New Quebec mining camp in the Barry-Urban township takes leap forward as consolidation begins
Eagle Hill Exploration Corporation to Combine with Oban Mining, Temex Resources, Ryan Gold, and Corona Gold. Market Equities Research Group issues update on Osisko's interest in new mining camp taking place in Barry-Urban township.
NEW YORK, NY, June 11, 2015 /Sector Newswire/ - This week the team behind Osisko Gold Royalties Ltd. structured a deal consolidating five resource-rich gold exploration miners (Temex Resources Corp., Corona Gold Corp., Ryan Gold Corp., Eagle Hill Exploration Corp., Oban Mining Corp.; collectively referred to as 'new Oban') into one entity that is well financed with $65 million of cash. The friendly, all-stock offer from Oban (founded by the members from Osisko) to the four entities and will see Osisko invest up to $20 million in the Company, and provide management support. The new Oban will be worth an estimated $122 million, and will own four projects holding more than six million ounces of gold resources. The new entity will host a portfolio advanced gold projects in Ontario and Quebec. The most value of the deal has been attributed to Eagle Hill Exploration Corporation (see breakdown of valuation on page 7 of the related Oban corporate presentation seen here [PDF]).
The gold system amongst a handful of players is part of a new mining camp in the Barry-Urban township of Quebec:
In light of the fact most value in the consolidation deal is being attributed to Eagle Hill, below is an overview of the new mining camp's main constituents. Important to note is that Eagle Hill's neighbors are now heightened acquisition targets, one (Bonterra) of which is also receiving financing from the new Oban Mining entity, which shows the people at Osisko are looking at the bigger area picture and potential, and one (Metanor) of which has been described by independent geological consulting firm SGS as comparable in potential to rival other multi-million ounce deposits such as Canadian Malartic gold deposit (formerly owned by Osisko, now owned by Yamana and Agnico-Eagle).
Eagle Hill (now part of new Oban) TSX-V: EAG:In April 2015 Eagle Hill published the results of a Preliminary Economic Assessment (“PEA”) for the Windfall Lake Project. The PEA outlines the design of a 1,200 tonne per day underground mine producing 106,200 ounces of payable gold annually for 7.8 years at an average total cash cost of $558/oz of gold (US$480/oz). At a base case gold price of US$1,200/oz the project has a pre-tax internal rate of return (“IRR”) of 23.6% and a pre-tax net present value discounted at 5% (“NPV5”) of $241.4 million. Initial project capital costs are estimated at $240.6 million. Eagle Hill intends to complete a pre-feasibility study for the Windfall Lake project by 2017. The current mineral resource is estimated at 2,762,000 tonnes grading 8.42 g/t gold for 748,000 ounces in the indicated category, and 3,512,000 tonnes grading 7.62 g/t gold for 860,000 ounces in the inferred category. 1 High-grade mineralization has been identified in multiple zones, yet only a small portion of the 12,400 hectare property has been tested to date. Mineralization has been identified only 30 metres from surface in some areas and as deep as 870 metres in others, with significant potential to extend mineralization along strike and at depth. Many gold deposits in this region continue well below 1,000 metres depth. Next steps at Eagle Hill include extending the existing ramp and taking a bulk sample, drilling both from surface and underground with the objective of expanding and upgrading the quality of the resource and testing continuity of grade, and finalizing the various studies required for a pre-feasibility study.
Bonterra Resources Inc. TSX-V: BTR (Neighbor to Eagle Hill)
Bonterra Resources was not part of the new Oban deal, however it will be the recipient of funds funds from new Oban; Oban will acquire, through private placement, 19.9% of the common shares of the Company at a price of $0.22 per flow-through share. This financing along with a small non-flow through private placement will capitalize Bonterra to advance its Gladiator Project (formerly known as their Eastern Extension Project). To date the Inferred resource on the project sits at 273,000 Oz @ 9.23 g/t gold + high-grade visible gold (up to 220 g/Mt Gold). Significant drilling has been performed since the last resource.
Metanor Resources Inc. TSX-V: MTO
Metanor is a Gold producer at its nearby 100%-owned Bachelor mill & mine, and neighbor to Eagle Hill & Bonterra
Trading with a market cap <$20 million gold producer Metanor offers significant upside share price opportunity, it is healthy both operationally and balance sheet-wise; the Company possesses:
- ~$200 million in infrastructure (replacement) value;
- ~1.6 million ounces gold global resource in all categories (on all properties, two of which are permitted mines (Bachelor and Barry)).
