NEAR MATAGAMI, QUEBEC– Maple Gold Mines (TSXV: MGM; US-OTC: MGMLF) is in “advanced and detailed” talks with three potential acquisitions as it seeks to nearly double its contained gold resources, chief executive officer Matthew Hornor says.
The Vancouver-based explorer wants to lift its total indicated and inferred contained metal resource to more than 5 million oz. from about 3 million oz., Hornor said last week at the camp for Maple’s adjacent Douay and Joutel projects, about 700 km northwest of Montreal. All of Douay and more than half of the Joutel property are a 50:50 venture with Agnico Eagle Mines (TSX: AEM; NYSE: AEM) in Quebec’s Abitibi gold belt.
Maple seeks to buy companies in the same region, which spans the Ontario-Quebec border south of James Bay and holds some of Canada’s largest gold producers, Hornor said in an interview. He declined to name the companies involved in talks because of rules about stock price-moving news.
“It’s got to be something we get at a discount because we have a joint venture partnership and cash,” said Hornor, who used to work for billionaire entrepreneur Robert Friedland, the founder of Ivanhoe Mines (TSX: IVN), among other companies. “We’re opportunistic in finding companies who would benefit from aligning with us.”
Maple wants the advantages of a larger resource base and a re-rating of its stock to secure better financing for development as it progresses through an agreement with Agnico that increases Maple’s share of expenses. It is also keen to buy companies while stock market valuations are relatively low and gold prices are generally high historically.
The Abitibi belt, known for the Canadian Malartic open pit mine run jointly by Agnico Eagle and Yamana Gold (TSX: YRI; NYSE: AUY; LSE: AUY), and Kirkland Lake Gold’s (TSX: KL; NYSE: KL; ASX: KLA) Detour Lake mine, also hosts many smaller projects that show resources and potential, but would benefit from consolidation, Hornor said. Some may lack funding or others may be in a distressed situation, he added.
“Given the challenges in the capital markets, talented geologists are often frustrated with the lack of budget to execute projects,” he said. “Our interest is in projects with smart people attached to them so we wouldn’t dilute the focus of our team here.”
Maple has $15.3 million in cash after reporting its third-quarter results on Nov. 9. Its shares were trading at 17¢ apiece on Monday in Toronto, valuing the company at $57.4 million. Analysts said the company would likely use some cash and sell shares to pay for the acquisitions, but will probably not use debt financing at this stage.
The explorer’s potential acquisitions are part of a dual-track strategy to dramatically expand its resources by January 2025. The other track is drilling. The company is adding two rigs this month for a total of five engaged at Douay and drilling as much as 1,800 metres underneath and beside former mines at Eagle and Telbel, which form the Joutel project.
“The fastest way to increase resources is this acquisition plan,” Mark Reichman, an analyst based in St. Louis for Noble Capital Markets, who covers Maple and visited the site this month, said in an interview. “If they were picking resources from a company trading at a lower enterprise value to resources ratio, it could be positive. But longer term, the real value is going to be determined by the deep drilling program.”
This year, Maple bought the underground Eagle mine, Agnico’s first mine which ran from 1974 to 1986, from Globex Mining Enterprises (TSX: GMX) for $2.4 million. It is part of the Joutel project, but not in the joint venture with Agnico.
The rest of Joutel is mostly the Telbel property, which Agnico mined from 1983 to 1993. Telbel and Eagle together produced 1.1 million oz.
But getting the former mines at Eagle and Telbel into working order would require various preparations, such as draining their shafts and tunnels of water which has seeped in over the past 30 years. The company needs to conduct a prefeasibility study to see if the “expensive” process is worth it, CEO Hornor said.
Analysts also said the Harricana River’s proximity to Joutel means restarting operations will need a water treatment plant that could easily cost tens of millions of dollars.
The 400-sq.-km Douay and Joutel properties straddle strikes along the Casa Berardi and Harricana/Joutel deformation zones that formed about 2.7 billion years ago. Multiple events over succeeding eras, including volcanic activity, intrusions and shearing pushed gold closer to the surface.
Douay has the same sort of scale and geological formations found at Canadian Malartic and Detour, Fred Speidel, vice president of exploration, said. The 2018 East Gouldie discovery at Canadian Malartic, which extends from 700 metres to 1,900 metres below surface, is especially interesting, Speidel said in an interview.
“The importance of that discovery has had a huge influence on our thinking, in terms of our willingness to pursue higher risk, but also potentially higher reward deep drilling,” Speidel said.
For winter 2022-23, Maple is seeking new discoveries in areas that haven’t been drilled before in 10,000 metres of drilling at Douay and 6,000 metres of drilling at Telbel. At Douay, the leading targets are below 1,000 metres vertical where there’s been almost no drilling deeper than 700 metres, he said.
At Joutel, targets are being drilled at depths of 1,400 to 1,800 metres, well below the deepest mine workings at about 1,200 metres. At Eagle, where both lateral and depth extensions are being tested, targets are continuing to be drilled at depths of between 200 and 1,300 metres. Eagle mine workings are between 65 and 800 metres deep, he said.
Even if Speidel’s drilling hits discoveries ballooning Maple’s resources, Hornor says his purchasing plans won’t shrink.
“The acquisitions get even easier when we have more ounces because people will be more interested in doing a transaction with us because the platform will be stronger,” the CEO said. “Consolidation in Abitibi should be done and we’re trying to make it happen.”
Maple’s total indicated resources at Douay and Joutel are 10 million tonnes grading 1.59 grams gold per tonne for 511,000 oz. contained metal, according to an update in March. The inferred total is 76.7 million tonnes grading 1.02 grams gold per tonne for contained metal of 2.53 million ounces.
The next update may come in 2024 after the current drilling program, barring a large discovery that can significantly alter the resources total on its own, Speidel said.
Highlights so far this year include Eagle mine drill hole EM-22-005 which cut 7.5 metres grading 4 grams gold per tonne, including 6.4 grams over 3 metres. Hole EM-22-009 returned 11.4 grams over 3 metres, including 24.4 grams over 1 metre.
In the 531 zone at Douay last year, drill hole DO-21-316 intersected 1.54 grams gold per tonne over 32.2 metres from 430 metres downhole, including 4.63 grams over 6.7 metres.
Pierre Vaillancourt, an analyst based in Toronto for Haywood Securities who doesn’t cover the company but visited the site, says the joint venture with Agnico shows the major’s confidence in Maple’s team and the potential for new drilling discoveries.
“There’s still a lot of work to be done to pull it all together into a cohesive system, but in the time they’ve been there they’ve made good progress,” Vaillancourt said. “It’s been 30 years since Eagle and Telbel closed so the timing is right for them to come in and take a fresh approach, especially with a higher gold price. What’s old is new again.”