Moneta Porcupine extends open-pit potential

Just four months after reporting a 3.1 million ounce gold resource from three open-pit zones at its flagship Golden Highway project 100 km east of Timmins, Moneta Porcupine Mines (ME-T, MPUCF-O) is back in the news with drill results from a fourth zone wedged between two of the other three zones that suggests there is potential for a single open-pit configuration stretching 2.5 km in length with strong gold potential at depth, the company’s president and chief executive says.

Drill results from the fourth zone or Gap Zone appear to establish a near-surface link between the Southwest Zone and the Windjammer South zone, says Ian Peres, who left a successful career in merchant banking to join the company in August 2008.

In addition to the three pits outlined at the Golden Highway project and included in the resource, there are another seven zones on the property that are no more than 1 km apart and that have strong exploration potential. Moneta Porcupine also has four other projects in Timmins proper (in the Porcupine Camp) that have yet to see many exploration dollars because the junior has been concentrating on advancing the Golden Highway project.

“Moneta has the fourth-largest land position after existing producers Goldcorp., St. Andrew Goldfields and Lake Shore Gold and all of our projects are located either on the Destor Porcupine Fault or on splays associated with the Destor and that is where the bulk of the 75 million ounces mined in the Timmins Camp have been found over the last 100 years,” Peres says. “I left merchant banking because I saw this as a tremendous opportunity with a company that had an extensive land package with substantial untested potential in the world-class Timmins gold mining camp.” 

Currently the Golden Highway project has 33.5 million tonnes grading 1 gram gold per tonne for 1.07 million ounces of contained gold in the indicated category and 47.8 million tonnes averaging 1.35 grams gold for 2.07 million ounces of contained gold in the inferred category at a 0.35 gram gold per tonne in-pit and a 2.00 gram gold per tonne out-of-pit cut-off grade.

Highlights from the most recent drilling in the Gap Zone at the Golden Highway project include 1.04 grams gold per tonne over 55 metres including 5.52 grams over 4.0 metres in hole 295A and 1.14 grams gold over 39.0 metres including 1.99 grams gold over 6.0 metres and 1.17 grams gold over 46.0 metres including 2.61 grams gold over 2.25 metres in hole 301.  Hole 303 returned 0.99 gram gold over 14.25 metres and hole 304 cut 0.89 gram gold over 34.69 metres including 29.11 grams gold over 0.42 metres.

Mineralization in the Gap Zone is similar to that in the Southwest Zone and the Windjammer South Zone and continues along strike within a corridor that is more than 150 metres wide in the hanging wall sediments of the banded iron formation along its southern contact.

The latest drilling demonstrates the strength of the near-surface mineralization, Peres says, which now extends over a strike length of 500 metres within the Gap Zone. It also illustrates the convergence of gold resources in the Gap and Windjammer South zones.

The results also illustrate that gold mineralization exists along a northwesterly structure and is characterized by increased brecciation and veining. The structure strikes northwest within a southwestern dip cross-cutting the iron formation near the centre of the Gap Zone.

“We continue to focus in the Gap Zone to improve overall drilling density and if we continue to have success, it is conceivable that Windjammer South and the Gap Zone will be one substantially larger pit,” he says. “And our internal modeling confirms that the resource domains connect. There is strong potential to connect Windjammer South with the Gap Zone and the Southwest Zone.”

Peres also notes that there is potential for the 55 Zone, which sits 1,000 metres to the west of the Southwest Zone, to be extended to the west and east.

The initial resource estimate was based on 274 diamond drill holes over a 4.5 km strike of the Golden Highway project’s 55 Zone, Southwest Zone and Windjammer South zones and included drilling from1994 to 1997 by past operator Lac Minerals, a subsidiary of Barrick Gold (ABX-T, ABX-N), and by Noranda Exploration from 1983 to 1989.

Moneta Porcupine Mines is actually one of the longest continuously listed mining companies on the Toronto Stock Exchange. It was founded in 1910 and developed an underground mine in Timmins after discovering a large quartz vein near surface. The Moneta mine produced 150,000 ounces at 15 grams gold per tonne between 1939 and 1943 and extended down six levels to 1,450 feet.

The mine is still part of the company’s holdings today and sits on what Moneta Porcupine now calls the Kayorum property in the Porcupine Camp. Drilling last year identified significant grade in and around the old mine workings it remains a significant exploration and development target for the company.

After WWII the company’s land package was put on care and maintenance and Moneta Porcupine was pretty much dormant until 1986 when it began assembling the claims in the Golden Highway project. A series of acquisitions in 2009 and prior, in addition to other staking over time, has translated into the large land position the company holds at the project today.

The most significant historical drill program at Golden Highway was a joint-venture with Barrick Gold (ABX-T, ABX-N). Barrick drilled about 35,000 metres before returning the project to Moneta in good standing. Moneta resumed significant drilling in 2010 and has completed more than 60,000 metres so far.

This year Moneta plans a minimum 20,000-metre drill program within the existing modeled pits and immediately adjacent to them in order to expand the National Instrument 43-101 gold resource and update it before the end of the year.

Moneta’s Golden Highway project covers 100 sq km, including 12 km of a volcanic/sedimentary belt along two branches of the prolific Destor Porcupine Fault Zone. The project also benefits from excellent infrastructure, Peres says. Power lines run through the project, which is no more than 4 km from a major paved highway, and the area has an abundance of skilled labour.

The project is also centered between two operating mills, one 25 km to the east and one 35 km to the west.   A few kilometres to the northwest and adjacent to it is Lake Shore Gold’s (LSG-T) Finn-Gib project and Northern Gold Mining’s (NGM-V) Garrcon project lies roughly five kilometres to the northeast. 

In terms of its capital structure, insiders have a very significant stake in the company. Peres along with his management team and board of directors all hold a significant number of shares in the company. “We all have skin in the game,” he says. “It’s unusual for insiders to have such a significant stake in a junior.”

He also points out that institutional investors hold about 36 million shares and include Sprott Asset Management, RBC, Sentry Select, BMO and Goodman Funds.  

When Peres joined the company, one of the first things he set out to do was to place large blocks of stock in close hands by taking out all of the significant blocks of stock held by companies such as Newmont Mining (NMC-T, NEM-N) and his previous employer, Augen Capital, among others.  

Killian Charles, an analyst at Industrial Alliance, initiated coverage of the company late last month with a speculative buy rating and a twelve-month target price of $1.00 per share. “Moneta currently trades at $10 per oz. valuation (roughly $14 per oz. in-pit),” he wrote in his Apr. 26 report. “For companies with deposits north of 3 million ounces, the average is approximately $75 per oz.”

“Moneta could be acquired by large regional producers including Detour Gold, Osisko and Goldcorp,” he continued. “These three companies all have proximal operations and are looking for near surface bulk tonnage deposits similar to the Golden Highway project. Average acquisition cost per ounce was $95. This represents roughly a 0.6x multiple of the current in-pit in-situ valuation.”

Mining analyst Michael Fowler of Loewen, Ondaatje, McCutcheon, also has a speculative buy rating on the stock and a twelve-month target price of 95¢ per share. “Moneta trades at an Enterprise Value of $11 per ounce of gold, has a market capitalization of $37 million, and is undervalued given its resource base and large property position in the Timmins camp,” Fowler wrote in a May 2 research note to clients.

The junior closed at 21¢ per share within a 52-week range of 13¢-39¢. The Toronto-based company has 168 million shares outstanding.


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