From Rouyn-Noranda, Quebec
BMR has already uncovered three gems along the infamous Cadillac Trend – Gold Bullion Development (GBB, TSX-V), Adventure Gold (AGE, TSX-V) and Cadillac Mining (CQX, TSX-V) – and now we have a fourth one that we are pleased to introduce to our readers.
Abcourt Mines Inc. (ABI, TSX-V) has been around for many years and has a history of spectacular moves: From July, 2005, to April, 2006, for example, the stock rocketed from 15 cents to nearly $1.40. The company recently grabbed the attention of BMR’s technical analyst when record trading volumes for ABI suddenly emerged last month. Our visit to Rouyn-Noranda allowed us to dig more into this story and it’s a powerful one indeed. We wanted to put this opportunity in front of our readers as quickly as possible, so we’re providing just the critical highlights tonight. We’ll go into more detail in the near future as time allows. As always, do your own due diligence as we stress in our disclaimer. Don’t take just our word for it – check ABI out for yourself.
What sets Abcourt apart from many other companies, including most of the ones we normally follow at BMR, are its resources in the ground and its near-term (18-24 months) production potential. Furthermore, and this is what really gets us excited, the current market capitalization of Abcourt is only $20 million. Given that we’re in the midst of a long-term “super cycle” for Gold, Silver and base metals, one that should intensify over the coming 12 months, Abcourt looks incredibly interesting. Despite the modest price increase and a surge in volume recently, we believe the company is still very much “flying under the radar” of most investors who have simply forgotten about ABI or aren’t even aware of this company’s resource assets.
Abcourt has a large silver deposit (19.6 million ounces – 43-101 measured, indicated and inferred reserves and resources) along with nearly 300,000 tonnes of zinc (43-101 measured, indicated and inferred reserves and resources) at its Abcourt-Barvue Property near Val d’Or. ABI placed the property into production in 1985 but mining stopped in 1990 because of falling silver prices and an anticipated drop in the price of zinc. A total of 2.7 million ounces of silver and 35,000 tonnes of zinc were produced. Drilling has resumed at the property, fueling speculation Abcourt wants to get this back into production and as quickly as possible.
In addition, Abcourt is developing a significant Gold resource at its Elder-Tagami Project 10 kilometres west-northwest of Rouyn-Noranda. We visited that property last Thursday. We were impressed with the infrastructure on site (functional buildings as well as substantial surface and underground equipment with a 2,600-foot shaft and 16 levels). Below is a picture from the site which also shows President and CEO Renaud Hinse:
ABI closed Friday at 18.5 cents. It has 110 million shares outstanding, $4 million in cash and no debt. Nearly 40 million shares have traded on the CDNX since the beginning of December – stock has been moving from weak hands into strong hands, and that kind of volume surge is extremely bullish as we’ve seen in many other cases. Yes, the company will need to raise significantly more capital to go back into production but by telling its story more effectively and aggressively, as President and CEO Renaud Hinse seems determined to do, we see great potential for this situation. Drill programs are ongoing at both properties and a steady flow of results early this year could get investors very excited.
Elder-Tagami Project
From 1947 to 1966, the Elder Mine produced 348,000 ounces of Gold. From 1984 to 1989, the mine was re-opened and a major surface and underground exploration program was conducted. A total of $23 million was spent on infrastructure and the drilling of over 200 holes. Since then, three major surface exploration programs have been completed and Abcourt is now conducting a 10,000 metre drill program. Results are confirming the continuity of good values over good mining widths at the eastern and western ends of the mine and at depth. Immediately to the north of the 587-hectare Elder Property is the under-explored Tagami Property (329 hectares) where there are six known occurrences of Gold and excellent upside exploration potential.
In July, 2009, a 43-101 report outlined 169,000 ounces of Gold at Elder in the measured and indicated categories as well as 46,000 ounces in the inferred category (using a 3.8 g/t Au cut-off). Given recent results and continued drilling, we believe it’s reasonable to conclude that Abcourt could double that resource and potentially put Elder back into production by sometime next year as an underground operation at a total capital expenditure of approximately $15 million (as revealed by the company). At full production this is the type of mine that could produce about 30,000 ounces per year – not a big number but Elder would nonetheless generate decent cash flow.
Abcourt-Barvue Silver-Zinc Property
Silver deposits are rare along the Cadillac Trend which is another reason this company caught our attention. GENIVAR completed a feasibility study in early 2007 which showed robust economics for this project (mostly open-pit) based on $15 silver and 88 cent zinc (silver of course is now near $30 and zinc is trading around $1.10) at 1,800 tonnes per day. The pre-production capital expenditure for the project was estimated by GENIVAR at $46 million.
Current drilling by Abcourt is designed to upgrade and augment reserves and resources, and justify an increase in the size of the proposed mill from 650,000 tonnes to one million tonnes per year. This would reduce the unit mining costs by treating a larger volume of ore annually, further enhancing the economics of the project.
Conclusion
Abcourt is the type of situation that should benefit enormously from higher silver, Gold and zinc prices – there is impressive leverage here. The 800% move in ABI from the summer of 2005 to the spring of 2006 is a good example of the potential explosiveness of this stock. Drilling at both major properties will ensure steady news flow. By articulating its message more effectively, Abcourt has serious potential to develop into a major success story.
Note: The writer holds a position in ABI.
