Cartier Resources (ECR) - Meticulous Abitibi Gold Explorer Nears PEA

September 21 2020, 13:28 GMT+01:00

Cartier Resources (ECR)

  • TSX-V: ECR
  • Shares Outstanding: 194.89M
  • Share price C$0.30 (21.09.2020)
  • Market Cap: C$58.467M

A mining company with credibility at its core?

Cartier Resources is a CVE-listed gold exploration company situated in the renowned Abitibi Gold Belt. Since we last spoke to Cloutier around a month ago, the share price has doubled. A lot of sceptical investors will put that purely down to the gold bull run, but growth remains impressive. Capital is predominantly being absorbed by gold producers, with some now trickling down to the gold explorers, but the explorers need to be doing the right things in the first place in order to attract interest from the market.

The company's flagship Chimo Gold Mine is being developed meticulously, and a PEA is just around the corner. Cartier Resources has raised $9.3M of flowthrough capital since we last spoke, and now has around $14M in the treasury to put into the ground and create catalyst moments. The market cap is now around $65M, and Cloutier is pleased to see Cartier Resources finally being valued close to what he thinks it deserves.

We Discuss:

  1. 2:02 - Quick Update
  2. 4:12 - Company Overview
  3. 5:34 - Promises in May: Company Processes and End Goal
  4. 14:07 - Chimo Mine: Average Grade too Average?
  5. 19:52 - Ore Sorter: Costs & Processes
  6. 21:09 - PEA Timings and Clues to Economics
  7. 21:51 - Comparable Peers: Who is Cartier Resources Like?
  8. 23:01 - Benoist: Plans and Goals
  9. 25:33 - Exciting the Market: Why Not Raise More Money?
  10. 30:43 - End Goal and Business Model
  11. 35:01 - Impact of COVID-19

Matthew Gordon: We spoke to you back in May, how have you been since then? How's life?

Philippe Cloutier: Excellent. We've had a terrific summer here. This is mine country, so obviously, a lot of contractors are busy, busy in the Abitibi. And because of COVID issues, obviously, not many people took vacations, and we've readjusted the work around that. But it's been a terrific summer, really nice weather. I’ve been growing a lot of tomatoes; I discovered the journey of tomato growing quite a challenge. We've actually dovetailed into more of a corporate development process with Cartier where the consultants that are working with us have had to rearrange their personal lives as well, and all to the benefit of where we're moving next. And you might've seen throughout all that, right in the middle of summer, a pretty important financing.

Matthew Gordon: What do you mean by corporate development? What do you mean by that?

Philippe Cloutier: What I mean by that is that obviously, so far in the last three years, we've been focused exclusively on developing the Chimo mine project, exploring it and orienting it towards can this thing fly? Can this thing get off the ground and fly? In the last interview I had with you, we had demonstrated that, yes, this thing is going to work. We've completed all that heavy lifting and now we're in the final stages of setting the table with the third resource estimate and working towards a PEA. That's the corporate development aspect.

But our corporation is not just Chimo. It's three other projects, it's three other deposits. We've had to engineer our corporate development around continuing and completing the work efforts on Chimo while emerging dynamic exploration program on Benoist and Fenton.

Matthew Gordon: What it is Cartier Resources?

Philippe Cloutier: Cartier Resources is Gold-centric. We explore for Gold in the Abitibi Greenstone Belt, the Quebec portion. Essentially, we got listed in 2007. By 2012, we redesigned our corporate strategy to focus on projects where Gold endowment had been demonstrated and we had Gold deposits. We picked up from 2012 to 2015, four Gold deposits. One of which was a past-producing mine. In the last few years, we've focused most of our exploration work, almost 60,000m of diamond drilling, within 500m of the Chimo mine historical shaft. And we've delivered two resource estimates and we're working on a third, and most likely walking into a PEA. Now we believe it is high time that we migrate towards developing or unlocking the value of our three other deposits: Benoist, Wilson and Fenton.

