History tends to repeat itself, and rightfully so, the world finds itself amidst yet another financial crisis at the hands of an invisible enemy that has brought nations and their economies to its knees. A battle not to be fought at the frontlines, but rather digitally in the form of debt, spending uncontrollably with hopes of avoiding economic flatline. Such troubling times make habit of exposing weaknesses in our current fiat system and drives bankers and investors alike to withdraw to the value of precious metals. Gold has enjoyed a stellar surge since mid-year 2019, and with no signs of slowing down, mining juniors everywhere are looking to claim a stake and take advantage of the current gold rush.
Mining the Maple Leaf
As a nation, Canada has enjoyed its fair share of success to support the international gold industry. Standing tall and rounding out the top five gold mining nations of the world, Canada produced almost 183 tonnes of the precious metal in 2019 according to the Goldhub website. Rewind one year prior, and Canadian gold mining companies contributed to more than 20% of all mining activity in the country, with Québec, Ontario, and British Columbia the three largest supporters. From current levels spanning to 2023, forecasts suggest that the nation will produce 7.6 million troy ounces, on the backs of active mines and current explorations.
Québec has long been considered favorable by many geologists and mining experts due to its tremendous potential regarding unexplored terrain. In addition, the province boasts a favorable subterrain, made primarily of Precambrian rock, well known for its precious metal deposits. Since its inception in the 1920’s, the provincial mining industry has experienced steadfast growth, however due to the vast landscape, less than half of Québec’s mineral potential is known today. With the province offering competitive tax incentives to dig for precious metals, Québec finds itself supplying roughly 20% of the country’s mining activity, hosting roughly 30 mines and 158 exploration projects.
Junior mining companies tasked with risky mining explorations usually translates to the average investor as “high-risk, high-reward”, which offers speculative appeal based on huge returns for investors. By investing in well-established junior mining companies with high-quality reserves, investors can still speculate on the massive financial potential while eliminating a modest portion of the risk associated. While searching for such an elusive asset to park your life savings may seem daunting, some extensive research points us in the direction of a recently formed company exploring the northern wilderness of Québec.
Québec Precious Metals
Québec Precious Metals Corporation (TSX-V: QPM) was formed in June 2018 through the merger of Matamec Exploration Inc. (TSX-V: MAT) with Canadian Strategic Metals Inc. (TSX-V: CJC). Rebranded under the QPM ticker, the newly combined companies also purchased the gold assets of Sphinx Resources Ltd. (TSX-V:SFX) that included their 50% interest in the Cheechoo-Eleonore trend and also the other 50% interest held by Sirious Resources Inc. (TSX-V:SOI). After the merger, a refreshed board of directors and management team defined a clear strategy to focus on gold within the James Bay region, with the Sakami Project being the focal point. Intentions within the company are to leverage a strong management team to advance prospective properties that fit the corporate mandate to become a leading exploration company. Its strategy is simple and straightforward. Drill, drill, drill, and with key strategic investors and strong shareholder support, the company has the potential to lead James Bay exploration efforts towards further mining prosperity.
The James Bay Region is a mining-friendly jurisdiction, and while the area is quite extensive, infrastructure is well established with a network of roads, power lines and airports created to support hydroelectric projects in the area. Using this infrastructure to its advantage, QPM has strategically claimed stakes that are within 10 kilometers from the roads, reducing exploration costs as a result. When compared to the Abitibi greenstone belts and the sheer volume of more than 38,000 drillholes to date, James Bay exploration has only just begun to scratch the surface with less than 2,000 drill holes in its greenstone belts.
Additionally, positives can be drawn from the presence of Éléonore Gold Mine, located a mere 90 km “as-the-crow-flies” to the southeast of the Sakami project. Owned and operated by Newmont, who is a lead investor in QPM with a 15.6% ownership stake in the company, this world-class, state-of-the-art facility is among the largest gold mines in Québec. With the successful strike nearby, the mining culture in the James Bay area receives a valuable boost that downplays any negative speculation around the area.
Sakami Project
The Sakami property contains a 23km contact between two geological sub-provinces that provides an ideal setting for the development of a significant mineralizing system. Exploration along the structure has discovered many high-grade gold showings and occurrences, one of which led to the La Pointe area discovery. Distinct gold zones (Zone 23, 25 and 26) identified in the La Pointe sector lie immediately adjacent to the contact between the two geological sub-provinces, and three main mineralized rock types have been identified consisting of metamorphosed sedimentary rocks to the east called paragneiss (Opinaca). Gold mineralization is largely contained within the Opinaca paragneiss, with Zone 25 being the most dominant gold zone, playing host to a fine to medium grained and foliated paragneiss.
