Northquest (NQ-V)
Nordgold (NORD-LSE) increased its stake in Northquest to 52.3% from 42.9% in late November, writing a cheque for $5 million (US$3.8 million) that will cover all of the junior’s exploration costs next year at its Pistol Bay project, about 80 km south of Agnico Eagle Mines’ (AEM-T) high-grade Meliadine project.
“This is the greatest confirmation of credibility that you can get,” Jon North, Northquest’s president and chief executive, says in an interview. “We have a million ounce gold producer who just paid $0.30 a share when the market says we’re worth $0.19 a share ... and there is no Canadian company that will do that.”
“We can’t get a meeting in Canada with an institutional fund, a mining company, or a portfolio manager,” the mining executive continues. “Five million dollars is coffee money. Why didn’t a Canadian company do that?”
Whatever the reason, and unlike its rivals, Nordgold spied an opportunity, making its first investment in Northquest in June 2014, before stepping in and taking majority control on Nov. 25. Nordgold made its move a day after Northquest released its second batch of drill results for the year, with intercepts from the project’s Vickers zone of 39 metres grading 2.57 grams gold per tonne; 30 metres grading 2.10 grams gold per tonne; 44.50 metres of 1.07 grams gold per tonne; and 50 metres of 2.13 grams gold per tonne. The first set of results were released in January with the best result returning 134.42 metres grading 1.36 grams gold.
Nikolai Zelenski, Nordgold’s president and CEO, said in a statement that the results released this year from 36 drill holes “confirmed” Pistol Bay’s “potential of being a high-quality deposit of substantial scale with high-grade ore, a moderate stripping ratio and excellent metallurgy.”
Northquest acquired Pistol Bay, on the west coast of Hudson Bay in eastern Nunavut, in 2010. But the story dates to 1985, when Inco discovered the Vickers zone in the centre of the property after drilling 149.82 metres grading 2.55 grams gold. In 2012, Northquest twinned the Inco hole in the same stratigraphy, and doubled the grade, with an intercept of 164.41 metres grading 5.39 grams gold. The company attributes the better grade to a larger core sample and more comprehensive assay method to take into account the abundant coarse visible gold in the core samples.
The fact that the grade and thickness of the zone were so good, and that Inco had only completed a nominal amount of exploration, and in a completely different gold price environment 30 years earlier, was appealing to Northquest. Also appealing was the fact that Pistol Bay was on Crown land that had been open for staking for more than ten years, meaning Northquest didn’t need to negotiate an exploration agreement with the territorial government.
Another surprising thing about the project, North says, is that companies involved in gold exploration in the region, with the exception of Agnico Eagle, seemed to have overlooked the mineral occurrences at Pistol Bay and the possibility that it was a linear trend parallel to Agnico’s Meliadine gold deposits, 25 km north of the hamlet of Rankin Inlet.
In 2010, Agnico Eagle and Northquest both claimed to have staked the ground covering the Vickers zone. The dispute was resolved two years later in Northquest’s favour, when the Mining Record awarded the claims to the person that Northquest had bought them from, allowing the company to begin exploration work in earnest.
Interestingly, North was quite familiar with the Meliadine deposit, when he worked for its previous owner, Western Mining, in 1994-1995. Although he never worked directly on Meliadine, he was part of a committee that recommended Western Mining purchase it from Complex.
Meliadine is Agnico’s largest development project based on proven and probable reserves, which stand at 13.9 million tonnes grading 7.44 grams gold for 3.3 million oz. gold. (Indicated resources measure 20.25 million tonnes grading 5.06 grams gold for 3.29 million oz., and inferred are 14.08 million tonnes averaging 7.65 grams gold for 4.36 million oz. gold.) By the end of the third quarter, Agnico had advanced the underground ramp at Meliadine by 1,960 metres.
Meliadine and Pistol Bay are on the opposite sides of a sterile, granitic gneiss block, and Northquest believes the Pistol Bay trend is a mirror image of the Meliadine trend. The first phase of exploration, in 2011, validated that concept, and quickly led to the recognition of the trend as a deformation corridor trending northwest, with a nominal width of at least 2 km, containing gold occurrences within epizonal porphyries, gabbro-diorite intrusions, quartz veins and banded iron formations, over at least 20 km of strike length on the property.
Over the last five years, Northquest has completed three airborne geophysical surveys and 21,750 metres of diamond drilling in 100 holes, 65 of which were completed in the Vickers zone, and last month, the company announced that it had discovered a second gold-bearing intrusion (at Vickers) that is open to the east and at depth.
The strategy this year is to complete drilling west and east of existing drill holes at the Vickers zone to explore the potential extension of the gold zone that already has been intersected over a 350-metre strike length.
Pistol Bay is accessible by air or by sea and is within 10 km of Whale Cove, a hamlet of about 350 people. Whale Cove has a 1,200-metre airstrip with daily flights to Winnipeg among other cities, and a port that accepts sea lifts from the rail head at Churchill, Manitoba and Montreal in the shipping season. There is also an all-season road from Whale Cove to the project.
The company says the surrounding infrastructure ensures that exploration costs at Pistol Bay, particularly for drilling, are about half of those of its peers working elsewhere in the Arctic.
Says North: “It’s an extremely robust project. In the last press release, we had an intercept of 39 metres of 2.57 grams gold, and that’s what we call a narrow intersection at Pistol Bay—anywhere else that’s their discovery hole.” |
