The New Gold Bull Market
2016 was an explosive year for gold stocks; they roared out of the bear market that had knocked them 90% off their 2011 highs. What caused the change in sentiment, early last year? It's tough to say, but for me, the gold thesis hasn’t changed; it's only become stronger since the world’s largest economies started printing money to pay off their debts and bail out too-big-to-fail corporations.
In the case of the gold thesis, even during the doldrums of the bear market a turnaround was inevitable, and sure enough, after 5 years of pain, we're set for the gain in a burgeoning, new gold bull market. Fortunes are made in bull markets and the one we're in currently could be the granddaddy of them all!
In an interview between Louis James, Casey Research Senior Investment Strategist, and Doug Casey, Founder of Casey Research, Casey had the following to say about gold bull markets,
“When the public gets the bit in its teeth and wants to buy gold stocks, it's going to be like trying to siphon the contents of the Hoover Dam through a garden hose.” ~ Casey Research
I recently attended the Vancouver Resource Investment Conference and was pleasantly surprised with the amount of optimism currently circulating amongst company personnel and investors. One company executive said to me, “financings are being over-subscribed and investors are responding positively to good news releases...these are the hallmarks of a bull market.”
Further, with the world’s economy still in a holding pattern and forces like a new American President who is ready and willing to make changes, some level of turmoil can be expected worldwide. To what extent? It's hard to say, but without a doubt in my mind, the uncertainty is good for gold and gold stocks, and is a major reason why I'm currently looking for gold companies that stand to give me the best bang for my investable buck!
Today, I have a story about a junior gold explorer that owns property in the famed Abitibi Greenstone Belt in Quebec, has a proven and serially successful management team, and a plan to expand their existing gold deposit. The company that I believe has so much upside potential is Genesis Metals Corp. (GIS:TSXV). 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 is led by CEO, Brian Groves, a 30-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.
First, we have Jeff Sundar, Executive VP and Co-Founder of Genesis. Sundar has 17 years of experience in the mining industry, having worked 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.
A major player on the Genesis team is Chairman and Director, Robert McLeod. McLeod has been serially successful during his career, thus far, with the discovery of Underworld’s 1.6 Moz White Gold deposit. To date, McLeod is also President and CEO of IDM Mining, which is set near his family’s hometown of Stewart, BC.
The McLeod family has been blessed with a high mining acumen. From his father Ian to his uncle Don, to his cousins Catherine (Pacific Rim Mining, Bear Creek Mining) and Bruce (Sabina Gold and Silver), everything the McLeod family touches seems to turn to gold.
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
Adrian Fleming, the former President 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, he 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 leads exploration for the 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. 2017 will be a busy year for Liboiron, as he looks to expand on the Chevrier deposit with a large drill program in the works for Q2.
8th 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 80.8, ranking it 2nd in Canada and 8th 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.
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 a just few of its largest contributors.
Source: Genesis Metals
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.
Source: Genesis Metals
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!
Chevrier Gold Project
Genesis’ flagship property, the 100% owned Chevrier Gold Project, is located 35 km southwest of Chibougamau, Quebec, in the heart of the Abitibi Greenstone Belt. The Genesis property straddles the Fancamp deformation zone, and is 15 km northeast of IAMGOLD’s high-grade Monster Lake gold discovery.
Source: Genesis Metals
Prior to Genesis, the area in which the Chevrier deposit is located was owned and explored by Inmet Mining Inc. (Minnova), who, 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, who 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.
Chevrier’s existing NI 43-101 inferred resource for its main zone is 300,000 oz of gold at 1.99 g/t (1 g/t cut-off), and is open for further expansion. From the NI 43-101 Report, the South Zone, while not having a resource estimate, is believed to hold a lot of potential, as Met-Chem, the company responsible for analyzing and writing the 43-101 technical report, says,
“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 - pg.93
Met-Chem expresses the need for further drilling on the South Zone to delineate the potential resource; however, if you express the 8.5 million tons of mineralized material at 1.8 g/ton, you get 459,000 ounces of gold. Successful drilling will be needed to get there, but the potential is compelling.
PUSH: Q1 will feature a 3D modelling of the Main and South Zones and a geophysical survey of the area. While Q2 will mark the beginning of a 5,000 to 10,000m drill program on the Chevrier property, which includes 6 new targets.
Source: Genesis Metals
2016 Trench Work
Last fall, Genesis began a re-trenching program that entailed the re-sampling of trenches that were formerly excavated by a previous owner. This program was followed in parallel with a core re-logging, which consisted of the re-assaying of cores that were drilled by the previous owner. Why re-do work that has already been done? To ensure that the assaying work, which was completed in the late 90s, was done correctly, but also to maximize the accuracy of future drill locations. Drilling is a costly business and the more efficient a company can be in the choosing of its targets, the further its dollars will go.
Source: Genesis Metals
The re-sampling data was released towards the end of 2016; on the Dec 12, 2016 news releases, CEO Brian Groves remarks,
“These final results from our resampling and analysis of existing drill core from work by other companies carried out prior to National Instrument 43-101 provide a high level of confidence in the results of previous work. We will now focus on understanding the controls to gold mineralization in the Main Zone and elsewhere on our large property within this prospective greenstone belt. This understanding will enable us to plan future drilling programs on the property.”
A few of the re-trenching results were highlighted by: 6.82 g/t Au over 4.7m, including 17.7 g/t Au over 1m in Trench 7, 4.59 g/t Au over 6.4m, including 7.43 g/t Au over 1.3m and 5.22 g/t Au over 4.25m, including 6.56 g/t Au over 2.1m in Trench 7. Check out the Genesis 2016 News Releases for further trenching results.
The Chevrier Gold project has great promise for further expansion and exploration. Good drill results and a bull market in gold are a great combination for a rising share price!
October Gold Project
Genesis also owns 100% of the 203 sq. 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 Probe Mines in June 2012 for $585 million, while the Borden Gold Deposit was purchased by Goldcorp from Trelawney Mining for $526 million in March 2015. This demonstrates how coveted this Ridout Deformation Zone is, and Genesis’ October Gold Project is right in the middle, and on trend.
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.
Source: Genesis Metals
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
Source: Genesis Metals
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 mineral exploration is as risky as it comes in the mining business. However, Genesis has some compelling facts that make their story undervalued in comparison to the paltry sub 10 million dollar MCAP that they currently possess, including:
- A proven management team: Groves, Sundar, McLeod, Fleming, Florek and Liboiron
- Existing 43-101 Inferred Resource of Cherveir Main Zone - 300,000 oz of gold at 1.99 g/t (1 g/t cut-off), which is open at depth and to the north
- Large land package with exploration potential, Chevrier Gold Project and October Gold Project
- 8th best jurisdiction in the world, Quebec
The next leg of the gold bull market is upon us, 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.
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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.