Exploration of the Sakami area has progressively advanced since the 1950’s, with the first 14-hole drill program performed in the winter of 2001. Several test holes have been drilled since, with activity revitalized again in the fall of 2018 with a $1.8M exploration program performing 3000 meters of drilling. Results for this program were released in February and June of 2019, with 10 of the 21 holes drilled located in La Pointe. In August 2019, QPM announced an initial resource statement was commissioned on mineralization in the area, and in October of 2019 the results of a property wide airborne survey were published. To kick-off the year 2020, the company announced a plan to drill 25,000 meters of test holes on the Sakami project designed to expand the La Pointe deposit and to further test targets along the 13km trend. Although the planned 25,000-meter drill campaign for 2020 at the flagship Sakami Project has fallen short due to the impact of Covid-19, some impressive results show just how significant this region may be
– EX-10: 2.51 g/t Au over 54.65m including 3.52 g/t Au over 14m
– EX-19: 9.22 g/t Au over 12.55m including 11.82 g/t Au over 8.45m
– EX-22: 4.16 g/t Au over 21m including 6.4 g/t Au over 12.67m
– PT-13-67: 3.78 g/t Au over 27.95m including 4.01 g/t Au over 22.6m
– PT-14-79: 2.51 g/t Au over 48.2m including 6.93 g/t Au over 12m
– PT-16-91: 1.62 g/t Au over 64.5m including 2.21 g/t Au over 43.3m
– PT-16-92: 2.52 g/t Au over 48.55m including 4.94 g/t Au over 21.05m
– PT-18-118: 3.22 g/t Au over 31.5m including 3.47 g/t Au over 28.5m
– PT-18-120: 3.59 g/t Au over 27m including 5.06 g/t Au over 15m
A review of the drilling completed at La Pointe to date seemingly indicates an existing area of gold mineralization that extends over a strike length of 900 meters, down to a vertical depth of 450 meters (with some intercepts at depths down to 600 meters). With the average width of Zone 25 being 19 meters, and the average grade at 2.1 g/t, rough calculations suggests a mineralization envelope of 18.4 million tonnes containing roughly 1.2Moz. When considering the low-grade nature of mineralization, open-pit mining would be the logical extraction method, restricting the zone to a depth of 300 meters and declining the resource size to 13.7 million tonnes containing roughly 0.9Moz.
Remarkably, drilling at the La Pointe extension located roughly 2.0km southwest of the La Pointe deposit, intersected a mineralized horizon that had similar geological characteristics with the main La Pointe deposit. While several holes recently drilled have yet to return from the lab, highlighted extensions estimate that an additional 600 meter strike length down to a vertical depth of 100 meters increases the count to roughly 1.3Moz of gold between the two targeted areas.
– PT-20-151: 1.15 g/t Au over 80.1m including 2.21 g/t Au over 24.85m
– PT-20-154: 1.14 g/t Au over 70.3m and 2.74 g/t Au over 6.8m
– PT-20-155: 1.03 g/t Au over 53.8m including 27.3 g/t Au over 0.29m
– PT-20-159: 0.93 g/t Au over 101.0m including 1.1 g/t Au over 80m
The company continues to focus its efforts on the main La Pointe and La Pointe extensions, advancing project development being the top priority while at the same time continuing to investigate the prosperity of additional targets on the trend. Sakami would need more open-pitable ounces to support a stand-alone mill, attained by eclipsing a 2.0-million-ounce resource. With the company currently floating around this amount, the target should easily be accomplished during the 2021 program. Combining these substantial calculations of the La Pointe/La Pointe Extension with the underexplored targets already identified, the degree of geological prospectivity remains high, and the drill program of 2021 will surely continue to increase strike and mineralization while revealing additional Moz of gold ripe for the taking.
Active Exploration
While the focus for exploration remains on the La Pointe and La Pointe Extension targets, alternative areas of interest have received consideration during recent activities.
