This article by Brian Leni has been published first at Junior Stock Review.
All pictures are company material, unless stated otherwise.
Is the tide beginning to change from bear to bull in the gold market? In my opinion, it could be, and one of the major driving forces behind it could be mergers and acquisitions (M&A).
For those who haven’t been following closely the last few months, it began with the merger of Barrick and Randgold and then, just recently, with Newmont’s acquisition of Goldcorp.
M&A is a great thing for the sector and, I believe, have set the tone for more M&A in 2019, as the other gold sector majors and mid tiers look to keep pace with the newly formed behemoths and, most importantly for the juniors, add to their depleting resource coffers.
Almost regardless of where the gold price is headed, M&A activity, I believe, is very positive for the junior gold companies and could spur a rally in some of the junior sector’s top M&A candidates.
As I’ve mentioned previously, the discovery of economic mineral deposits is slowing dramatically because most of the easy, outcropping mineralization has been found, at least in the world’s top jurisdictions.
Junior companies are forced to raise more money, drill deeper and enter ‘risky’ countries in the hopes of finding the world’s next big discovery. New discoveries, therefore, will be highly valuable and, for those high quality companies that already sit with good deposits, there’s a ton of potential value to be unlocked.
Speaking of M&A candidates, while they are still very early in the development of their flagship Chevrier Gold Project, given its location, its potential size, and the team leading its development, Genesis Metals Corporation could soon be on that list of the top takeover candidates.
Today, I take a look at their newly released resource estimate, and more importantly, in my mind, some key advisors that have chosen to help move this project forward.
Let’s take a look!
Genesis Metals Corporation
MCAP – $8.6 million (at the time of writing)
Shares – 101.8 million
FD – 137.7 million
Management and Advisors – 16%
Other Major Shareholders – Osisko Mining, Eric Sprott, Gold 2000, Delbrook Capital, US Global Investors, SIDEX/SDBJ and Medalist Capital – 34%
Retail – 50%
The Genesis 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 41-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.
Working hand in hand with Groves is Jeff Sundar, President and Director of Genesis. Sundar has 20 years of experience in the mining industry, and is a former Director of Northern Empire, which was sold to Coeur Mining for $117 million in October of 2018. Also, he was a VP/Director of Underworld Resources, which was acquired by Kinross for $140 million in the last cycle.
The Genesis team is rounded out by Exploration Manager, Andre Liboiron, Executive Director, Adrian Fleming, Director John Florek, Independent Director, Keenan Hohol, Independent Director, Robert Scott and newly appointed Steve Williams.
A Discovery Group Company
In its most recent press release, Genesis Metals Corp. announced that they are now a part of the Discovery Group of Companies. This is a major step in the right direction for the company as they now become a part of the John Robins and Jim Paterson led group, which has churned out some of the best stories the sector has seen over the last few years.
A few of the M&A successes have been Kaminak Gold Corp., which was sold to Goldcorp for $520 million, and Northern Empire Resources Corp. which, as my readers, you are very familiar with; they were sold this past summer to Coeur Mining for $117 million.
Additionally, you have other high quality resource projects, such as Bluestone Resources Inc., Fireweed Zinc Ltd. and Great Bear Resources, all of which have had success over the last year, as they move their projects forward.
In short, Genesis’ entry into Discovery Group speaks to the potential of the company and to its management team, a group in which Robins and Paterson must have confidence, as their reputations are now linked.
While not being a part of the company’s main team, strategic advisors can play key roles in the development of a project. In particular, Genesis has done a great job assembling a cast of advisors that have resumes filled with success, particularly in exploration, resource expansion, capital markets and, arguably most important to the Genesis story, M&A.
As I just covered, Genesis is now a Discovery Group Company, and with that comes not only the notoriety of being a part of the group, but also means, in this case, that both Robins and Paterson will play strategic advisor roles for the company.
John Robins is a professional geologist by trade, with a wide variety of experience over the course of his more than 30 years within the industry. Robins was both a founder and Chairman of Kaminak and, in 2008, was recognized for his achievements in mining exploration by the Association for Mineral Exploration British Columbia with the H.H. “Spud” Huestis Award.
Jim Paterson has more than 22 years within the mining industry with experience in raising capital, M&A, joint-ventures, spin-outs, RTOs and IPOs. Currently, he is Chairman and CEO of Valore Metals Corp and was a founding Director of Northern Empire Resources Corp.
Genesis will benefit greatly from having these two men as strategic advisors, as they move their flagship Chevrier Gold Project forward.
In November of 2018, Genesis announced that Dr. Rob Carpenter, Dr. Andrew Ramcharan and Garrett Ainsworth would be joining their list of strategic advisors.
Dr. Carpenter is a professional geoscientist with over 25 years of experience in the resource sector. He is best known as co-founder, President and CEO of Kaminak Gold Corporation (2005 to 2013) and its multi-million ounce Coffee Gold Project, which was sold to Goldcorp in 2016 for $520 million.
Dr. Ramcharan is a professional engineer with over 18 years of experience in operations, project evaluation, M&A, finance and investor relations. Most recently, he was a managing Director of Project Evaluation for both debt and equity financings at Sprott Inc.
