Monarques builds critical mass

Over the last 18 months, Monarques Resources (TSXV: MQR; US-OTC: MRQRF) has taken advantage of the depressed capital markets to accumulate 13 gold properties on the cheap in Val-d’Or, Que. 

The final price tag for all 13 properties — or 161 sq. km of ground along the Cadillac Break in the Abitibi greenstone belt — came to just $544,000 in cash and $2.2-million worth of exploration properties that Monarques Resources owned in the James Bay region of Quebec.

“Most of the properties we bought were from companies who were in financial trouble,” president and CEO Jean-Marc Lacoste says. “We got some good deals throughout 2013 — it was a year for deal-making.”

In June, the junior consolidated the 13 properties into four larger projects, two of which (Croinor and Simkar) are past-producers, with Croinor fully permitted for production. A prefeasibility study on Croinor, the flagship project 70 km east of Val-d’Or, will be complete soon.

Lacoste and his management team intend to move Croinor into production as quickly and cheaply as possible, and are in talks with all three of the custom millers in the region to keep upfront capital expenses down. Lacoste says he isn’t sure yet whether Monarques will negotiate a custom-milling arrangement or buy a mill outright, and points to Integra Gold’s (TSXV: ICG; US-OTC: ICGQF) recent acquisition of the Sigma mill complex for $7.5 million — which he estimates would have cost $100 million to build. “We saw what Integra was able to do … they made a good deal,” he says. “The markets are not nice right now, but they’re perfect for mill shopping.”

The three mills left in the region — Beacon Gold, Aurbel and Camflo — are “under capacity” and “running out of ore in 2015,” Lacoste says.

“There’s only one project fully permitted to go into production, and it is ours,” he continues. “In a depressed market all of these things aren’t worth a lot, and if there is no ore going through there’s no one to pay for it — it’s like having an apartment building with no people in it.”

Lacoste says the prefeasibility study could confirm that putting Croinor into production would cost $20.5 million, and if the company can finish a 30,000-ton (27,216-tonne) bulk sample in 2015, Croinor could enter production in 2016 and even sidestep a time-consuming feasibility study.

The mining executive says he is looking at financing options, including private money, a private partner, or a line of credit.

“Sometimes there’s private equity that might be willing to take a risk with the right return,” he says. “A feasibility study is good when you want one of the big banks to get involved, but if you have someone with $20 million ready to back your project, you don’t need a full feasibility study.”

Something that gets Lacoste really excited is the technology the company is testing in its prefeasibility study on Croinor, which he believes will “revolutionize” the underground mining of narrow orebodies at shallow angles. A  company in Val-d’Or named Minrail has developed a system for shallow-angle mining and trademarked the invention “S.A.M.S.”

Lacoste says that with the S.A.M.S. technology, miners can extract ore from sloping surfaces of between 10 and 45 degrees that do not allow for mechanized operations on wheels. Minrail uses an overhead double rail system that apparently allows mining companies to extract ore from veins with more precision than traditional methods.

“It’s a beautiful technology,” he says. “You’re working the face of the mineralization twenty feet behind it and you’re sitting off the roof, so the rocks aren’t tumbling down on you. We’re going to have a full chapter on the technology in our prefeasibility study, and if we can prove it with our 30,000-tonne bulk sample, we could make a revolution in the mining world.”

Lacoste says the technology could save on labour costs, improve safety and boost profitability. “The machine needs one person with a joystick instead of three people working on their knees trying to get the rock out,” he explains. “And it’s much more lucrative from a mining perspective … we think it can bring underground mining costs down from $1,000 per oz. to $750 per oz.”

The Minrail system might be considered “green” because it’s fully electric. “It would make Croinor one of the first green mines in North America,” he says, adding that the project is situated within 3 km of a cogeneration power station. “Other underground mining operations use diesel equipment and have to install ventilation systems. This equipment uses electricity — it’s like we’re running around with Teslas in the mine.”

If Monarques can prove the Minrail system works at Croinor, it would mean that the company can reassess other deposits with mineralization that slopes at 45-degree angles.

“There will be a lot of deposits that come back to life because of it,” he says. “If we’re lucky enough — and if we prove the technology — we can scoop up these properties that have been ‘unloved,’ and left behind.”

But for now Monarques is advancing Croinor, which produced 13,000 oz. gold from a number of small open pits between 1996 and 2005. (Today the open pits have become fishing ponds for locals, Lacoste says.) Between 1949 and 1980, Croinor also produced 1,000 oz. from underground.

Croinor has a historic resource at a 3-gram-gold-per-tonne cut-off grade of 870,000 tonnes grading 7.45 grams gold per tonne for 230,000 oz. gold in the measured and indicated category, and 145,000 inferred tonnes at 8.56 grams gold for 44,100 oz. gold.

Once Monarques develops Croinor, it could turn to its Simkar project — 50 km from Croinor and 20 km east of Val-d’Or — which produced 50,000 oz. gold in the 1980s from the old Louvicourt Goldfield mine.  

The Simkar project has a National Instrument 43-101 compliant measured and indicated resource at a 3-gram-gold-per-tonne cut-off grade of 100,000 tonnes grading 5.54 grams gold per tonne for 18,265 contained oz. gold, and an inferred resource of 291,000 tonnes at 4.76 grams gold for 57,325 contained oz. gold.

Monarques was spun out of Nemaska Lithium (TSXV: NMX; US-OTC: NMKEF) in February 2011.

Lacoste joined the company in October 2012, and refocused the company on gold projects in Val-d’Or. Nemaska is Monarques’ largest shareholder, with a 25% stake.

Before joining Monarques, Lacoste was president and CEO of Golden Goose Resources and oversaw the development of the company’s Magino gold mine in northern Ontario.

He presided over the company’s sale to Prodigy Gold in December 2010. Argonaut Gold (TSX: AR; US-OTC: ARNGF) acquired Prodigy Gold in 2012 for $341 million.

Over the last year, Monarques shares have traded in a range of 8.5¢ to 14.5¢ per share. At press time they traded at 12.5¢.

On Sept. 5, Siddharth Rajeev of Fundamental Research Corp., initiated coverage of the company with a “buy” rating and fair value estimate of 50¢ per share.