Owing to its rich mineral resources, a developed capital market, and government support, Canada is an attractive jurisdiction for junior miners such as Northern Superior Resources(NSUPF) .
Benzinga recently sat down with CEO Simon Marcotte to discuss the state of the market and the company's plans for its promising projects in Quebec and Ontario.
BZ: How would you describe Northern Superior in an elevator pitch?
Marcotte: We're a pre-production junior miner who prefers to build ounces rather than build mines. In the gold space, the quickest and easiest return comes from putting ounces together, making these ounces viable, and increasing their value. That’s exactly what we do.
We’ve been consolidating the gold camp of Chibougamau. By doing this, we’re making the camp viable and increasing its value. Even in difficult markets, there have been places where gold stocks performed well and attracted capital, such as Guana, Finland and Yukon.
We looked at the Chibougamau Gold camp and saw the potential. This camp already has 10 million ounces and is located in Quebec, one of the best mining jurisdictions. With current and upcoming work, I strongly believe it could have close to 15 million ounces within a year and a half to two years, putting it in a top-tier jurisdiction for an emerging gold camp.
A key difference with this camp is that all deposits are much closer together than in Yukon, Guana or Finland, making it more suitable for a unified operation where all deposits feed the same mill.
BZ: Makes sense from a cost perspective, right?
Marcotte: Absolutely. If everything comes together, it would be like discovering 10 to 15 million ounces quickly, which would make front-page news in Canada.
The camp was fragmented, with key deposits owned by five different companies three years ago. They couldn’t be part of the same mine plan or visibility study. We took advantage of difficult years to consolidate, and now it's primarily us and Iamgold Corp(IAG).
Iamgold (IAG) is now focusing on this camp as their next growth avenue after successfully ramping up their Cot mine in Ontario. They overcame significant challenges, divested assets at good prices, improved their balance sheet and brought in a new CEO, Renaud Adams, who is a great operator.
With $300 million recently raised, Iamgold(IAG) is now turning its attention to the Chibougamau camp, actively drilling projects in the area and acquiring Vanstar Resources, their joint venture partner. They've successfully repositioned as a Canadian company, and I'd be surprised if they turn and re-expand internationally.
BZ: Recently, we've seen different approaches to the market. From focusing on tier-one assets only to acquisitions or prioritizing internal growth. How do you view these approaches by major companies?
Marcotte: Generally, larger companies are not growing assets in Africa, even though you can make money there. There’s just as much value in tier-one jurisdictions without the extra risk, especially given the current volatility in Africa and South America.
For junior miners like us, it’s about building ounces and eventually selling to a larger company. Given that larger companies are focusing on tier-one jurisdictions, I don't see value in venturing into riskier areas.
BZ: Your largest individual shareholder is Michael Gentile from Bastion Asset Management. How did that partnership start?
Marcotte: Michael and I saw the potential as the Nelligan project won the discovery of the year in Quebec in 2019. While many saw the potential, we decided to act on it.
In 2020, I started Royal Fox Gold with the Philibert project to consolidate the camp, and Michael and I soon decided to work together to achieve this goal. It made sense to join our forces, and Royal Fox Gold became part of the consolidation strategy of Northen Superior.
As a board, we own 25% of the company, having recently done an $8 million financing where we provided $1 million ourselves. Michael and I work closely together. His involvement as a director is rare, but he's very active and brings immense value.
BZ: What is the camp's state at the moment?
Marcotte: Chibougamau is an industrial mining town with a history in copper mining and lumber, supported by extensive road and power infrastructure. Nelligan, an Iamgold(IAG) project, is the largest deposit in the area, with significant growth potential and a grade of about 0.85, typical for large tonnage operations.
Philibert, our key deposit with around 2 million ounces and a grade 25% higher than Nelligan, can significantly lower the project’s payback period due to its high grade and excellent recovery rates (93-95%). Strategically, a mill between Philibert and Nelligan, only 9 kilometers apart, would be efficient.
