Eldorado nears $100M bet on Amex as Perron advances

Mid-tier producer Eldorado Gold (TSX: ELD; NYSE: EGO) is set to inject $20.6 million in Quebec-focused Amex Exploration (TSXV: AMX; US-OTC: AMXEF) to maintain its 27% stake in the junior, after an April feasibility study gave Amex’ Perron gold project strong returns and modest initial costs.

Eldorado’s financing next week would bring its cumulative investment in Amex to nearly $100 million. Its stake was diluted following the earlier tranches and its upcoming investment would restore its interest in Amex. Eldorado’s transaction needs shareholder approval under TSXV rules and heads to a vote on June 16. Perron is about 550 km northwest of Montreal.

The financing deals followed Amex’ April feasibility, which raised annual gold production by about 47% over its September preliminary economic assessment (PEA). Perron is now expected to produce 147,000 oz of gold per year in the five years of stage one production at an all-in sustaining cost of $910 per oz. gold. At a spot gold price assumption of US$3,500 per oz, the study gave Perron a post-tax net present value (discounted at 5%) of $1.1 billion and an internal rate of return of 114%. Initial capital costs are estimated at $193.9 million.

‘Substantially better numbers’

“It was really nice to see the sharp improvement,” Amex CEO Victor Cantore told The Northern Miner, in a video call Monday. “It’s rare to see a feasibility study show substantially better numbers than a PEA,” he said, adding Amex was very conservative in its PEA to make sure of the numbers given the close follow-up of its feasibility study.

The study marks a major milestone for Amex as it transitions from explorer to developer. With a feasibility study complete, a bulk-sampling permit secured and toll-milling discussions underway, Perron has emerged as one of the most advanced undeveloped gold projects in Quebec.

The study estimated Perron hosts proven and probable reserves of 1.9 million tonnes grading 12.1 grams gold per tonne at the Champagne zone, for 774,000 contained oz. of gold. Perron is expected to have a 17.5-year life, with average operating costs of $617 per ounce. At a gold price of US$3,500 per oz., the study estimates Perron would have a 0.5-year post-tax payback period.

The latest investment of $20.6 million follows $59.47 million Eldorado spent last December to acquire 14.87 million Amex shares from existing shareholders in a private transaction. The purchase significantly increased Eldorado’s ownership position and reinforced its status as a strategic investor in Amex as the Perron project advanced toward development.

40,000 sample tonnes

Cantore said the financing deals will fully fund planned work at the Perron project, including bulk sampling which he said is moving along.

“We’re fully permitted for the bulk sampling to extract 40,000 tonnes,” Cantore said. “Getting the permit for the bulk sampling at the end of March was really a big event for us because it converts you from just being an exploration firm into being a miner.”

In about 18 months, after the portal and declines are built, Amex could start extracting ore and shipping it off for processing, Cantore said.

Amex will announce its toll milling partner in the next 60 days, Cantore added. Amex hasn’t released details of its ongoing discussions with potential facilities but the list of interested bidders could include Eldorado’s massive Lamaque Complex and Sigma mill in Val-d’Or.

“We’re very fortunate that there’s multiple operating, hungry mills in the area,” Cantore said. “So, we’re able to keep everybody on their toes in bidding for it.”

The feasibility anticipated two years of pre-production at Perron followed by five years of commercial mining and toll milling operations in its first phase. Amex has said it may move to an expanded owner-operated model with onsite processing after the first five years of operation.

Golden tailwinds

Gold prices have been hovering around US$4,500 per oz. over the past few weeks. A recent report out of London-based Metals Focus anticipated that prices could continue to climb to a record annual average of $4,920 per oz. this year as geopolitical uncertainty continues to draw interest from investors looking for safe bets.

While Amex has a mining team dedicated to bulk sampling work, it has been busy closing land deals and generating new targets for its exploration team.

“In a little over a year, we’ve gone from 46 square kilometers to 570 square kilometers, all contiguous, all inside the Abitibi greenstone belt,” Cantore said. “There’s massive potential there.” The land package includes 60 km of prospective strike length in Ontario and Quebec.

100,000 metres of drilling

Amex’ planned exploration work is financed under a flow-through financing deal the company completed in August. The deal, aimed at new target definition and drilling across Perron, included just shy of $25 million in flow-through common shares and $12.3 million in hard dollar common shares. The financing would support up to 100,000 metres of drilling across Perron in Quebec and Perron West in Ontario in 2026, the company said in November.

“We truly believe that we are still at the beginning in terms of the ounces to be discovered on the Normétal-Burntbush greenstone belt which has historically been very underexplored for gold,” Amex Vice-President of Exploration Aaron Stone said. “My geological team and I have identified several highly prospective new targets.”

Cantore said Monday the company has $16 million in remaining flow-through financing to spend by the end of 2026. Perron West in Ontario has been a major area of focus so far this year, where a 15,000-metre drill program is underway.

“There are two drills onsite right now and we’re going to continue increasing the amount of drills that we have,” Cantore said. “The geologists see a mirror image of what we have on the Quebec side, so those are some of the areas that we’re drilling.”

Amex’ stock hit an all-time high of $5.32 on May 14, the day before obtaining TSXV approval for the placements under which Amex would eventually raise about $80 million, excluding Eldorado’s earlier secondary share purchase. Shares were up 1% to $4.57 apiece on Tuesday morning in Toronto, for a market capitalization of $642.8 million.