Matthew Gordon: Why don't we start off with the money first because that's was going to be optionality to deliver on some of the other information you've been building during that period.

Philippe Cloutier: In the last 4-months, what we've discovered is off Chimo is clearly moving towards the end zone. We've done the bulk of the heavy lifting, right? And now the game is essentially in the hands of the resource estimate consultants and the engineers to deliver the final value of Chimo. It requires high-level supervision on our part but having seen that, were on the lookout for additional funds to be able to jumpstart rapidly on our other exploration place. And therein lies the reason for the financing; we had at the time of that decision and that epiphany, USD$4.5M hard cash, and we didn't want to burn through that doing exploration work on Benoist, Wilson and Fenton. So therein lies the rationale for the raise.

Everything that we learnt: the strategy, exploration strategy, the techniques that we learnt on Chimo in the past few years, we're going to apply in a dynamic or relatively aggressive manner on Benoist and Fenton, and maybe Wilson.

That's basically what we've done in the last four months. And when I said we would come to a decision within those six months, is that well, at Chimo, we've decided that we've done enough, we could continue exploring at depth, but we wouldn't be able to capture all that much additional value from deep drilling, for 1. For 2, it would delay or further delay resource estimate work and engineering work. At one point you have to cap off your work and just roll the dice and let it go and then move on to another project.

Matthew Gordon: Benoist, Wilson and Fenton. What you did there and at the point at which you decided to stop and then we'll get onto the other three projects.

Philippe Cloutier: It would be fair though to comment to the fact that there's currently a trend, a very favourable trend for Gold and a window of opportunity, hence our accelerated decision. Perhaps if it was a shitty market, we would continue, but in this environment, we've done enough. We know this thing flies, so what have we done at Chimo Mine? The Chimo mine project is a past producer, we've had the benefit of being able to anchor or calibrate all of our exploration work on known data, 4,000 diamond drill holes, a layout of underground infrastructure, costs of local access to mills, trucking, et cetera, et cetera. Therefore, we're able to focus on the direct exploration at depth of, I think, there were 25 or 27 known Gold zones. Throughout a 3-year program, we were able to target all 27 zones, bring that down to 12 and then 6 and now 3. That doesn't say that the remaining 24 zones still don't have potential. It's just that we felt that we've drilled those enough, and they ultimately could be drilled from underground once this thing gets into production. We've drilled up to 60,000m, as you've seen in a recent press release. 60,000m on the zones that are within 500m of the shaft laterally and at depth. We've produced two resource estimates.

With this morning's press release, we're able to shut the database and launch the third resource estimate process. And then once that reaches a critical aspect, then we can bring in the engineering reports and walk right into a fully-fledged PEA. That's what we've done.

We're very comfortable with where we're at, and that's why we're also comfortable moving on to the deposits. And the market, the M&A ecosystem or what will happen to Chimo, we'll see those recommendations emerge from the work that we've recently launched.

Matthew Gordon: What was the profile of the assets that you look for?

Philippe Cloutier: On Chimo we've addressed the issue. We believe it's going to fly. We simply need to rush the ball the last nine yards over the touchdown line. On the other projects, we have the benefit of having been through a process that we know works on the type of deposits that are in the pipeline of our portfolio. What we've learned in the last few years, our intention is to apply that more comfortably. I mean, the learning curve on Chimo is way behind us and we're going to apply that more dynamically on Benoist.

Now, business model, when we built this portfolio was to identify projects that clearly had endowment metal factors. I mean, grades of Gold over widths that demonstrate that the projects have legs to them. For us, we don't want to be prospecting with a drill or burn through cash trying to make a discovery. We focus our exploration, on stuff that has already been discovered, but were discovered at a period in time where drilling was naturally limited to the first few hundred metres. Now our job is to just pick these things up from what they let were left off and to drill at depth and to continue to explore and build ounces on these things.

