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Genesis Metals drills for high-grade gold in Quebec

Drilling later this year will test new targets identified by last year’s property-wide soil sampling.

By James Kwantes
Resource Opportunities

For veteran speculators, the latest hits to junior mining share prices feels like deja vu all over again. Sentiment is gloomy and market capitalizations are depressed. But gold in U.S. dollar terms is still up more than 25% year-over-year. And US$1,500 gold translates to more than $2,150 Canadian, an exceptional price for Canadian projects whose expenses are measured mostly in loonies.

Gold producers that deplete their reserves with every shift and every scoop still rely on junior exploration companies to find the deposits that will replenish their ore. Most juniors, meanwhile, had yet to respond even BEFORE the Coronavirus corrections — which has further pummelled the sector. Expectations are very low, along with share prices.

For exploration companies with strong management and backing, a flush treasury and potential for high-grade discoveries, it’s not a bad setup. Genesis Metals (GIS-V, GGISF-OTC) fits the bill. The Discovery Group company has $3.5 million in the treasury to drill its flagship Chevrier project in Quebec’s Chibougamau mining district. Chevrier is located in the eastern portion of the prolific Abitibi Greenstone Belt (180M oz of historical gold production).

Genesis is drilling an initial 2,500 metres (10 holes) at Chevrier, part of a planned 8,000-metre drill program this year. The initial program is designed to tap into high-grade shoots within the Chevrier Main zone deposit, expanding the higher-grade domain. Genesis’s market cap of about $7.9 million is backstopped by existing gold resources at Chevrier totalling 395,000 ounces Indicated grading 1.45 g/t Au and 297,000 ounces Inferred at an average grade of 1.33 g/t, at the Chevrier Main and East zones.

The company has already identified high-grade areas within the deposit — assays announced on January 22, 2018 included 8.73 g/t over 21.35 metres and 4.26 g/t over 19.4 metres at the Main Zone. But those results went unappreciated with gold trading at US$1,330 an ounce on its way down to $1,200. Later this year, Genesis plans to test targets elsewhere on the 295-sq-km property that were identified through last year’s property-wide glacial till survey.

Overseeing the exploration program is new CEO David Terry, an economic geologist who was appointed President and CEO on Dec. 2, 2019 (Jeff Sundar remains as Executive Director). Terry obtained a PhD in Geology from Western University in Ontario. He’s also well-schooled in the vagaries of bull and bear market mining cycles, through decades in the industry running projects — both large and small — for majors and helming explorecos. Terry is currently a director of several active exploration companies including Golden Arrow Resources, Aftermath Silver and Great Bear Resources. Great Bear, also a Discovery Group company, is drilling high-grade gold along kilometres of strike at its Dixie project in Red Lake, Ontario.

For Terry, the Great Bear directorship is a kind of return to Red Lake. His first summer job in exploration included mapping and sampling in the prolific district for a large mining company called Goldfields while he attended Western in the 1980s. He later worked for several years as a contract geologist with Cominco (which sponsored his PhD thesis) in Alaska, followed by a stint with Hemlo Gold exploring back in the Abitibi.

Geologist David Terry, the Genesis Metals CEO, in the field at a gold project in central Ecuador.

After obtaining his PhD, Terry worked for Westmin Resources then Boliden, as a geologist and project manager. When Boliden exited Canada with the mining sector in a post Bre-X slump, Terry took a position as a Regional Geologist for the B.C. Geological Survey in southeastern B.C. for three years. He spoke at the closing ceremony for Teck’s legendary Sullivan mine, which operated for nearly a century and produced 160 million tonnes grading 12% zinc/lead and 67 g/t silver. Since 2004 he has worked in management, director and advisory roles with a number of juniors exploring and advancing precious and base metal projects in both North American and a number of Latin American countries.

Terry joined the Great Bear board in July 2016, before the Dixie project was the company’s flagship. Great Bear’s mineralized LP fault is now recognized as one of the best gold discoveries of recent years, globally. But Terry remembers when the team operated in relative obscurity, with GBR shares trading for dimes not dollars.

As for Genesis, adopting a go-slow approach in 2019 laid the groundwork for an active 2020. Instead of drilling in the depths of a bear market, former President and CEO Jeff Sundar focused on building out the team and raising a war chest. Genesis joined the Discovery Group of companies and added Discovery principals John Robins and Jim Paterson as strategic advisors. The Discovery Group has an impressive record of wins in recent years, including the $520-million sale of Kaminak Gold to Goldcorp and the $117-million sale of Northern Empire Resources to Coeur. Rob Carpenter, the cofounder and former CEO of Kaminak, also came on as a strategic advisor.

