This article by Brian Leni has been published first at Junior Stock Review.
All pictures are company material, unless stated otherwise.
We are not only in a resource sector bear market, but in the midst of peak holiday season, at least in the northern hemisphere. At the current moment, these two factors are pushing many company share prices downward, and in the process, giving those with the wherewithal and appetite for risk great opportunities for entry into the stock.
You may be asking yourself, if the bear market trend continues, can I buy the same stock more cheaply in a month? That could be correct - or the market might turn. It's anyone’s guess as to which way the market will flow.
There are many ways to invest in the resource market; sit tight and wait for the upswing to be firmly in place before entering, buy stock in tranches – possibly dollar cost averaging your position or buying your entire position in one order. All are good choices depending on who you are and what your appetite is for risk.
I'm a market participant and believe buying in tranches is the best way to “catch a (potentially) falling knife,” along with concentrating on quality companies with catalysts for share price appreciation. The caveat, however, is that I must be willing to hold the company if the share price appreciation doesn’t follow the good news. These days, it's totally possible to have good news followed by a liquidity event for existing shareholders, which can be disappointing - or maybe it's more of an opportunity.
Determine who you are and the way you're best suited to participate in the market, and it's my opinion that you will have formed a great base for future investment decisions, especially in the junior resource sector.
Today, I'm sharing an update on Genesis Metals Corp., a gold exploration and development company with their flagship Chevrier Gold Project in the Abitibi Greenstone Belt in Quebec, Canada.
Let’s take a look!
The Genesis Metals Team
A junior resource company is only as good as its people, and in the case of Genesis Metals, they’ve assembled a great team.
Genesis Metals’ CEO and Chairman, Brian Groves, is a 40-year veteran of the mining industry. Groves has explored in both Australia and Canada, working with AMAX Minerals, Noranda and Manager of Corporate Development at Placer Dome. Moving up the organizational ladder throughout his career, Groves has gained valuable experience in capital markets, project development, permitting and corporate strategy. Today, he leads a group of people who have not only worked together previously, but who have a history of success within the mining industry.
Working hand in hand with Groves is Jeff Sundar, President and Director of Genesis. Sundar has 19 years of experience in the mining industry, having held a VP and Director’s position while working with other Genesis Board members in Underworld Resources. Underworld, in particular, was a great success, as the 1.6 Moz White Gold deposit was sold to Kinross for $140 million. Sundar and the team look to replicate this success with Genesis in the years ahead.
Adrian Fleming, the former President and CEO of Underworld Resources and former VP Exploration of Placer Dome, joins the Genesis team as an Executive Director. Fleming is a Professional Geologist with over 30 years of experience in the mining industry. Some of Fleming’s most notable work experience includes the following:
Former VP Exploration for Placer Dome based in Sydney Australia. Fleming spearheaded Placer Dome into Western Australia, where he directed the group and found the Big Bell Mine.
Fleming co-led the team that found the high grade zone at the monster, 28 Moz gold equivalent, Porgera copper gold deposit, located in Papua New Guinea.
Former VP Exploration for Golden Star in the early 90’s. Fleming directed the team that uncovered the Gross Rosebel Deposit, which has now grown to 17 Moz of gold.
Fleming will be counted on to provide valuable input as Genesis moves forward with a plan to expand its Chevrier Gold Deposit resource, and explore the gold anomalies at their October gold project.
John Florek, the former Senior Geologist at Barrick Gold’s Famous Hemlo Mines, is on Genesis’ Board of Directors. Hemlo was a world-class gold deposit and is credited as being the catalyst for the 1980’s exploration boom. Florek co-led the exploration team that found an additional 2 Moz of gold, which extended the Hemlo mine life. He was also Senior District Exploration Geologist for Placer Dome in Red Lake, and in 2008, his team was awarded the Northwestern Ontario Prospectors award. Florek’s more than 20 years of experience in the mining business as a professional geologist should add great value for Genesis in the future.
