If you walked around the recent Cambridge House Canvest2015 show, you’d be forgiven for thinking that mining is officially dead. Those resource companies that showed up were talking to precious few investors, and the only deals being made were the ones involving a broker, an 8-ball and a bathroom stall.
But in talking to those CEOs that did make the trip, it wasn’t all nooses and self-harm.
“We’re close to the bottom,” said about 11 different CEO’s I talked to, from prospect generators to mid-majors, and that thinking was largely echoed by pundits, geos, and industry-dependent media.
“We’re seeing the guys with big money – the Lundins and the like – make investments in the discovery end of town,” said a prominent financier on the condition I keep his name out of things, “and they’re not flipper deals… these are properties with nice data that others ran out of money pushing forward.”
One of those sits on the mineral-rich Abitibi greenstone belt, which spans across the Ontario-Quebec border, stretching from Wawa, Ontario to Val-d’Or, Quebec. This gold belt is no secret, and in fact has figured prominently in Canadian mining history and featured the Kerr-Addison Mine in Virginiatown, once Canada’s largest gold producing mine.
The region has also garnered a significant spot on the world stage, having produced over 100 mines and 170 million ounces of gold since 1901, pounding out more gold than has been held in Fort Knox. In fact, in 2006, of the over 40 gold deposits worldwide producing more than 10 million ounces of gold, five of those, Hollinger-McIntyre, Kirkland Lake, Dome, Kerr Addison and Horne Mines, were all located in the Abitibi.
Part of the reason why is the quality of the pickin’s in those parts. But Quebec’s famed love of the act of mining helps. First world infrastructure and ease of delivery doesn’t hurt, which brings low development costs and helps ease the pain of recent commodity price issues.
But we’ve seen all the Abitibi has to offer, haven’t we? I mean, folks have been through that ground with a fine toothed comb. What’s left?
That depends on what you value. There’s not a lot of virgin unexplored territory out there, but there are some operations with data and cores and potential that have been sullied by poor management, or run out of money when the going was good, and some that have more in common with a dog’s breakfast than a finely run mining operation.
Long cursed with the kind of management Vancouver is famous for – the kind that raise money to drill and then, “Oops! Where’d that money go? I guess we should raise some more and, whoopsie! How does this keep happening, guys?” [high fives at the board table as investors pound on the door]
BonTerra was one of those plays where what was in the ground looked nice, but nobody involved seemed to want to risk harming it by, you know, actually poking holes in the place. Or sending cores for testing.
Unlike many companies that suffer this malaise, Bonterra shareholders lit some torches, raised their pitchforks, and raised hell. A dissident shareholder proposed disposing of the board in January 2013, claiming officers of the company had ramped up salaries while stock slid almost 80%, and accused the company of carrying out significant financings which never made their way to exploration – a claim that would be slanderous if it wasn’t absolutely correct.
By the end of 2014, CEO and Director P. Bradley Kitchen was gone, and then interim President, Nav Dhaliwal, stepped up as CEO.
Dhaliwal needed to clean the balance sheet, lose a bunch of debt, raise money in a crappy market for a company with a crappy reputation, and do the unthinkable… actually explore.
This, of course, was absolute folly, on a Fitzcarraldo-like level.
But anyone betting the rent on Dhaliwal missing his mark would be looking for fresh digs about now.
Dhaliwal tightened up the balance sheet in November 2014 by folding 760K of debt into paper, so that proceeds of a new financing could be directed toward exploration to expand the resources at the company’s Eastern Extension property.
The company duly published positive results in February from the processing of a 2012 drilling campaign at Eastern Extension which extended continuity of the Peninsula Zone, leading Dhaliwal to tell investors, “Now that BonTerra is restructured, we are reinvigorated to push this project forward to achieve our previously stated goals. We are excited to continue adding additional resources to this developing gold deposit.”
Restructured? Hells yes. A 20:1 rollback. Killing off $700k+ in debt.
And, did you miss this one? Bringing on Dale Ginn as a director.
Ginn came on in March, legitimizing new management and the new corporate focus in ways fifty press releases and a dozen newsletter writers can’t. The man has nearly three decades of success as a storied mining executive and geologist, with expertise in developing complex, structurally-controlled deposits.
Ginn founded San Gold and led it as CEO. He’s currently at SGX Resources and VP of Kerr Mines. He’s a busy guy. He puts mines into production. He’s earned stripes at Hudbay and Goldcorp. He doesn’t do the ‘shares for use of my name’ routine.
He doesn’t need BonTerra. But he’s knees deep in BonTerra. And I think I know why.
BonTerra is raising money when few can, and it’s using that money to make low cost, smart moves that are expanding their resource and their knowledge base.