Elmer East
Discovered following the summer prospecting program, the Elmer East Project is conveniently located east of the recent Patwon prospect gold discovery made by Azimut Exploration Inc. Expected to remain active during the next campaign, the Lloyd discovery has captivated imaginations sufficient for further exploration. Interestingly enough, this area has been submerged in elevated river tables until just recently, increasing the ease of operations and the potential for feasible studies. A total of 425 grab samples were collected during the summer field program, revealing the following:
– B566181: 17.75 g/t Au and 29.2 g/t Ag
– B565106: 13.55 g/t Au and 23.0 g/t Ag
– B566182: 5.19 g/t Au and 21.2 g/t Ag
– B566114: 2.66 g/t Au and 67.2 g/t Ag
Simon Showing
The Simon discovery can be found roughly 3km’s to the northeast of the La Pointe Deposit, along the same fault and Opinaca geological sub-province, nonetheless. A total of 6 drill holes have intercepted gold mineralization, and with a little over 3000 meters drilled to date, the 4 km strike potential remains open in all directions, and can be highlighted by the following results:
– SI-19-01: 3.68 g/t AU over 2.07m
– SI-19-02: 14.20 g/t Au over 2m
– SI-19-03: 5.05 g/t Au over 5.06m
– SI-19-04: 2.19 g/t Au over 1.45m
– SI-20-06: 0.52 g/t Au over 57.3m
– SI-20-16: 0.73 g/t Au over 54m
JR Showing
The JR discovery can be found an additional 5km’s northeast of the Simon discovery and falls along the same Opinaca geological sub-province as La Pointe and Simon. A total of 6 drill holes have intercepted gold mineralization, and with a little over 2,200 meters drilled to date, the strike remains open in all directions, and can be highlighted by the following results:
– JR-19-01: 1.03 g/t Au over 2.5m
– JR-19-02: 0.59 g/t Au over 6.2m, 1.1 g/t Au over 9m, 0.72 g/t Au over 6.9m, 1.23 g/t Au over 5.5m, 1.81 g/t Au over 2.5m
– JR-19-03: 2.11 g/t Au over 1.5m
– JR-19-04: 1.27 g/t Au over 1.5m, 1.27 g/t Au over 15m, 2,52 g/t Au over 1m
– JR-19-05: 1.54 g/t Au over 1.05m, 1.38 g/t Au over 3m
– JR-19-06: 6.39 g/t Au over 1m
While some samples do not appear to jump off the page, the results are impressive enough to recognize the obvious mineralization and upside potential unearthed. Whether QPM chooses to explore further down the road, or consider the assets Non-Core, intrinsic value belongs in the hands of the company regardless and can be leveraged for future benefit.
Non-Core
Outside of the main holdings discussed, the company has fifteen (15) properties which are currently considered non-core and are up for sale, with no direct activity planned for the 2021 field season. Not all QPM’s non-core properties are related to mining for gold. Several properties obtained during the merger with potential rare earth, nickel-copper, copper-lead-zinc, and graphite deposits are up for grabs while the direction of the company remains fixed on gold. With the expectation that QPM is willing to consider joint venture or option agreements, additional revenues could potentially be generated for the company to further fund its targeted drill program. Three (3) of these properties have since been monetized, generating $2.25 million of cash or value in shares. For the remaining non-essential properties, QPM carries a book value of 1.8 million, and while the amount spent on a project is a poor indication of current market value, the realization of $1 to $3 million for the non-core assets through monetization should be realistically considered.
Kipawa and Zeus
Located 50 km east of Temiscaming in southwestern Québec, these projects lie in the Grenville geological province. Twelve heavy rare earth showings have been identified on the 100% owned Zeus project, with some containing niobium and tantalum. The 68% owned Kipawa deposit is defined by three enriched horizons within the “Syenite Complex”, which contains some light rare earth oxides but primarily hosts heavy rare earth oxides. The property has been drilled since the early 2010’s with a total of 293 drill holes totaling roughly 24,000 meters in length. This program was used to prepare a feasibility study which was completed in 2013, with the focus being a 15-year production schedule plus an additional 2 years to prepare a process plant and related infrastructure. In 2017 development activities were stopped for the project as well as research activities with various university partners and government agencies. The other 32% of Kipawa ownership belongs to Investissement Québec.
Blanche and Charles
Located 120 to 150 km northeast of the Éléonore Gold Mine in the James Bay region, the geological setting in the greenstone belt appears to be favorable for the discovery of base metals and gold. Exceptional as it may be, the stakes are a mere 7km to the north of the Midland Exploration Mythril discovery, a significant copper-gold mineralized zone. Between the two properties lies 162 square kilometers, boasting 100% ownership with no royalties owed. The Blanche stake hosts 256 claims spanning 131 square kilometers, with 221 grab samples collected in 2017 revealing copper values up to 0.31%. Charles holds 61 claims spanning 31 square kilometers and hosts a compilation of historical exploration work. These plots appear to hold significant value based on its surrounding proximity to Midland, along with recent investment of $5.9 million dollars from BHP Billiton Canada Inc. towards further drilling at the Mythril discovery. With base metals and gold being the target, sell interest in the projects should easily be marketable.
Vulcain
Located in Haute-Gatineau, 165 km southeast of Val d’Or and 280 km northwest of Montréal, the 100% owned Vulcain property spans a total of 40 square kilometers, with 68 claims. Nickel-copper showings hosted by ultramafic sills which vary in width from 10 to 300m are up to 3 km long. The project contains the former Renzy Lake mine with production of approximately 718,000 tonnes grading 0.70% nickel and 0.72% copper from the late 60’s to mid-70’s. With no recent work performed nor planned, the intention is to sell interest in the project or identify a partner to pursue a recommended $1 million exploration program.
