Genesis Metals Corp. [TSX-V: GIS / OTCQB: GGISF) has been a client of Epstein Research for a few months, but each time I sit down to write a timely, comprehensive article, someone beats me to the punch. This time it was Brian Leni, P. Eng of Junior Stock Review. Brian and others have noted that both Osisko Mining and Eric Sprott invested in a Genesis Metals private placement in June. These investments come on the heels of a tremendous amount of work done by the Company’s management, Board and technical teams. Today, the Company announced the start of a 10,000 m drill program. Genesis has a market cap of about $11 M and $4 M in cash, so an Enterprise Value of ~C$7 M. [73 M shares outstanding at $0.15/share]
Instead of me writing what would have been a substantially similar article, appearing within a week of Brian’s, I’m posting his piece herein as a Guest Post. By “substantially similar,” I mean I would have conveyed largely the same important facts, namely,
I plan to write an article or written interview of Chairman / CEO Brian Groves later this month.
Today, I have a story about a junior gold explorer that owns property in the famed Abitibi Greenstone Belt in Quebec, has a proven management team, a strong list of strategic shareholders, CASH and a plan to expand their existing gold deposit. The company that I believe has so much upside potential is Genesis Metals Corp. Let’s take a look!
Genesis Metals Corporation (GIS:TSXV)
MCAP – C$ 14.6 million (at the time of writing, June 30th)
Shares – 73,026,204, Fully Diluted – 100,395,092
Stock Options / Warrants – 4,550,000 / 22,818,888
Management / Consultants Ownership – roughly 12%
The Genesis Metals Team
A junior resource company is only as good as its people, and in the case of Genesis Metals, they’ve assembled a great team.
Genesis Metals’ CEO and Chairman, Brian Groves, is a 40-year veteran of the mining industry. Groves has explored in both Australia and Canada, working with AMAX Minerals, Noranda and Manager of Corporate Development at Placer Dome. Moving up the organizational ladder throughout his career, Groves has gained valuable experience in capital markets, project development, permitting and corporate strategy. Today, he leads a group of people who have not only worked together previously, but who have a history of success within the mining industry.
Working hand in hand with Groves is Jeff Sundar, President and Director of Genesis. Sundar has 18 years of experience in the mining industry, having held a VP and Director’s position while working with other Genesis Board members in Underworld Resources. Underworld, in particular, was a great success, as the 1.6 Moz White Gold deposit was sold to Kinross for $140 million. Sundar and the team look to replicate this success with Genesis in the years ahead.
Adrian Fleming, the former President and CEO of Underworld Resources and former VP Exploration of Placer Dome, joins the Genesis team as an Executive Director. Fleming is a Professional Geologist with over 30 years of experience in the mining industry. Some of Fleming’s most notable work experience includes the following:
- Former VP Exploration for Placer Dome based in Sydney Australia. Fleming spearheaded Placer Dome into Western Australia, where he directed the group and found the Big Bell Mine.
- Fleming co-led the team that found the high grade zone at the monster, 28 Moz gold equivalent, Porgera copper gold deposit, located in Papua New Guinea.
- Former VP Exploration for Golden Star in the early 90’s. Fleming directed the team that uncovered the Gross Rosebel Deposit, which has now grown to 17 Moz of gold.
Fleming will be counted on to provide valuable input as Genesis moves forward with a plan to expand its Chevrier Gold Deposit resource, and explore the gold anomalies at their October gold project.
John Florek, the former Senior Geologist at Barrick Gold’s Famous Hemlo Mines, is on Genesis’ Board of Directors. Hemlo was a world class gold deposit and is credited as being the catalyst for the 1980’s exploration boom. Florek co-led the exploration team that found an additional 2 Moz of gold, which extended the Hemlo mine life. He was also Senior District Exploration Geologist for Placer Dome in Red Lake, and in 2008, his team was awarded the Northwestern Ontario Prospectors award. Florek’s more than 20 years of experience in the mining business as a professional geologist should add great value for Genesis in the future.
