This buy recommendation for Aurvista Gold
Corp. should be read in conjunction with my
comments of March 13, 2015 (see
http://sectornewswire.com/AVAJayTaylor-2015-03-13.pdf
online), about this company when I placed it
on my “Watch List.” Aurvista was one of
several companies I sold at the end of last
year, not because I didn’t believe in its
long-term prospects, but because it could
provide an immediate tax break and a chance
to revisit its prospects during a period in
the gold share market where there was little
worry about a stock running away on the
upside.
As I noted in my March 13 comments, the
hiring of Jean Lafleur as the company’s
president was key to my renewed optimism for
this company and its Douay Gold Project. My
confidence in Lafleur rests on his track
record as a Professional Geologist with 30
years plus of experience in various
capacities within the mineral exploration
industry. He has been active with major
mining companies like Newmont, Falconbridge,
and Placer Dome. And from 1998 to 2003, Jean
worked with McWatters Mining Inc., a
Quebec-based junior exploration and mining
company, and was instrumental in the
discovery of new ore reserves for the
company's gold projects in the Val-d'Or and
Malartic Mining camps, including development
of the bulk gold exploration program at the
Canadian Malartic Gold Property which
eventually became Osisko's 20 million ounce
Canadian-Malartic Deposit.
Lafleur knows the geology as well any
geologist does and in fact what has him so
excited about the Douay’s prospects is its
similarity to the world-class Malartic Gold
Mine discovered by Osisko. Not only is the
Douay located in a similar regional
geological setting and in the same Abitibi
Gold Belt, but its structural patterns are
similar as well, which is why Lafleur is so
confident in his ability to ramp up this
3-million-oz. deposit into something much
bigger. Whether the Douay can replicate
Malartic with its 9 million ounces of
reserves plus a whole lot more in various
resource categories remains to be seen. But
there is a huge amount of exploration
potential, plus there are some strategic
advantages that the Douay has that the
Malartic did not have when Lafleur began
exploring and developing that deposit.
Specifically, the Douay has some
higher-grade veins and I have to think
management may be thinking in terms of some
early production potential from near-surface
high-grade veins from which to fund larger
scale exploration. I say that because out of
the blue in the March 24 press release,
Lafleur stated, “In
the event that any shareholder missed it,
the Sleeping Giant mill owned by Aurbec
Mines Inc., a subsidiary of Maudore Minerals
Ltd., located 50 kilometers south and east
of Douay, is now in receivership. A call for
tenders is expected in Q2, 2015.”
Exploration Potential
In a March 24, 2015, press release, the
company announced progress on engineering
studies for an open-pit design at the Douay
West Project. The work on pit engineering
was completed but the firm that is carrying
out the work, Golder Associates Ltd., was
also retained to look at underground
prospects including either an open-pit and
underground scenario or an underground-only
scenario given the potential to exploit the
high-grade vein system in an underground
scenario. The company wants to compare the
economics of either scenario, but in order
to do so is planning to complete an infill
drilling campaign that would lead to an
update of the mineral resource and the start
of a more comprehensive prefeasibility study
later this year. But I have to think that
given Lafleur’s “out of the blue” comment
regarding the possible availability of the
Sleeping Giant Mill, he has his eyes on
possibly mining some higher-grade
mineralization as a means of generating some
early cash flows from high- grade
near-surface veins in the Douay West area. I
put in a call to the company’s CFO regarding
that idea. When I hear back regarding that
matter I will let you know. But it is my
hunch.
Absent from recent exploration efforts has
been big picture generative work to better
understand factors controlling
mineralization on the program. Under
Lafleur’s leadership, independent
geophysical and geological consultant Yvan
Bussičres, PEng, of St-Eustache, Quebec has
been hired to help refine the original 25
exploration targets outlined in 2014 into
five higher-priority gold and base metal
sites for follow-up fieldwork during the
2015 summer exploration season, assuming of
course that the company can raise funding to
carry out the work.
Regarding the exploration plans, Jean
Lafleur recently stated: “The
strategy behind the ongoing geophysical and
geological interpretation work was to assist
in identifying additional targets with
similar geophysical properties to those
associated with already known gold
mineralization on the project.”
Management now believes that the previous
and current results still show the potential
for additional and significant gold and also
base metal mineralization, similar to those
of other bimodal gold and base metal
occurrences and deposits in the Abitibi
Greenstone Belt of Quebec and Ontario. With
numerous electromagnetic input conductors
identified outside of the known gold
mineralization corridor, the potential for
this 20-km-long Casa Berardi Deformation
Zone to host a major deposit appears to be
very good. In fact only about 5 kilometers
of this 20-kilometer zone have been explored
extensively and only another 5 kilometers
have been explored at all. So the generative
program is designed to provide a more
intelligent, big picture understanding of
the Douay’s prospects and to help prioritize
its exploration efforts to expand
mineralization to at least a potential
10-year mine life.
In addition to the generative program,
ground geophysical surveys are being used to
indentify disseminated sulfides and faults
potentially linked to the gold
mineralization. A total of 68.6 new line
kilometres of IP surveys were recently
completed by the company covering gaps in
the extreme NW corner of the Douay property
and the western end of the porphyry zone.
The porphyry zone sector hosts the majority
of the lower-grade gold mineralization at
Douay and overlaps the base metal target
area west of the south porphyry. Both
sectors covered were integrated with the 11
previously completed IP surveys done during
previous campaigns and will be
re-interpreted as a single database.
Approximately one-half of the IP database
has been compiled and readied for
interpretation with final results expected
later in the second quarter of 2015.
Early results show a complex network of
faults criss-crossing Douay with consistent
east-west, northeast-southwest and
northwest-southeast trends mirroring
structures outlined by the airborne magnetic
survey that are parallel to the Casa Berardi
deformation zone, its subsidiary faults and
EM Input anomalies.
Lafleur noted in his March 24 press release
that “As a rule of
thumb in the mining business [I want] to
define minimum 10 years of mineral resources
before advancing Douay West to the
feasibility stage. Right now there are three
additional gold targets within a 1-kilometer
radius of Douay West from which to add
mineral resources, in addition to the
immediate Douay West potential on strike to
the west of the planned pit and at depth
below 250 meters. These additional zones
include the Porphyry, Porphyry NW Extension,
and the NW zones.”
The Bottom Line
As I noted in my March 11 report, the
capital costs to commence open-pit
production with custom milling are estimated
to be C$12.2 million. Assuming the market
wakes up to this company’s potential and
begins to price the ounces in the ground at
a more reasonable level so that capital can
be raised efficiently, even in these dire
times, a $12.2-million capital nut to crack
does not seem out of the question.
Potentially, work being carried out this
year will upgrade and increase the Douay
ounces and further enhance the economics.
Once production begins, an additional $50
million will be required to fund underground
development and initial stoping. A higher
level of confidence in the economics should
be forthcoming with additional drilling and
feasibility work to be concluded this year.
However, as noted above, management’s
comments about examining both the
underground-only option versus the open pit
plus underground option, combined with
Lafleur’s comments about the nearby possible
acquisition of a mill at fire sale prices,
lead me to believe underground mining of
near-surface high-grade mineralization could
be an emphasis early on to generate cash
flow from which to expand this company’s
growth organically. With the company now
having a competent jockey in place to
exploit this world-class exploration
potential that I have always believed the
Douay has, and with the gold markets
seemingly bottoming out, I was compelled to
put this company back on my list after
“enjoying” a 2015 tax loss sale.
...click here for full copy from source |