As luck would have it, our first asset that we focused our attention on was on that very productive and prospective Cadillac Fault Extension. Now we are going to focus our exploration attention on what everybody's seeing as an emerging mining district: The Windfall Belt. And so, there's going to be a lot of bang for the buck because we've developed a process that can really benefit the three other assets that we have.

Matthew Gordon: Do you feel that economics are not going to be as good as you thought?

Philippe Cloutier: In today's press release, in the second table we present high-grade intervals. And we purposely did that because we get the criticism that, this is low grade or average grade. Chimo, much like any other project in the Abitibi, has its sweet headline pockets within the mineralisation panels. We always have tended to focus on the number of ounces or the volumes that generate ounces rather than the teaser headlines. Our focus on Chimo was making sure that the mineralisation that we outlined was amenable to mining with modern techniques. Mining in modern times has migrated towards bolt mining underground, or more so open pit, in some cases. People that look at Chimo or any other project with a 1990s mindset, they're missing the point. Gold X is a brilliant example, Canadian Malartic is a brilliant example, where you take known deposits and you look at them with a modern set of white glasses and you design a program to address that target type, and at Chimo that worked.

That's why the crucial components of our third resource estimate is to come to an understanding of what is the appropriate cut-off grade for the Chimo-type mineralisation and run various simulations and scenarios. And what I forgot to mention in the previous part of the interview is that throughout the past four months or six months, we've stumbled on what I would call technical discoveries. In discussing with the resource estimate people and the engineers they've brought to our attention, some technical advantages to the Chimo mineralisation infrastructure.

Matthew Gordon: What are you able to tell us about the way that this could be processed?

Philippe Cloutier: At Chimo, when engineers and resource estimate people look at it as a deposit, they don't look at it from an exploration geologist standpoint, right? They look at this and they say, why don't you lower your cut-off? Without any additional drilling, you're generating a lot more ounces. But the engineers will look at this and say, hold on. Can I wrap wire frames around this? Can I actually come up with a stope design? It's a lot of back and forth work with the geological team, the resource estimate team and the engineering team. And then in the process you get these Eureka moments, and when you map it out, when you go to the drawing board, that's what I call technical advantages or technical discoveries that are made that aren't through the drill bit, but through an understanding and a mapping out of the various scenarios.

For instance, at Chimo, we know that ore sorting works. We know that if you take the mineralisation and you put it through an optical or an electromagnetic sorter, it can sort, the material can be recognised and separated into ore and waste. It either does already, or it doesn't. If it doesn't, that's it, you don't investigate that path anymore. In our case, it does.

In our case, we're also very proximal to the to the Val d’Or mining camp. And you could either truck your ore on paved highway, or you could truck your ore on forest roads. You could send it to a lower volume mill, or you could send it to a higher volume mill. And we have the advantage of having locally, I think, six mills by six different owners. You've got the LaRonde mill by Agnico. You've got the Canadian Malartic mill, which is co-owned by Yamana and Agnico. You have the Goldex mill, which is Agnico. You have the Western mill, which is keynote, which is Western. You have the QMX mill, which has an option on. You have the Eldorado mill, you have a lot of different players, a lot of different mills and all that optionality that goes with it. An important part of the engineering design of the project is to unlock the value of each scenario; to be fully aware of which scenario can give you a revenue of X and which scenario gives you a revenue of Y, and just map it all out.

Matthew Gordon: How much work have you done on that in terms of engineering? What's the increased recovery rates? What's the cost of it?

Philippe Cloutier: The cost of it is actually low. The ore sorting plants themselves, purchasing them and installing them - that's low. That's a low-cost item. It's not even mentionable in terms of CAPEX and OPEX. The essential point is the trade-off; are you better sorting this thing and high grading your ore, lowering the trucking cost, sending it to more potential mill sites, or are you going to just throughput as much tonnage as you can at the lowest grade possible, just send it to a local mill and let them sort it out? It's the measure of trade-offs that we're going through right now. That process is ongoing, but obviously, you can assume that if we're doing that process it's got passing grades and therefore, we're going to deliver on it.

