Probe Metals hikes resource at Val-d’Or East project

Probe Metals (TSXV: PRB; US-OTC: PROBF) has proved up more gold ounces and has greater confidence in its Val-d’Or East project after upgrading inferred ounces into the indicated category.

An updated resource estimate based on four deposits — all of which remain open in all directions — is made of resources found within a surface expression 2.5 km long, 1 km wide and 1 km deep along the Pascalis gold trend.

The project, 25 km east of the city of Val-d’Or, now has an open-pit, constrained resource of 7.71 million tonnes grading 2.16 grams gold per tonne for 535,900 contained oz. gold and inferred of 5.26 million tonnes averaging 1.46 grams gold for 247,400 contained oz. gold. The resource is based on a cut-off of 0.5 gram gold and is located in the deposit’s upper 250 metres.

The underground indicated resource has 1.33 million tonnes grading 3.44 grams gold for 146,500 contained oz. gold, and inferred measures 4.04 million tonnes grading 3.65 grams gold for 474,700 contained oz. gold. The underground resource uses a 1.95 gram gold cut-off grade and most of it is found between 250 and 800 metres’ depth.

David Palmer, Probe’s president and CEO, says the team is happy with the results.

“It’s almost a doubling of the previous initial resource in 2013, so we did very well,” he says in an interview. “And there are a couple of other things it has done: it gives us confidence in the ounces — we’ve got a higher indicated resource — almost half the current resource is indicated. The continuity also looks better and there’s less nugget effect. There were a whole bunch of things that came out that were improvements over the historic estimate.”

The resource includes four deposits — New Beliveau (including the former L.C. Beliveau mine), the North Zone, Highway and the newly discovered South Zone — but most of the estimate occurs within the central New Beliveau deposit (600,000 oz. gold in the indicated category and 531,500 oz. gold in the inferred).

The New Beliveau deposit sits beneath the past-producing Beliveau mine, which Cambior operated from 1989 to 1993. The underground operation produced 170,000 oz. gold at 3.15 grams gold per tonne.

The Val-d’Or East project is part of the Val-d’Or mining camp within the Southern volcanic zone in the southeastern part of the Archean Abitibi greenstone belt. It is less than 20 minutes away from one of the area’s largest gold-producing systems at Sigma-Lamaque, and yet has seen very little exploration.

“One of the reasons we acquired this project is that we saw this district-scale potential in an area that had really been neglected historically in exploration, and especially in gold exploration,” Palmer says. “We saw as much potential on the east side as on the west side. The geology on the east side is the same as on the west side, it’s just that exploration had never really trickled over to that side of Val-d’Or, so we see a lot of upside in this region, and this year we’re going to exploit that potential.”

Palmer says that part of the 85,000-metre drill program this year will be dedicated to regional exploration on the property. The company will use five drill rigs to expand resources and find gold deposits.

“This year will be a really interesting year,” Palmer says. “We’re going to continue with resource expansion, but as an exploration geologist, I’m excited because we’re also going to be drilling some regional targets. Last year was a great year, too. We ramped up our drill program, drilled just over 80,000 metres — mostly on resource expansion, but we were also doing regional exploration, and we actually generated a lot of regional targets.”

The company is “going back to Borden-scale drill programs,” Palmer adds, referring to the Borden gold project he and his team at Probe Mines discovered and later sold to Goldcorp (TSX: G; NYSE: GG) for $526 million in March 2015. Probe Metals was then formed as a spinout company with much of the original team intact. (Goldcorp has a 13.7% stake in Probe Metals.)

“We really want to accelerate the project, and I think this is the best way — to maintain a significant drill program, and we’ve got a strong treasury and can do the entire 2018 drill program,” he says. “We’ve got a good reputation as explorers, so these properties are in good hands.”

After the resource update was announced, Michael Gray of Macquarie Securities raised his 12-month target price on the stock from $1.75 to $2.15 per share. “We continue to like Probe’s pragmatic strategy of advancing the underexplored Val-d’Or East project while keeping strong option value on large land positions in Canadian gold belts,” the mining analyst wrote in a research note.

Tyron Breytenbach of Cormark Securities has a $2.20-per-share target price on Probe. “Probe already holds a viable satellite target for the producers in the camp [Eldorado, Iamgold, Agnico, Yamana], but is on track to potentially define a resource large enough to justify a stand-alone project, bringing it into the ranks of a handful of high-quality projects located in safe jurisdictions,” Breytenback wrote.

IA Securities’ George Topping has a $2.50-per-share target price. “While the proportion of underground ore was higher than we expected, so were the grades,” he said in a research note. “This initial resource should be seen as the first of several, as the experienced management team methodically advances exploration. We note that Integra Gold was acquired by Eldorado Gold … when it had a 2.3 million oz. underground resource at the same camp.”

At press time, Probe’s shares traded at $1.40 apiece within a 52-week range of $1.25 (August 2017) to $1.74 (September 2017). Probe has 94 million shares for a $131.5-million market capitalization.