From the safe and predictable profits of La Ronde to the risky Lamaque, Quebec has a major role as a gold mining hub in North America. The traditional area of production from Val D’Or continues to grow as many of the intermediate and junior producers that staked the area bring their own mines into production.
With the largest mine in Canada, Agnico Eagle’s (TSX: T.AEM, Stock Forum) La Ronde mine being the current dominant producer in the area, and La Ronde II in the works, Osisko’s (TSX: T.OSK, Stock Forum) Malartic Mine almost fully funded and well into its development, it’s no wonder that there is a buzz about the potential for other mines and discoveries in the province.
First let me give you an idea of the sheer size of production coming out of the region. Agnico’s La Ronde is producing at over 200,000oz/yr at a cash cost of $294US/oz, with phase II coming on stream in 2011. IAMGold’s (TSX: T.IMG, Stock Forum) Doyon is producing at a yearly rate of over 100,000 oz at $529US/oz. Inmet’s (TSX: T.IMN, Stock Forum) Trolius is producing an anticipated 132,000 oz for 2009, there are already several major’s making money in the area that could easily add to their production with highly complimentary acquisitions nearby.
Among the smaller producers that could be acquired are Richmont Mines (TSX: T.RIC, Stock Forum), Wesdome (TSX: T.WDO, Stock Forum), and my personal favorite Aurizon (TSX: T.ARZ, Stock Forum). Wesdome continues to expand its resource at the Kiena mine with recent success at the Schist Zone. Kiena will be churning out more than 40,000oz for Wesdome this year. Richmont on the other hand is a miner with a relatively smaller resource base, however management continues to add to the resource. Richmont is targeting production of 180-240K/yr and a reserve base of 1 million oz. RIC has only 26.1 million shares o/s, $27.4 million in cash and no long term debt, making their goals easier to reach in this on-going financial crisis. This all leads me to Aurizon Mines. Aurizon owns the Casa Berardi mine which is just north of the Val D’Or region, and is their current main producing mine. Casa Berardi churned out almost 40,000 oz in the first quarter at a cash cost of $379US/oz. Yearly production is on par with 2008 at over 150,000oz/yr, however the potential for production growth comes from their Joanna project in the heart of the Val D’Or greater area. Situated near the mines mentioned above, Agnico’s La Ronde I and II, IMG’s Doyon, Osisko’s Canadian Malarctic (anticipated 591,000 oz/yr at $313US/oz for 10 yr mine life) the Joanna Project is already showing the potential to help Aurizon produce almost 330,000 oz/yr by 2012. With a pre-feasibility study on Joanna is due out in Q3, it is no wonder that analysts have been upgrading their target prices on ARZ with increasing frequency.
Moral of the story: With production in the area being dispersed among a number of companies, there are bound to be mergers and acquisitions where some of the larger fish (IMG, AEM) swallow the smaller fish (RIC, WDO, ARZ) at significant premiums to what these companies are currently trading at. Quebec is a mining friendly jurisdiction, and most of the producers are doing so at a profitable clip. It is only a matter of time before the dance begins, and several of the smaller producers are bought up.
As always, do your own due diligence before investing.
Disclosure: yorkmemo owns the stocks mentioned from time to time, with no long positions at this time.
This article was written by a member of the Stockhouse community.
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