GMP Securities - Updated resource sets solid base for PEA This morning, Eastmain announced an updated resource estimate for its
Clearwater project in James Bay, Quebec. The new resource incorporates
over 78k metres of new drilling at the Eau Claire deposit.
With the recent focus on mostly infill drilling, the new resource is a more
robust estimate that has considerably improved overall grade (by approx. 57% from 4.0 g/t to 6.3 g/t), but modestly reduces contained ounces (approx. 293k oz less compares to prior estimate). Refer to Figure 1 for a comparison of the new resource vs. the 2015 estimate.
Overall, Eau Claire now sits at 1.29mm oz at an average grade of 6.27
g/t (M&I + Inf) compared to the previous 1.58mm oz resource at an average grade of 4.00 g/t. The updated resource has enhanced parameters, including a more constrained pit shell with an average depth of approx. 150m, while drilling improved on the geological understanding of the deposit.
The high-grade schist veins (“HGS”), which were better defined in the 2016/2017 drilling program, proved to be a good complement to the widespread narrower quartz-tourmaline vein sets. The HGS now account for approximately 16.8% of the total contained ounces (approx. 23.4% of the M&I ounces).
The new resource now sets a solid base to advance a PEA for the project. A PEA is expected to be completed in 1H 2018.
The late 2017/2018 exploration program is expected to test six active targets around the Eau Claire deposit as well as continue with the focus of extending the known limits of the deposit.
Impact: Positive – Better confidence and quality (grade) resource should offset modest reduction in
ounces.
We view the new resource update positively mainly as we see: (1) the new estimate being based on increased understanding of the deposit – infill drilling adding more confidence to the overall resource base and importantly improving grade, (2) a new estimate that is built on enhanced parameters and sets a more solid base for a PEA, and (3) good opportunity to continue growing the resource with new drilling now focusing on expanding the limits of the resource as well as testing new areas around the Eau Claire deposit.
We are pleased with the new estimate and as we review the results, we could potentially see upside to our valuation given the meaningful improvement in grade. Currently, our DCF valuation for Clearwater is based on a conceptual openpit and underground mine producing at an average rate of 85k oz/yr over a nine-year mine life (a total of 767k oz gold recovered at an average grade of ~4.6 g/t).