Explorers’ League Editor Jeff Clark: Bonjour, Andre. Welcome to our Explorers’ League! We’re glad you’ve joined us.
Andre Gaumond: Bonjour, Jeff. I’m extremely pleased you chose me. You guys are superstars in the industry.
Jeff: Thank you. Let’s start with what I understand is an interesting story about your attraction to geology.
Andre: I'm from a very small town called Montmagny, Quebec, on the shore of the St. Lawrence River. As a youngster, I was very intrigued and even impassioned with archeology, paleontology, geology – you know, volcanoes, dinosaurs, all these things you dig up that have been buried for years and years. I think it was the discovery I enjoyed most.
Well, when I was 13 years old, I heard there was a cow buried in a field near my house, so I decided to try to find it with one of my friends. We dug and dug for days and finally found the cranium of the skeleton, and eventually found every bone of it and reassembled the skeleton of that cow. I was really proud of that “archeological work”! I always dreamed about finding treasures.
Of course as I got older I realized that the real treasures were found by geologists, and that they were called mines. The catch with geology, of course, is there’s no X on the map like you’d have with a sunken treasure ship or chest of gold buried on an island. But I realized by reading a lot of books about geology that it was basically like being a detective; Mother Nature gives you clues and you have to use these tips to learn what happened there a long, long time ago. That is how you eventually end up with a discovery.
So that's how I decided to study geology. And when I applied to the university, there was no other choice. I wanted to become a geologist.
Jeff: Where did you go to school?
Andre: I earned a Bachelor’s degree in Geology from Laval University, and then a Master’s degree at École Polytechnique de Montreal.
My master’s work on the Val d’Or deposit in Quebec led to the reopening of the mine, which was very motivating for me. The mine had been closed because they had a hard time recovering all the gold – but with my study, they realized there was still a lot of coarse gold available, and they eventually changed the metallurgy and recovered much more gold.
Jeff: That’s impressive.
Andre: I was very proud of that.
Jeff: How did you end up running Virginia Mines (T.VGQ)?
Andre: I worked in exploration for a few years, but my real goal was to run my own exploration company. Of course, geology classes don’t teach you anything about the financial aspects of running a public company. One night while working in the field, I received a call from a brokerage firm in Montreal saying they were looking to train mining analysts, and I jumped at it. So for three years I worked as a mining analyst, which helped me learn about all the financial aspects of the mining business. It also allowed me to develop a network of contacts with both major and junior mining companies.
Then I had an offer to join a three-company exploration group based in Montreal. I said to my wife, “This is more schooling for me… I am going to learn how to run a public company.” So I ended up as vice president of one company and general manager of another. I learned all the things you don’t learn as a geologist or financial analyst – accounting procedures, press releases, how to work with directors, boards, stock exchanges, lawyers, prospectors, joint venture deals, etc.
Again I said to my wife, “I will stay three years and then I'm going to launch my own company.” And that's exactly what I did. In 1992, I decided to go on my own and reorganize a company called Virginia Mines. I was 32 years old then and felt I had enough background to run a public company and start my own business.
Jeff: That's great. Let’s talk about your six discoveries.
Andre: My first was called La Grande Sud, followed by Poste Lemoyne, Coulon, Gayot, Eleonore, and most recently Corvet. La Grande Sud is a small gold discovery, just 350,000 ounces, but it proved our strategy was right. It was the first really important discovery in the area.
Jeff: This is in Quebec?
Andre: Yes, in James Bay. When I reorganized Virginia, I wanted to find my niche, something that would differentiate me from other junior mining companies. There are thousands of junior explorers, and I wanted my own recipe, you might say.
For a year I worked on developing a precise exploration strategy that I could follow over the years. I traveled around the world, visited a lot of projects, and decided to go to an area in northern Quebec called James Bay, where nobody else was working. I realized the geology there was very similar to the main mining camps in southern Quebec. So I forgot about traveling and instead focused on this brand-new territory and decided to build a company there with my new strategy. All the discoveries we’ve made have come from following this strategy and by focusing on this one territory called James Bay.
Jeff: So tell us about this strategy that’s made you so successful.
Andre: It’s a five-point strategy we’ve followed for 15 years now. We’ve never deviated from it and have six discoveries as a result.
The first one is focus. We are focused solely in Quebec, the largest province of Canada.
The second is expertise. When you focus in one area over a number of years, you become the area expert. In fact, we’re now considered the best exploration team in that territory, and one of the best in Canada.
Third, our expertise has attracted a lot of interest from major mining companies, so we have a lot of partners that are spending millions of dollars on our properties. This helps us simultaneously develop multiple projects and reduce exploration risk. I’ve heard many mining analysts and companies say they’re following the Virginia model, which means, in part, they’re pursuing partnerships.
And that leads to the fourth point: diversification. To increase our chances of discovery, we have more than 20 active projects. I’ll take as many projects in Quebec as I can, as long as they’re high quality and have the potential for discovery.
