Too much gold!?!? Whoever said too much gold is a problem? That can’t be…. or can it? Well in the case of Wallbridge Mining Ltd. (Wallbridge), WM on the TSX, a series of business plan changes because of finding more gold mineralization has ultimately led to an excellent buying opportunity to acquire a stake in a future Quebec gold mine.
Wallbridge is a gold exploration and development company with the primary focus of developing its Fenelon gold project along the Detour-Fenelon trend, approximately 80 km east of Agnico Eagle’s Detour Lake gold mine. Wallbridge controls a larger land package which extends 97 km from the Ontario border east into Quebec. Most of this land package is underexplored due to significant overburden and little rock outcrop.
Wallbridge’s flagship Fenelon project consists of an open pit with underground infrastructure which was developed in the early 2000’s by a previous operator during bulk sampling. Since acquiring the project in 2016, Wallbridge has made a series of gold discoveries in varying host rocks at Fenelon which initially resulted in significant share price appreciation. From the broader view of delivering a producing gold mine, these discoveries conversely led to a series of business plan changes. For prospective investors, it is important to understand the history of these discoveries, how Wallbridge changed their business plans, the resulting context of the current company valuation, and the ultimate future potential upside of the company as a whole. Let’s dig in!
The Original Business Plan
In May 2016, Wallbridge announced that they had entered into an agreement to acquire the Fenelon project where Marz Kord, CEO of Wallbridge, was quoted saying that the acquisition of Fenelon “…is an important step forward for Wallbridge as we implement our strategy of becoming a sustainable producer…” and that their plan for the property was to be in a “…position to make a production decision in the first half of 2017” . A Pre-Feasibility Study (PFS) centered around the existing resources (all within the now-named Gabbro Zones) at Fenelon was completed in March 2017 and was eventually used as the basis for permitting of the recommended low throughput operation (about 500 tonnes per day) with the Quebec Government (the Environmental and Social Impact Review Committee) .
Change of Plans??
During 2017, Wallbridge’s exploration program targeted holes near existing infrastructure and at a depth above 150 m. This program intersected and expanded mineralization in the previously known Gabbro Zones. For the 2018 drilling program, Wallbridge’s goal was to target undrilled mineralized zones at depth under the Gabbro Zones and laterally away from the mine workings. It was during this program that the Tabasco-Cayenne (press release on November 20, 2018 , see Figure 1) and Area 51 Zones (press release on February 21, 2019  and see Figure 2 from the March 25, 2019  press release) were initially discovered. Figure 3 highlights the new discoveries in relation to the previously developed mine workings.
Figure 1: Location of Tabasco-Cayenne System extension.
Figure 2: Bottom left on the Figure is the location of the Area 51 discovery hole.
Figure 3: Overview of Area 51 and Tabasco-Cayenne zones in relation to the bulk sample and existing infrastructure considered in the 2017 PFS.
Concurrent with these exploration drilling programs, operations to support the development and eventual mine permitting of the Gabbro Zones continued with the approval of a bulk sample. The bulk sample would provide Wallbridge with the information required to make a production decision on the Gabbro Zones . In 2018/2019 a 35,000 tonne bulk sample was completed. Considering the 2017 PFS and 2018/2019 bulk sample, an initial project description for mining the Gabbro Zones was submitted to the Environmental and Social Impact Review Committee in June 2019 . The proposed mining plan submitted to the Environmental and Social Impact Review Committee, centered around the low throughput underground mining project and highlighted the potential to expand the operation through the inclusion of the newly extended Gabbro Zones from deeper exploration drillings .
The 2019 drilling program then focused on the expansion of these newly discovered Tabasco-Cayenne and Area 51 zones and to explore below the 2018/2019 bulk sampled area. This drill program was conservative to expand mineralized zones close to anticipated mine development while also allowing for potential vertical and lateral extensions of the mineralized footprint. The program was extremely successful with following up on the discoveries of the new zones identified in 2018. Throughout press releases in 2019, Wallbridge management commented on the discoveries of gold in differing host lithologies. For instance, from the June 24, 2019  press release, Attila Péntek, Vice President Exploration of Wallbridge noted:
“An unexpected surprise was the intersection of 3.61 g/t gold over 18.96 metres in hole FA-19-054 within a mineralized shear zone cutting through sediments at a vertical depth of 450 metres. Such significant mineralization has previously not been observed to be hosted by the sedimentary package at Fenelon, highlighting the fact that we now have multiple mineralization styles and host lithologies within the rapidly growing footprint of the Fenelon Gold System…" Figure 4 highlights the varying host lithologies with the Gabbro on the right, the diorite (Area 51) on the left, and the sediments between the two.