Last, but certainly not least, Andre Liboiron is the Exploration Manager for Genesis’s projects, Chevrier and October. Liboiron is a Quebec native with more than 26 years of experience as a geologist in Quebec, as well as internationally. 2017 will be a busy year for Liboiron, as he looks to expand on the Chevrier deposit with a large drill program in July.
Robert McLeod, Genesis Co-Founder and former Chairman of Genesis’ Board, recently relinquished his position because of the heavy time commitment required by his primary focus as CEO of IDM Mining, a near term producer in BC’s Golden Triangle. However, given the working history amongst the members of this management team, McLeod has agreed to remain with the company as a strategic advisor.
McLeod is on Casey Research’s Nexten list, which features the top young professionals in the mining industry. A quote taken from Casey Research’s profile of McLeod,
“Luck has nothing to do with it. Rob has the pedigree, the smarts, and the perseverance to have forged a stellar career in mining exploration and company development.” ~Casey Research
Also, Genesis has added former Laurentian Bank Securities Mining Analyst and Peartree Securities Technical Advisor, Eric Lemieux. Lemieux is a geologist by trade and has 25 years in the mining industry with experience in a variety of areas, such as mineral exploration and project valuation. Lemieux’s addition to the Genesis team should prove advantageous as Genesis looks to develop their properties.
While the people who run junior resource companies are the core component for investment, looking at the people who choose to invest in the companies is a great gauge for potential value. In Genesis’ case, there are a few heavy hitters who have just recently taken major positions in this junior gold exploration company.
The list of strategic shareholders is headlined by Osisko Mining, which acquired a 6.4% position in Genesis through a private placement announced on June 15th. For those unfamiliar with Osisko Mining, they’re a major player in the gold sector, owning strategic positions in a lot of great companies, such as: Falco Resources, IDM Mining and Beaufield Resources. Outside of owning strategic positions in companies, Osisko is exploring their 70,000 Ha Windfall property, which is located in the Urban-Barry Greenstone Belt in Quebec. Osisko is known for their geological expertise and well timed investment in smaller junior gold companies. Their investment in Genesis speaks volumes about Genesis’ potential.
The strategic shareholders list is further headlined by Eric Sprott, who has acquired a 7.2% position in Genesis through a private placement announced on June 5th. Sprott is a major player in the resource sector, with a history of successful investments throughout his career. Also, Sprott has multiple Sprott named companies offering various market related products across the sector. Over the last few years, he has taken strategic positions in a few junior gold companies such as Kirkland Lake Gold. Sprott’s investment, like Osisko’s, is a great gauge for potential value in Genesis.
For those who aren’t familiar, the Societé de development de la Baie-James (SDBJ) is a government run organization focused on the development of natural resource projects within Québec. Their mission statement is as follows;
“To promote the economic development, development and exploitation of natural resources, other than hydroelectric resources within the mandate of Hydro-Québec, of the James Bay territory, from a sustainable development perspective. In particular, it may encourage, support and participate in projects aimed at these ends.” ~SDBJ
Additionally, the SIDEX fund, which was created by the government of Québec to support mineral exploration activities within its borders, participated in the latest financing. Having both SDBJ and SIDEX as stakeholders in Genesis is a great sign of political support for Genesis’ Chevrier Gold Project. The strategic shareholders list is rounded out by Delbrook Capital, Gold 2000, US Global Investors and Medalist Capital. These organizations and people represent smart money in the sector and I’m happy to speculate along with them.
6th Best Jurisdiction for Mining Investment in World
From a jurisdictional standpoint, it doesn’t get much better than Quebec when it comes to mining investment attractiveness. The Fraser Institute (FI) gives Quebec an index score of 85.02, ranking it 3rd in Canada and 6th in the world. FI’s mining investment attractiveness index score is reflective of both the mineral potential and the government policy perception of the region.
Quebec is home to 25 producing mines and over 350 surface mineral mining operations, putting the value of Quebec’s mineral shipments at $8.7 billion in 2014 (Investissement Quebec). Quebec is Canada’s 2nd largest producer of gold, largest producer of iron and zinc, and the only North American producer of niobium. The mineral wealth is evident and is a big reason why FI ranks Quebec among the world’s top ten in mining investment attractiveness.
