This week, Globex Mining Enterprises Inc. (TSX: GMX – $0.47 & OTCQX: GLBXF – $0.39 & Fra: G1MN – €0.32) issued an update on the status of three projects currently under exploration through option agreements. The first of these, the Parbec Gold property located in Quebec, is optioned to Renforth Resources (CSE: RFR).
Parbec is of interest because it is situated just 4km and along strike from the significant producing Canadian Malartic gold mine. The Canadian Malartic Mine is one of the largest new mines in Canada, and its success encouraged several other nearby exploration programs elsewhere in the district.
The Parbec project is advanced, with an extensive gold system already encountered during previous exploration work. Renforth recently presented a compliant NI 43-101 report that established an estimated gold resource amounting to more than 33,000 ounces of gold in the Indicated category, in addition to 514,108 ounces Inferred. This is considered a preliminary estimate, with the defined gold zones open for the potential of further expansion to depth, and numerous additional untested targets elsewhere on the property area.
The property remains an excellent candidate for follow up exploration work to increase the magnitude of this gold deposit. Renforth recently closed a private placement to raise additional funding, and commenced a round of diamond drilling work on the property. The program was completed in December, amounting to a total of 1,265 meters in seven diamond drill holes. Drill core has been logged and samples submitted for assay.
Renforth will carry on more exploration work with another drill program announced on January 11, 2018. Approximately 1,900m is planned, with a total of eight drill holes scheduled.
With its aggressive approach to exploration, and success delivering a gold resource that holds the promise of a much larger deposit area, Renforth has proven itself to be an excellent partner for Globex. As part of the agreement between the two companies, Renforth paid $125,000 in cash, as well as half a million shares (worth $25,000) to Globex earlier this month.
In addition to funding the ongoing exploration work at Parbec with a commitment of at least $4 million of work, Renforth may earn 100% ownership of the property, after making installment payments of $550,000 in total, and issuing 2 million shares to Globex.
Even after vending ownership of Parbec to Renforth, Globex would still maintain leverage to the upside from any discovery through its ownership of a significant share position in Renforth, plus a sliding scale Gross Metal Royalty that increases to 2% at the current price of gold. Globex is thus well-positioned to participate in the success from Renforth’ s exploration work, without the liability of contributing to the cost to advance the project.
Update on the Activity Underway at Donalda Gold Mine Property
This week Globex also provided an update on the status of the Donalda Gold Mine property, which it vended to Falco Resources Limited (TSX-V: FPC) in September 2017. Under the terms of the sale transaction, Globex received a payment of $300,000 in cash, plus 350,000 shares (worth $353,500 today) and 350,000 five year warrants of Falco.
Similar to the structure of the deal with Renforth, Globex shareholders retain leverage on the Donalda property through a 2.5% Gross Metal Royalty (GMR). This royalty would generate payments to Globex in the event that the project is advanced through to mining development. The prospect of successful mining is a very real possibility given that the Donalda property is host to two continuous gold bearing quartz veins which had a historical resource of 1.5 million tonnes grading 6.9 g/t gold, of which approximately 790,000 tonnes were mined and approximately 710,000 tonnes remain unexploited. There are also indications that the gold deposits continue below the 700 metres depth.
Falco has successfully completed a large equity offering to raise $8.5 million, of which the bulk will be spent to advance the Donalda property. In 2017, about 4,700 metres were drilled on the Donalda property, results are pending. Following the reception of results, a preliminary NI 43-101 resource calculation will be initiated. Falco is considered to be well-financed to carry on with its objectives as it works to advance Donalda towards renewed mining activity.
Partner Chalice Gold Mines Commences Exploration in Abitibi Greenstone Belt
In a third update, Globex reported on the activity with its partner Chalice Gold Mines (TSX-V: CXN). The East Cadillac property (Nordeau East and West Gold Zones, Bateman Claims), located in the prolific Abitibi Greenstone Belt of Quebec, was optioned to Chalice in a deal reported in October 2016. Extensive exploration work commenced at the project in the second half of 2017, with the objective to define targets for the discovery of new gold zones. Chalice then followed up with a 7,700m diamond drilling program at several of these targets. Results of the drill program will be announced as they become available.
At East Cadillac a preliminary gold resource has been defined amounting to 30,200 ounces Indicated, and 146,300 ounces in the Inferred classification. Chalice has committed to a systematic, modern exploration program that it believes will expand on the known gold zones, and realize untapped discovery potential for targets elsewhere on the property.
Chalice has the option to earn 100% of East Cadillac during a 4-year term with the payment of $590,000 in cash, plus the completion of at least $2.5 million in exploration work. Globex retains a 3% GMR on any production that may be achieved at East Cadillac.
This week, Chalice announced that it has launched an expanded exploration program at East Cadillac, including an additional 21,000m of diamond drilling planned. Combined with the drilling work already completed, this amounts to a very ambitious exploration effort and represents an endorsement of the high discovery potential of the project. A total of four drills will be active at several distinct zones, to test structural targets identified through interpretation of fieldwork and geophysical surveys.
The total budget for all of the reported work programs will amount to more than $5.3 million, which is well above the requirement Chalice committed to as part of the agreement to acquire the property.
Successful Project Generator Strategy Builds Discovery Leverage For Shareholders
The appeal of the Project Generator business model relates to the high cost and uncertain outcome of exploration activities. Even a highly prospective property must sustain several rounds of successful exploration work before a deposit may be outlined with the potential to build asset value. As a deposit is established and some economic merit is demonstrated, the property advances up the value curve and may become a candidate for development to a profitable producing mine. This process may take many years and a great deal of money to realize.
The approach to secure control of numerous attractive projects, and then source partners to continue with exploration as part of the earn-in requirements for option deals, is considered a lower risk method to participate in the resource sector. Globex has become a very proficient player with this strategy, and the Company controls a suite of more than 160 exploration projects, many of which are currently active under option deals with other companies or are the subject of exploration by Globex.
The updates reported this week, highlighting activities underway for just three of the option deals arranged by Globex, illustrate the effectiveness of the business model. Each of these high quality properties has been vended under terms that net cash payments to Globex, structured so that the Company earns a profit on its cost base to secure the initial ownership of these projects. Thereafter, Globex shareholders retain royalty leverage to the projects as the partners bear the burden of funding exploration work that may achieve new discovery value, and advance the projects along the value curve.
Globex is successfully delivering on its business model to provide shareholders leverage to resource discovery, with multiple prospects underway in a diversified portfolio that provides a lower overall risk profile with enhanced upside potential. Recommendation BUY.
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