VANCOUVER — Eastmain Resources (TSX: ER) is in the midst of a proxy fight, as dissident shareholder and junior explorer Columbus Gold (TSX: CGT; US-OTC: CBGDF) aims to unseat the board at the Eastmain’s next annual general meeting in April and open up the company to a takeover or another transaction.
Robert Giustra, CEO and chairman of Columbus, tells The Northern Miner during a phone interview that the management team at Eastmain has lost sight of how to unlock value at its Clearwater property, 200 km east of James Bay, Que., which includes the Eau Claire gold deposit.
“Between 2002 and 2013 they drilled over 200,000 metres in core, and it’s remarkable that despite all this work they haven’t pursued any economics on the asset … they have no vision,” Giustra argues, noting that Donald J. Robinson has served as president and CEO of Eastmain for the past 21 years alongside his wife, exploration manager Catherine Butella.
Giustra, a cousin of mining financier Frank Giustra, says that Eastmain popped up his radar when Columbus was scouting for assets to boost its portfolio, but he was warned not to engage with the company because “they turn so many people away.”
He says that Columbus “identified Eau Claire as a quality project, so we pulled up a list of their shareholders as a starting point to get a sense of why they’re shareholders, but the response we received was overwhelmingly negative. They weren’t willing to put any more cash into the company, or discuss possible transactions, as long as the current management was in place.”
During these discussions, Giustra says, Columbus picked up 2.7 million shares — or 2% — of Eastmain, and issued the notice for a proxy battle.
“We’re not being coy about it. We’re going to replace the board and open up a process where any company that has been turned away in the past can have another look at the project and propose transactions that will unlock value for the shareholders,” he says.
Meanwhile, Robinson counters that the new interloper is being “opportunistic and self-serving,” and is trying to “orchestrate a zero-premium, cashless and hostile takeover of Eastmain.”
Robinson says in an interview that “we’ve been in a downward market, so it’s easy to kick the hornet’s nest, get everyone angry and say that a fresh face would make everything wonderful. Columbus has essentially launched a hostile takeover disguised as a concerned shareholder … they identified a high-grade, quality project, and want to get their hands on it for free.”
He says that Eastmain has put in a lot of “hard technical work” to advance the project in recent years, and that “you need a lot of drilling to uncrack the geological code of these kinds of deposits.
“We’ve seen a number of other projects have major issues because of geological uncertainty,” he says, citing as examples Rubicon Minerals’ Phoenix gold deposit in Ontario and production shortfalls at Goldcorp’s Éléonore mine, 50 km north of Clearwater. “There are multiple orientations for mineralization at Eau Claire … so it requires a substantial amount of drilling to demonstrate you have interpreted the deposit correctly and have something that could be minable.”
Eastmain — alongside junior explorer Westmin Resources — got involved in the project in 1984, and a few years later uncovered the high-grade and structurally controlled vein systems at Eau Claire.
After inactivity at the site between 1990 and 1995, Quebec government-owned explorer Soquem stepped in with an exploration program, and in 2002 delivered a 259,000 oz. gold maiden resource within 972,900 indicated tonnes grading 8.27 grams gold per tonne, and 60,000 oz. gold within 509,000 inferred tonnes at 3.68 grams gold.
Eastmain gained full control of the project in 2002 and accumulated 178,000 metres of drilling, with the last drill campaign ending in 2013. Total drill metres for the project stands at 204,000 metres.
Robinson says during the last phase of drilling, the company updated the resource and discovered a mineralization type that “changed the complexion of the project.”
He says that “we can see a high chrome member within the basalts that host stratabound gold mineralization, and we only saw it using multi-element data in 3-D, where it jumps off the page.” He notes that the company recently earned the Quebec Mineral Exploration Association’s 2015 Discovery of the Year Award.
Eastmain commissioned SRK consultants to investigate the geology and update the project’s resource to include Eastmain’s entire drill database.
The consulting firm found a series of tension-gash veins at Eau Claire that form a crescent-shaped, open-ended orebody trending for at least 1.8 km along strike, more than 100 metres wide and 900 metres deep.
Open-pittable, measured and indicated resources at Eau Claire stand at 7 million tonnes at 4.05 grams gold for 885,000 contained oz. gold, whereas underground resources measure 428,000 tonnes of 4.78 grams gold for 66,000 tonnes gold, using a 2.5-gram-gold cut-off.
Inferred resources weigh in at 5.1 million tonnes at 3.88 grams gold for 633,000 oz. gold.
“The deposit is still small, but where it stacks up is the grade … with definition drilling, we can make it bigger,” Robinson says.
In the company’s technical report, SRK said the exploration potential outside the deposit is “excellent,” as gold zones focus along contacts of felsic dykes that swarm across Eastmain’s 201 sq. km, “relatively” underexplored property.
“You can take the entire Val-d’Or or the entire Timmins gold districts and plunk them into one-half of our property,” Robinson says. “And from our exploration work we have demonstrated a gold footprint that’s at least 7.5 km long.”
Robinson points out that since the latest resource estimate, the company has launched a preliminary economic study at Eau Claire, which is expected to be completed by mid-2016.
“To add shareholder value you need these projects to move the bottom line, and that’s what we’re doing,” he says. “But it’s not something where you can snap your fingers and it happens overnight.”
Robinson says Eastmain has updated its board twice in the past six months to help transition the project from exploration to development. The company appointed Laurence Curtis — who has a history of corporate finance and mine development — and developer Michael Hoffman.
Although Giustra says adding Curtis was a “step in the right direction,” it was “too little, too late.”
“They can put in as many mine builders as they want, but they have exceptionally weak experience in capital markets,” Giustra says, proposing that the new board at Eastmain should include himself, Shawn Wallace, Geoff Stanley, Michel Jebrak and Columbus Gold director Peter Gianulis.
“We’re a group of individuals that are well-connected in the industry, and we can make things happen from a capital-market experience.”
Columbus Gold has traded within a 52-week range of 31¢ to 47¢ per share, and closed at 40¢ at press time. The company has 141.7 million shares outstanding for a $53.8-million market capitalization.
Eastmain Resources has traded within a 52-week range of 37¢ to 40¢ per share, and closed at 40¢ at press time.
The company has 133.9 million shares outstanding for a $53.9-million market capitalization.