Highlighting Quebec’s world class mineralization is the Abitibi Greenstone Belt (AGB), which is 150 km wide and stretches 650 km from roughly Wawa, Ontario to Val d’Or, Quebec. The belt has produced millions of ounces of gold over its history, with the Cadillac Gold Camp, Virginiatown, Rouyn-Noranda Gold Camp, and Val d’Or Gold Camp being a just few of its largest contributors.
Source: Genesis Metals
Quebec Politics and Infrastructure
The government of Quebec supports mineral exploration within its borders, with a tax credit system that refunds 25% of eligible exploration expenses for non-operating corporations, and 10% of eligible exploration expenses for operating corporations. (Financial Incentives) So, roughly, for every $1 spent by a Quebec based mineral explorer, 25 cents will come back to the company, which can effectively be rolled right back into further exploration work. This is not only a huge plus for the company and its shareholders, but an ingenious way for the province to promote mineral exploration.
The long history of mining in the AGB means that most regions of the belt are accessible or near infrastructure such as highways, rail, power, and deep water ports along the St. Lawrence Seaway. Also, Quebec boasts some of the most competitive electricity rates in Canada, as its hydroelectric dams constitute a major portion of its electricity production.
Source: Genesis Metals
Finally, Quebec takes great pride in a transparent mining system, which is built around three key pillars:
“Open access to resources is ensured on the largest possible portion of territory, Mineral rights are granted on a first-come, first-served basis and if a discovery is made, the title holder can be reasonably sure of obtaining the right to develop the resource.” ~Investissement Quebec
Favourable politics and world class geology – for me, it doesn’t get much better than Quebec, as far as your investment buck goes!
Chevrier Gold Project
Genesis’ flagship property, the 100% owned Chevrier Gold Project, is located 35 km southwest of Chibougamau, Quebec, in the heart of the Abitibi Greenstone Belt. The Genesis property straddles the Fancamp deformation zone, and is 15 km northeast of IAMGOLD’s high-grade Monster Lake gold discovery.
Source: Genesis Metals
Prior to Genesis, the area in which the Chevrier deposit is located was owned and explored by Inmet Mining Inc. (Minnova), who, in 1989, was the first to drill the now Main Zone of Chevrier, where they intersected gold grading 5.4 g/t. The property was then purchased by Geonova Explorations, who outlined Chevrier’s Main Zone. In 2007, the property changed owners once again, with Tawsho taking the reins. They went on to complete a 2,792 km aeromagnetic survey, a ground EM Time Domain survey, 24 diamond drill holes, an independent NI 43-101 resource estimate (by Met-Chem Canada Inc.), and a 5,000 ton bulk sample.
Chevrier’s existing NI 43-101 inferred resource for its main zone is 300,000 oz of gold at 1.99 g/t (1 g/t cut-off), and is open for further expansion at depth and to the north. Also to note, there are an additional 40 historical drill holes that weren’t included in the existing inferred resource. Genesis had 3D models completed for the Main, South and East Zones earlier this year, giving us a better idea of the structure of the deposit. Here is an image of the Main Zone:
Source: Genesis Metals Corp
From the NI 43-101 Report, the South Zone, while not having a resource estimate, is believed to hold a lot of potential, as Met-Chem, the company responsible for analyzing and writing the 43-101 technical report, says,
“the Chevrier South deposit contains a potential between 8.5 and 9.0 million tons of mineralized material grading 1.8 to 2.2 g/t Au.” ~ Met-Chem – 43-101 Technical Report on the Mineral Resource of the Chevrier Gold Project – pg.93
Met-Chem expresses the need for further drilling on the South Zone to delineate the potential resource; however, if you express the 8.5 million tons of mineralized material at 1.8 g/ton, you get 459,000 ounces of gold.