Last, but certainly not least, Andre Liboiron is the Exploration Manager for Genesis’ projects, Chevrier and October. Liboiron is a Quebec native with more than 26 years of experience as a geologist in Quebec, as well as internationally.
Robert McLeod, Genesis Co-Founder and former Chairman of Genesis’ Board, relinquished his position because of the heavy time commitment required by his primary focus as CEO of IDM Mining, a near term producer in BC’s Golden Triangle. Given the work history of the members of this management team, however, McLeod has agreed to remain with the company as a strategic advisor.
McLeod is on Casey Research’s Nexten list, which features the top young professionals in the mining industry. A quote taken from Casey Research’s profile of McLeod,
“Luck has nothing to do with it. Rob has the pedigree, the smarts, and the perseverance to have forged a stellar career in mining exploration and company development.” ~ Casey Research
Also, Genesis has added former Laurentian Bank Securities Mining Analyst and Peartree Securities Technical Advisor, Eric Lemieux. Lemieux is a geologist by trade and has 25 years in the mining industry with experience in a variety of areas, such as mineral exploration and project valuation. Lemieux’s addition to the Genesis team should prove advantageous as Genesis looks to develop their properties.
While the people who run junior resource companies are the core component for investment, looking at the people who choose to invest in the companies is a great gauge for potential value. In Genesis’ case, there are a few heavy hitters who have taken major positions in this junior gold exploration company.
The list of strategic shareholders is headlined by Osisko Mining, which acquired a 6.4% position in Genesis through a private placement announced in 2017. For those unfamiliar with Osisko Mining, they’re a major player in the gold sector, owning strategic positions in a lot of great companies, such as: Falco Resources, IDM Mining and Beaufield Resources. Outside of owning strategic positions in companies, Osisko is exploring their 70,000 Ha Windfall property, which is located in the Urban-Barry Greenstone Belt in Quebec. Osisko is known for their geological expertise and well timed investment in smaller junior gold companies. Their investment in Genesis speaks volumes about Genesis’ potential.
The strategic shareholders list is further headlined by Eric Sprott, who has acquired a 7.2% position in Genesis through a private placement announced in 2017. Sprott is a major player in the resource sector, with a history of successful investments throughout his career. Also, Sprott has multiple Sprott named companies offering various market related products across the sector. Over the last few years, he has taken strategic positions in a few junior gold companies such as Kirkland Lake Gold. Sprott’s investment, like Osisko’s, is a great gauge for potential value in Genesis.
For those who aren’t familiar, the Societé de development de la Baie-James (SDBJ) is a government run organization focused on the development of natural resource projects within Québec. Their mission statement is as follows;
“To promote the economic development, development and exploitation of natural resources, other than hydroelectric resources within the mandate of Hydro-Québec, of the James Bay territory, from a sustainable development perspective. In particular, it may encourage, support and participate in projects aimed at these ends.” ~SDBJ
Additionally, the SIDEX fund, which was created by the government of Québec to support mineral exploration activities within its borders, participated in the latest financing. Having both SDBJ and SIDEX as stakeholders in Genesis is a great sign of political support for Genesis’ Chevrier Gold Project. The strategic shareholders list is rounded out by Delbrook Capital, Gold 2000, US Global Investors and Medalist Capital. These organizations and people represent smart money in the sector and I’m happy to speculate along with them.
In news released on July 23rd, Genesis announced it had completed an $805,000 private placement, which will fund their 2018 surface work program. Participating in the placement once again was SIDEX, who increased their position in Genesis with their participation and a new participant, Fonds de solidarite FTQ. Much like SIDEX, Fonds de solidarite FTQ is a development capital investment fund in Quebec, as of May 31st, 2018 the organization had $14.3 billion in net assets.
