A recent flurry of deals has almost doubled Probe Metals’ (TSXV: PRB) land position at its Val-d’Or East project in Quebec, and the latest set of assay results suggest why.
Earlier in December, the junior announced two property transactions on the same day.
In one it acquired a 100% interest from QMX Gold (TSXV: QMX) and its joint-venture partner in the Bonnefond North property, which extends Probe’s land package south of its Val-d’Or East project.
The new ground is along strike of Probe’s New Beliveau deposit, which sits around and underneath the past-producing underground Beliveau mine. The former mine, operated by Cambior from 1989 until 1993, produced 170,000 oz. gold at a grade of 3.15 grams gold per tonne.
Probe’s New Beliveau deposit has an inferred resource of 9.1 million tonnes grading 2.63 grams gold per tonne for 770,000 contained oz. gold. Of that, 330,000 oz. at 2.4 grams gold are in-pit resources, and 394,000 oz. at 3.1 grams gold are underground.
In a second deal, Probe signed an option and joint-venture agreement with Alexandria Minerals (TSXV: AZX) to earn up to 70% of 232 mining claims spread across 72 sq. km that it also plans to fold into its Val-d’Or East project.
The claims are 10 km south of the Beliveau mine on Probe’s Val-d’Or East project, 25 km southeast of Val-d’Or. They also contain the Sleepy gold project, which has an inferred resource of 1.9 million tonnes grading 5.1 grams gold for 307,350 oz. gold. The resource was based on 45 drill holes totalling 20,665 metres.
The Sleepy deposit is a disseminated gold-pyrite resource, 550 metres long by 575 metres deep, with an average 4.1-metre width. The resource is hosted in the Vicour gabbro sill, a discrete 8 km long body that also hosts the past-producing Sigma 2 mine. The Sigma 2 mine produced 1.8 million tonnes grading 2.7 grams gold in the early 1990s.
“It’s good to do land consolidation early before you unlock too much value,” Probe Metals’ CEO David Palmer says. Palmer’s early claim to fame was selling Probe Mines’ Borden Lake gold project in Ontario to Goldcorp (TSX: G; NYSE: GG) for $526 million in March 2015. He headed Probe Mines from 2003 until its sale to Goldcorp.
Palmer won the Prospectors & Developers Association of Canada Bill Dennis Award for a Canadian mineral discovery in 2015, as well as this newspaper’s Mining Person of the Year Award. In 2014, the geologist was named prospector of the year in Ontario, and won the CIM A.O. Dufresne Exploration Achievement Award.
Probe Metals’ latest land deals, announced on Dec. 1, follow news in September that the management team acquired a 100% stake from Richmont Mines (TSX: RIC; NYSE-MKT: RIC) in six mining claims west of the New Beliveau deposit.
“These transactions suggest management has sufficient confidence in their drill results to buy more assets,” George Topping, an analyst at IA Securities, said in a research note on Dec. 5. “This is a positive harbinger of things to come from Probe.”
Topping’s commentary proved prescient. In the latest batch of assay results released on Dec. 6, Probe reported that further definition and delineation of the east- to west-trending, gold-bearing quartz-tourmaline vein system has resulted in finding a high-grade gold zone hosted by a diorite dike, and is similar in style to that of the Beliveau mine.
Infill hole 90 returned a 7.3-metre intercept grading 12.6 grams gold per tonne. The mineralization, Probe said, was intersected consistently between 400 and 800 metres deep, and could represent a new gold zone. (The same hole returned a shallow intercept of 2 grams gold over 143 metres, starting at 15 metres deep.)
Holes 91 and 94 intersected the high-grade zone, too, and returned 3.5 metres of 8 grams gold starting at 681 metres and 4.2 metres of 9.7 grams gold starting at 809 metres.
The true width of these zones is unknown, but the company says the presence of strong mineralization in the diorite dike at these depths shows that the east–west feeder system is active at these levels and bodes well for further expansion along strike, away from the dike, at these depths.
Results from the first-phase drilling program are encouraging, the company says, and show potential for both near-surface bulk tonnage and deeper, higher-grade mineralized systems. The drill results also indicated continuous gold mineralization and the potential for mineralization laterally to the west and east of mineralization.
Probe acquired Val-d’Or East through its business combination in April with Adventure Gold.
“We learned a lot from Borden, it kind of helped us build a template, and what you needed for a successful project, and Val-d’Or East was a project that ticked all the boxes,” Palmer says. “It was all about the ability to expand an existing resource. That was a critical parameter in our project generation model and it was surprising to see how many resources out there that don’t have potential to expand, and Val-d’Or East had it. The more layers we peeled back in the due diligence, the better it got, and we definitely saw the potential to expand this thing.”
The geologist adds that he likes “underappreciated” and “neglected areas,” and that there was hardly any geophysics or early stage exploration done on the project.
“We’ve got a resource open to expansion and grassroots potential all around an old mine site, and it really intrigued us,” he says. “It’s funny to find that in a major Canadian mining camp, there’s a portion of it that has been underappreciated, and that’s what we found on the east side of Val-d’Or.”
Probe kicked off a 10,000-metre drill program on Aug. 10 and began seeing interesting features in the core. What was really encouraging, Palmer says, is that what was intended to be infill drilling resulted in finding new mineralization in the first seven or eight holes.
When Cambior operated the Beliveau mine in the late 1980s and early 1990s, the company was mining a north- to south-trending, vertically dipping diorite dike, Palmer says. It had wide mineralization that Cambior could mine in an underground, bulk-tonnage scenario, using longhole open stopes, which was both cheap and profitable, Palmer says.