- Steady cash on hand ($4.4M in its bank account and 785 oz of gold stored at the Royal Canadian Mint (as declared in June 1, 2015 news release).
- MTO.V also offers a significant latent tax savings windfall value for a future acquirer with a loss-carry-forward on the books of ~$40 million, the impact could generate $12 million to $15 million in tax credits.
with nominal long-term debt,
- Metanor’s loan from Investissement Québec (originally $7M) only has $485,715 remaining and will be paid off by August 31st 2015.
- Metanor’s single convertible debenture has been paid down to $9 million outstanding and the term extended to August 2017.
Bachelor Gold Mill (a separate asset from the Bachelor mine):
Something the new Oban may approach Metanor about, especially since Eagle Hill has a bulk sample planned and the mill is only ~70km from Eagle Hill's Windfall project.
- The 100%-owned Bachelor mill has a capacity of 1,200 tpd but is currently running at a rate of ~800 tpd.
- Metanor's latest gold production figures reveal the Company is profitable, operating cash flow positively, and successfully executing on cost-cutting measures, delivering cash costs of US$849/oz gold with all-in costs of US$959/oz.
- Improved grade control is expected to lower cash costs substantially in the coming quarters.
- There exists opportunities to expand production beyond the current production level of ~50,000 ounces of gold per year.
Bachelor Mine:
- The 100%-owned Bachelor is a rich underground mine with grades upwards of 26 g/t gold with an average grade of 7.38 g/t gold (fully diluted using long hole). Recent drilling results (e.g. March 20, 2015 "Metanor Intersects 8.64 g/T Over 5.8 Meters at Bachelor Mine", and May 14, 2015 "Metanor Intersects 12.24 g/T Over 4 Meters in the Hewfran Sector of the Bachelor Mine") continue to demonstrate, in-part, Metanor's ability to readily extend the mineable life of Bachelor, similar to how other successful area miners have operated (and several continue to this date) -- typically lining up a couple years of initial quality mineralized material but remaining operational for many decades, adding as they go. MTO is able to sell 80% of its Bachelor Mine sourced gold at spot prices with the balance sold to Sandstorm as per gold participation agreement (Note: this arrangement is only on Bachelor-area sourced material, Metanor's mill is a separate asset that is 100%-owned by the Company and the mill may be used to process material sourced from outside Bachelor without restriction (for Metanor's sole-benefit) as long as it meets minimum covenants to Sandstorm -- covenants Metanor has been more than able to satisfy to date).
Barry Mine (Neighbor to Eagle Hill and Bonterra):
- The 100%-owned Barry Gold Project, Quebec, is located ~65 km from Metanor's Bachelor gold mill, it is neighbor to Eagle Hill's Windfall Lake Deposit and Bonterra's Gladiator Gold Project. The resource estimate at Barry now sits at 309,500 oz Gold of Indicated Resources (7,701,000 t at 1.25 g/t Au) and 471,950 oz gold of Inferred Resources (10,411,000 t at 1.41 g/t Au) and is wide open for large resource growth expansion. The current 1km strike at Barry is potentially 13km, there are in excess of 150 anomalies outside the pit area. The Barry deposit is a potential 10M+ ounce target; the independent international professional geological firm SGS Geostat has identified Metanor’s Barry deposit as comparable in potential to rival other multi-million ounce deposits such as Canadian Malartic gold deposit (formerly owned by Osisko, now owned by Yamana and Agnico-Eagle) & Detour Gold's Detour deposit. Metanor is not currently mining from Barry, however one option is to put a concentrator on site and transport material to its Bachelor Mill.
The following excerpts are from SGS Geostat’s summary section found in the 43-101 Barry resource estimate technical report:
Barry Technical Report [9.4MB PDF] |
“…the exploration and development work at Barry has significantly increased the amount of resources. The mineralisation is open in all directions and the property has not been drilled out to its full extent. … In the context of larger tonnage with lower grade with an onsite mill, the property has the potential to become a significant low grade high tonnage deposit similar to the Aurizon (Joanna), Osisko (Malartic) and Detour Gold (Detour) deposits.The gold is in the system, the mineralized fluids have circulated in the major shear. Additional exploration and geological work are required to increase level of knowledge of the mineralization system to better define the high grade zone behaviour in addition to development of additional resources laterally in junction to the latest geophysical survey.”
“The Barry project geology has the potential to become an important gold deposit and SGS Geostat recommends the continuation of the development of the Barry project. SGS recommends continuation of exploration and development on the Property.”
Source: SGS Geostat's technical report on Metanor's Barry deposit |
. Source: Market Equities Research Group
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