Monarques Gold (TSXV: MQR) has joined the club of Canadian gold producers after pouring its first gold bar from its Beaufor mine in Quebec, 20 km northeast of Val-d’Or.
The Montreal-based junior acquired Beaufor — along with a number of other key assets in the province — from Richmont Mines (TSX: RIC; NYSE: RIC) in a deal that closed earlier this month.
In addition to Beaufor, Monarques received the Camflo mill, 50 km from Beaufor, as well as the Wasamac, Camflo Northwest, Chimo, Monique and Louven 117 properties.
Richmont agreed to sell its non-core assets in Quebec to Monarques on Sept. 11, the same day it announced that it had signed a plan of arrangement under which it will be acquired by Alamos Gold (TSX: AGI; NYSE: AGI) in a friendly transaction.
In addition to becoming a gold producer with Beaufor, which churned out 19,562 oz. gold in 2016, Monarques has also come out with an updated resource for the Wasamac project, 15 km southwest of Rouyn-Noranda.
By upgrading most of the previous inferred resource to the indicated category based on infill drilling, Wasamac now has measured and indicated resources of 2.59 million oz. gold (29.86 million tonnes grading 2.70 grams gold per tonne) and 293,900 inferred oz. gold (4.2 million tonnes grading 2.20 grams gold per tonne). The resource is estimated at a cut-off grade of 1 gram gold per tonne and using a gold price of US$1,500 per ounce.
Monarques is also making headway at its Croinor gold project, which it owned before the Richmont transaction, and on which it expects to complete a prefeasibility study in November.
At an investment conference in Toronto hosted by Red Cloud Klondike Strike, Monarques president and CEO Jean-Marc Lacoste said the company is growing from strength to strength.
“We are now officially a gold producer with the Beaufor mine in East Val-d’Or and we now have a very large portfolio of 250 sq. km with two advanced projects — Wasamac and Croinor,” Lacoste said. “Croinor is fully permitted and ready to go and is about the size of the Beaufor mine as we know it now, and we also have six other exploration projects that have a lot of potential.”
As for Wasamac, he said, “we have leverage with the gold price.We all know if gold starts going, the value of the Wasamac project will develop. And that was our intention all along with this transaction with Richmont, it was to have what I like to call ‘a free call on the price of gold.’ We all know we’re one tweet away from a crazy price on gold.”
LaCoste adds that before Monarques’ transaction with Richmont, the company was “evaluated at $115 per oz. gold underground — mostly based on the fact that we had Rob McEwen [as an investor] and a lot of good people around us and a lot of goodwill. Post transaction we are valued at around $20 per oz. underground … that’s good. Isn’t it good for shareholders to be valued at $20 instead of $115? We are hoping to get back to $115 with the portfolio we have. The idea is to get a good deal for your buck, and that’s what we’re aiming at.”
The company’s wholly owned high-grade Croinor deposit, 55 km east of Val-d’Or, has measured and indicated resources of 804,600 tonnes grading 9.12 grams gold for 236,000 contained oz. gold and inferred resources of 160,800 tonnes averaging 7.42 grams gold for 38,400 oz. gold.
“Croinor was the main reason why Rob McEwen came on board,” LaCoste says. “He said: ‘Jean-Marc, you have 150 sq. km and [Croinor] is only on a square kilometre of the property, I don’t believe this is the only thing you’ve got. There’s a lot of exploration that should be done.’”
Monarques also owns the 750-tonne-per-day Beacon mill, which is authorized to process up to 1.8 million tonnes of ore, equivalent to nine years of production at full capacity. Beacon, which Monarques acquired in November 2016, is 4 km from the Beaufor mine, and can be used as a secondary milling operation.
“Beacon is a fully permitted mill, may I repeat, fully permitted, in Quebec, which means we don’t have to wait three to five years to get the permits in line,” LaCoste says. “It’s not functional at the moment. We know it’s going to take about $1 million to $2 million to put it in movement.”
The company has $12 million in cash. In March it completed a $5.1-million, bought-deal private placement and during the Richmont transaction in October, completed a senior-secured gold loan from Auramet International LLC in New York, which gave the junior access to US$4 million.
“We borrowed some money against the gold we are pouring at Beaufor to be repaid on a monthly basis for 12 months,” LaCoste says. “That was one of the conditions that helped us close the deal.”
It also completed a $6.5-million financing at 35¢ per share at the time of the Richmont deal. Major subscribers included Richmont ($2 million), Fonds de Solidarité FTQ ($1 million) and Probe Metals (TSXV: PRB) ($0.6 million).
Richmont owns 40 million shares of Monarques’ 200 million shares outstanding. That block of shares will be transferred on Nov. 23 should the transaction with Alamos Gold go through, LaCoste adds.
“We have had a meeting with Alamos and they like what we’re doing and they want us to pursue and develop the assets, and they will be supportive shareholders.”
At press time Monarques’ shares were trading at 32¢ apiece within a 52-week range of 25.5¢ (November 2016) and 49¢ (January 2017). The company has 200 million shares outstanding.