Richard (Rick) Mills
Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information
McWatters Mines acquired two major assets in the Val-d’Or/Malartic area from Placer Dome - the Sigma Mine and the Kiena Mine Complex.
In 2004 McWatters went bankrupt - all their land became open for acquisition.
Osisko Mining purchased the Canadian Malartic Project, Wesdome Gold Mines purchased the Kiena Mine Complex, and NioGold Mining Corp. TSX.V – NOX purchased (for $10,000 and right in the heart of the Val-d’Or/Malartic mining camp), three large claim blocks that were relatively underexplored compared to the rest of the area.
Then, in early 2006, NioGold signed a deal with Aur Resources to acquire the other 50% interest in Marban it did not already own, and 100% interest in two other properties (First Canadian and Norlartic). Between these three properties (which include three past producing mines) there was 585,000 ounces of past gold production and a lot of upside according to NOX’s due diligence.
Over a period of several years NioGold has managed to consolidate a large 130 square kilometer land package right in the heart of the Malartic and Val-d’Or gold mining camps – an impressive feat. Since the 1930s the Cadillac, Malartic, and Val d’Or (French for - “valley of gold”) camps have produced upwards of 45 million ounces of gold.
NioGold’s Malartic-Val d’Or properties are divided into six projects: the Marban Block (Aurizon JV), the Malartic Block, the Malartic H, Val-d’Or, Héva and Siscoe East.
There are a number of important facts to understand about NioGold’s projects:
- NioGold has one of the largest land holdings (130 square kilometers) in the Malartic/Val d’Or mining camps. The properties are located along the Trans Canada Highway 117 - a stretch of pavement called the Golden Highway as it links a large number of current and historic gold mines, gold development projects and gold milling facilities. In total 45 million ounces of gold has already been produced along this section of the highway and there are known to be a further 15 million ounces of reserves.
- The Marban block contains 3 previously producing gold mines, and NioGold has delineated 959,000 oz gold as of a 43-101 report in January 2010. Since then, Aurizon Mines is earning-in to a potential joint venture (JV) by spending $20,000,000 on drilling and then is required to make a resource payment estimated at $35,000,000+ to become a 50/50 partner on this 10% part of NioGold’s properties. An additional 84,000 meters have been drilled on these deposits in the past 2 years and an updated 43-101 resource report is pending.
- The contiguous Marban Block, Malartic H and the Malartic Block are on a major gold mineralized structural zone known as the Norbenite-Marbanite. To date NioGold Mining has only explored a small portion of their 20 kilometer piece of the Norbenite-Marbanite fault zone.
- The Malartic Block Property covers a seven kilometer stretch of land that Niogold feels is under-explored plus another five kilometer stretch of unexplored land adjacent to the past producing Camflo Mine. In 2006 NioGold completed geophysical surveys and drilled eleven widely spaced holes testing the sediment/volcanic contact. The drilling uncovered high level intrusives and significant alteration similar to those associated with gold mineralization at the Malartic camp. Recent drilling has discovered the Ludovick zone with 8.16 g/t gold over 3.1 meters and 3.6 g/t gold over 6.5 meters. More assay results are pending.
- Northwest of the Marban Block, Niogold owns the Heva Property. The Heva Property is on trend with the Marban Block
- NOX is in a proven and historic gold camp with existing excellent infrastructure - full service towns, nearby access to road, rail, power, water, telecommunications, gold milling facilities and an experienced labor force.
- The properties are in Quebec and Quebec is consistently rated among the best places in the world for mining investment by the Fraser Institute, an independent research organization.
- NioGold receives up to 35% in tax credits for work performed in the field; this allows the company to use tax credits for refinancing with no dilution to the share structure.
- NioGold has attracted the attention of a deep pocketed partner committed to building shareholder value, for both companies, through the drill bit.
- NOX’s 100% owned Malartic block, which adjoins the Marban Block to the West, is on trend with Marban and is easily three to four times the size of Marban.
- Management is highly skilled, well known and respected industry veterans.
