Falco vies for environmental OK 

After eight years in environmental review, Falco Resources (TSXV: FPC) expects Quebec to sign off on Horne 5 by year-end — a decision that would unlock a gold and critical minerals project carrying a $3.3-billion (US$2.4-billion) net present value, held by a company the market prices at $200 million. 

The gold-silver-zinc-copper Horne 5 sits beneath a former mine in the Noranda camp in northwestern Quebec beside Glencore’s (LSE: GLEN) copper smelter. The 15,800-tonne-per-day project could run for 15 years at pre-production costs of $1.7 billion, according to a June feasibility study update. Horne 5 is about 510 km northwest of Montreal. 

“There is clear scarcity value for the nearly permitted Horne 5 mine,” BMO Capital Markets analyst Andrew Mikitchook said in a note on Friday, following a visit to Horne 5 the previous week.

“The site visit clearly highlighted the project’s scale and potential for economic benefit to shareholders and surrounding communities. As we approach a decision from the provincial government, we look forward to Falco advancing towards first production in 2031.”

After the project receives the government decree, Falco sees its value being greater than just its $200-million market cap, Falco CFO Anthony Glavac told The Northern Miner in a September video call.

“We’ll be among the few projects in Canada with gold and critical minerals to be on a path to production. We should see a significant re-rate of the stock.” 

Major target 

With gold at record highs yet few new projects permitted, an approved Horne 5 carrying gold and critical minerals would put Falco on a short list of developers that could attract a strategic partner.  

Horne 5 is to be developed below the historical Horne mine, which produced 11.6 million oz. of gold and 2.5 billion lb. of copper between 1927 and 1976. 

Falco shares traded at 50¢ apiece when markets closed in Toronto on Friday, valuing the company at $171.6 million. The stock has traded in a 12-month range of 30¢ to 65¢.   

The June study also updated Horne 5’s resource, estimating proven and probable reserves of 80.9 million tonnes grading 1.44 grams gold per tonne, 14.1 grams silver, 0.17% copper and 0.77% zinc. Its 3.7 million contained oz. gold makes Horne 5 Quebec’s second-largest undeveloped gold project by contained gold in reserves, after Troilus Mining’s (TSX: TLG; US-OTC: CHXMF) namesake copper-gold project.  

The reserve also contains 36.7 million oz. silver, 303 million lb. copper and 1.37 billion lb. zinc. 

Falco first submitted the environmental impact assessment for Horne 5 in December 2017. The project has since undergone provincial reviews, information requests and public hearings. 

Fall enviro analysis 

The company expects Quebec’s environment ministry will complete its analysis this fall. President and CEO Luc Lessard said five or six matters remain to be clarified with regulators, but Falco doesn’t foresee them delaying a decision into 2027. 

“Those elements are achievable,” Lessard said in the interview. “It’s a question of having meetings with the regulators one by one and making sure we submit the right information.” 

Even after a decree is issued, Falco still needs to go through permit applications, beginning with permission to dewater and rehabilitate the former Quemont shaft. Much of next year will be occupied by permitting, detailed engineering and financing negotiations, with early works at Horne 5 potentially starting near the end of next year, Lessard said. 

Financing options 

The company is considering developing Horne 5 independently, bringing in a minority partner or forming a 50:50 joint venture. It is also examining equipment financing, institutional debt and more under its silver-stream with OR Royalties (TSX, NYSE: OR). 

OR has committed as much as $180 million through a staged agreement. Payments depend on Falco meeting permitting, construction, equity-funding and project-financing milestones. 

Horne 5’s location beside Glencore’s smelter gives the mine a ready customer for its copper concentrate. Under agreements signed in 2020, the Swiss major will purchase Horne 5’s copper and zinc concentrates over the mine’s life, with the copper concentrate processed at its Horne smelter, Falco says.  

Regional exploration  

Looking further ahead, the deposit sits under the existing reserve and could support about five more years at the project’s planned annual processing rate, Lessard suggested. 

“The inferred resources are 30 million tonnes,” he said. “That gives you right there at least five years of [potential] mine extension.” 

Lessard also outlined a scenario in which Falco eventually converts 50 million tonnes to reserves, which he estimated could support seven to eight years of additional production. 

Falco doesn’t expect another Horne 5 resource update before 2028 because the deep mineralization would be more economically drilled from underground after the Quemont shaft is dewatered.  

Discoveries elsewhere on Falco’s 600-sq.-km package – particularly within 10 km of a future proposed mill – could provide another five to 10 years of feed, Lessard said. Thirteen former mine sites are part of the Noranda camp.

“When we start the mine, we need to start also to think about the closing of that mine and re-evaluate the potential for other resources and discoveries,” Lessard said. ”The potential is there but this is clearly the intention to add feed to the mill at Horne 5 to extend the life of mine.”