gold since the early 1900’s.
Its name derives from the township of Cadillac, where it was first discovered. The CLLFZ is roughly 160 kilometers long and extends from the town of Val d’Or, in Quebec, to Kirkland Lake, in Ontario, Canada. Although the city’s 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.
Even after a century-long history of mining over 190 million ounces of gold, the region is far from being depleted. The AGB currently features 21 deposits containing over 3 million ounces of gold in each deposit. During the last century, some 124 mines have been placed into production.
Discoveries in the region at depths between 600 and 3,000 meters show that the Cadillac Break is highly under-explored, as most historic drilling in brownfield areas of the CLLFZ has been only locally tested down to 500-600 meters depth.
During the previous gold bear market, Canadian junior miners acquired dozens of brownfield’s projects over Quebec’s entire Abitibi region. The acquisitions ignited a revival in exploration, development, and production activity once capital markets in the resource space improved in early 2016.
At this time last year, the Detour Lake area of the Abitibi saw some consolidation begin to take place when global miner Kirkland Lake Gold (KL) purchased the Detour Lake Gold Mine in late January 2020. Then three months later, junior developer Wallbridge Mining (WM.TO) bought out junior explorer Balmoral Resources.
More recently, M&A activity has heated up again in the Abitibi, as a handful of deals have been announced over the past few months. Last November, global miner Yamana Gold (AUY) acquired the Wasamac Gold Project, along with a nearby mill, owned by junior developer Monarch Gold (MQR.TO). This week, Monarch announced the transaction with Yamana has been completed. The common shares of the new Monarch Mining Corp., which were spun-out to Monarch Gold Shareholders, will begin trading on the Toronto Stock Exchange under the symbol GBAR on January 26th.
Then last week, junior developer O3 Mining (OIII.V) sold its Garrison gold project to Moneta Porcupine Mines (ME.TO) by taking a 30% stake in the company in roughly 150M common shares of Moneta for a deal worth about $48M. O3 Mining updated the resource and completed a PEA on Garrison in December 2020, outlining a 12-year mine life from an open pit operation producing 121,000 oz. gold in years one through eight, or 94,000 oz. annually over the life of mine.
Garrison has measured and indicated resources of 66.3 million tonnes grading 0.86 gram gold per tonne for 1.82 million oz. contained gold and 45.3 million inferred tonnes averaging 0.73 gram gold for 1.06 million ounces.
Since its inception in mid-2019, O3 Mining has tied up 65% of the Val d’Or mining district as well. And in June 2020, the company initiated a fully-funded 150,000 meter drilling campaign on its projects in Val-d’Or, which will continue through 2021 using 12 drill rigs. The firm released a PEA on its 100% owned flagship Marban Project in September 2020, outlining a 15.2-year mine life from an open pit operation producing an average of 115,000 oz. gold per year at an AISC of US$822 per ounce. The company is building upon last year's Marban PEA by initiating the PFS in 2021.
This week, global miner Eldorado Gold (EGO) announced it is buying QMX Gold Corp. (QMX.V) by acquiring all the shares it doesn’t already own of the Val d’Or explorer, in an offer worth C$132 million. The proposed deal represents a 39.5% premium to the closing price of QMX shares on the TSX Venture Exchange on Jan. 20th. Once the transaction is closed, QMX shareholders will own about 2.8% of the issued and outstanding common shares of Eldorado.
With M&A heating up in the AGB recently, buyouts for a healthy premium to market by a major miner in the not-too-distant future is not out of the question for other small-cap juniors de-risking projects in the area. Here are a few juniors operating in the Val d’Or district I have accumulated in the open market and also cover in my newsletter.
Probe Metals (PRB.V): In 2016, the company began to explore its flagship Val d’Or East Project in Quebec. The proven management team at Probe has more than quadrupled the deposit to a measured and indicated resource of 866koz and an inferred resource of 2.3Moz. An updated resource estimate and Preliminary Economic Assessment (PEA) study are expected in H1 2021. Moreover, the company has recently begun work on its highly prospective Detour North Gold Project. The district scale sized land package stands at 1,434 claims representing 777 square kilometers, while located along 90 kilometers of the prolific trend. The Project is located along the lateral extensions of the aforementioned Detour Lake mine and recent high-grade gold discoveries in Zone 58N, Area 51-Fenelon and Martiniere/Bug Lake.
Cartier Resources (ECR.V): In 2013, the company began searching for high margin potential gold projects on the Cadillac Fault in the AGB, then purchased four projects at an average acquisition cost of just $1 per ounce of gold based on historical resource estimates. The company’s flagship Chimo Mine Project in Val d’Or has measured and indicated resources of 4 million tonnes grading 4.53 gram gold per tonne for 585,190 oz. contained gold and 4.87 million inferred tonnes averaging 3.82 gram gold for 597,800 ounces. To date, two internal engineering studies have been completed with positive conclusions. Two other internal engineering studies are underway, along with an internal study to prepare for a new mineral resource estimate on the Chimo Mine Property to be released by the first week of February, followed by a PEA in H2/2021. The company has also recently begun a fully funded 30,000 meter drill program on its Benoist Property, located 65 km northeast of Lebel-sur-Quévillon in Québec.
This is a good time for resource stock speculators to take advantage of the current weakness in the sector to perform proper due diligence on a carefully selected watch list of quality juniors. If you require assistance in choosing a basket of M&A candidates, and would like to receive my research, newsletter, portfolio, watch list, and trade alerts, please click here for instant access.
Disclaimer: I recently booked an over 200% gain on a position in MQR.TO that was purchased in the open market after recommending the stock to my subscribers. And I also purchased shares of OII.V, PRB.V, and ECR.V in the open market, after recommending all three to my subscribers. Please do your own due diligence before considering the purchase of any junior resource stock.
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