Genesis’s successful financings were done in conjunction with a 5-for-1 share consolidation and the appointment of Terry as CEO. Rollbacks have a bad reputation — and rightly so — but consolidations done in conjunction with management changes and large financings can set the stage for success. Great Bear is another example of a successful rollback, its tight share structure helping to propel the stock post-discovery.

Chevrier is located in a prolific district of high-grade gold resources. Directly to the southwest is the Monster Lake gold discovery, where JV partners IAMGOLD and TomaGold have identified an Inferred resource of 433,000 ounces at 12.14 g/t gold. At the Nelligan project further southwest, Vanstar has delineated 3.1 million ounces of gold (Inferred) at about 1 g/t but last year hit 6 metres grading 56.46 g/t Au. IAMGOLD recently increased its interest in the project to 75%.

South of Chevrier, the Joe Mann gold mine produced 1.2 million ounces of gold at 8.26 g/t, as well as silver and copper. Infrastructure is excellent at Chevrier: a highway and power line runs through the property and the regional airport is a few minutes drive to the north. 

With Discovery Group backing, a strong management and technical team, and a full treasury to drill high-grade gold targets at Chevrier, Genesis has laid the foundation for success. And high-grade gold discoveries get rewarded by the market, even in these tumultuous times for juniors.

Genesis Metals (GIS-V)
Price: 0.18
Shares outstanding: 43.76 million (59M fully diluted)
Market cap: $7.9 million

Disclosure: James Kwantes owns Genesis Metals shares and Genesis is one of three Resource Opportunities sponsor companies. Genesis is a speculative, high-risk exploration stock that may not be suitable for all investors. This article is not intended as financial advice and all investors should conduct their own due diligence and/or consult an investment advisor.

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Genesis builds ounces, recruits top talent

New resource estimate shows 423,000 Au oz Indicated at 1.22 g/t Au and 303,000 Au oz Inferred (1.27 g/t) at Chevrier

Genesis Metals joins Discovery Group; John Robins, Jim Paterson come on as strategic advisors

By James Kwantes
Editor, Resource Opportunities

Genesis Metals is a Resource Opportunities sponsor company.

Chibougamau is Cree for “gathering place” and the First Nations hamlet in northern Quebec served as one long before French explorers and traders travelled the area in the 1600s.

Gold was discovered in 1903 and mining companies followed. Fast-forward 116 years and Chibougamau is now an important hub for the Quebec government’s Plan Nord, an economic development plan designed to open up the vast north of the province to new opportunities, particularly in mining. The initiative has elevated a jurisdiction that was already recognized as among the most mining-friendly in the world.

Genesis Metals’ Chevrier gold project is about 35 kilometres southwest of Chibougamau at the western end of the prolific Abitibi Greenstone Belt, a structure that has produced more than 180 million ounces of gold. Mining operations in the region include Stornoway Diamond Corp.’s Renard mine and the Monster Lake high-grade gold project, a JV between Toma Gold and IAMGOLD.

And Genesis continues to gather ounces at Chevrier, in the Abitibi’s Fancamp Deformation Corridor. An updated resource estimate published February 4 shows 423,000 ounces Indicated at 1.22 g/t gold and another 303,000 ounces Inferred at 1.27 g/t gold at the Main Zone and East Zone at Chevrier. Average grades have decreased because Genesis moved to a lower cut-off grade (0.3 g/t in-pit, 0.95 g/t u-g) for the resource update.

The resource update establishes Chevrier as a growing open-pittable deposit with higher-grade underground and discovery possibilities, says Genesis chairman and CEO Brian Groves.

“This resource is a significant milestone in the history of Chevrier. We have developed a robust model for gold mineralization in the Main Zone with multiple new targets elsewhere on the property,” Groves said. “With our recently strengthened technical team, we will now explore the potential for expansion of the mineralized envelopes as well as other targets on the 130-square-km property.”

Jim Paterson: key contacts

Joining John Robins’ Discovery Group should help Genesis tap into talent and open doors. Robins and Discovery Group principal Jim Paterson have joined Genesis as strategic advisors. The group, founded by Robins in 2005, has an impressive record of creating shareholder value in a dismal market, including:

  • the $520-million sale of Kaminak to Goldcorp in 2016;
  • the 2018 sale of Northern Empire Resources to Coeur Mining for $117 million;
  • Great Bear Resources has been a junior mining standout, with a 1-year return of more than 600% on bonanza-grade gold discoveries at its Dixie project in Ontario’s Red Lake district.

