Maudore’s new management tries to right the ship

VANCOUVER — It has been a bit of a whirlwind over the past five months for Quebec-focused gold explorer Maudore Minerals (MAO-V).

The majority of Maudore’s board of directors and management team were replaced following a successful challenge by dissident shareholders in late July. Now under the control of CEO Howard Carr, Maudore has pledged to focus on re-establishing shareholder value by expediting its wholly-owned Comtois gold property — located 150 km north of Val-d’Or, Que. — into production.

A group of investors owning roughly 18% of Maudore’s outstanding shares successfully wrestled control of the company from outgoing CEO Ronald Shorr and his team during an annual general meeting on July 19. After the dust had settled, the only remaining member of Maudore’s board nominees was mining engineer Raynald Vezina.

Led by activist investor Rex Harbour, the dissident group focused on Maudore’s poor market performance over the first half of 2012. The company plummeted 51% or $2.59 per share from mid-January through July. The Harbour group cited a lack of technical expertise on Maudore’s existing board and unduly slow progress at the Comtois property as its main concerns.

Following the change in management, Maudore announced a 100-day action plan that includes updating resource estimates at Comtois’ Osbell deposit, as well as reviewing exploration targets and regional programs. The company took its first step on Oct. 29, when it released a resource update on Osbell.

Marking the first updated resource at the project since Sept. 2010, the new resource estimate added 543 diamond drill holes and identified 8.5 million indicated tonnes grading 2 grams gold per tonne for 546,000 contained oz.

Maudore reports that 99.7% of the indicated resource lies within its newly-defined open-pit shell. Inferred resources remain relatively unchanged at 8.1 million tonnes averaging 4.6 grams gold for 1.26 million contained oz. Only 4.9 million tonnes of the inferred resource sits in the pit shell at an average grade of 2.7 grams gold. Resources within the pit shell were calculated using a 0.5 gram gold cut-off, while resources below the shell assume a 2.5 grams gold cut-off.

“We’ve devoted considerable time and effort to ensure the integrity of this report, and we are confident to state that our understanding of morphology and geostatistical characteristics of the Osbell Deposit has considerably improved,” Carr stated following the press release. “Furthermore, the Whittle optimization study completed on the potential open pit resource increases our confidence in the economic viability of the deposit.”

Maudore followed up its resource estimate on Nov. 21 by releasing results from 25,000 metres of drilling that missed the Osbell resource cut-off date. The additional in-fill results focused on targeting Osbell’s mineralization at depth, with highlights including: 1.5 metres grading 19.4 grams gold from 282 metres depth in hole 12-896C; 1.5 metres averaging 8.5 grams gold from 1,341 metres in hole 12-885B; and 1.2 metres grading 22.9 grams gold from 1,231 metres depth in hole 12-890A.

The company also released preliminary results from two satellite deposits. Drilling at the Greer gold target located 1.9 km southwest of Osbell cut 7.6 metres of 3.6 grams gold from 356 metres depth in hole 12-895, including a higher-grade intercept of 38.7 grams gold over 0.5 metres.

Drilling at the Macific North target, located 250 metres north of Osbell, confirmed gold mineralization that sits partly within Osbell’s existing pit shell, but has yet to be included in Maudore’s resource calculations. Highlights from the Macific program include: 3 metres grading 2.9 grams gold from 136 metres depth in hole 12-903; and 3.9 metres averaging 14.3 grams gold from 456 metres depth in hole 12-909.

“The results validate our drilling and assay protocols that we established over the past few months. Our meticulous approach is proving its value, and we are very encouraged by the results,” commented Carr. “We will continue to focus on further delineation of the deposits as we move forward with our exploration plans.”

Perhaps the biggest news came on Dec. 5, however, when Maudore announced a series of transactions, including a business combination proposal and two major financing initiatives. The company entered into a non-binding term sheet with a private equity group to secure a senior loan facility of up to $35 million. In addition, Maudore signed commitment letters for a bridge loan totalling $3.25 million with lenders including Rex Harbour and his City Securities firm.

The proceeds of the loans are aimed at completing two acquisitions. Firstly, Maudore signed a purchase and sale agreement with Noront Resources (NOT-V) wherein the company will acquire Noront’s 25% in the Windfall Lake gold project, which is also located in the Val d’Or region of Quebec. Maudore will pay Noront $10 million in cash plus three million in warrants for its stake in the property.

The Noront deal was just a smaller piece of a larger play, which involves a proposal to acquire Eagle Hill Exploration (EAG-V), the company that owns the remaining 75% in Windfall Lake. The Noront agreement includes a clause that stipulates Noront must exercise its right to reacquire Eagle Hill’s interest in Windfall Lake, after which Maudore will pay Noront an additional $6 million.

Maudore’s offer for Eagle Hill would allow investors to exchange each Eagle Hill share for 0.0773 shares of Maudore, which would equate to Eagle Hill shareholders owning roughly 33.7% in the merged company. According to Maudore the offer represents a 42% premium on Eagle Hill’s Dec. 5 closing price of 17¢ per share.

Maudore speculates that due to Windfall’s proximity to Comtois it could be possible to run a central processing facility for both deposits. Windfall Lake currently hosts 1.7 million indicated tonnes grading 10 grams gold for 538,000 contained oz., as well as 2.9 million inferred tonnes averaging 8.76 grams gold for 822,000 contained oz.

Eagle Hill has acknowledged Maudore’s proposal, but made no public statement regarding its intentions.

“These proposed transactions would collectively transform Maudore into a well-funded exploration and development company with one-hundred percent ownership in two projects containing significant gold resources in one of the world’s most prolific gold mining regions,” Carr stated.

Markets have yet to buy into Maudore’s updated management vision. The company’s stock has dropped 40% or $1.14 since the proxy battle wrapped up on July 20, and was trading at a 52-week low of $1.65 per share at time of writing. Maudore has 27 million shares outstanding for a $44 million press-time market capitalization.