6th Best Jurisdiction for Mining Investment in the World
From a jurisdictional standpoint, it doesn’t get much better than Quebec when it comes to mining investment attractiveness. The Fraser Institute (FI) gives Quebec an index score of 85.02, ranking it 3rd in Canada and 6th in the world. FI’s mining investment attractiveness index score is reflective of both the mineral potential and the government policy perception of the region.
Fraser Institute Rankings
Quebec’s Mineral Potential
Quebec is home to 25 producing mines and over 350 surface mineral mining operations, putting the value of Quebec’s mineral shipments at $8.7 billion in 2014 (Investissement Quebec). Quebec is Canada’s 2nd largest producer of gold, largest producer of iron and zinc, and the only North American producer of niobium. The mineral wealth is evident and is a big reason why FI ranks Quebec among the world’s top ten in mining investment attractiveness.
Highlighting Quebec’s world class mineralization is the Abitibi Greenstone Belt (AGB), which is 150 km wide and stretches 650 km from roughly Wawa, Ontario to Val d’Or, Quebec. The belt has produced millions of ounces of gold over its history, with the Cadillac Gold Camp, Virginiatown, Rouyn-Noranda Gold Camp, and Val d’Or Gold Camp being just a few of its largest contributors.
Quebec Politics and Infrastructure
The government of Quebec supports mineral exploration within its borders with a tax credit system that refunds 25% of eligible exploration expenses for non-operating corporations, and 10% of eligible exploration expenses for operating corporations (Financial Incentives). So, roughly, for every $1 spent by a Quebec based mineral explorer, 25 cents will come back to the company, which can effectively be rolled right back into further exploration work. This is not only a huge plus for the company and its shareholders, but an ingenious way for the province to promote mineral exploration.
The long history of mining in the AGB means that most regions of the belt are accessible or near infrastructure such as highways, rail, power, and deep water ports along the St. Lawrence Seaway. Also, Quebec boasts some of the most competitive electricity rates in Canada, as its hydroelectric dams constitute a major portion of its electricity production.
Finally, Quebec takes great pride in a transparent mining system, which is built around three key pillars:
“Open access to resources is ensured on the largest possible portion of territory, Mineral rights are granted on a first-come, first-served basis and if a discovery is made, the title holder can be reasonably sure of obtaining the right to develop the resource.” ~ Investissement Quebec
Favourable politics and world class geology – for me, it doesn’t get much better than Quebec, as far as your investment buck goes!
Genesis Metals Corp. – Chevrier Gold Project
Genesis’ 100% owned Chevrier Gold Project encompasses 120 square km and is located 35 km south of Chibougamau, Quebec, in the heart of the Abitibi Greenstone Belt. Chevrier straddles 15 km of the Fancamp deformation zone, and is 15 km northeast of IAMGOLD’s high-grade Monster Lake gold deposit.
NOTE: The IAMGOLD and Toma Gold Monster Lake JV released their maiden inferred resource of 433,300 ounces of gold at 12.14 g/t at a 3.5 g/t cut-off.
Chevier Gold Project History
Prior to Genesis, the area in which the Chevrier deposit is located was owned and explored by Inmet Mining Inc. (Minnova), which, in 1989, was the first to drill the now Main Zone of Chevrier, where they intersected gold grading 5.4 g/t. The property was then purchased by Geonova Explorations, which outlined Chevrier’s Main Zone.
In 2007, the property changed owners once again, with Tawsho taking the reins. They went on to complete a 2,792 km aeromagnetic survey, a ground EM Time Domain survey, 24 diamond drill holes, an independent NI 43-101 resource estimate (by Met-Chem Canada Inc.), and a 5,000 ton bulk sample.
2017 Exploration Program
2017 was a busy year for the Genesis team with the re-sampling of core from 11 historic holes from the Main and East Zones, 25 new trenches completed on IP targets, 58 new drill holes completed for a total of 10,150 meters – both in-fill and step-out holes. Let’s take a look at those results and how they lead into the work planned for 2018 and beyond.