Cambior was mining the north trending dike. The mine consisted of a number of high-grade lenses within the dike, and every time the vein system hit a dike they would get a high-grade envelope, and because the veins were so close together they got a bunch of high-grade zones. Between them, however, was low-grade material, so it made sense to mine them all as one zone, which was much cheaper and more profitable. What they eventually mined was an average of 3.2 grams per tonne in a bulk-tonnage, underground scenario.
“Although that would typically be considered low grade for underground mining, the thickness of it and the fact that it was vertical made it the most profitable operation for Cambior at the time, and even today at that grade it would work,” Palmer says. “So it was a question of grade over mining costs, and mining costs won out.”
What Adventure Gold found —and the premise for the junior picking up the project from Iamgold (TSX: IMG; NYSE: IAG) in 2008 (Iamgold had acquired Cambior) — was to look outside the mine footprint. Adventure Gold found the east–west vein system, Palmer says, which is a hallmark of Val-d’Or, and that’s when Adventure started to build out its 770,000 oz. gold resource. That resource, completed in 2013, was based mostly on the east to west system.
“It turns out that it’s a feeder for the mineralization in the dike, so the dike didn’t come in mineralized, it was the east–west system that introduced the mineralization,” Palmer says. “We’ve got two north- to south-oriented vertical dikes, and the east- to west-trending veins that crosscut them. The east–west structure consists of a parallel system of stacked veins.” Palmer estimates that within 200 metres of surface there are probably 10 to 12 veins stacked parallel to each other.
“What Cambior found when they were mining the vertical dike was that as they went north, they cut higher grade,” he says. “We thought that if the east–west system feeds the dike, maybe those east–west veins get higher grade to the north as well.”
Hole 90 was designed to test the east- to west-trending vein system to see if it was higher grade in the northern sections. It was at the edge of the resource, not to increase volume in the gold resource, but rather to improve grade.
“We drilled a sub-vertical hole to go to 500 metres deep, and at 400 metres, we hit the new dike,” Palmer says. “Nobody knew it was there and it turns out to be mineralized just like the old Cambior mine, so this infill hole designed to improve grade found a gold zone at depth, in a vertical-dipping dike, which is an ideal underground mining scenario. We hadn’t planned to expand within the perimeter of the resource, but we were, and now we see expansion potential within the current resource.”
One of the important implications, he adds, is that Probe is hitting gold between 400 and 700 metres deep.
“Before this, we thought the mineralized system only went down to 400 metres. Now we have proved that it is much bigger, and we’re probably seeing stacked veins down to 800 metres, and this means the system could be more robust than we thought it was, and bodes well for expansion and continuation for a significant strike length along the east–west system,” he says. “Hopefully this means we find even more dikes, and more open pit and underground mineralization than we thought.”
The mineralization is interesting, too, he notes. “It’s diorite dike with disseminated pyrite, but the pyrite is cubic — and usually when you see cubic pyrite, you think that there’s no interest because it’s not the typical morphology for pyrite in most gold deposits. It usually indicates recrystallization … you think there is not much potential for gold, but it turns out it’s the ore horizon. And it’s very, very distinct, so when you’re drilling though it you know exactly when you are in the gold horizon, you just don’t know grade.”
The mineralization is distinct, he adds, with quartz-tourmaline hosting sulphides and pyrite, and an alteration halo that is twice the thickness of the vein.
Drilling at the Val-d’Or East project has shown mineralization widths ranging from 60 to 300 metres, and typically averages between 1 gram gold and 3 grams gold per tonne.
In addition to the drilling, the company has completed the first phase of a property-scale, induced polarization (IP) survey, which is being interpreted. Probe plans to drill-test the new IP anomalies in the first quarter of next year, and add a new drill.
As well as staking more ground in the area, in July Probe showed its confidence in the Val-d’Or East project by buying back 20% net proceeds of production royalty on mineral claims at the project from Vaaldiam Mining Inc., a wholly owned subsidiary of Orion Resource Partners LP.
“It’s interesting that you can still find these things, and it highlights the fact that we have an expansive country, an expansive amount of exploration potential — and there are still opportunities in Canada to find exciting areas that can be explored,” Palmer says. “Borden was a classic example of where people thought there couldn’t be any gold, and it turned out to be a multimillion-ounce deposit.”
Probe has drilled 19 holes, or 9,000 metres, and no longer thinks that it will cut off the program at 10,000 metres.
“Given the results, it’s a question of adding drills,” he says. “We’ve got two drills and hopefully by late January we’ll have a third. We’ll just keep drilling until we run out of ore.”
The junior’s shareholders include Goldcorp — which owns a 14% stake — as well as AGF Investments, Caisse de dépôt, Picton Mahoney, Windermere Capital, Sprott Asset Management, U.S. Global Investors, Libra Advisors, J Zechner Associates and Sidex.
Management and insiders own 6%.
Probe’s chairman, Jamie Sokalsky, is also a director of Agnico Eagle Mines (TSX: AEM; NYSE: AEM), and served as president and CEO of Barrick Gold (TSX: ABX; NYSE: ABX) between 2012 and 2014. Before that, Sokalsky was Barrick’s chief financial officer from 1999.
Over the last year, the junior’s shares have traded in a range of 33¢ to $2.18, and at press time traded at $1.17.
The company has 85.5 million shares outstanding for a $100-million market capitalization.
Probe has $30 million in cash and investments.
Topping of IA Securities has a 12-month price target of $2.50 per share.
The analyst has a “speculative buy”
rating on the stock, “given the management team’s record, highly prospective property, with an existing resource, property location and strategy of proving up a resource attractive to senior producers.”