Quebec’s Abitibi region has been home to some of the richest polymetallic gold driven mines in Canada’s history. For Falco Resources (V.FPC) the old Noranda Camp looked like a high potential opportunity. But this was not just guesswork and “closeology”: Falco had an inside track.
Falco was created in 2012 by spinning out non-core assets from Alexis Minerals, now QMX Gold, which, in turn, had an option to purchase 70% of the old Noranda Camp which included the Horne 5 project. Perhaps more importantly, the company had bought the paper archives of historical assays and of 305,000 meters of drilling undertaken by Noranda on the property.
“That archive was in a vault right underneath the Horne smelter.” said Luc Lessard, Falco’s President and CEO. “No one had looked at it for 40 years.”
Lessard understands the area well having recently managed the construction and commissioning of the very successful Canadian Malartic gold mine in the Abitibi for Osisko before the company was taken over. He remained the Chief Operating Officer during the transition period for the Agnico Eagle and Yamana partnership which now operate the mine.
The Osisko Royalties connection to Falco started at its inception when Osisko Mining Corporation put up two of the five million dollars to get the company funded. From 2012 to 2014, Falco digitized the trove of Noranda historic drilling data. It was a massive job and in 2014 Falco was able to put out a 43-101 resource estimate of 2.8 million ounces of gold based on historic drilling results.
This was promising and in early 2015, Lessard and CFO Vincent Metcalfe joined the company to advance its exploration and development programs to the next level.
“We drilled a 17,000 meter confirmation program which allowed us to confirm the 2.8 million historic ounces.” said Metcalfe, “All of this drilling was from the surface. Noranda had historically produced to a depth of around 600 meters. However, we now know that several Abitibi deposits extend at depth, so we confirmed historical drilling results down to 2,300 meters.”
“Our deposit currently sits between 650 and 2,300 meters.” explained Lessard. “It is not that deep compared to some of the other Abitibi area mines, there is still room to grow.”
But it is certainly deep enough that Falco needed to be confident that the rock it was finding would work metallurgically. It also had to ensure that, from a mining engineering perspective, the disseminated gold and other metals could be mined economically.
With the results of the metallurgical testing in place, Falco was able to issue a revised resource in January of 2016 which put the Horne 5 resource at 6.6 million gold-equivalent ounces. Falco then moved quickly to put out a Preliminary Economic Assessment in May of 2016.
“It took the market a couple of weeks to “get it””. said Metcalfe. However, once the market digested the information in the PEA Falco shot from $.55 to $.98 in a few trading sessions.
What the market was responding to was a large and prospective gold, zinc, copper and silver deposit in a well-known area with a team of experienced mining professionals who had brought in successful mines before. While the $900 million CAPEX might have appeared daunting, the commitment of Osisko Royalties to the project opens a lot of financial doors.
The market may also have responded to the fact that over and above the 12 year mine life forecast in the PEA, there is a large potential for resource growth at depth. “We want to drill from underground.” said Lessard, “Drilling from surface is very expensive and highly technical.”
The next milestones are a feasibility study and an environmental impact assessment report which Lessard anticipates to complete over the next twelve months in the mining-friendly Quebec jurisdiction. This schedule was given a real boost with the announcement of a 10 million dollar loan from Osisko. The loan could be applied to the future proceeds of a silver (and perhaps gold) streaming deal to be negotiated with Osisko down the road. “We wanted to avoid pricing the stream in today’s market.” explained Metcalfe.
The feasibility report will incorporate a technologically advanced underground mining operation which would use remote controlled equipment which could be operated from the surface. This modern and advanced equipment would allow the mine to run up to 14 hours per day as opposed to the more typical 5-8 hours per day with traditional equipment. “We’re not chasing veins here.” said Lessard. “The deposit is highly disseminated and up to 120 meters wide.”
Essentially, Falco is planning an underground mine which is closer to an open pit operation than it is to a conventional vein driven underground mine. It is that level of innovation, along with a large tonnage, bulk tonnage deposit which leads Lessard to characterize the Horne 5 project as “Canadian Malartic 2.0”.
The market seems to agree. At time of writing Falco was trading at $.99 with 110.21 million shares outstanding and a market cap of $105.81 million.