2017 Phase 1 Drilling
The 2017 drill program was broken up into 2 Phases of roughly 5,000 metres. Phase 1 drilling focused on four things; confirm historical Geonova drill holes by twinning, complete infill and step out drilling on the existing Main Zone Deposit, and finally, explore other IP and geological targets.
The results of the twinned and infill holes did not disappoint, as they confirm continuity of the shallow gold mineralization within Chevrier’s Main Zone. A full list of drill results can be found on SEDAR, a few of the highlights from the results are:
Twinned hole GM17-09 returned 2.94 g/t gold (Au) over a width of 58.70 m (starting at 74.60 m down hole), which included an interval of 14.01 g/t over a width of 6.35 m.
Hole GM17-20 returned 2.00 g/t Au over 35.20 m within a zone that graded 0.93 g/t Au over 94.90m starting at 91.5 m down hole.
Hole GM17-21 returned 1.13 g/t Au over 38.05 m.
Hole GM17-22 returned 1.06 g/t Au over 24.45 m.
Hole GM17-16 returned 1.06 g/t Au over 14.22 m including: 3.50 g/t Au over 3.22 m.
Using the image below to reference the highlighted holes:
Chevrier Gold Project – 2017 Drilling
2017 Phase 2 Drilling
On January 22, 2018 Genesis announced the results of its 5,000 metre Phase 2 drill program on the Chevrier Gold Project. The Main Zone was the focus of Phase 2, completing 18 holes of infill and step-out drilling. The results, in my opinion, look good. Check out highlights from the drill program:
8.73 g/t Au over 21.35 m including 37.97 g/t Au over 3.00 m in hole GM-17-42
3.59 g/t Au over 22.60 m in a separate zone in hole GM-17-42
4.26 g/t Au over 19.40 m including 8.99 g/t Au over 7.80 m in hole GM-17-48
4.47 g/t Au over 12.45 m within an interval of 1.08 g/t Au over 84.85 m in hole GM-17-46
5.06 g/t Au over 8.45 m and 1.23 g/t Au over 43.00 m in two intervals in hole GM-17-41
4.53 g/t Au over 13.80 m in hole GM-17-44
1.04 g/t Au over 50.05 m including 1.94 g/t Au over 17.10 m in hole GM-17-44
Putting the results into perspective, remember that the Main Zone’s existing inferred resource has an average grade of 1.99 g/t.
Additionally, and of particular importance, was the step-out results which came from holes GM-17-45 and GM-17-46. These holes were drilled with the intent of testing for an extension of the mineralization from hole GM-17-09, which was drilled in Phase 1 (refer to the image above for the location).
The results from these two holes reveal a new north-east trending shallow extension of the mineralization discovered in GM-17-09. Specifically, from the drill results table in the news release , GM-17-45 returned a shallow interval (35.4 m down hole) of 63 metres at 0.5 g/t gold, while GM-17-46 returned a shallow interval (19.35 m down hole) of 84.85 metres of 1.08 g/t gold.
New Geological Model
Over its 29 year history, Chevrier has seen 213 drill holes, totalling over 87,000 meters. However, the Genesis team are the first to consolidate, re-evaluate and form a comprehensive geological model regarding the Main Zone’s gold mineralization. With reference to the image below, the new model’s Principal Zone is made up of two bodies, which are coloured purple, while red bodies represent satellite Sub-zones.
Chevrier Gold Project – Plain View of the Main Zone Deposit
In my conversation with Groves and Sundar, they mentioned that the geological model suggests further drilling in the north-west portion of the deposit, specifically around the red Sub-zones, could have the potential to define a parallel trend to the Principal Zone. Examining the image above and hypothetically connecting the dots between the red Sub-zones, you can see how this may be a key area for drilling in Genesis’ next program.
Still focusing on the Main Zone, outside of the potential in the north-west, the other main area of interest, in terms of expanding the deposit, is drilling deeper, as the Principal Zones remain open at depth.