It’s no secret that the company, back in the day, brought a bunch of cores up that it didn’t bother sending for analysis. That’s not unusual in this business, sadly. If you’re looking to bring a mine to production, you get those cores checked because you’re about to commit hundreds of millions to the project and you best know where to put it.
But if you’re looking to keep the party going for a few more quarters, you might think about only getting the cores with visible gold sent to the lab. No risk of stock cratering if you can actually see the flecks, and as long as the stock isn’t dropping like a stone, nobody is calling for a new CEO.
But sometimes a core hides the glory within. BonTerra released 2012 drilling results in February of this year… Where do you think those results came from?
They’re talking about it, but casually. From an April news release:
“Upon examination of core at the site visit, it was determined that further analysis on the existing core is required, specifically, the host rock between the high-‐grade veins. This will accomplish a better understanding of the host rock potential for additional resources. This knowledge will aid in the Company’s approach to exploration and update/enhance the block model which will help envision future mining scenarios. Therefore, an old core-‐ cutting and analysis program will be implemented.”
It continues, “In addition to the old core-‐cutting program, reassay results of two diamond drillholes within the main zone (BA12-‐09 and BA12-‐11), now called the Spartacus Trend located on the West Arena Property, are still pending.”
In a market where nobody is raising money, poor old beaten down abused unloved BonTerra is bringing in the readies. Despite the naysayers, Dhaliwal continues to push ahead and money still comes to the table, and then some.
Perhaps this confidence is focused on the Abitibi itself, as companies scramble to capitalize on the prospectivity of Lake Shore Gold (TSX: LSG, Stock Forum) driving up shareholder value at the Timmins West Complex. Then you have Kirkland Lake Gold (TSX: KGI, Stock Forum) which sits on 2.04 million measured and indicated gold ounces at the Macassa Mine complex, one of six producers that pulled more than 25 million ounces of gold from the Kirkland Lake Gold Camp.
And let’s not forget Osisko (TSX: OR, Stock Forum) and Detour Gold (TSX: DGC, Stock Forum), who fueled activity in Abitibi between 2000 and 2010 with their significant investments in the Malartic and Detour Lake areas respectively. Osisko’s Malartic commenced commercial production in June 2011 and is expected to bring $3.25 billion to the region’s economy over the next 20 years while Detour Lake is expected to attract $1.0 billion.
And there’s Barrick Gold (TSX: ABX, Stock Forum) with the Hemlo property approximately 350 kilometres east of Thunder Bay which produced 206,000 gold ounces in 2014, and Harte Gold (TSX: HRT, Stock Forum) exploring the Sugar Zone Property, 6o kilometres east of the Hemlo Gold Camp, and the Stroughton-Abitibi Property, 10 kilometres east of the Holloway-Holt gold mine.
There are numerous other miners hoping to zero in the next massive multi-million ounce discovery in the Abitibi greenstone belt, so the Abitibi subprovince provides a lucrative option to juniors wishing to outlast the miserable commodities market and possibly become the next big player in one of the globe’s most prolific mineralized zones.
But let’s bring it closer to home: Who is next door to BonTerra?
A couple of companies with studly resources but without the wherewithal to make good use of them, that’s who.
Two months ago, Eagle Hill Exploration (TSX:V.EAG, Stock Forum)(to the north of BonTerra) put out a PEA that outlines a 1200 tonne p/day underground mine producing 106k ounces of payable gold p/year at a total cash cost of $558 p/oz. The current mineral resource there is estimated to be 2.7m tonnes grading 8.42 g/t for 748k ounces indicated. That play is growing and moving to a pre-feasibility study.
Despite these great results, while volume in Metanor stock (all 356m shares of it) has been picking up wildly of late, the share price has barely nudged. The company recently reminded investors, “Metanor’s share price is trading at a market capitalization of approximately $14M (4¢/share) while its book value stands at $56M (15¢/share), as of March 31st 2015,“ which would point to the potential of a takeover in the near future.
Eagle Hill has a property that has seen some $25m spent on it, but has only a $7.2m market cap and is low on cash. Golden Valley Mines (TSX:V.GZZ, Stock Forum), which has property that splits BonTerra, Eagle Hill and Metanor, is sputtering on fumes and has brought in the financial advisors to figure out how to ‘optimize shareholder value’ (translated: sell up).
Yes, the mining slump is real, but Bonterra’s stock price TRIPLED between January and February of this year, while those around it clutched their chests and looked for someone to catch them. Volume in BonTerra over the last month has been extreme for the stock, topping activity levels even as far back as 2011 – and all that on a company with only 20.9m shares out.
The Greenbelt is in play, and BonTerra may just be the prettiest girl at the party. Mining slump be damned.
This is the second in a series called The Mining Rebound, where we explore little known corners of the resource world that point to the beginning of a resource resurgence. The first, focused on the Pikoo diamond region, can be found here.