Niogold has committed $2.5 million to exploring it’s 100% owned Malartic Block. The Malartic is between Osisko Resources 11 million ounce gold resource and NOX’s Marban Block which is host to a NI 43-101 compliant resource estimate of Indicated resources of 598,000 ounces gold in addition to Inferred resources of 361,000 ounces gold.
NioGold started drilling in the southern portion of its Malartic Block (next to the boundary with Osisko) in April 2011 and discovered two major shear zones in the sediments. The Ludovick Zone is 8-10 meters wide with lots of sulfides, is recognized over 200 meters and in some holes has visible gold. One intersection had 3.6 grams gold over 6.5 meters. NioGold has plans to try and extend the Ludovick laterally and at depth because it’s open in all directions.
There are a lot of geophysical anomalies in the southern part of the Malartic Block that NOX has investigated. But with all the work/drilling on the Marban Block they did not have the human resources to complete sampling of what is a substantial amount of core. The plan is for their technicians to switch to the Malartic Block and sample all the core during the break between the Phase ll and Phase lll programs on the Marban Block.
The north-west extensions of the gold mineralized structures that host NioGold’s gold deposits on the Marban Block are the Marbanite and Norbenite faults.
Geophysics shows the two faults extending from the Marban Block onto the northern portion of NioGold’s Malartic Block.
While there is obvious and enormous blue sky exploration potential on the rest of NioGold’s properties, work, for obvious reasons you’ll soon read about, is going to be focused on the Marban Block property in 2012 and early 2013.
NioGold’s Marban Block to July 2010 – Setting the Stage
There is a NI 43-101 compliant resource estimate of Indicated resources of 598,000 ounces gold in addition to Inferred resources of 361,000 ounces gold for the Marban Block:
- The gold resources are defined along a three kilometer segment of a regional gold mineralized fault zone
- Known deposits are reasonably close to the surface and can be accessed by a ramp
- The access provided by the old mines drifts and adits means a much lower cost and shorter timeline to production startup
- To date NioGold’s Marban Block Project has been drilled to a maximum depth of 500 meters. Most major deposits on this belt have been mined at 1,000 meters or more
- NOX’s current deposits are open at depth
- NioGold has an existing resource of 960,000 oz’s gold across all categories. This resource includes open pit as well as underground ounces and both have very good potential to expand at depth and near surface
- NioGold’s Marban Block is adjacent to Osisko Mining’s Canadian Malartic project; one of Canada’s largest developing gold projects having eleven million ounces of gold.
The Marban Block contains three past producing gold mines - the former Norlartic, Kierens and Marban mines - and three additional distinct gold deposits - the North-North, North and Gold Hawk Zones. There are also several satellite deposits that have not yet been evaluated and they could be add significant ounces to the total gold count on the Marban Block.
Marban has an indicated resource of 181,000 ozs of gold and an inferred resource of 114,000 ozs of gold.
Kierens has an indicated resource of 101,000 ounces of gold and an inferred resource of 99,000 ounces of gold.
Norlartic has an indicated resource of 316,000 ounces of gold and an inferred resource of 148,000 ounces of gold.
A good portion of the Norlartic and Kierens former mine resources are near surface mineralization potentially amenable to open pit mining down to the 200 meter level with underground mining envisioned after near surface mineralization is exhausted.
In 1989, Aur Resources estimated:
- The North Zone had over 136,000 tonnes of resource grading 6.86g/t gold for 30,000 ounces of gold
- The Gold Hawk Zone veins, one and two, had over 254,000 tonnes of resource grading 8.57g/t for 70,000 ounces of gold
- The North-North Zone had over 754,000 tonnes of resource grading 2.85g/t for 70,000 ounces of gold
The Marban gold system has been traced over 1.4 kilometers and there is substantial lower grade gold mineralization within the upper 250 meters of the gold system.
By 2010 NOX had not done sufficient near surface drilling to put the results into a NI 43-101 compliant in-pit-type of resource – they could only publish underground resources for the Marban deposit. Phase I of the Aurizon (2H/2010, 2011) agreement focused on this shallow drilling and the update NI 43-101 report due in June will include these results.