Lac Surprise, an extension of Nelligan, has shown significant potential, especially with recent drilling results during COVID-19, which increased Northern Superior's share price. Iamgold’s development towards Lac Surprise indicates a merging of values. Monster Lake, another Iamgold(IAG) project to the north, has a high grade of 12 grams per ton. Although not large enough to stand alone, its high-grade material can be trucked to the mill to enhance lower-grade operations.
Chevrier, located to the northeast, currently holds about 1 million ounces and shows massive potential. Our primary focus is expanding Philibert while IAMGOLD(IAG) continues to develop Nelligan, aiming to reach approximately 15 million ounces in the next 18-24 months.
BZ: You had the TPK project, which you spun into another company. What was the advantage of that move?
Marcotte: Our size limits how many projects we can manage effectively. Spreading ourselves too thin leads to dilution without value creation. We wanted to focus on Quebec, where there’s enormous value potential, but TPK deserved attention, too. It is the largest gold-in-till anomaly in North America and potentially the world.
So, we created a new company, ONGold, with its own capital and management team. TPK, located in Ontario, has different socio-economic considerations. We hired Kyle Stanfield, a sustainability expert, to lead the team. He understands the local communities and their needs, ensuring we advance the project responsibly and create value for all stakeholders.
BZ: Have you engaged with the government, and do you think they are doing enough for this sector?
Marcotte: We’re fortunate to have the Quebec government as a partner. Quebec is one of the best jurisdictions for mining due to the government’s serious commitment to the industry.
Permitting is clear and structured, and there’s financial support available at every development stage. For example, Philibert was initiated by the Quebec government, and we did an earn-in to acquire most of it. Investissement Qubec can invest in projects at various stages, supporting visibility, permitting, and capex.
This region offers a great combination of geology, engineering capability, and government support.
BZ: Considering the current economic cycle, what do you see next for gold and mining?
Marcotte: I don’t believe the debt level will make everything explode. Yes, the deficits are big, but we would have faced a severe recession without them. It’s not ideal, but it’s the lesser of two evils.
The U.S. debt is at $34 trillion and rising fast, but household wealth has increased by $50 trillion in the last five years. If we reverted to our financial state five years ago, we would be debt-free with an extra $10 trillion. However, if interest rates surge, the debt interest payments could become unmanageable. Thus, globalization is crucial as it helps keep inflation down.
Regarding gold, I think it’s about to soar. Gold is inversely correlated to real rates (rates minus inflation).
For gold to rise, either rates must drop or inflation must rise while rates stay the same. I believe we are at a point where either or both will happen.
Rates are likely to drop significantly. Canada has already cut rates twice, and the U.S. will follow. The U.S. needs to cut rates because credit has been contracting for almost two years, risking a severe recession. Lower rates are necessary to keep the economy moving. I am convinced the [U.S.] Fed will cut rates more than anticipated.
We’re also entering a political campaign period, which will likely be very inflationary. People dislike inflation but enjoy hearing about government spending, tariffs, and reduced immigration — all highly inflationary. As rates drop and inflation rhetoric spikes, gold is well-positioned to rise.
Gold has already increased from $1,800 to $2,400 in the past year, driven by central bank purchases and demand from Asia, particularly as a hedge against real estate and a collapsing yen.
As real rates decline in the Western world, people will shift investments from the NASDAQ 100 to gold and gold derivatives. This shift will amplify gold’s rise, and gold equities will start catching up in valuation.
BZ: What should investors look for when evaluating junior miners?
Marcotte: Look for companies where insiders own a significant stake, ensuring aligned interests. I know I preach my own gig, but in a company like ours, you have an insider ownership of about 25%.
Also, companies need to have a clear exit strategy, aiming to sell to larger companies. They should be located in jurisdictions with active larger companies and should be able to move the needle for potential acquirers.
It's essential to balance financing with value creation and to be positioned in emerging camps or jurisdictions attractive to major players.
BZ: Any final message for our readers?
Marcotte: We’re serious about our company and confident in our strategy. In 18 months, the Chibougamau camp will be red hot. We're valued at $20 per ounce, but the National Bank says this camp is now becoming viable, so it should be worth about $100 per ounce.
With the money raised, we expect to find ounces at less than $10 per ounce, setting us up for very accretive growth.
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