For the longest time, Cartier Resources (V.ECR) has been reporting high-grade gold from its Chimo Mine project. A couple of meters of +10 grams per ton (gpt) here and 16 gpt there. But it has never been the headline number for the Cartier press releases.
“The high grade has always been there,” said Philippe Cloutier, CEO of Cartier. “We reported it, but it was always in the second or third paragraph of the press release.”
The reality is that 75% of the value at the Chimo Mine is in the average grade material running between 4 and 5 grams per ton because there are a lot of tons of that material as disclosed in Cartier’s most recent 43-101 Resource Estimate update. However, in Cartier’s last two press releases, the company reported 4.0 meters of 20.8 gpt and 4.5 meters of 16.5 gpt material from drill holes 450 meters to the east of the existing underground workings. Critically, these high-grade intercepts are well below known gold zones on the property.
“We had the discovery hole back in July of last year,” said Cloutier. “What we decided to do was define a target which was the size of the original mine. We essentially copied the mine-sized target to drill the discovery area.”
“These recent press releases are amongst the first results of our drilling in that target area. For a while, the results were delayed as all the labs were closed because of COVID. They re-opened on May 11. These were the first results we got after the labs re-opened. We’re continuing to drill but the results will be delayed a couple of weeks because of the backlog in the labs,” said Cloutier. “But these first batch grades are quite impressive. And the rest of the samples are looking very good.”
With two drills deployed at Chimo, Cloutier is anticipating news right through the summer.
“The drill target looks very much like the old mine,” said Cloutier. “Right now the drill hole intersections that dot the target could end up adding up to 500,000 ounces. It’s a mine within a mine.”
While the high-grade intercepts are deep, the great strength of the Chimo project is that there is already a 920-meter shaft and an extensive network of drifts. This existing infrastructure changes the economics of mining the Chimo Mine deposit and the extensions of that deposit which Cartier is exploring.
“The current 43-101 does not include any of this new drilling,” said Cloutier. “Nor does it include any of our new engineering work. We are working on the engineering side so that we can lower the cut-off grade by a gram. We’re pretty sure we can and the results of those efforts could add another 500,000 ounces to the resource.”
As the current 43-101 has 585,190 ounces of gold in the indicated resource category and 597,800 ounces of gold in the inferred resource category adding a million ounces by exploration and engineering would take to project to the 2 million plus ounce category.
2 million ounces with existing infrastructure is a pretty attractive package for a mid or senior tier producer looking to replace reserves. “We know some technical teams out there like what they see,” said Cloutier. “Which is why we are doing the exploration and engineering. We don’t want to leave those ounces on the table.”
The effect of the new ounces to the East is to lengthen the mine’s projected life even though they would be unlikely to be mined immediately. Drilling those ounces adds value to the Chimo Mine project but it also alters a potential purchaser’s calculations of that value.
It is also a calculation which makes Chimo attractive for Cartier to operate itself. “If our share price rises and we don’t get the right offer, we could run the mine ourselves,” said Cloutier. Because Chimo was already an operating mine, it has fast track options. After all, if the numbers make sense for an acquirer, they would make even more sense for Cartier itself. Cloutier is not ruling out any of the options but he sticks to his maxim of “creating shareholder value” as Cartier’s first priority.
Drilling and engineering for new ounces in what looks to be a rising gold market has put Cartier in a nearly perfect position for the coming re-rating of junior gold explorers. When that re-rating happens is unknown but Cartier is trading less than $0.10 higher than it was when gold was hovering around $1300 a year ago.
If Cartier can come up with another million ounces, it is hard to believe it will trade at less than $0.30. If gold and the juniors rally, Cartier could easily hit a dollar as drilling results and the third 43-101 prove up the resource at Chimo Mine.