Target "494": Goldcorp’s Eleonore Set for Resource Expansion
Issue 72, February 2014
The flip side, others say, is that Goldcorp’s dominance in the region may deter other majors, for fear of counter-bidding on properties. Its $2.4bn bid for Osisko meanwhile, announced last month, only heightens its focus on Quebec. “Goldcorp will become the largest gold producer in Quebec and a true Canadian mining champion,” president Chuck Jeannes said at the time of the bid, now embroiled in legal wrangling.
Operating at full capacity, Eleonore and Malartic would produce over 1m ounces per annum, equal to a third of Goldcorp’s current output. “It increases our investment in a part of the world we really like.”
“Eleonore is already a world-class deposit, there’s no doubt about that,” says Andre Gaumond, founder of Virginia Mines, which discovered the deposit by retracing the path of a gold-rich boulder over 6km to its original outcrop. “I think you could double the resource over time, maybe even more than that, which would be spectacular.”
Satellite discoveries no longer need to be of Roberto’s size, he adds, to be economically viable. “I have absolutely no doubt that there is a lot of potential, not only on the deposit itself, but on the property, the surrounding areas. It’s the first mine in the camp."
Virginia, a tightly-held bundle of royalties and exploration joint-ventures, sold Eleonore to Goldcorp for $420m in 2005, retaining a 2.2 to 3.5 per cent royalty. Shares defied both the gold price and the wider mining industry in 2013, rising 40 per cent in the last 12 months as Eleonore nears completion.
But some of the company’s investors worry that the Eleonore royalty, widely seen as the best gold royalty not already owned by the royalty majors, may prove too lucrative for Virginia to hold onto. According to one of Virginia’s largest institutional investors, Quebec-leaning Franco-Nevada is unlikely to ever make a hostile bid for the asset, but could act as a “white knight”, should a rival kick-off a takeover tussle.
“We’re a public company,” says Gaumond. “I’m there to create value for my shareholders and to protect their interest and I will do everything I can to do that.” This week the company spun-off its Coulon project, Quebec’s largest undeveloped zinc-copper-silver resource, into a new subsidiary held by Virginia and 3 institutional funds. The move, Gaumond says, was designed to accelerate drilling to $7m per annum, with a view to expanding the resource to 20m tonnes ahead of any zinc price uptick.
As “Target 494” indicates, Eleonore promises to evolve from a gold mine into a gold complex. If so, the Eleonore royalty may come to be likened to the Goldstrike royalty in Nevada, a seemingly ever-growing source of free cash flow that has helped build Franco-Nevada into a $7bn business.
“We believe we’re in the middle of a very new mining camp,” says Guy Belleau, Goldcorp’s Directeur General at Eleonore, “so there’s a lot to discover. We will be continuously investing in exploration to make sure we continue to grow our reserves, our resources and I’m confident that we will be here for many, many years.”
Belleau says he expects Goldcorp to remain on the property for much longer than the current mine life of 15 to 17 years. “The best,” he says, “is yet to come.”
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