We’re a project generator and a royalty holder. We want to be at the beginning of the food chain – a project generator – and the end of the food chain, a royalty holder. We have no intention to become a producer. A project generator is really what defines us, and so every year we generate new projects. We don’t fall in love with any project and occasionally drop properties; if discovery potential is not there, we just drop it, turn the page, and go to the next one.
The last point is to ensure a long-term presence in the area. You don’t know how long it's going to take to make a discovery, so you need to prepare to be there for a long time. That's the only way you will find a big deposit. And for a junior, the only way to be there on a long-term basis is to be in an excellent financial situation and have no debt. That's why we always have more than $40 million in the bank.
The second aspect of ensuring a long-term presence in the territory is to maintain access, and we define that by community engagement. This means we have to be very much involved with the people living in the area, and we must act as very good citizens. It is a must to be in favor of sustainable development, both environmentally and socially, to ensure a long-term presence.
We are totally convinced that the key to our success is our five-point strategy – focus, expertise, partnerships, diversification, and long-term presence – and we firmly believe it will be the key to our future successes.
Jeff: Excellent, Andre. Tell us about your other five discoveries.
Andre: The second discovery was Poste Lemoyne, which is also small, a little more than 100,000 ounces. But it's 15 grams per tonne and right at surface [Ed note: surface mining has the advantage of being less expensive than underground mining.]
Then we discovered Gayot, a nickel deposit. It’s not 43-101 compliant yet, but it's very promising.
Next came Coulon and Eleonore, practically at the same time. Coulon is a base metal project and is actually the largest undeveloped copper-zinc-silver resource in Quebec. It has 14 million tonnes and is still growing. It’s a brand-new camp, but it will eventually be a mine.
Eleonore is the dream find for any geologist, certainly for me – a world-class deposit, a real treasure, something that will create hundreds of jobs for the Province of Quebec. It has more than $10 billion worth of gold in the ground, and it keeps growing. It’s a company maker. It will be the first mine in the James Bay territory, which we identified 15 years ago.
This is proof that Northern Quebec has the same potential as the southern parts of Quebec and Ontario that host world-class deposits. We proved to the rest of the world that we were right to explore in James Bay, as we’re now finding the same kind of world-class deposits in Northern Quebec.
Jeff: Tell us how you discovered Eleonore.
Andre: It’s an exciting story… We visited a few copper showings discovered by Noranda (NYSE:NOR) in 1964, and realized the geology they described was completely false and was different from what was indicated on the maps. We spent a couple of years exploring the territory and eventually found a boulder – a boulder is a rock moved by glaciers. We know glaciers were there 60,000 years ago scratching the surface of the planet, and by incorporating some pieces of rock into the glacier, they were transporting them over a certain distance.
Well, this boulder was found in the middle of a forest, in the middle of nowhere. I said to my team, “Stop what you're doing and go chase the source of that boulder!” It took us 18 months, but we found the source 6 kilometers away. That was a very exciting day for us. And as they say, the rest is history.
Jeff: How big is it now?
Andre: It’s close to 8 million ounces now. And the average grade is 10-11 grams, so it’s very high grade. The average grade of all the producing mines in Quebec is 6 grams, so Eleonore is a class apart. It really is a jewel.
Jeff: Louis James said to ask if you have a sense for how big it will eventually get.
Andre: If you had asked me that question when we first discovered it, I would’ve said 5 to 7 million ounces. Now I am seeing that it will be over 15 million ounces. It will be at least double what it is now, and it's already a world-class deposit. It really is a dream.
Jeff: When will it go into production?
Andre: Production will start in 2014 and will produce a minimum of 600,000 ounces of gold per year, for a minimum of 15-20 years. The deposit is still wide open and just keeps growing year after year.
Goldcorp [GG, T.G; a current BIG GOLD recommendation] bought the deposit, but we kept a very nice royalty. It’s actually our largest asset and will keep growing every year.
Jeff: So the natural question I have as an investor is, when is Andre going to find the next Eleonore?
Andre: Yes. Well, these world-class deposits come in clusters – that's how Mother Nature works. So there's absolutely no doubt there are more treasures to be found here in James Bay. The territory is immense – 300 miles by 250 miles. How many other gold and uranium and diamond and copper and nickel deposits are there? I don’t know, but I do know there are more than what we have found so far. It's just a question of exploring. So of course we are exploring very aggressively.
The beauty about being the pioneer of a territory is that the first mover gets most of the value. The fact that we are the pioneer in the area allowed us to acquire huge land positions. We control nine thousand square kilometers in James Bay.
The famous geologist Pierre Lassonde [of Franco-Nevada (T.FNV), a current BIG GOLD recommendation] said to me, "You know, land position is not something; land position is everything." So we are totally convinced that within our portfolio of projects we will find other deposits and hopefully other world-class deposits.
Jeff: What project are you most excited about right now?
Andre: It’s hard to say that there’s just one. Coulon is the most advanced project in the company and the largest copper/zinc resource in Quebec, but we are mainly focusing on gold. We have a budget of $15 million this year – $2 million will be spent on Coulon and $13 million will be spent on gold properties. We have around 20-25 active projects. I can’t describe them all, but I would say five of them have the potential to be the next big winner.
