Editor’s word: This story has been up to date to right the spelling of the nation Guyana.
Owing to its wealthy mineral assets, a developed capital market, and authorities help, Canada is a beautiful jurisdiction for junior miners resembling Northern Superior Sources NSUPF.
Benzinga not too long ago sat down with CEO Simon Marcotte to debate the state of the market and the corporate’s plans for its promising tasks in Quebec and Ontario.
Marcotte: We’re a pre-production junior miner who prefers to construct ounces slightly than construct mines. Within the gold house, the quickest and best return comes from placing ounces collectively, making these ounces viable, and growing their worth. That’s precisely what we do.
We’ve been consolidating the gold camp of Chibougamau. By doing this, we’re making the camp viable and growing its worth. Even in troublesome markets, there have been locations the place gold shares carried out effectively and attracted capital, resembling Guyana, Finland and Yukon.
We appeared on the Chibougamau Gold camp and noticed the potential. This camp already has 10 million ounces and is positioned in Quebec, the most effective mining jurisdictions. With present and upcoming work, I strongly imagine it might have shut to fifteen million ounces inside a yr and a half to 2 years, placing it in a top-tier jurisdiction for an rising gold camp.
A key distinction with this camp is that every one deposits are a lot nearer collectively than in Yukon, Guyana or Finland, making it extra appropriate for a unified operation the place all deposits feed the identical mill.
Marcotte: Completely. If every thing comes collectively, it could be like discovering 10 to fifteen million ounces rapidly, which might make front-page information in Canada.
The camp was fragmented, with key deposits owned by 5 totally different firms three years in the past. They couldn’t be a part of the identical mine plan or feasibility examine. We took benefit of adverse years to consolidate, and now it is primarily us and Iamgold Corp IAG.
Iamgold is now specializing in this camp as their subsequent development avenue after efficiently ramping up their Coté mine in Ontario. They overcame important challenges, divested belongings at good costs, improved their stability sheet and introduced in a brand new CEO, Renaud Adams, who is a good operator.
With $300 million not too long ago raised, Iamgold is now turning its consideration to the Chibougamau camp, actively drilling tasks within the space and buying Vanstar Sources, their three way partnership companion. They’ve efficiently repositioned as a Canadian firm, and I might be stunned in the event that they flip and re-expand internationally.
Marcotte: Typically, bigger firms usually are not rising belongings in Africa, despite the fact that you can also make cash there. There’s simply as a lot worth in tier-one jurisdictions with out the additional threat, particularly given the present volatility in Africa and South America.
For junior miners like us, it’s about constructing ounces and ultimately promoting to a bigger firm. On condition that bigger firms are specializing in tier-one jurisdictions, I do not see worth in venturing into riskier areas.
Marcotte: Michael and I noticed the potential because the Nelligan venture received the invention of the yr in Quebec in 2019. Whereas many noticed the potential, we determined to behave on it.
In 2020, I began Royal Fox Gold with the Philibert venture to consolidate the camp, and Michael and I quickly determined to work collectively to attain this aim. It made sense to affix our forces, and Royal Fox Gold grew to become a part of the consolidation technique of Northern Superior.
As a board, we personal 25% of the corporate, having not too long ago completed an $8 million financing the place we supplied $1 million ourselves. Michael and I work intently collectively. His involvement as a director is uncommon, however he is very lively and brings immense worth.
Marcotte: Chibougamau is an industrial mining city with a historical past in copper mining and lumber, supported by intensive highway and energy infrastructure. Nelligan, an Iamgold venture, is the most important deposit within the space, with important development potential and a grade of about 0.85, typical for giant tonnage operations.
Philibert, our key deposit with round 2 million ounces and a grade 25% greater than Nelligan, can considerably decrease the venture’s payback interval on account of its excessive grade and wonderful restoration charges (93-95%). Strategically, a mill between Philibert and Nelligan, solely 9 kilometers aside, can be environment friendly.
Lac Shock, an extension of Nelligan, has proven important potential, particularly with current drilling outcomes throughout COVID-19, which elevated Northern Superior’s share worth. Iamgold’s growth in the direction of Lac Shock signifies a merging of values. Monster Lake, one other Iamgold venture to the north, has a excessive grade of 12 grams per ton. Though not massive sufficient to face alone, its high-grade materials will be trucked to the mill to boost lower-grade operations.