Paterson has already been key to helping Sundar build out the Genesis team. Paterson tapped into his extensive network to attract three experienced operators for the Genesis technical team: geologists Rob Carpenter and Garrett Ainsworth and engineer/financier Andrew Ramcharan. The trio joined the advisory board in November. Each should help unlock further value at Chevrier, including potential new discoveries.

Rob Carpenter, co-founder of Kaminak Gold, checks out Chevrier core. Carpenter is a strategic advisor to Genesis.

Carpenter and Ainsworth are familiar names to Canadian mining investors. Carpenter was a co-founder and the former CEO of Kaminak Gold and key to identifying the 5-million-ounce Coffee gold deposit purchased by Goldcorp. Among other ventures he is a director of White Gold, where he is helping legendary Yukon prospector Shawn Ryan explore the White Gold district between Coffee and the Klondike goldfields.

As for Ainsworth, the exploration geologist’s greatest accomplishments have been in the western Athabasca Basin. As VP Exploration for Alpha Minerals, Ainsworth discovered the Patterson Lake South uranium deposit now being advanced by Fission Uranium (which bought Alpha). Ainsworth then spent four years at NexGen Energy as VP Exploration and Development, a period that saw NexGen’s shares soar from 30 cents to above $4.00 as it expanded the ultra-high-grade Arrow uranium deposit in Saskatchewan.

Andrew Ramcharan, an engineer and graduate of the Colorado School of Mines, was Managing Director of Project Evaluation for debt and equity financings at Sprott Inc. He also worked with IAMGOLD on M&A. Stephen Williams, a metallurgical engineer who is Vice-President of Corporate Development and Investor Relations for Bluestone Resources, has also joined the Genesis board of directors. He previously worked for Canaccord Genuity as a director of the metals and mining investment banking team.

Quebec has earned a reputation as one of the world’s best mining jurisdictions. Now, the province’s Plan Nord has opened up Quebec’s vast north, providing linkages to already exceptional infrastructure in Chevrier’s immediate neighbourhood (the Abitibi’s Fancamp Deformation Corridor). The Genesis gold project is near major highways and a rail line, and has a regional road running through it, as well as an airport nearby. The solid infrastructure in a safe jurisdiction tick off two of the main boxes for both investors and potential suitors.

Jeff Sundar, the president of Genesis, is younger than most mining execs. But he has been working in the sector long enough to see cycles come and go. Sundar has also experienced M&A success, in both 2010 and 2018. He was a director of Underworld Resources, which was acquired by Kinross for $138 million in July 2010 for its White Gold deposit in west-central Yukon (now owned by White Gold Corp). More recently, Northern Empire Resources — where Sundar was on the board — and its Sterling gold project was acquired by Coeur Mining for $117 million.

But the years between those takeovers were mostly punishing, for Genesis and the whole sector. Genesis completed a successful 10,000-metre drill program in 2017 that firmed up the resource at the Main Zone and identified new target areas. But the company received little recognition for it in the market, even though most intercepts were within 150 metres of surface. The final assays, announced Jan. 22, 2018, included some of the best mineralization yet:

  • 21.35 metres of 8.73 g/t gold including 3 metres of 37.97 g/t;
  • 22.6 metres of 3.59 g/t Au;
  • 19.4 metres of 4.26 g/t Au including 7.8 metres of 8.99 g/t.

The program helped Genesis develop a new geological model that laid the foundation for the resource update. Company geologists followed up this past summer with a surface prospecting and mapping program that defined extensions to Main Zone mineralization and identified new target areas. The work was funded by Quebec investment funds that provide assistance to active junior exploration companies in the province.

As for the price of gold, Sundar believes the timing could be right. Gold equities have seldom been cheaper relative to the price of gold, he pointed out.

XAU (the gold miners index) to gold ratio, 1984-present

“Generalist interest is returning to the space,” Sundar said. “People are starting to look at gold and gold equities again. With new team members providing a fresh look at our Chevrier deposit, including the potential for new discoveries, Genesis is well-positioned to capitalize.”

Genesis shares sank as low as 6 cents during tax-loss selling season in December. The stock has since rebounded to the 8-cent level, giving Genesis a market capitalization of about $8.15 million.

Genesis Metals (GIS-V)
Price: 0.08
Shares outstanding: 101.8 million (137.7 million fully diluted)
Market cap: $8.15 million

Disclaimer: James Kwantes owns Genesis shares and Genesis Metals is a Resource Opportunities sponsor company. Readers are advised that this article is solely for information purposes. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice. The information is based on sources which the publisher believes to be reliable, but is not guaranteed to be accurate, and does not purport to be a complete statement or summary of the available data.