MALARTIC, Canada – Membership in this northern Quebec club has its privileges.
Quebecois have a Frenchword for striking it rich on the richly-treed poplar and birch swampland of northern Quebec. I just can’t for the life of me remember what it is.
So we’ll just say, ‘Sacre dingue.’
Some 10 million ounces of low-grade gold are definitively across the surface and into the easy underground pickings of Osisko’s Canadian Malartic, a project embedded into a town the size of a postage stamp. Compared, that is, with the Osisko mine’s monstrous new mill and kilometers of earth movers and other heavy-ass equipment.
Some say another 10 million ounces are in the ground here, reachable first via open pit mining and then bulk underground mining. Golden Valley Mines (TSX: V.GZZ, Stock Forum) controls many of the zones that could contribute to a doubling of this vast and producing mine’s output from now until 2027 or later. (Photo: One of those Malartic CHL zones – Thom Calandra photo)
Golden Valley Mines, or G-zed-zed as it sometimes is called here, is the company that has more concessions and staked properties from Kirkland Lake and Timmins to Val d’Or than any other entity I know. Most of the prospects are found in the Abitibi Gold Belt.
Glenn Mullan’s Golden Valley Mines is days away from completing what I like to call its transformation into a “transactional gold” prospector. (Please see:Thom’sIntroduction to GZZ.)
A share distribution next week from GZZ will give investors “three for free.” As is my custom, after giving notice to the Stockhouse audience earlier this week, I now own 226,000 shares of GZZ at market prices. I hope to purchase a few more, and then receive my three-for-free in coming days.
At the top of the “three” list is that Osisko Mines (TSX: T.OSK, Stock Forum) joint venture at Malartic, called Malartic CHL to mark Mr. Mullan’s affection for Canadian Hockey League players and teams.
Here is the GZZ skinny (one-minute read):
- The three-for-free in a one-for-25-share spinout are Abitibi Royalties, Nunavik Nickel Mines and Uranium Valley Mines.
- Malartic CHL is a corker: one-plus grams gold – disseminated pyrite-gold in potassic-altered quartz porphyrys. Osisko, operator of the JV, likely will earn 70 percent of the project when all is said and done.
- This leaves GZZ with a 30 percent free carried interest, as Mr. Mullan calls it. One of the three spinouts, Abitibi Royalties, has a two percent net smelter royalty on the Charlie Zone just southeast of what is now Canada’s largest gold mine at Malartic.
- Osisko is “running” a fresh pit design and a resource estimate on the joint venture. Whilst anything is possible, Osisko’s Pierre de Chavigny tells us, as we view Osisko’s $21 million new school in the tiny town of 3,600: “Canadian Malartic, our project, exists because we have large-scale extraction of low-grade gold. So because the (main) road will move with the Barnet pit, we see another possibility with a satellite pit (on GZZ property).”
- Aside from the “three for free” going to shareholders next week, each of them with just 10 million shares outstanding and likely a stock-market challenge to purchase “in bulk,” Golden Valley Mines’ line-up of further subsidiaries is too long to list here. It includes properties in Sierra Leone (my favorite these days, along with Ghana and others parts of east and West Africa); James Bay in far northern Quebec; Kirkland Lake in Ontario; Beartooth Island in Saskatchewan. And so on.
- Mr. Mullan, VP of Exploration Michael Rosatelli and others at Golden Valley Mines in these past 10 years have now corrected their exuberant oversights of the past. “We believe our subsidiary strategy helps us to raise money at higher prices and keep our fingers in quite a few property pies,” says Mr. Mullan, 52 and a resident of Val d’Or. “We get to go along for the ride on our 70-30 (or 60-40) partners’ rides into their travels, like Burkina Faso.” Mr. Mullan is referring to an option/joint venture with tiny Cambrian Corp. that involves property northwest of Kirkland Lake and stock in Cambrian.
- GZZ also gets fees and other income when it is operator. The company has a small portfolio of public stocks in the treasury. Three of its past 10 years were net-income black, as in positive.
Membership in GZZ’s Canada-traded shares (i.e., owning it before the distribution) has its privileges. The dynamic on the operating side is a 180-flip from how Glenn Mullan and his team ran next-door neighbor Canadian Royalties. That is, before a China-leaning group more or less swept away the company in an economic (read: inexpensive for the China group) transaction. It’s now privately held and quite a gamer in northern Quebec.
Mr. Mullan is still friendly with the folks at Canadian Royalties. In fact, a lot of GZZ’s drill core from across the Abitibi is in the Canadian Royalties backyard, a few hundred feet from Golden Valley’s Val d’Or field office. One of GZZ’s architects, Germany (and now Montreal) geophysicist and financier Dr. Jens Zinke, is still part of the Canadian Royalty fold.
I came to Quebec neither to read press releases nor to savvy the hard-R Quebecois way of speaking French; I came instead to see drill core and meet the principals and the Osisko operators. To get my head around the GZZ poly-metallic (nickel, zinc, gold, uranium) proposition. I think I have.
The reach of Mr. Mullan’s audacious Golden Valley Mines starts in its map room amidst a team of geophysicists, claims stakers, GPS experts and quick-to-the-switch transactions. If I prove correct, ordinary folks like moi will have a tough time buying any of the new subsidiaries coming out of Golden Valley Mines … at least, not during their first week of trading.
With 10 million shares outstanding and probably a mere four million-share “float,” these spinouts likely will settle at $3 to $5 each when the stock changes hands in meaningful quantities of 100,000 shares a day and more. Of the three, most folks likely will be “chasing” Abitibi for the net smelter royalty proposition. That leaves the other two out there. One of them, the uranium venture, has tycoon Rob McEwen as a large shareholder.
Says Mr. Mullan, “The idea here is that we protect our shareholders, we spend a lot less money developing properties and we get to participate in jurisdictions we otherwise might not be in.” Thus, at Malartic CHL, Osisko, now a $5 billion-plus company, pays $150,000 up front and then $2 million in expenditures over three years to earn 70 percent.”
“That leaves us with 30 percent free carried interest on 10 claims). And you know, our other single claim at Malartic was that two percent NSR for $100K,” he says.
On Malartic CHL, if, as Osisko’s Pierre De Chavigny says, the entire Malartic proves rich and “easy” enough to perform underground section-block bulk mining, much as Ivanhoe Mines’ (TSX: T.IVN, Stock Forum) Oyu Tolgoi copper-gold project in Mongolia (a wonder I have seen twice) is designed, all bets are off on how rich both Osisko and Golden Valley shareholders might become. Alors …
NOTES: I own shares of Golden Valley as noted above. … I will be speaking at the Gold Antitrust Action Committee’s early August gathering at The Savoy in London. It will be one classy party and an eye-opener for bullion believers. Eric Sprott and James Turk will be there. … Sandspring Resources (TSX: V.SSP, Stock Forum), a Guyana company whose shares I own and whose interests I represent as a principal of Torrey Hills Capital Management, will be on the road next week in Atlanta, Charlotte and Philadelphia. … I am happy to report that at least three of our featured companies in Ghana (and Mali & Tanzania) are now getting third-party attention from writers and in one case, sell-side researchers. … I await the share distribution of the new Tigray Resources (ticker: TIG) next week – from Tanzania’s Canaco Resources (TSX: V.CAN, Stock Forum). I own shares of Andy Smith’s Canada-traded Canaco ahead of the Ethiopia spinoff. … Finally, I am looking to increase my holdings of diamond and gem prospectors.
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