2016 Trench Work
Last fall, Genesis began a re-trenching program that entailed the re-sampling of trenches that were formerly excavated by a previous owner. This program was followed in parallel with a core re-logging, which consisted of the re-assaying of cores that were drilled by the previous owner. Why re-do work that has already been done? To ensure that the assaying work, which was completed in the late 90s, was done correctly, but also to maximize the accuracy of future drill locations. Drilling is a costly business and the more efficient a company can be in the choosing of its targets, the further its dollars will go.
Source: Genesis Metals
The re-sampling data was released towards the end of 2016; on the Dec 12, 2016 news releases, CEO Brian Groves remarks,
“These final results from our resampling and analysis of existing drill core from work by other companies carried out prior to National Instrument 43-101 provide a high level of confidence in the results of previous work. We will now focus on understanding the controls to gold mineralization in the Main Zone and elsewhere on our large property within this prospective greenstone belt. This understanding will enable us to plan future drilling programs on the property.”
The trench results for trenches T1 and T4 are of particular interest. These two trenches, originally completed by Geonova, have gold grades that are indicative of the tenor of the gold mineralization found on the property, and may be indicative of a parallel structure to the main zone which is outlined in red in the image.
A few other re-trenching results were highlighted by: 6.82 g/t Au over 4.7m, including 17.7 g/t Au over 1m in Trench 7, 4.59 g/t Au over 6.4m, including 7.43 g/t Au over 1.3m and 5.22 g/t Au over 4.25m, including 6.56 g/t Au over 2.1m in Trench 7. Check out the Genesis 2016 News Releases for further trenching results.
2017 10,000m Drill Program
PUSH: Genesis will begin a Phase 1 5,000m drill program in July of this year. They plan to allocate 30% of the drilling to further expand the Main Zone, while the remaining 70% will be focused on 10 new target areas which they have identified through trenching and an induced polarization (IP) survey of the property.
Source: Genesis Metals – 10 New Targets
In my discussion with management, they estimate that the July drill program should cost around $1 million dollars, leaving them with plenty of cash to execute on a Phase 2 5,000m drill program in Q4, focusing on the Main and East Zones, along with a winter drill program in Q1 of 2018. The winter drill program will focus on the South Zone of the property and will be the final drilling PUSH before they release an updated 43-101 Resource Estimate in Q2 of 2018.
Getting the Chevrier Project over a million ounces of gold is a realistic prospect because even without the 10 new targets, the south zone’s historical drilling data suggests that it could more than double the current resource as it stands. There will be a good amount of news flow over the next 8 to 12 months, and I look forward to Genesis’ story gaining more attention in the market.
Induced Polarization Survey Results
For those unfamiliar with an IP survey, it’s a geophysical imaging method for identifying electrical chargeability of subsurface materials, used early on in the exploration process to identify high probability areas of mineralization.
In Genesis’ case, one IP anomaly in particular stood out and was identified south east of the main zone. This area has not seen any drilling and could give more insight into the geology of this deposit. The strong IP response is characteristic of disseminated sulphide grains, which would suggest the mineralization is distributed in low grades across a large volume of rock, or more commonly referred to as a porphyry.
Further drilling in this area should provide us with a lot of insight into how this deposit may be mined in the future, as the prospects of further shallow mineralization point to open pit mining.
Source: Genesis Metals Corp.
Further, the IP survey identified another potential target in the East Zone of the property. This area was originally drilled years ago by Falconbridge Copper. The drill cores from their program are part of Genesis’ large inventory of cores and will be looked at more closely in the coming months. This is particularly important, as Genesis will be able to avoid the front end cost of drilling in this area and only pay for the assaying of the existing cores.
Source: Genesis Metals Corp.
Source: Genesis Metals Corp.
October Gold Project
Genesis also owns 100% of the 203 sq. km October Gold Project, located in the southern Swayze greenstone belt in Benton Township, Ontario. This project is located 35 km northwest of IAMGOLD’s Cote Lake deposit and 50 km southeast of Goldcorp’s Borden Gold Deposit. The Cote Lake Deposit was purchased by IAMGOLD from Trelawney Mining for $585 million, while the Borden Gold Deposit was purchased by Goldcorp from Probe Mines for $526 million. This demonstrates how coveted this Ridout Deformation Zone is, and Genesis’ October Gold Project is right in the middle, and on trend.