There has also been no systematic drilling of the Marban deposit to depth yet. NioGold has shown the system continues to depth and is wide open.
Historic drilling data has indicated that the geologic features that were the foundation for the Marban Mine are also present in other areas around the mine.
In July 2010, NioGold negotiated a joint venture (JV) with Aurizon Mines Ltd. (TSX - ARZ) to further develop the Marban Block property gold resources.
Aurizon must incur expenditures of C$20 million over three years, of which C$6 million was spent in the first year and $5,000,000 is budgeted for the second year ending this June. After the third year and the $20,000,000 in drilling are completed, Aurizon must prepare an updated NI 43-101 compliant mineral resource estimate, and make a resource payment equal to the sum of C$30 (or C$40 if the price of gold is then above US$1,560) multiplied by 50% of the number of total gold ounces in the Measured and Indicated resource categories plus C$20 (or C$30 if the price of gold is then above US$1,560) multiplied by 50 percent of the number of total gold ounces in the Inferred resource category.
Aurizon can then increase their stake to 60 percent by delivering a feasibility study, and a further five percent (at NioGold’s option)(cumulative 65 percent stake) by arranging project financing for capital expenditures estimated by the feasibility study to place the project into commercial production.
NioGold will be the operator during the initial earn-in period but Aurizon will become the operator after they earn 50 percent of the project.
The Joint Venture deal between Niogold and Aurizon assures minimal dilution to NioGold for development of the Marban block - they are fully carried to production. All the costs required in delivering an independent feasibility study are paid for by Aurizon and Aurizon also arranges the financing for NOX’s cost of production.
When you consider that the Marban block is only ten percent of NioGold’s holdings, Aurizon’s $20 million in expenditures, all the costs required in delivering an independent feasibility study are paid for by Aurizon, NioGold gets paid on a per oz basis and ARZ is carrying NOX to production to get 65 percent, it seems, to this author, to be a very good deal for NioGold shareholders.
JV First Phase Work Program
The JV’s first phase program commenced on August 30, 2010, and was completed on August 9, 2011. The program consisted of 50,253 meters of diamond drilling (170 holes, eight extensions) at a total cost of six million dollars.
Drilling was distributed between the Marban (41,270m) and Norlartic (4,319m) deposits and exploration ‘fences’ between the two deposits (4,664m).
Highlights include the identification of two new gold zones surrounding the former Marban mine - the High Grade Western Zone and Eastern Down Dip Zone - both well within the Marban mineralized system.
High Grade Western Zone - On surface and to the west side of the old Marban mine shaft there had been very limited mining development. NOX recognized, and drilled, some very high-grade structures – one of the intersections returned 900 grams over 2.9 meters. This kind of near surface high grade mineralization could improve the overall grade of the gold mineralization for an open pit resource.
NOX also recognized mineralization on the north wall of the deposit in another type of rock, granodiorite intrusives in the hanging wall of the deposit. Some of these mineralized zones appear consistent and could add width to the Marban mineralization. This could lower the strip ratio of the near surface mineralization in an open pit mine.
Eastern Down Dip Zone - The Eastern Down Dip Extension is under the old mine workings. Previous mining on the Marban deposit was very shallow, between 150-250 meters vertical depth. NioGold drilled half a dozen very good intersections between the 400 meter level and the 500 meter level vertical below the old mine.
NOX, so far, has defined the Eastern Down Dip Extension over a strike length of 300 meters and to a vertical extent of over 200 meters. It’s wide open to the east as well as to depth and may continue to the west.
These two new discoveries, both within the Marban mineralized system, lead one to believe there could be a lot more to this project than past miners believed.
JV Second Phase Drill Program
A $5 million second phase program commenced in November 2011 and will continue through to the second quarter of 2012. The second phase program includes 34,000 meters of diamond drilling on the Marban deposit, updated resource estimates and basic technical studies.