Matthew Gordon: When do we start getting more clues about the economics around this?

Philippe Cloutier: Ultimately, the public has to wait for the PEA to be published. The more sophisticated investors will actually wrap their heads around what we have, they'll go to local other PEAs and 43-101, where you could find in these reports, these cost estimates, these trucking costs, these milling costs, and they could piece together their own napkin study PEA-type thing.

Matthew Gordon: Who do you consider your peers are in terms of similar ore bodies, etc?

Philippe Cloutier: Not in terms of similar ore bodies, but in terms of similar dynamics, there would be Monarch, there would be Radisson. There would be Probe, there would be O3. Listen, even Agnico Eagle, in 2006, developed the Lapa mine, and the Lapa mine ultimately produced 825,000oz of Gold, from 2006 to 2018. Don't let anybody tell you that senior mining companies don't tackle million ounce deposits; they do when it makes sense. And so we're working on Chimo to deliver it. We're already, at 1.2, we're working to deliver a minimum of 1.7 that we arm-waved in our corporate presentation. And I'm quite confident that we may even top that.

Matthew Gordon: Benoist. What are you doing there now with this new money of yours? Or what do you plan to do?

Philippe Cloutier: If we dial back to 2016, when Agnico Eagle invested USD$4.5M for a USD$19.9M stake, that USD$4.5M was to drill Wilson, Fenton, Benoist and Chimo. We never got around to drilling Benoist, so it's a given that we already have a drill program mapped out for Benoist. However, in light of what we've discovered that Chimo, the program at Benoist has now developed into a three-component program, we will be drilling the natural depth extension of the Benoist deposit as known today. We will be drilling the deep-seated ore vision anomalies that are distributed in and around of the Benoist deposit. And we will be drilling the deposit itself. All three parts of the program are directed, or their objective is to rapidly vault Benoist into the limelight and properly evaluate. The drilling of the deposit itself is meant to reflect, whereas at Chimo, we had historical metallurgy in rock production and production reports at Benoist, this is not a past producer so drilling the deposit itself is meant to rapidly jumpstart metallurgical studies on the project. Whereas drilling the extension of the deposit and the ore vision anomalies is meant to build or scope out the potential that this project has to deliver how many ounces in a given time.

Matthew Gordon: What are you going to need to do with Benoist, with Fenton, to really get the market excited?

Philippe Cloutier: In our opinion, the market has only recently started to recognise some value at  Chimo, but zero value at Benoist, Fenton and Wilson, because these are all historical resources, they are not 43-101, given the fact that they were essentially outlined in drilled off before the pre-Bre-X scandal. 43-101 norm and regulation come into play in 2001. What we aim to do is to take the historical resource estimates that we have on these projects and flesh them out. This is our embryo. This is our start number. And look at the program; the program is built to develop rapidly, expand the number. At Benoist, for example, there are, I think half a million tons, am historical resource assessment mine, not 43-101 on half a million tons at 5g/t Gold, 12g/t Silver and 0.3g/t Copper.

If you take half a million tons 5g/t, that's about 90,000oz in the first 100 or 200m, but we've drilled down, in 2014, to 750m. We know the systems there. We have to design a drill program that will clearly show the market the value that we're building at Benoist, and have it understand the value of Benoist and also at Fenton. And then ultimately, at Wilson.

Right now, we're getting zero value for the three other deposits. And we're also only getting partial value from Chimo. Our challenge is essentially, not a technical one, it's raised awareness of what we're doing and have the market recognise our value. Have the market recognise that we're not vulnerable financially; we have the cash. We have the right team to do the right work. And obviously, we have the right assets in the right location. The market valuation will perhaps at one point meet the corporate valuation. And that's where I think the value proposition is.

