Integra punches above its weight with 50,000-metre program

With eight drill rigs on-site at its Lamaque South project just east of Val-d’Or, Que., and 20,000 metres of drilling already completed this year, Integra Gold (TSXV: ICG; US-OTC: ICGQF) stands out as being one of the most active exploration companies today, Stephen de Jong, the company’s president and CEO, tells The Northern Miner.

The company’s 50,000-metre drill program this year is fully funded; its drill costs are low at just $110 to $120 per metre; it has $9 million in the bank, and no debt; and in early March management added even more weight to its team by appointing Jacques Simoneau as exploration manager.

The seasoned exploration geologist’s career includes stints at Goldcorp (TSX: G; NYSE: GG), where he led the exploration team at the Eleonore project through a positive feasibility study and construction decision; Barrick Gold (TSX: ABX; NYSE: ABX), where as principal geologist he was responsible for identifying and evaluating projects for potential acquisitions; and Placer Dome, where for 18 years the senior positions he held included project manager for early- to advanced-stage exploration projects in North America, West Africa and southern Africa.

Simoneau joins a team that already includes Integra’s senior vice-president, Herve Thiboutot, who spent 25 years at Placer Dome including as head of exploration for the Las Cristinas project in Venezuela, and who, as former vice-president of exploration at Alamos Gold (TSX: AGI; NYSE: AGI), played a significant part in increasing the company’s reserves in just three years to more than 8 million oz. gold.

“We’ve created a work environment that really attracts top people,” de Jong says in a telephone interview from his Vancouver office. “As an exploration geologist you want to be involved in an active company, so it’s an exciting opportunity for Jacques as well. There are not a lot of exploration geologists who are getting asked to work on programs this big.”

Integra’s two priority targets are the high-grade Triangle and Parallel zones. Between November 2013 and February 2015, the company increased the indicated resource at Triangle by 164% to 441,580 contained oz. gold. Triangle’s indicated resource now stands at 1.3 million tonnes grading 10.4 grams gold per tonne, and inferred resources total 429,300 tonnes averaging 11 grams gold for 152,370 contained oz. gold.

Drilling at the Parallel zone, meanwhile, has delineated an indicated resource of 462,900 tonnes measuring 9.6 grams gold per tonne for 142,890 contained oz. gold, and an inferred resource of 153,700 tonnes grading 15 grams gold per tonne for 73,880 contained oz. gold.

For the Lamaque South project as a whole, Integra has increased the indicated resource by 40% from 756,310 oz. gold to 1.06 million oz. gold, and inferred resources by 13% from 293,710 oz. gold to 330,990 oz. gold.

“What we’re showing is that drilling adds substantial value in our case,” de Jong says. “A lot of the support we get to fund our drill program is because we’re expanding on a resource that is already what we think is a critical mass that we need for production.”

The Triangle deposit is open to the east, west, south and at depth, and “continues to demonstrate its ability to grow,” de Jong says, noting that the objective of the drill program at Triangle this year is to assess the lateral extensions of the deposit, down to vertical depths of up to 900 metres. He also noted that the program could be increased at any time, depending on results.

On March 24, Integra released the first batch of results from its 2015 drilling at Triangle, which confirmed extensions up to 330 metres down-dip south of the deposit, and returned high-grade intercepts, including 14.79 grams gold over 10 metres, 11.47 grams gold over 8 metres and 15.55 grams gold over 5 metres.

The Triangle zone is situated in the South Cluster of Integra’s Lamaque South project, while the Parallel zone is in the North Cluster. (The project also has a West Cluster.) The project is 550 km northwest of Montreal.

Integra also owns the nearby Sigma-Lamaque mill and mine complex, on ground it is calling Lamaque North. The historic Sigma and Lamaque underground mines, which operated for 75 and 52 years, produced between them more than 9 million oz. gold. The Parallel zone is less than 500 metres from the old Lamaque mine and 1 km from the mill, while the Triangle deposit is 3 km from the mill.

Integra bought the fully permitted, 2,200-tonne-per-day mill and tailings facility — along with the past producing Sigma and Lamaque mines — for just $8 million, and de Jong estimates the replacement value of the mill complex alone is closer to $100 million.

“It was a bit of a steal, that’s for sure,” he admits. “In all honesty, the mill and past-producing mines were great, but the permits that came with it, and the permitting milestones we’ve been able to achieve since then, have been phenomenal for the project as well.”