Chevrier, positioned to the northeast, presently holds about 1 million ounces and exhibits huge potential. Our main focus is increasing Philibert whereas IAMGOLD continues to develop Nelligan, aiming to succeed in roughly 15 million ounces within the subsequent 18-24 months.
Marcotte: Our dimension limits what number of tasks we will handle successfully. Spreading ourselves too skinny results in dilution with out worth creation. We wished to deal with Quebec, the place there’s monumental worth potential, however TPK deserved consideration, too. It’s the largest gold-in-till anomaly in North America and doubtlessly the world.
So, we created a brand new firm, ONGold, with its personal capital and administration staff. TPK, positioned in Ontario, has totally different socio-economic concerns. We employed Kyle Stanfield, a sustainability knowledgeable, to steer the staff. He understands the native communities and their wants, guaranteeing we advance the venture responsibly and create worth for all stakeholders.
Marcotte: We’re lucky to have the Quebec authorities as a companion. Quebec is among the finest jurisdictions for mining as a result of authorities’s severe dedication to the trade.
Allowing is obvious and structured, and there’s monetary help out there at each growth stage. For instance, Philibert was initiated by the Quebec authorities, and we did an earn-in to accumulate most of it. Investissement Québec can put money into tasks at numerous phases, supporting visibility, allowing, and capex.
This area affords an ideal mixture of geology, engineering functionality, and authorities help.
Marcotte: I don’t imagine the debt degree will make every thing explode. Sure, the deficits are large, however we might have confronted a extreme recession with out them. It’s not splendid, nevertheless it’s the lesser of two evils.
The U.S. debt is at $34 trillion and rising quick, however family wealth has elevated by $50 trillion within the final 5 years. If we reverted to our monetary state 5 years in the past, we might be debt-free with an additional $10 trillion. Nonetheless, if rates of interest surge, the debt curiosity funds might change into unmanageable. Thus, globalization is essential because it helps hold inflation down.
Relating to gold, I believe it’s about to soar. Gold is inversely correlated to actual charges (charges minus inflation).
For gold to rise, both charges should drop or inflation should rise whereas charges keep the identical. I imagine we’re at some extent the place both or each will occur.
Charges are more likely to drop considerably. Canada has already lower charges twice, and the U.S. will comply with. The U.S. wants to chop charges as a result of credit score has been contracting for nearly two years, risking a extreme recession. Decrease charges are essential to hold the economic system shifting. I’m satisfied the [U.S.] Fed will lower charges greater than anticipated.
We’re additionally getting into a political marketing campaign interval, which can probably be very inflationary. Individuals dislike inflation however get pleasure from listening to about authorities spending, tariffs, and decreased immigration — all extremely inflationary. As charges drop and inflation rhetoric spikes, gold is well-positioned to rise.
Gold has already elevated from $1,800 to $2,400 up to now yr, pushed by central financial institution purchases and demand from Asia, notably as a hedge in opposition to actual property and a collapsing yen.
As actual charges decline within the Western world, folks will shift investments from the NASDAQ 100 to gold and gold derivatives. This shift will amplify gold’s rise, and gold equities will begin catching up in valuation.
Marcotte: Search for firms the place insiders personal a major stake, guaranteeing aligned pursuits. I do know I preach my very own gig, however in an organization like ours, you will have an insider possession of about 25%.
Additionally, firms have to have a transparent exit technique, aiming to promote to bigger firms. They need to be positioned in jurisdictions with lively bigger firms and may be capable of transfer the needle for potential acquirers.
It is important to stability financing with worth creation and to be positioned in rising camps or jurisdictions engaging to main gamers.
Marcotte: We’re severe about our firm and assured in our technique. In 18 months, the Chibougamau camp might be pink scorching. We’re valued at $20 per ounce, however the Nationwide Financial institution says this camp is now turning into viable, so it must be value about $100 per ounce.
With the cash raised, we look forward to finding ounces at lower than $10 per ounce, setting us up for very accretive development.
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