Matthew Gordon: Money is flying around left, right. And centre. Why not take more to accelerate this so you can actually deliver in a very positive Gold bull environment?

Philippe Cloutier: Obviously, there's a world between investing funds properly and just blowing it out and spending it. USD$9M-ish is on the high side of what we can appropriately manage and deliver in the Cartier fashion. Above that, the work would get done. We can manage it, we could deliver, but it wouldn't respect our signature program. That amount basically reflects the backend interests that we're able to generate. USD$9.3M that you mentioned is flowed through. When you raise flow-through dollars, it's a promise to the market that you're going to invest that money in exploration. You can't use that money for GNA and stuff like that. The retail investment community should be hearing, wow, we're going to get USD$9.3M worth of diamond drilling, because Cartier doesn't fly airborne surveys or do grab sample trench programs and stuff like that.

The majority, if not, all of it is going to go directly to diamond drilling, some reserved for engineering and 43-101 resource estimate work. It's going to be a very, very dynamic year for Cartier in terms of news flow, in terms of deliverables.

Matthew Gordon: What's the end point for you, and how much more money and how much more time is it going take to get to that point?

Philippe Cloutier: We're looking at USD$500,000 to USD$700,000 to complete the work on Chimo, have the market fully appreciate in terms of resource estimates and preliminary economic assessment of the project - the value of Chimo. From that point on, it's a different ball game; the market comes into play, the corporates come into play. Even at the board level, we have to make a decision of how we're going to capture that value and monetize it for our shareholders. What remains to be done on Chimo is simply bringing to the market an evaluation picture of Chimo. And from that point on, we've got two elements: we've got a defence mechanism if there's an opportunistic bid or a delinquent bid on Cartier or Chimo. And then we have the blueprints to build it ourselves if we have to make that sort of decision. We'll have covered the basic needs as a team and we'll have protected what we've generated as value, we'll have protected that for sure.

Matthew Gordon: Whats your business model?

Philippe Cloutier: That's our business model, and in the best of worlds that's what you do. Junior companies, a four-man team junior company that says that it's going to build a deposit in this day and age, with the permitting, with the capital raise, you have got to be credible when you want to do this type of thing. It's one thing having a four-man team and doing exploration, quite another having 200 men onsite or women, and having health and safety meetings on Monday morning. It's two different worlds. If you decide to walk the talk and say, you're going to build this thing that can become scary. You could always have that up your sleeve, but at least with the third resource assessment and the engineering work that we're doing, and eventually the PEA, that will spell the value for Cartier and the shareholders. Obviously, we're hoping that all of this is done and delivered while the price of Gold is still going up and the market is favourable. That's why we're very content where we're at right now. I would hate to be delivering when the market crashes.

Matthew Gordon: What are we walking into? Are we in this for some sort of long haul with you, or is there an event coming up soon? 

Philippe Cloutier: There are several events coming up.

Matthew Gordon: I know we're going to catch up in a few months as things progress and we've talked about staying in touch more regularly. I appreciate that. Things are going well. You seem to have delivered everything you told me you were going to deliver, which is unusual. COVID is not making too much impact on moving things forward dates not changing?

Philippe Cloutier: I'll tell you something: because of what I mentioned earlier on, people not taking vacation time, saying, I can't travel abroad. I can’t do this and that. I'll just stay at work and stuff. And then working off-site, working from home, we've managed to do it quite well. Some of our contractors or some of the other groups that we intervene with, will they manage that the same way? When you have a whole bunch of different moving parts and they try to coordinate meeting times and that falls because things get bullied around a bit. We could answer to our plans and that's what we aim to continue doing. It hasn't impacted us yet. What will COVID bring us in the second wave or even third wave? I don't know, but we have taken the necessary steps here to manage that accordingly. We have the cash, the team and the assets.

Company Page: https://ressourcescartier.com/

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