Article on area play strategy Kirkland Lake Gold (TSX: KL) is the obvious frontrunner, although another Canadian gold junior could be a better fit with Metanor Resources (CVE:MTO)
SmallCapPower | April 28, 2017: Recent corporate actions at Metanor Resources Inc. (TSXV: MTO) suggest that this is a company looking to be acquired. The successful suitor, though, may not be the obvious choice, all of which could be part of a much bigger plan for this popular mining district in Quebec.
Metanor Resources owns the Bachelor Lake property and gold mine about 225 km northeast of Val d’Or, Quebec. The Bachelor mine produces about 35,000 ounces of gold each year and is cash-flow positive with all in sustaining costs at a little less than US$1000 per ounce. Bachelor contains about 200,000 Proven & Probable gold ounces at 7.4 g/t, 211,000 M&I gold ounces at 8 g/t, and about 90,000 Inferred ounces at 6.5 g/t. Metanor expects to have another producing asset at its Barry property, with an estimated in-pit resource of 347,350 gold ounces at 2.07 g/t.
Up until recently, Metanor was thought of as a nice ‘little’ high-grade gold project but with far too many shares outstanding (more than half a billion fully diluted). That all changed in 2017. Metanor Resources did a 1-for-10 share consolidation earlier this month (it now has just about 63 million shares). And Company founders Serge Roy, Executive Chairman, and Ghislain Morin, President and CEO, both announced their immediate retirements. Taking over as CEO on an interim basis is current Chairman Greg Gibson. Mr. Gibson has a history of selling gold projects he helped develop, most notably Ct Lake in northern Ontario, a low-grade gold deposit sold to IAMGOLD Corporation (TSX: IMG) in 2012 for approximately C$600 million.
Metanor Resources also recently closed an $8.85 million private placement at $0.70 a share, $7.25 million of which was purchased by Kirkland Lake Gold Ltd. (TSX: KL). As a result, Kirkland Lake Gold now owns 13.7% of the outstanding common shares of Metanor, and 19.3% if all warrants are exercised. Wexford Capital LP also owns or controls a significant stake in Metanor Resources, 14.2% or 19.9% if all warrants are exercised.
But don’t be surprised if Osisko Mining (TSX: OSK) decides to take a run at Metanor. Bachelor Lake is right next door to Osisko’s Windfall Lake gold project. In fact, there’s similarities between Metanor Resources and Eagle Hill Exploration (small, high-grade gold project with too many shares outstanding), the previous owner of the Windfall Lake project, which was acquired by Osisko Mining in 2015.
With the Windfall Lake area attracting more investor interest in recent days, we could soon see an area consolidation movement taking place. Metanor Resources would be too small for a Major to take interest, however added to Osisko Mining, along with another junior, such as Bonterra Resources (TSXV: BTR) and/or Beaufield Resources (TSXV: BFD), and the combination of these assets could spark a bidding war amongst some much bigger players.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.