Figure 4: Fenelon Gold from the June 24, 2019 press release. Gabbro is on the right, the diorite (Area 51) on the left, and the sediments between the two.
Updated Business Plan #2
Following the success of expansion drilling, Wallbridge issued a press release on June 24, 2019  updating the Fenelon exploration and future production strategy. In this press release, it appears as though Wallbridge is considering a change in business plan as noted by Marz Kord as he highlighted the expansion success of the Tabasco-Cayenne and Area 51 zones which gives Wallbridge “… the optionality to evaluate [Area 51] with various resource/mining scenarios in mind. These options will be tested in 2019 for possible scenarios of open pit mining with typical cut-off grades of 0.3 grams per tonne and underground high-grade narrow vein mining or underground bulk mining. All of these are potential methods that could be used to maximize the value of this deposit". Wallbridge concluded the press release with the following objective and an action plan moving forward:
“The exploration success at Fenelon is rapidly advancing Wallbridge’s five-year plan of working towards sustainable annual production of +60,000 oz. gold in three years with growth to +100,000 oz. of annual gold production in five years.
To achieve these objectives, Wallbridge is also:
• pursuing an additional 25,000-tonne bulk sample permit to test some of its newly-discovered zones in the Main Gabbro area and to evaluate alternative mining methods;
• commencing production permitting for the Main Gabbro area; and
• continuing to review value-accretive gold projects to add to its portfolio to achieve its 100,000 oz. per year gold production target.”
Transitioning from the 2019 to 2020 drilling programs, drill rig deployment shifted from definition drilling of the Gabbro Zones more towards surface drilling to define the footprint of the Fenelon gold system via completing wide spaced step outs. This shift could be interpreted as a second change in business plans. Throughout the rest of 2020, most drill rigs focused on the expansion of the Tabasco-Cayenne and Area 51 Zones. On March 2, 2020, the successful step-out drilling program at Fenelon led Wallbridge to acquire Balmoral Resources, the company who sold Fenelon to Wallbridge in 2016 and who owned the land surrounding Fenelon from the Ontario border, 97 km east into Quebec (see Figure 5). Throughout the rest of 2020, multiple new mineralized gold zones were discovered within Area 51, Tabasco-Cayenne, and an eastern extension of the Gabbro Zones. Furthermore, many instances of open pit potential were mentioned throughout press releases in 2020 , , , , .
Figure 5: Wallbridge Detour-Fenelon trend after Balmoral acquisition.
On the underground mine permitting front, Wallbridge submitted all required studies as outlined by the Environmental and Social Impact Review Committee in October 2020. However, on December 17, 2020, a letter written by Wallbridge was sent to the Environmental and Social Impact Review Committee requesting the Committee to suspend the review of the of the submitted documents from October 2020  (French only). The provided reasoning for the suspension of the analysis was attributed to the latest results of the exploration program where Wallbridge expressed a desire to focus on defining the scope of the project before continuing with the impact assessment. The letter went on to highlight how future exploration activities in Area 51 are required to better define the scope of a proposed mining operation.
On January 11, 2021, Wallbridge updated the market on their 2021 exploration and development plans . Wallbridge formally announced the pause of the small-scale underground mine permitting and announced a 170,000 m drill program and a 4,800 m underground exploration development program. This drilling program was primarily planned for the Fenelon project while about 10% of the total was to be drilled at regional targets located on the acquired Balmoral lands, including at Martinière, an advanced exploration stage gold project. Wallbridge’s stated goal for the year was to release a maiden resource estimate (RE) in Q3 2021. At this point it seemed as though Wallbridge was still considering a future potential underground and/or open pit mining project.
A Change of Plans… Again?!?!
Throughout 2021, Wallbridge reported on mostly infill drilling results, with some expansion results in preparation of their RE. Of note, on May 12, 2021, Wallbridge updated the market on their underground development program and announced a change where one crew would start with the Area 51 ramp (instead of two crews each working on the Area 51 and Tabasco ramps) and announced a decrease in underground development meterage . Wallbridge also announced that they would update the RE at Martinière and at the Grasset nickel project which has the potential for new gold discoveries.
On October 6, 2021, Wallbridge updated the market on the status of their RE . They highlighted the mineralized zones that would be included in the RE which included: 1. the near surface potentially open pittable mineralization in Area 51, 2. The near surface high-grade mineralization adjacent to the existing mine workings from the Gabbro Zones, and 3. The wide zones of potentially bulk mineable underground mineralization from the Tabasco-Cayenne, Contact, and Area 51 Zones. This update highlighted the significant open pit potential of the upcoming resource.