Chevrier Gold Project – Long Section of the Main Zone Deposit
To date, I believe there have only been a handful of holes drilled below 400m, each of which hit mineralization. Given this, additional drilling targeting the expansion of the deposit at depth could prove to be advantageous in terms of making the deposit bigger.
Mining of Chevrier’s Main Zone
Interestingly, the potential expansion of the Main Zone deposit at depth has allowed the company to contemplate other potential mining techniques to extract the gold. With the Main Zone deposit as it is currently modelled, an open pit mine appears to be the best suited operation, however, with the growth at depth, the Genesis team believes that bulk underground mining may also be a fit. As an example, they are using the mine plan for Goldex, which, as you can see below (company material), outlines how it could possibly be done.
Ultimately, more work needs to be done and more gold needs to be found at depth before bulk underground mining even becomes an option. However, given the nature of many of Abitibi gold deposits, there is certainly potential that more ounces are waiting to be found at depth.
Main Zone Resource Update
With the new geological model in hand, Groves and Sundar explained that along with their current surface work program, the company will be updating the resource on the Chevrier Main Zone deposit by the end of the year, 2018.
Personally, I have been eagerly awaiting a new resource estimate for the Main Deposit, and believe that it has the potential to get Genesis more attention from the market, which is paramount in realizing the value that I see in Chevrier.
2018 Surface Work Program
The 2018 surface work program has been funded in part by the FIELD-ACTION 2018 initiative co-ordinated jointly by SIDEX and Fonds de solidarite FTQ. Genesis will use the funding to define potential extensions to the gold mineralization within the Chevrier Main Zone and to identify new areas with the potential to host gold.
Surface Work Program – 5 Target Areas
In all, the Genesis team has identified 5 priority targets along the Fancamp Deformation Corridor (FDC). The FDC is the major structural break controlling gold mineralization across the belt.
Using the image above as reference, here is a quick rundown of the 5 target areas:
Area 1 - Explore the area between the Main Zone deposit and trench T-29, which was completed last year and returned a sample of 2.55 g/t over 2.33 meters. The IP anomaly, which originally attracted the Genesis team’s attention, is open in this area and is a good target for the surface work.
Area 2 – Claims which lie east of the East Showing, which were acquired in 2017, will be a target of this year’s surface work. The East Showing was originally explored by Falconbridge Copper in the 1980s, and did have a historical resource, however, it isn’t 43-101 compliant and shouldn’t be relied upon.
Area 3 – Claims which lie south of the East Showing, which were acquired in 2017 and 2018, will also be a target of this year’s surface work. Interest in this area is provided by the historic gold showing which were identified by previous companies.
Area 4 – Newly acquired claims in the south-west portion of the property.
Area 5 – Claims located north-west of the property's access road.
The surface work program covers a good portion of the Chevrier property, and should provide good insight into future potential drill targets outside of the Main and South deposits. Stay tuned for news flow from the surface work program.
Chevrier South Zone
While Chevrier’s Main Zone, with its existing Inferred Resource, has garnered the bulk of drilling over the history of the Project, I believe there’s the possibility of some great results from Chevrier’s South Zone. Why? Although the South Zone doesn’t have an existing 43-101 resource, Met-Chem’s comments within the technical report state,
“the Chevrier South deposit contains a potential between 8.5 and 9.0 million tons of mineralized material grading 1.8 to 2.2 g/t Au.” ~ Met-Chem – 43-101 Technical Report on the Mineral Resource of the Chevrier Gold Project – p.93
If you express the 8.5 million tons of mineralized material at 1.8 g/ton, you get 459,000 ounces of gold. Met-Chem’s reference to the possible resource size of the South Zone deposit is based off a small historical drill data set and its similarities in alteration and deformation like the Main Zone. The fact is, the South Zone needs further drilling before a 43-101 complaint resource can be officially estimated and given the rightful focus on the Main Zone, it is my guess that Genesis will leave the South Zone area for future a drill program.