For now, de Jong says, the company has no intention of going after the estimated historic resource at the Sigma and Lamaque mines because it’s lower grade and deep, and it would take time to do a full audit of the resource. The historic resource is 3.67 million tonnes grading 5 grams gold for 586,000 oz. gold in the indicated category, and 9.2 million tonnes grading 6.3 grams gold for 1.85 million oz. in the inferred category.

But he says what’s really interesting is that the mineralization at the historic Lamaque operation provides a good conceptual guide for what is possible to achieve at the Triangle zone. “It’s why we’ve been able to keep traction in our story, because we have a good analogue sitting a few metres away in the Lamaque mine,” he says.

Not only was the Lamaque mine Quebec’s largest gold producer, de Jong points out, but it also never had more than a half a million ounces in reserves at any one time, and operators would replenish the reserve while producing. (“When you look at the resource at Triangle right now,” he says, “it’s a larger resource than they actually ever had at Lamaque.”)

Equally, if not more important, he says, is that of the 4.5 million oz. gold Lamaque produced over its lifetime, 3.7 million oz. came from just one main plug — or a 200- to 300-metre wide cylindrical pipe with shear zones running through it that extended to depths of 1,000 metres.

“About 83% of the gold was from veins and mineralization hosted within that pipe,” he explains, “and the remaining 20% was from veins that bled out into the surrounding mechanics.”

The mineralization at Triangle is hosted within a series of parallel, shear-hosted structures that run east to west and dip south, and Integra has identified 34 of these structures within the intrusive and volcanic host rock.

Integra believes there is excellent exploration potential at depth, as the 9 million oz. of historical production from the Sigma and Lamaque mines was produced to vertical depths of more than 2,000 metres, while the depth of Integra’s updated resources are from surface to a 620-metre vertical depth and open below.

Condemnation drilling near the Parallel deposit has also identified gold-bearing zones that correspond to east–west, sub-vertical, shear zone-hosted gold mineralization typical of the mineralization at the Sigma mine, which operated a few hundred metres north, and produced over 4.5 million oz. gold over its multi-decade mine life
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Of the remaining 30,000 metres of drilling Integra plans to complete this year, targets include condemnation drilling at the Parallel ramp, No. 3 mine, No. 6 vein, extension drilling at Triangle and testing regional geophysical targets identified with airborne surveys measuring magnetics. “There is a long magnetic trend, so you look at magnetic highs to see if there is another intrusive plug,” de Jong says. “There are no resources on any of those targets, but it would be phenomenal for us to discover another intrusive host.”

Two of the eight drills this year will target the No. 6 vein, de Jong adds. The No. 6 vein already has a small resource and could provide a third source of feedstock to the mill. “Our entire mine plan is based on extracting ore from Triangle and the Parallel zone, but the mill we purchased has additional capacity, so if we can expand on the resource for the No. 6 vein, it would be a low capex to add that and increase our annual production,” he explains.

The No. 6 vein has 245,200 tonnes averaging 7.8 grams gold for 61,400 contained oz. gold in the indicated category and 93,400 tonnes grading 7.4 grams gold for 22,220 oz. in the inferred category.

The Lamaque project’s South Cluster — which consists of the No. 4 Plug, Triangle and Triangle South zones — is just 3 km from Val-d’Or, while the North Cluster, 1 km from Val-d’Or, is made up of the Parallel, Fortune, No. 5 Plug, and No. 3 mine zones.

Analysts Michael Gray and Duncan Lai of Macquarie Research describe Lamaque South “as one of the best high grade/low capex exploration and development projects in Canada,” and have a 12-month target price on the stock of 60¢ per share.

“Given the majority of the Sigma mine was hosted in volcanics and 20% of the Lamaque mine in volcanics, we see high potential to add high-grade ounces lateral to the Triangle deposit and increase the ounce and vertical metre endowment to enhance underground infrastructure development economics,” they write in a March 24 research note to clients. “The Lamaque gold project is now at a stage where exploration drilling can not only create visibility on expansion of deposits, but can also provide significant torque.”

Mick Carew and Kerry Smith of Haywood Securities also like the project, pointing to its “excellent infrastructure” — including the fully permitted mill and tailings — and argue that not only is there “plenty of upside” and “robust economics,” but that the project also has a “modest” capex estimated at just $62 million.

Over the last year, Integra’s shares have traded in a range of 14¢ to 36¢ per share. The company has 245 million shares outstanding.