On November 9, 2021, Wallbridge released REs for Fenelon, Martinière, and Grasset . Most of the gold ounces at Fenelon came from the open pit portion of the deposit, as per Figure 6 below, definitively signalling to the market that Fenelon has significant open pit potential with underground bulk tonnage upside based on this resource. Wallbridge has communicated to the market that the Martinière deposit (30 km from Fenelon) is important to consider alongside Fenelon as it “…strengthens [Wallbridge’s] vision of establishing multiple gold producing assets sharing centralized infrastructure on the Detour-Fenelon Gold Trend” as per CEO Marz Kord. Figure 7 and Figure 8 highlight the evolution of the discovered Tabasco-Cayenne and Area 51 Zones and the footprint of gold mineralization/pit outline relative to the underground infrastructure.
Figure 6: Fenelon and Martinière RE from November 9, 2021 press release .
Figure 7: Gabbro/Tabasco-Cayenne/Area 51 Zones as of the resource estimate (see Figure 7.7 of the December 2022 NI 43-101 Technical Report) .
Figure 8: Footprint of the Fenelon gold system and RE block model from the November 9, 2021 press release .
On January 10, 2022, Wallbridge announced the company’s exploration and development plans for the current year. Wallbridge is predominantly focusing on resource expansion at Fenelon and Martinière with some infill drilling at Fenelon and some regional exploration drilling across the entirety of Wallbridge’s Detour-Fenelon trend. At Fenelon, Wallbridge intends on expanding the footprint of the open pit shell and plans on adding ounces though infill drilling within the open pit resource. At Martinière, Wallbridge intends to infill drill between deposits to maximize the open pit resource. A future resource update encompassing both Fenelon and Martinière is intended to be completed in 2023 followed by economic studies .
Share Price Performance
Wallbridge is a story of multiple business plan changes which may have not been communicated effectively to the market. In the junior exploration business, risk mitigation is key where multiple business plans are preferred relative to one. Fully committing to one plan and clearly communicating that plan to the market may not be the best business decision as the next round of incoming assays could significantly change the business plan. Multiple business plan changes communicated to the market could also be very confusing. I believe that there was a disconnect between evolving company business plans and the market expectations of Wallbridge. This is clearly conveyed in overall decline in share price illustrated in Figure 9. Negative sentiment in the market was also evident after the release of the RE as the share price dropped by approximately 17% the next trading day and has dropped 60% overall since the RE was released (as of June 3, 2022).
Figure 9: 3-year chart of Wallbridge’s share price as of June 3, 2022 (Source: Stockwatch.com).
The Wallbridge Opportunity Today
Considering the current cash balance as of March 31, 2022 (Q1/22 financial statement) of approximately $47.2 million (excluding the expected over $8 million of tax credits to be received) and a market cap of about $207.3 million (as of June 3, 2022), the enterprise value is $160.1 million. The current RE valuation of Fenelon and Martinière can be estimated using a rough (and likely conservative) price per ounce of gold in ground for inferred and indicated resources of $20 USD and $30 USD respectively . Based on these estimates and an exchange ratio of $1.26 USD/CAD (as of June 3, 2022), Wallbridge’s RE is worth approximately $144.3 million. When considering the valuation of Wallbridge’s Grasset nickel project and gold upside along with their other nickel-copper-PGM assets around Sudbury, their stake in Lonmin Canada (Sibanye-Stillwater), other non-core gold assets, and exploration upside potential along the Detour-Fenelon trend, I believe Wallbridge is undervalued.
Going forward, the likelihood that Wallbridge will deviate from their current business plan of upgrading the Fenelon and Martinière REs and subsequent economic studies is low. Wallbridge has substantially more information in 2022 than they had in 2016. It is demonstrated that Wallbridge have a large and expanding gold footprint with an open pittable and underground resource at Fenelon which provides a solid resource base for future economic studies. Martinière offers great upside as a satellite deposit for a hub-and-spoke operations model with immediate exploration upside in 2022 via ongoing infill drilling.
Has Wallbridge always been transparent and clear at communicating their business plans? Yes and no. From the press releases referenced in this article, it is evident that Wallbridge has always been very transparent. However, it is arguable that clarity has been lacking in these press releases as business plans have changed multiple times since Fenelon was acquired. With a divergence in the general understating of Wallbridge’s business plans and market expectations (attributed to multiple gold discoveries), I believe that today’s market valuation offers current and prospective investors an excellent opportunity to capitalize on Wallbridge’s business model going forward.
Note: All dollar amounts are in Canadian dollars unless otherwise stated.
Disclosure: I have a beneficial long position in the shares of one or more of the companies discussed in this article, either through stock ownership, options, or other derivatives. I wrote this article without external assistance, and it expresses my personal opinions. I was not compensated for this article, and I have no business relationship with any company whose stock is mentioned in this article.
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