Last but not least, Garrett Ainsworth is a geologist by trade and former VP Exploration for NexGen Energy, which discovered the world class Arrow Uranium Deposit in Canada’s Athabasca Basin.
Additional Strategic Member of the Genesis Team
Eric Lemieux, a geologist and former Laurentian Bank Securities Mining Analyst, has over 25 years of experience in the mining industry. His experience in project evaluation and connections within the sector make him a valuable member of the Genesis team.
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 2nd 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.
2018 Fraser Rankings; Source: Fraser Institute
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
NOTE: Quebec provincial funds, SIDEX and SDBJ, have participated in past private placements in Genesis and now own a good portion of stock. In my mind, it’s a great indication of the potential value that the Chevrier Gold Project may have moving forward.
Favourable politics and world class geology – for me, it doesn’t get much better than Quebec, as far as your investment buck goes!
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.
Chevrier 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.
Since Genesis acquired Chevrier in Q2 of 2016, it has completed a long list of work which includes, the inventory of more than 70,000 m of drill core, the re-sampling and re-assaying of selected mineralized intervals, re-sampling of 4 trenches, 3D modelling of Main, South and East Zones, 50+ km of IP surveying, and executed a 10,000 m drill program, which focused on confirming historical Geonova drill holes, exploration step out holes on the Main Zone Deposit and the exploration of other IP and geological targets. Results from this program can be found on Sedar.
New Geological Model
Over its 29 year history, Chevrier has seen 213 drill holes, totalling over 87,000 meters. However, the Genesis team is the first to consolidate, re-evaluate and form a comprehensive geological model regarding the Main Zone’s gold mineralization.
Below is an image of the mineralization within the Main Zone, using a 0.3 g/t Au grade shell.
Chevrier Gold Project – Plain View of the Main Zone Deposit
Chevrier Gold Project Resource Update
Using the new geological model and the compiled data from the most recent drill program, Genesis has released an updated resource for the Chevrier Gold Project. The updated resource includes the Main and East Zones and, as described in the previous section of the report, envisions a mining scenario in which there is both an open pit and underground workings.
Indicated Gold Resource – 423,000 ounces averaging 1.22 g/t
Inferred Gold Resource – 303,000 ounces averaging 1.27 g/t
*Mineral Resource Estimate for a combined pit constrained and underground scenario at a cut-off of 0.3 g/t Au in-pit and 0.95 g/t underground. Gold price assumption US$1400/oz.
NOTE: With a combined indicated and inferred resource of 726,000 ounces of gold, and with Genesis’ MCAP sitting at roughly $8.6 million, this presents an interesting value proposition. Keep in mind, not all ounces are of equal value, but nonetheless, this is a good high-level indicator of value.
This is a great start for the Genesis team as, collectively, – indicated and inferred – they sit very close to 1 million ounces of gold in an area of the Abitibi which looks poised for development in the coming years. Clearly, the next move for the Genesis team is to expand this new resource, which will be aided by their newly formed strategic advisors team.
2019 and beyond should be very interesting for investors as they move forward.
Chevrier Resource Expansion
In terms of expanding the deposit, one of the best possibilities comes with 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 the nature of many of the Abitibi gold deposits, such as Osisko Mining’s Windfall Lake Gold Project, there is certainly the potential for more ounces to be found at depth.
I look forward to the next drill program which will test the extent of the mineralization at depth, and will most certainly tackle the other high priority targets on the property.
New Target Generation
Target formation is very important to an exploration company because it’s integral to ensure that they are spending their money on the targets that pose the highest potential for returning mineralization.
In an important piece of news, which dropped just before I went to publish this piece, it was announced that Vector Geological Solutions (Vector) has been engaged to aid in new target generation at Chevrier.
The Vector team, Daniel MacNeil and Dr. Alan Wainwright, will be joined by Strategic Advisor, Dr. Robert Carpenter, in applying modern gold exploration targeting methods to over 100 years of historical exploration data from the existing Chevrier gold deposit.
Their goal is straightforward; increase the grade and tonnage of the known deposits and find new, high potential gold targets on the rest of the property.
Personally, I believe 2019 will see a changing of the tide in terms of the direction of the gold market, as both uncertainty and M&A drive much-needed attention to the junior companies of the gold sector.
Investing in junior resource companies is risky and, therefore, in my opinion, you need to seek out companies that are led by strong management teams, who can navigate the risk and propel the company forward.
Genesis Metals Corporation is a company which I am invested in and believe has the horsepower, in terms of the management team, to move the Chevrier Gold Project forward. Clearly, the company must focus on expanding the resource by drilling deeper and exploring the property’s high priority targets.
As outlined in my report, there is a strong list of advisors who have “been there and done that” within the resource sector, and I am confident will have a great influence on the direction of Genesis moving forward.
Summarizing my thesis for investment, here are what I think are a few of Genesis’ most compelling strengths:
- A proven management team: Groves, Sundar, Fleming, Florek and Liboiron
- Strategic Advisors: Discovery Group’s John Robbins and James Paterson, Dr. Robert Carpenter, Dr. Andrew Ramcharan, and Garrett Ainsworth.
- 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
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 release. 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, 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 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.