The objectives of the second phase drilling program are:
- Improving the quality of the Marban near surface resources - The most recent drill results demonstrated that there is a higher grade gold distribution around the Marban deposit in distinct zones. Different areas of the deposit have been identified for delineation above 250 meters vertical depth using a 25 or 50 meter drill hole spacing. The objective is to improve the quality of the known resources and to increase the potential to find more mineralized corridors within a pit shell to help decrease the stripping ratio
- Developing a mineral inventory below 250 meters vertical depth - This objective targets the identification of new gold resources inside the Marban structural zone. Preliminary interpolation on the Eastern Down dip Zone indicates a strong potential to identify gold resources between a vertical depth of 350 to 600 meters. The mineralized structure is considered open laterally and down dip
New holes, and wedging from previous holes, are planned at vertical depths of 300 meters to 1,000 meters to test the consistency and extension of the Eastern Down Dip Zone at an average drill hole spacing of 50 meters.
A total of $460,000 in engineering work and updated resource modeling and estimates are planned on the Marban and Norlartic deposits. Engineering studies, which will take into account near surface in-pit mineralization, include preliminary metallurgical tests and a base line environmental study expected to be completed by mid 2012.
Phase lll should begin soon and end in December 2012 - there is still $9 million to be spent on the JV agreement for the last year, so it’s likely the Phase lll program will come in at something like $4.5 million for the rest of the year.
In Phase 1 NOX drilled 4,000 meters on the Norlartic to confirm their geological model and 4,600 meters of exploration holes. This drilling was in three fences 300 meters apart and was done in between the Norlartic and the Marban deposits.
NioGold believes they hit the extension of the Norlartic Zone. They extended the Norlartic system towards the southeast by about 600 meters. It heads closer to Marban and then becomes a parallel structure.
The Kierens-Norlartic trend is a northwest-southeast trend, but when extended it looks to be turning to an east-west trend - there’s a curve in it, and it’s the same for Marban. Marban is on the part of the trend where everything is east-west, and then when you go towards the west, it goes parallel to the Norlartic and Kierens system - basically two parallel corridors. One trend has two mines on it, on the northwest-southeast orientation, and the southernmost trend has an east-west deposit on it.
The extension of both these systems is making two parallel trends, and NioGold wants to explore the extensions of those trends in the Phase lll program because they believe the possibility is to have parallel zones for Marban, which means the deposit may get bigger, or perhaps they just reduce the dilution and stripping ratio. it also means the same thing might happen for the Kierens and Norlartic system.
Parallel to the northwest-southeast trending Norlartic and Kierens structures but a little more to the southwest, is yet another trend - the Marban Gold Arc trend.
Gold Arc is a high-grade vein that was mined when the Kierens mine was in operation - they went underground and mined a part of the Gold Arc vein. There are still some historic resources in the extension of the vein.
NioGold doesn’t see any metallurgical problems on the Marban Block and ore cyanidation testing produced results ranging from 95.4% to 97.6% gold recoveries.
“Two gold-bearing composite samples were examined at the SGS Mineral Services Lakefield site. The #1 composite containing an assay grade of 1.24 g/t gold was designed to study the metallurgical response of a low grade envelope. The #2 composite containing an assay grade of 4.59 g/t gold and was designed to represent the high grade envelope. After 48 hours, gold recoveries ranged from 95.4% to 97.6% for composite #1 and 95.7% to 97.3% for composite #2. Finer grinding typically increased the gold recovery at the cost of higher cyanide consumption.
Gravity separation testing on the #1 composite showed a 41.3% Gravity Recoverable Gold (GRG). Gravity separation testing on the #2 composite showed a 56.5% GRG. The combination of gravity recovery and cyanidation of the gravity tail did not increase the overall gold recovery. This demonstrates that while this concept could be beneficial from a plant design perspective, gravity recovery is not essential to obtaining good recoveries from these two composites.
Bond ball mill testing indicated that the two composites fell in the medium-soft to medium range of hardness compared to the SGS database (10.1-10.9 kWh/t).” NioGold news release April 24, 2012
There is nothing complex about the ore, it’s basically gold associated with pyrite iron sulfides - no arsenic or antimony and very limited silver, it’s nearly all gold in pretty simple form.
