The recent market correction has led bears to take over the gold market sentiment. A somewhat quick burse rebound saw spot gold prices drop as low as US$ 1,931 over the week, while indexes bounced all over the charts until seeming to reach the beginning of a consolidation period.
The situation set up a great buying opportunity for bullish investors, whose subsequent market moves have largely offset losses in the sector. That, and a weakened USD index served to prop up the metal’s price around a stable level.
Even with moderate instability in the short term, the longer-term trend for gold continues to be largely positive – and with the Canadian summer drilling season in full-fledge, more and more investors are keeping a close eye on mining companies to gain an edge in the search for the next big mineral deposit.
Relentless Exploration
A company that fits the profile is Toronto-based Marathon Gold Corporation (TSX:MOZ). MOZ acquires, explores, and develops mining properties across Canada, searching for gold and precious metals. Its flagship project, the Valentine Lake gold property in Newfoundland, Labrador, logged an impressive 4Moz+ Mineral Resource Estimate.
The company completed a Pre-Feasibility Study for the Project in April, outlining an open pit mining and conventional milling operation over a twelve-year mine life with a 36% after-tax rate of return.
A contrasting, earlier-stage exploration company that’s been garnering attention lately is Québec Precious Metals Corporation (TSX:QPM). Headquartered in Montréal, QPM boasts a notoriously large position in the highly prospective Eeyou Istchee James Bay region of Québec. Its project is in the vicinity of one of QC’s largest active gold mines – Newmont’s Éleonore.
QPM’s flagship is the 100%-owned Sakami project. The potential is in plain sight: it has an ongoing drilling program, significant grades (1.15g/t Au over 80.1m, including 2.21 g/t Au over 25 m, 6.40 g/t Au over 13 m, 26.35 g/t Au over 11 m) and well-defined and drill-ready targets. The site’s appeal is bolstered by a reliable established infrastructure, which allows for year-round access.
Estimating the Potential
Marathon entered the current drilling season boasting an impressive updated resource estimate of over 4 million ounces. The estimate is divided between 3.06 Moz Au in Measured and Indicated Mineral Resources, and an additional 0.96 Moz in Inferred Mineral Resources, as of January 2020.
In their Q1 results report, CEO Matt Manson talked about the new estimate, and their goals for the summer: “During the first quarter we completed two important studies that define the scope of the mining project we intend to develop at Valentine Lake. Our updated Mineral Resource estimate released in January demonstrated continued growth in Measured and Indicated ounces, with the refined geological modelling and tighter constraints on grade distribution appropriate for mine development.”
He continued: “Our strategy is the development of the Valentine Gold Project on this basis, with ongoing environmental assessment and feasibility-level studies, and continued exploration focused on new discovery along the 20km mineralized trend of the property.”
QPM, on the other hand, holds considerable potential of similar nature, while being in a much earlier exploration stage.
The company used early 2020 to analyze data previously gathered in the Sakami and James Bay regions. With the due diligence now already executed, their drilling program is at full steam, aiming to drill 25,000 metres in total by EOY to subsequently prepare a mineral resource estimate.
Two major factors that inevitably garner interest in the project are its location – right by Newmont’s massive Éleonore mine, and the large land package size.
The potential for additional discoveries, aside from their already ambitious exploration targets, are likely part of why their very neighbors, Newmont Corporation (NYSE:NEM) chose to become a part of its solid shareholder base – along with local QC institutions.
One such additional discovery was the La Pointe extension – for which assay results recently came in. The revealed numbers made the company’s leadership even more confident in the overall project.
Normand Champigny, CEO of QPM, stated: "The discovery of the La Pointe Extension marks a turning point for the Company and highlights the strong exploration potential of the Sakami Project. We are pleased with the initial results and are excited to test the continuity of the structure identified at the La Pointe Extension and a new target area uncovered by the IP survey. We are also pleased that Windfall Geotek Inc. (TSX.V:WIN) has worked closely with us to validate and identify high priority targets on the Project".
The Bottom Line
A clear-cut direction, bold leaders and favorable logistics are the makings of an exploration market darling. When a major resource estimate is added to that equation, as in MOZ’s case, the company is generally set for explosive growth.
However, opening a position in a company in an earlier stage holds a much larger potential. Marathon’s more tenured and advanced operation sees it trading at CA$ 2.54. QPM, which is now in the process of determining its estimate has thus far shown great drilling results – making it a possibly undervalued portfolio pick – currently trading at CA$ 0.25.
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