In recent news, IAMGOLD announced in a press release on June 5, 2017 that Sumitomo Metal Mining has acquired a 30% undivided participating joint venture interest in IAMGOLD’s ownership interest in the Cote Gold Project for an aggregate $195 million. Sumitomo’s interest in this area of Northern Ontario should bring more attention to the surrounding land claim owners, one of which is Genesis’ October Gold Project.
The October Gold Project straddles what is considered the western extension of the Larder Lake-Cadillac Deformation and a portion of the Ridout Deformation zone. Historic gold deposits on these deformations, Kirkland Lake and Kerr Addison-Chesterville, have historic gold production north of 49 Moz.
Source: Genesis Metals
The October Gold property saw surface exploration work in 2011. The program comprised of Soil Gas Hydrocarbon (SGH) sampling and reconnaissance level gravity geophysical surveys.
“A SGH survey is a deep penetrating geochemical method that involves the analysis of various hydrocarbons associated with ore bodies at depth using a forensic and comparative approach for Identification. “ ~ Genesis
Source: Genesis Metals
The program has identified two gold anomalies, which Actlabs, the interpreting laboratory, says have a high degree of confidence. This confidence is based on comparisons with other surveys that Actlabs has completed on other gold deposits. These anomalies will see future surface work which should better define where the diamond drilling should take place.
The October Gold project property is early stage, but holds very promising gold exploration potential.
The Genesis Metals story is not without risk, as any gold exploration company runs the risk of not finding anything or not finding mineralization which is economic. In Genesis’ case, the Q3 drill program should provide us with some insight into the potential of the Chevrier deposit.
Outside of the risk of exploration, Genesis has some compelling facts that make their story undervalued in comparison to the paltry sub $14 million MCAP that they currently possess, including:
- A proven management team: Groves, Sundar, Fleming, Florek, Liboiron and Mcleod
- Strategic Shareholders List Headlined by: Osisko Mining, Eric Sprott, Delbrook Capital, Gold 2000, US Global Investors, SIDEX/SDBJ and Medalist Capital
- Located in the 6th best jurisdiction in the world, Quebec
- PUSH: 2017 10,000m drill program on their flagship Chevrier Gold Project
- CASH – roughly $4 million, which will carry the company to a new resource estimate in Q2 2018
- Large land package with exploration potential, Chevrier Gold Project and October Gold Project
- Existing 43-101 Inferred Resource of Chevrier Main Zone – 300,000 oz of gold at 1.99 g/t (1 g/t cut-off), which is open at depth and to the north
The next leg of the gold bull market is upon us, fortunes will be made in the coming years by buying right and sitting tight, investing in companies that look to add value for their shareholders. Genesis Metals (GIS:TSXV) is a great example of this and is a company in which I’m investing.
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Until next time,
Brian Leni P.Eng
Founder – Junior Stock Review
Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria. I do own Genesis Metals Corporation stock. All Genesis Metals Corporation analytics were taken from their website and press release. Genesis Metals Corporation is a Sponsor of Junior Stock Review.
Epstein Research Disclosures: The content of this article is for illustrative and informational purposes only. Nothing written in a Guest Post is the responsibility of Peter Epstein or [ER]. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research, [ER] including but not limited to, commentary, opinions, views, assumptions, reported facts, estimates, calculations, etc. is to be considered implicit or explicit, investment advice. Further, nothing contained herein is a recommendation or solicitation to buy or sell any security. Mr. Epstein and [ER] are not responsible for investment actions taken by the reader. Mr. Epstein and [ER] have never been, and are not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and they do not perform market making activities. Mr. Epstein and [ER] are not directly employed by any company, group, organization, party or person. Shares of Genesis Metals Corp are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they consult with their own licensed or registered financial advisors before making investment decisions.
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