It’s interesting how exploration works. If you asked me in 2004 which property would have been the next winner, I wouldn’t have mentioned Eleonore. You just don’t know at the beginning which one will work out. So that's why I mention 4 or 5 projects because you don’t know who will be the next big winner.
Jeff: Andre, you created the Nunavik Action Funds and done some other promotion with the First Nations, so can you tell us about your involvement with these programs?
Andre: We have been very much involved with the First Nations and were instrumental in creating the Restoration Fund, which focuses on cleaning and rehabilitating abandoned exploration sites in northern Quebec. These are sites from 50 years ago when there were no environmental regulations or environmental government ministry. The First Nations began complaining that they were finding empty barrels and other refuse in abandoned camps in northern Quebec.
So I decided to create a fund to raise money within the mining industry to clean up abandoned exploration sites, with the help of the Quebec government. We have been doing that for five or six years now and have spent a few million dollars cleaning these sites. It's a real success story, and other provinces are trying to copy us.
Jeff: What's been the reaction from the First Nations?
Andre: Oh, they have applauded it and are extremely pleased. In fact, the First Nations are now entirely managing the program. They remove all the material from the sites and put it on boats and helicopters, and they do the reporting.
Jeff: Sounds like it's a job creator as well.
Andre: Yes, exactly. It's been a very big success story. There are about 30 other companies participating now, both producers and juniors. We're very proud of the initiative.
Jeff: As you should be.
Andre: We’ve also been involved in another initiative called Minalliance, which promotes the mining industry with the public. As you know, the mining industry got a bad reputation because of these abandoned mining sites. So, we’re working to educate the public in general so it better understands what we're doing and make them aware of the fact that we’re socially and environmentally responsible. We have very strict practices for sustainable development, and we want each Quebecois to be proud of what we do.
Jeff: How exactly do you do that?
Andre: We do a lot of things, including advertise on TV for 30 seconds every week, something we started more than a month ago. It's called “L'industrie minière Québecoise bâtie sur du solide,” which means “The mining industry of Quebec is built on solid ground.”
But there’s another message, too, which is the fact that green energy needs a lot of metals. Wind power and electric cars, for example, all require metals. And technology, of course, needs metals – cars, computers, Blackberries, and so on. Going without metals would mean going back to the Stone Age.
Jeff: What kind of reaction have you received from the typical environmentalist?
Andre: The environmentalists are environmentalists. They’re preaching their own agenda, and I would say that some of them are not necessarily fans of any type of industry. Some of them are just too stubborn or closed-minded. Having said that, we’ve found many are not like that; some are becoming more pro-development. They just want to make sure the development is done on a sustainable basis, which we totally agree with.
Whom we want to reach with our initiative, though, is the public in general. We just want them to be proud, and that every time there’s a discovery made in Quebec they understand it means wealth for the entire province, and that it's good for every citizen.
Jeff: And how is the public reacting to this so far?
Andre: The comments I’ve received so far are exceptionally positive. We finally have a good message about the mining industry. In fact, PDAC has been watching very closely what we're doing and would like to apply it to the rest of Canada.
Jeff: That's fantastic. Just to wrap it up, Andre, what's your outlook on gold and silver as an investment?
Andre: I'm not a specialist, and my opinion is worth no more than many opinions, but I'm personally quite bullish. You can see that demand for gold is increasing, and demand for silver in Asia and India is increasing very significantly year after year. In Asia, gold is more than just gold. It's a part of religion. It's a safe haven. It's a commodity. So I think this growth in demand from Asia will continue.
At the same time, we aren’t increasing our worldwide gold production, and yet demand continues rising, so that's one reason I think gold will continue to perform well. Same thing for silver. So I am quite bullish for the future.
We will have our bumps, as you know, but the fact that all countries are now in debt and are printing more and more dollars is good for gold. There are only a certain number of ounces in the world, and you can’t print them. Also, a lot of wise investors, institutions, and governments will continue to have a certain percentage of their assets in gold. So it seems to me that the planets are in line for the gold bull market to last for years.
Jeff: I certainly agree with you on that.
Andre: I would also like to mention that I think we’re in the right business, and that the future of the mining industry in Canada and in Quebec is extremely bright. We will find other deposits. There is a huge appetite for high-quality resources, and when you are able to find high-quality resources in the best jurisdiction in the world, namely Quebec, I think you will have a premium attached to them.
All of this combined with the fact that I am totally bullish on metal prices for years to come makes me convinced that the next 10-20 years will be great for the mining business. And this is very good for the new generations of mining engineers and geologists.
Jeff: Good point. Is there anyone else you think we should consider for our Explorers’ League?
Andre: I would recommend Ewan Downey.
Jeff: Yes, at Premier Gold (T.PG). Why do you suggest him?
Andre: If you look at the land packages he has been able to assemble, as well as his exploration successes in the past, I think he's pretty good. He has a good track record in creating value for his shareholders, so I would say that he fits perfectly in your league.
Jeff: That's a good recommendation. Thank you for the fantastic interview, Andre, and again, we’re excited to have you.
Andre: Merci, Jeff. It was a real pleasure.