Value Added
Heading into 2021, the company finds itself sitting on roughly $1.5 million in cash, with an additional $2 million in payments from a previous land sale expected prior to year-end. Considering the available funds backing a 2021 drill program, additional financing is not immediately required to begin drilling, a favorable sign for investors. With such a significant potential for additional discoveries amidst the targeted areas of James Bay, especially considering the proximity to the already proven Éléonore Gold Mine, the sheer determination for timely exploration and production of drill results provided by QPM makes the illusion of upside potential seems comforting.
A combination of key share structure points add value to investment consideration. Currently sitting on roughly 68 million shares, major investors such as Newmont Corporation, Québec Institutions and QPM Management and Board of Directors account for more than 33% of total shares issued. This leaves a mere 44 million tradeable shares available for open market activity. With such a low float, any form of positive news (expected assay results prior to year-end) could propel the stock swiftly in the vertical direction. Combined with the mild amount of broker warrants outstanding, dilution of total shares and share value becomes an afterthought. Looking closer at the chart, a steady pattern of high-volume accumulation has been occurring over the course of the past several months, suggesting a transfer of shares into stronger hands likely well-equipped to endure the game of patience that junior mining investment has always required.
When considering a proper valuation, target price can be based on a conservative valuation metric of the market value of contained gold ounces for a peer group of comparable exploration companies, and the estimated value of non-core assets held for monetization. When considering peer group valuations where resources have been identified, one can summarize an average of $53/oz, ranging from $7/oz to $124/oz. While resources in the James Bay area are considered undervalued compared to other areas such as Val-d’Or or Red Lake, considerations can be made based on proximity to Éléonore gold mine, currently producing 246Koz annually. Using the average of $53/oz as the base for the value of the gold mineralization already identified at the La Pointe / La Pointe Extension (excluding cash in hand and assets) the company appears to be undervalued at its current $15m market cap with a more realistic valuation closer to $65 million.
Not to be forgotten, the sheer amount of property assets available for purchase add additional value to a company hosting an already underwhelming market cap. When considering all assets combined, predictions can be made that only a matter of time remains before lively markets aspire towards the re-evaluation of a company well deserving of the extra attention. Given the presence of a strong demand for gold, the expected endurance of precious metals through 2021 could very well make QPM the next $100 million exploration company.
Forward:
In closing, Québec Precious Metals appears to be following a similar discovery cycle as two of Québec’s most recent successful gold discoveries, Virginia Gold Mines Inc., and Osisko Exploration Ltd., both of which were acquired after substantial mineralization discoveries. In 2004, Virginia Gold Mines discovered the Roberto Zone at Éléonore. After completing roughly 86,000 meters of drilling and exposing the mammoth reserves, Goldcorp stepped in and acquired the now mine for approximately $420 million. Again in 2004, Osisko acquired the Canadian Malartic claim for $80,000. By 2010, construction had begun, reaching commercial production by March 2011 sitting on an astounding 10 million oz Au mineral reserve. By 2014, Osisko was acquired by Agnico-Eagle (TSX: AEM)/Yamana Gold (TSX: YRI) for $3.6 billion. To summarize, opportunity awaits those who are fortunate enough to be sitting on such prosperous reserves, while only beginning to understand its true value, and speculation can be made that the upside potential for Québec Precious Metals over the course of progression could very well be worth its weight in gold.
By: Ryan Krikke
FULL DISCLOSURE: Author (Ryan Krikke) owns shares in the company featured and has a conflict of interest. The content of this article is for information only. Readers must fully understand and agree that the contents of this article are not a recommendation or solicitation to buy or sell any security. The author assumes no responsibility for the investment actions executed by the reader. Always do additional research and always consult a professional before purchasing any security.
Legal Disclaimer/Disclosure: While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our article is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. Furthermore, it is certainly possible for errors or omissions to take place regarding the profiled company, in communications, writing and/or editing. Nothing in this publication should be considered as personalized financial advice. We are not licensed under any securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this article is not provided to any individual with a view toward their individual circumstances. Baystreet.ca has been paid a fee of one thousand nine hundred dollars for Québec Precious Metals Corporation advertising from the company. There may be 3rd parties who may have shares of Québec Precious Metals Corporation and may liquidate their shares which could have a negative effect on the price of the stock. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this article as the basis for any investment decision. By reading this communication, you agree to the terms of this disclaimer, including, but not limited to: releasing Baystreet.ca, its affiliates, assigns and successors from any and all liability, damages, and injury from the information contained in this communication. You further warrant that you are solely responsible for any financial outcome that may come from your investment decisions.