During the most recent market downturn, when many of his peers were running for cover and trying to preserve cash, French Canadian geologist Philippe Cloutier went on a shopping spree.
The founder, president and CEO of Cartier Resources (TSXV: ECR) bought three key assets at fire-sale prices — all of them in the Abitibi Greenstone Belt, one of the world’s most prolific gold-producing regions.
Since then Cartier has attracted investments from Agnico Eagle Mines (TSX: AEM; NYSE: AEM), JP Morgan UK and Quebec funds.
“Our strategy was to focus on small, high-grade historical resources that had been delineated in the pre-Bre-X days,” Cloutier says, describing the period leading up to the salting scandal in 1997 as a time when “companies were raising cash, coming up with showings and drilling them off down to 250 or 300 metres.”
Many of these projects were shelved after the Bre-X fiasco undermined confidence and decimated investment in the mining industry.
“The projects we were hunting for were under the radar because they had no 43-101 resources on them, and the heavy lifting had been done between 1993 and 1997,” Cloutier says. “They had to be partially delineated — but not too deep — close to infrastructure, and they had to be things that had been in some filing cabinet of a junior exploration company that didn’t have a lot of cash. We focused on stuff that had been de-risked at least from the discovery standpoint, and where there was a lot of upside potential at depth.”
The first project that met those parameters was Benoist, which Cartier Resources picked up for $250,000 in May 2013.
Benoist, 30 km from Nyrstar’s Langlois zinc-copper-silver mine and 25 km from Metanor Resources’ (TSXV: MTO) Bachelor gold mine, has a historic resource of 531,428 tonnes grading 5.52 grams gold per tonne, 12.1 grams silver per tonne and 0.27% copper.
The deposit was found in the early 1990s and most of the drilling — 72 holes — was done before the Bre-X implosion.
Highlights from Cartier Resources’ drill programs at Benoist between 2012 and 2014 include a 65-metre intercept grading 1.7 grams gold, with a 3-metre interval of 24.5 grams gold.
The deposit has a large alteration envelope and is open at depth and laterally.
Cartier’s second acquisition — for $261,000 in June 2013 — was the past-producing Chimo mine, 43 km east of Val-d’Or, which it picked up with a bid on a bankruptcy sale managed by PwC.
Between 1964 and 1997, three producers mined 14 zones at the mine, churning out 379,012 oz. gold. The third operator, Cambior, shut it down, but “not for lack of ore,” Cloutier says.
“Cambior had delineated quite a bit of ore underground, but they shut it down because the gold price was US$275 per oz., and they were just barely making money,” he says. “Cambior shut down two other mines in the Abitibi at the same time.”
Mine infrastructure consists of a three-compartment shaft that goes down 965 metres, and a network of drifts on 19 levels.
“It’s proximal to infrastructure and a qualified workforce, and it’s a past producer, so we won’t have any surprises with metallurgy or rock mechanics,” Cloutier says. “It’s an asset we think we can fast track, if we’re successful drilling it this year.”
The company is undertaking a 34,000-metre drill program, 8,000 metres of which focuses on deep targets below the historic mine, and 26,000 metres on depth and lateral extensions of the deposit’s 23 known gold zones.
The company has four drills turning and is using control-directional drilling, designed to cut several gold-bearing zones and explore the potential depth extensions of the gold zones beneath past-producing stopes.
In March, Cartier Resources reported an intercept of 8.5 grams gold over 3.5 metres, 205 metres beneath Chimo’s deepest stope. The intersection included 2 metres of 14.6 grams gold. The drill hole intersected mineralization at 1,050 metres along the depth extensions of gold-bearing Zone 5, which produced two-thirds of the ounces that were mined historically. Another hole returned 7.6 grams gold over 5 metres, 235 metres beneath the deepest stope. The intersection included 60 metres of 1 gram gold.
“This old mine is probably going to get a new life through this drill program,” Cloutier says of the company’s flagship asset.
The third asset Cartier Resources acquired, for $42,000 in May 2016, was the Wilson project, 130 km northeast of Val-d’Or, 15 km east of Lebel-sur-Quévillon and 7 km from where Osisko Mining (TSX:OSK) plans to build a mill at its Windfall project.
Freewest Resources drilled the project in the mid-1990s, completing a non-compliant resource of 187,706 tonnes with an average grade of 7.1 grams gold.
Freewest optioned it off to Viking Gold, which then sold it to Cartier Resources.
“Basically Viking Gold had lost interest. The markets had turned on them, and we were there and paid on the eve of them becoming a delinquent, so we saved the day for them and got a 100% interest,” Cloutier says. “The philosophy when someone is drowning is that you’re morally obliged to give them a life jacket, but you don’t have to buy them a yacht.”
Cloutier notes that there is potential at depth that has not been tested because previous drilling only went down to 200 metres.
Wilson was “way too small for anything to be considered, but the project takes on a new valuation because it happens to be in a band of rocks that is extremely popular with companies like Bonterra, Metanor and Osisko,” he says.
What’s more, the whole package of rocks and fault zones in the area are just north of the 49th parallel, “which happens to be the geographical southern limit of Quebec’s Plan Nord,” he says. “So projects in that area get special treatment by the Quebec government.”
Cartier Resources has three main drill zone targets at Wilson, and all three zones are open at depth.
The company has $16 million in cash and no debt. It expects to end the year with $10 million in the bank.
Cloutier reckons that Cartier Resources’ acquisition costs work out to $1 per oz., based on historic resource estimates.
“Our strategy was to acquire legacy projects, stuff that already had meat on the bone,” he says. “We held in there, weathered the storm, and now we’re in an enviable position.
“Fortunately, we had the cash to do it and a board that supported us, he adds. “Some people say we got lucky, but we engineered our luck.”
The investment from Agnico Eagle in December 2016 was a turning point, he says. The gold major invested $4.5 million for a 19.9% interest. As of April, Agnico held a 17% stake in the junior.
“Agnico has a good reputation for doing good due diligence, and that attracted the attention of JP Morgan UK, which took a position of just under 10%, and injected $6 million. And there were a few other financings, one with Paradigm Capital and one with Sprott, which brought us up to $16 million. And all of that because Agnico took a shine to us.”
J.P. Morgan owns 8.3%, and Quebec institutions, 13%.
“The new thing is partnership with senior companies that not only sponsor you financially, but they also backstop you, from a technical point of view,” he says. “They are a great sponsor to have because not only did they do the initial investment, but when we did subsequent financings, they were there to maintain their interest. And whenever we want to have a brainstorm session and compare notes, their team is there … and help us in every way they can.”
On his more recent marketing trips, Cloutier says people are often surprised that they have never heard of the Cartier story.
The reason, he says, is simple.
“We were busy building the story in the bear market, and we had very little money to go out there and tell the story, which would have fallen on deaf ears anyway, so we chugged along, and then 2016 comes along and Agnico invests, and by now, people are saying: ‘Phil, get out there and tell this story. This needs to be heard.’