GoldQuest Mining (TSXV: GQC) shares got a welcome boost after reports that Agnico Eagle Mines (TSX: AEM; NYSE: AEM) is buying 15% of the company for $23 million. This marks Agnico’s first investment in the Dominican Republic, where GoldQuest is advancing the prefeasibility-stage Romero gold-copper project and drilling the surrounding, underexplored Tireo gold district.
Under the March 6 agreement, Agnico will buy 38.1 million GoldQuest shares in a non-brokered private placement at 60¢ apiece for $22.9 million. The news sent GoldQuest shares up 15% that day to 54¢, before closing March 9 at 51¢.
Agnico will also get one seat on GoldQuest’s board and the right to participate in future equity financings, as well as the flexibility to boost its holding to a maximum of 19.99% in two years.
The funds will allow GoldQuest to advance both its exploration program and the development of its wholly owned Romero project, which it discovered in 2012.
“The money means we can accelerate our drilling. We made a big discovery that we announced in January of zinc and gold together. And we will put a second rig on that immediately. Also [Romero’s] environmental and mining permitting process will drive that much faster now that we have the money,” GoldQuest’s chairman Bill Fisher said at the recent PDAC convention.
GoldQuest aims to complete the minimum 40-hole, 10,000-metre drill campaign that it started last August at its Tireo project, south of the Romero deposit.
On Jan. 10, it reported the near-surface Cachimbo discovery, after drilling the third target out of the 20 targets it had identified. GoldQuest cut a new volcanogenic massive sulphide zone that returned 14 grams gold, 74 grams silver, 12% zinc and 1% copper over 5 metres. “In terms of richness, it shows a very rich area,” Fisher says.
Cachimbo is 20.5 km south of the Romero project and sits in the 50 km Tireo gold belt. “This is the boundary between the Caribbean and Atlantic plates. So we expect a string of pearls along that boundary.”
To date, GoldQuest has completed two-thirds of this drill campaign. It has tested eight of the 20 targets.
This year, Fisher says its objectives include continuing to drill the targets along the Tireo belt, and revisiting the Cachimbo discovery to see “how big it is.”
“On the development side, we will be advancing the engineering and preproduction engineering, and also satisfy the environmental impact assessment (EIA) file, as we go from the mining ministry to the environment ministry — all that boring stuff that you need to go and build a mine.”
The company expects to receive the mining concession shortly, which would give it a 25-year concession with two extensions of up to 75 years, Fisher notes. Once it has that permit, it can begin the EIA process, which could take a year to complete. After the EIA approval, Romero will be shovel-ready for construction.
The November 2016 prefeasibility study envisions Romero as a 2,800-tonne-per-day underground operation, annually producing 109,000 equivalent oz. gold over a 7.3-year mine life. Estimated all-in sustaining costs are US$595 per oz. gold. Initial capital should be US$158 million, with a 2.5-year payback.
Romero has a 7-million-tonne maiden reserve grading 3.72 grams gold, 4.33 grams silver and 0.88% copper for 840,000 oz. gold, 980,000 oz. silver and 136 million lb. copper, or 1.12 million equivalent oz. gold.
Agnico’s endorsement “is extremely important to the Dominican Republic, as we move through the government stages, permitting, et cetera.”
Fisher and Julio Espaillat, the company’s president and CEO, played key roles in developing GlobeStar’s Cerro de Maimon copper-gold mine in the Dominican Republic. GlobeStar bought the project for $350,000 in 2001, and a decade later Perilya acquired the company for $186 million.