October Gold Project
Genesis also owns 100% of the 203 square km October Gold Project, located in the southern Swayze greenstone belt in Benton Township, Ontario. This project is located 35 km northwest of IAMGOLD’s Cote Lake deposit, and 50 km southeast of Goldcorp’s Borden Gold Deposit. The Cote Lake Deposit was purchased by IAMGOLD from Trelawney Mining for $585 million, while the Borden Gold Deposit was purchased by Goldcorp from Probe Mines for $526 million. This demonstrates how coveted this Ridout Deformation Zone is, and Genesis’ October Gold Project is right in the middle, and on trend.
IAMGOLD announced in a press release on June 5, 2017 that Sumitomo Metal Mining has acquired a 30% undivided participating joint venture interest in IAMGOLD’s ownership interest in the Cote Gold Project for an aggregate $195 million. Sumitomo’s interest in this area of Northern Ontario should bring more attention to the surrounding land claim owners, one of which is Genesis’ October Gold Project.
The October Gold Project straddles what is considered the western extension of the Larder Lake-Cadillac Deformation and a portion of the Ridout Deformation zone. Historic gold deposits on these deformations, Kirkland Lake and Kerr Addison-Chesterville, have historic gold production north of 49 Moz.
The October Gold property saw surface exploration work in 2011. The program comprised of Soil Gas Hydrocarbon (SGH) sampling and reconnaissance level gravity geophysical surveys.
“A SGH survey is a deep penetrating geochemical method that involves the analysis of various hydrocarbons associated with ore bodies at depth using a forensic and comparative approach for Identification. “ ~ Genesis
The program has identified two gold anomalies, which Actlabs, the interpreting laboratory, says have a high degree of confidence. This confidence is based on comparisons with other surveys that Actlabs has completed on other gold deposits. These anomalies will see future surface work which should better define where the diamond drilling should take place.
The October Gold project property is early stage, but holds very promising gold exploration potential.
The Genesis Metals story is not without risk, as any gold exploration company runs the risk of not finding anything or not finding mineralization which is economic. In Genesis’ case, I believe further modelling of the gold grade distribution within the Main Zone should feed nicely into Chevrier’s Main Zone resource update later this year. While on the exploration side, the current surface work program is going after 5 high potential targets and should provide good news flow over the coming months.
Outside of the risk of exploration, Genesis has some compelling facts that make their story undervalued in comparison to the paltry $5 million MCAP that they currently possess, including:
- A proven management team: Groves, Sundar, Fleming, Florek, Liboiron and Mcleod
- Strategic Shareholders List Headlined by: Osisko Mining, Eric Sprott, Delbrook Capital, Gold 2000, US Global Investors, SIDEX/SDBJ and Medalist Capital
- Located in the 6th best jurisdiction in the world, Quebec
- Great bang for their drilling buck, as their all-in drill costs, thus far, have roughly averaged $220 per metre
- Large land package with exploration potential, Chevrier Gold Project and October Gold Project
The next leg of the gold bull market is coming; fortunes will be made in the coming years by buying right and sitting tight, investing in companies that look to add value for their shareholders. Genesis Metals (GIS:TSXV) is a great example of this and is a company in which I’m investing.
Until next time,
Brian Leni P.Eng
Founder – Junior Stock Review
Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria. I do own Genesis Metals Corporation stock. All Genesis Metals Corporation analytics were taken from their website and press releases. Genesis Metals Corporation is a Sponsor of Junior Stock Review.
I hope you will find this article interesting and useful, and will have further interest in upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.
The Critical Investor is not a registered investment advisor, currently has a long position in this stock, and Genesis Metals is a banner/syndication sponsoring company. The Critical Investor is compensated for the syndication of this article by Genesis Metals. All facts are to be checked by the reader. For more information go to www.genesismetalscorp.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.