Canstar, Adventus and Altius to consolidate Buchans camp

Last year, Osisko Metals (TSXV: OM) acquired more than 500 sq. km in the historic Bathurst mining camp of New Brunswick to develop a multi-deposit zinc asset base that would feed a central concentrator.

“On the back of that, they raised a lot of capital,” says Christian Kargl-Simard, president and CEO of Adventus Zinc (TSXV: ADZN) tells The Northern Miner in an interview. “It was a huge success right out of the gate.”

Now Kargl-Simard and his counterparts at Canstar Resources (TSXV: ROX) and Altius Minerals (TSX: ALS) hope for something similar by consolidating their base metal assets in Newfoundland.

Under a three-way agreement, Canstar will acquire a 390 sq. km land package from Adventus — the largest land position in the Buchans camp — where a 2017 electromagnetic survey produced 35 drill ready targets, as well as the company’s Katie and La Poile copper-zinc-lead projects, both of which have prospective volcanic massive sulphide targets.

Canstar will also acquire Altius Minerals’ Daniel’s Harbour zinc project, which consists of 90 sq. km of prospective land next to the closed Daniel’s Harbour zinc mine, which produced 7 million tonnes at 7.8% zinc from 1975 to 1990 by Teck Resources (TSX: TECK.B; NYSE: TECK).

The assets will complement Canstar’s Mary March project, 20 km east of Buchans, which it owns in a 56% to 44% joint venture with Glencore (LON: GLEN). (Canstar has first right-of-refusal to acquire Glencore’s interest.)

Historically the Buchans deposits ranked among the world’s most prolific high-grade polymetallic VMS deposits. Credit: Altius Resources.

Mary March in central Newfoundland is northeast and within the same geological group that hosts the former producing Buchans mine, where discovery holes by Phelps Dodge in 1999 and 2000 yielded some of the highest-grade base and precious metal intersections ever found in the area.

Over its 56-year mine life, Buchans produced 16.2 million tonnes averaging 14.50% zinc, 7.56% lead, 1.33% copper, 126 grams per tonne silver and 1.37 grams gold per tonne.

Discovery holes Phelps drilled at Mary March ran to 10.33% zinc, 1.62% lead, 0.66% copper, 118.1 grams silver and 4.1 grams gold over 9.23 metres; 16.8% zinc, 5.44% lead, 0.18% copper, 660 grams silver and 12.2 grams gold over 0.91 metre; and 3.02% zinc, 1.08% lead, 0.13% copper and 72.4 grams silver over 20.6 metres.

Adventus’ Kargl-Simard notes that the transaction provides synergies for all three parties and a focused vehicle to unlock value in the Buchans camp and in Newfoundland and Labrador.

“It came together really quickly — you just know when a deal really makes sense, and everyone thought it was a no-brainer,” Kargl-Simard says.

“What we’ve put together here is a similar concept to what Osisko Metals did last year in consolidating the Bathurst camp, and on the back of that they raised $45 million and they had a $130-million market capitalization on a district consolidation of a base metals camp in Canada.”

After the transaction closes, Canstar is planning a 3,000-metre drill program this year, which will be operated by Altius.

“Altius put up its hand to run the exploration programs in Newfoundland because they’re based there and know how to operate there better than anyone else,” Kargl-Simard says. “That was another nice synergy for all of us.”

Under the agreement, Canstar will issue 86.7 million shares to Adventus for its assets and Altius will receive 12.1 million shares for its Daniel’s Harbour zinc project. Canstar will finish a $750,000 non-brokered private placement and part of the proceeds will apply to a first-phase exploration program.

The financing will include selling 4.17 million common shares at 6¢ per share for gross proceeds of $250,000. Altius will subscribe for 6.25 million common shares issued on a flow-through basis at 8¢ per share for gross proceeds of $500,000.

David Palmer, a director of Canstar, noted in prepared remarks that consolidating the Buchans properties into a district-scale exploration project is a great opportunity for shareholders.

“We are pleased that Adventus and Altius share our enthusiasm for its potential, and with the combined technical experience of all three companies and a new management team, we will be able to advance exploration programs very effectively,” Palmer said.

Kargl-Simard adds that there could be more consolidation opportunities, with Teck’s Duck Pond mill — on care and maintenance since 2015 — just 20 km from the Mary March project.

“There hasn’t been a base metals focused company in Newfoundland for a while,” he says, “and we will have a dedicated Newfoundland team that can tap flow-through funds and use modern exploration tools in this district.”