Eventually the Marban Block could have three open pit mines, the Marban, Kierens and Norlartic (with as many satellite zones as possible around those pits) with plans to underground mine all three after open pit resources are exhausted.
When NOX first signed the JV agreement with Aurizon the ounces NOX had in the ground were valued as an $18 million resource payment. There’s no doubt in this authors mind that the first year Phase l program - 50,000 meters drilled – will significantly increase the gold ounces on the Marban Block (in a new 43-101 Resource Estimate expected shortly) and the size of the resource payment. No drill results from the second phase 34,000m program are included in the new resource estimate.
Northern Star Mining Corp. TSX.V – NSM went bankrupt about two years ago - NSM had quite a bit of property right around, and adjacent to, NioGold’s Marban Block.
“Northern Star's Malartic Midway project was to be Quebec's highest grade mine at 7 to 10 grams. The mine was to be an underground, with a decline and two 3000 foot shafts (inherited from the old Malartic mine). A decline had been started on the western part of the property next door to Osisko's 11 million ounces of gold.
The Malartic Midway project features two different types of gold mineralization: the higher grade gold mineralized gabbros and the larger volume lower grade mineralized porphyries like Osisko.
Fourteen of these near-surface (containing about 90,000 ounces of gold each) mineralized lenses were drilled off. The lenses have been drilled from surface to 1500 feet. One hole drilled in 2007 intercepted a mineralized lens at 5300 feet; at this depth, the mineralized area has seven zones (several high grade breccias and several porphyry lenses).
Mining engineers really like Northern Star's near surface mineralized lenses because of their impressive widths and grade (ranging from 12 feet to 77 feet running 8 to 10 grams/ton). In the old Malartic mine, substantial amounts of one ounce plus material was mined at the 2200 foot level - one hole intercepted 16 feet of 2.5 ounces/ton gold. The initial year of production should be in a range of 30,000-50,000 ounces of gold with the goal of achieving 300,000 to 500,000 ounces/year 3-5 years.” 24hnewgold.com, Heather A. Conley, BSc Geo, The Raya Group
NSM’s bankruptcy focused a lot of attention to the camp because a few extremely large funds in the States had their bonds - bankruptcy means the bonds are worthless. Interestingly enough the rumor on the street is some of these funds have been acquiring more of these discounted bonds, and someone is trying to get the company out of bankruptcy.
The funds that have ended up owning the property obviously must be quite keen on the area. They know a lot about the Malartic Midway projectand other potential deposits that are on Northern Star’s property, and of course, a lot of that property is adjoining, actually borders all around NioGold’s Marban Block.
Wexford Capital, a five billion dollar fund, recently filed that they own 11,728,379 shares of Niogold - 11.70 percent of the outstanding shares.
Agnico-Eagle is looking to replace lost production and has loads of mill capacity sitting idle nearby, as do other miners in the camp. Agnico-Eagle was forced to shut down production, and write off its investment, at its Goldex mine (Goldex was supposed to account for 17% of the company’s gold output in 2011), in October 2011 due to water inflow and ground stability issues.
Goldex’s sizable 8,000 tpd capacity plant is sitting idle. There is also spare capacity in the camp at plants operated by Wesdome, Richmont, Century and Alexis. In February 2012 Agnico-Eagle booked a partial write down on the value of its Meadowbank mine in the Canadian Arctic after being forced to alter its mine plan due to lower than expected ore grades.
These developments have combined to put NioGold in a very unique position among junior resource companies.
For these reasons, and for the upside of the blue sky exploration potential of the rest of NioGold’s 130 square kilometer land package in the heart of the Malartic and Val-d’Or gold mining camps, NioGold should be on every investors radar screen. Are they on yours?
If not, maybe they should be.
Richard (Rick) Mills
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Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.
Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.
Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
Richard does not own shares of NioGold Mining Corp TSX.V – NOX
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