Maple Gold Mines

Matthew Hornor: Sure, Mike… and happy to be with you as well. So, Inco drilled a number of holes including a high-grade discovery intercept east of the highway back in 1976. While the grades were compelling, the amount of contained gold in that target area appeared limited… so Inco optioned the property to a junior company called Vior.

A local Quebec explorer drilled significant meterage [almost 100,000 meters] during the late-80’s and early-90’s discovering the Douay West and 531 Zones which are located approximately 4-5 km apart. The Douay West Zone was already compelling enough in the 90’s to attract Aurizon, who signed an option agreement that required them to bring the Douay West Zone into production as part of the earn-in agreement.

They drilled 11 holes and built mining infrastructure, but ultimately had to relinquish the option without ever producing an ounce due to corporate capital constraints and a low gold price environment [~$260/ounce].

MH: So, Vior completed an additional 30,000 meters of drilling and discovered what we now refer to as the Porphyry Zone, which is a 3+ km long zone of gold mineralization that essentially links up the western Douay West Zone at one end to the 531 Zone at the southeastern edge of the deposit.

The larger tonnage Porphyry Zone and the potential for continued exploration and drilling to link up other known zones and define new ones within the greater resource area changed the outlook for this project from one with prospects for smaller higher grade underground mining to one with significant bulk tonnage open-pit potential as well.

Unfortunately, the gold market pulled back significantly shortly after Aurvista acquired the project back in 2011, and so Douay was once again orphaned for a number of years during what proved to be a challenging period for the junior gold sector.

MH: Yep, exactly, Mike. The gold market began showing signs of life again, and a team of us were hunting for overlooked/undervalued/unloved gold deposits with the potential to provide significant returns in an improving gold market.

There were a number of attributes that attracted us to Douay:

First, the project benefits from a significant amount of historical investment. For example, just to drill all of the meters that have been completed to-date would cost around C$60 million today… let alone the time required for such an undertaking.

Second, all of the drill core from the programs dating back to 1976 are still preserved and meticulously archived at the site (see below). As you know, this is extremely rare and very beneficial for new geologists attempting to apply modern techniques to better understand the controls on gold mineralization.

And finally… location, location, location!

Douay is located within the Abitibi Greenstone Gold Belt — a belt that has seen more than 200 million ounces of gold produced to-date. That rich history is part of the reason the project has such excellent infrastructure, pro-mining communities, and skilled local labor.

*Located approximately 80km to the NW of Maple Gold’s Douay Gold Project
**Most similar geologically to Maple Gold’s Douay Gold Project (located 150km south of Douay)
***Located only ~ 50km west of Maple Gold’s Douay Gold Project along the same Casa Berardi Deformation Zone
All transaction amounts reported in Canadian dollars. (FX used for converting USD transactions: $1USD = $1.21CAD)

A lot of your readers probably already know this but Quebec is ranked as the 4th best mining jurisdiction on the planet with tax incentives and government supported financing alternatives.

That makes Quebec one of the best places to explore and most preferred destinations for gold producers to transact when they want to add ounces to their pipelines.

MH: Yeah. The Abitibi Greenstone Belt stretches across the Ontario/Quebec provincial border with numerous prolific faults with more than 200 million ounces of historic production. The mines within this region have contributed significantly to the local economies and have created significant wealth for several generations.

The deposit/mine that exhibits the most similarities geologically to Douay is the Canadian Malartic Mine (see below) which is located approximately 150 km due south with more than 12 million ounces of past production + current reserves/resources.

Canadian Malartic Mine, partnership between Yamana Gold and Agnico Eagle

Osisko brought new ideas and started drilling and exploring around known resources there back in 2004 when they had a $10-20 million dollar valuation [market capitalization].

In 2014, and shortly after commencing production, Osisko sold the mine to Agnico Eagle and Yamana for $3.9 billion.

More recently [Jan 31 2020], Kirkland Lake closed their acquisition of Detour Gold, which boasts more than 18 million ounces of gold [past production + current reserves and resources] located 125 km to the northwest of Douay.

Kirkland paid $4.9 billion!

Closer to home, along the same Casa Berardi deformation zone that hosts the Douay Project, Aurizon sold its Casa Berardi gold mine [about 40 km to the west of Douay’s property boundary] for $794 million back in 2013.

Several other gold deposits in the region have sold for hundreds of millions of dollars before commencing production over the past 5-6 years. We believe Maple Gold’s Douay Gold Project has that same type of potential.

MH: Aside from a brief false start in 2016, Mike, the junior gold sector has faced challenging market conditions for the better part of a decade. Advanced exploration companies with resource-stage projects like Maple Gold typically don’t see quantum leaps in valuation until the majors and mid-tiers rise.

After that is the point where the trickle down or waterfall effect begins with the smaller cap names experiencing strong breakouts as speculative capital begins entering the space at a faster clip.

Gold is breaking out, as you know, and last year we experienced the biggest year in terms of M&A dollar value on record in Canada [more than $30 billion].

The combined transaction value from last year was largely attributed to a few select major combinations – but I expect the volume of M&A transactions to increase in 2020 with more resource and development stage companies combining.

The amount of money spent on exploration over the past 8 years dried up significantly creating a great opportunity for companies like Maple Gold who control established gold resources in great jurisdictions with the potential for growth.

We are very well-positioned as other producers begin hunting downstream for additional ounces to fill their pipelines.

MH: Yeah, you know, we can’t control the market of course. None of us saw the COVID-19 situation escalating to the degree that it has, for example, but we’ve responded in order to ensure the health and safety of our employees and contractors and to preserve financial flexibility.

Our executive and exploration teams are working for reduced pay during Q2 yet remain working full-time as we are all committed to this. I believe there are several macro factors pointing to a very strong gold market in the near term, and the adjustments we are making simply put us in a better position to create value once the market stabilizes.

We remain focused on optimizing existing resources/models and the pursuit of defining new ounces that have the potential to deliver the greatest impact for the Douay deposit and future economic studies.

MH: So, we’ve completed about 4,400 meters of drilling to-date in 2020, and we hope to have new assay results out to the market later this spring.

We also have a very active data room with several notable major/mid-tier companies evaluating the project now that we’ve completed significant technical work since our team took over.

Delivering a new strategic partner in 2020 is a key focus for us and something that would bring immediate validation and credibility and support a rerating for the share price.

We believe the potential for making new discoveries at Douay is high, and every drill hole provides a potential catalyst for significant value creation.

MH: Amazingly, Mike, the only permits we require for our exploration and drilling programs are forestry intervention permits. These permits take only a month or two to obtain and aren’t permits for the drilling itself but rather are for the brush clearing that’s oftentimes required in order to set up the drill pads.

I can’t say enough about the benefits of working in Quebec. For starters, mother nature has gifted this province with world class gold deposits which in-turn have attracted major mining companies from all over the world. Having your prospective buyers/customers operating next door is clearly a major benefit.

Quebec also has countless government funded/supported resource funds, tax benefits, and other initiatives that drive new exploration investment into the province. For example, the various tax incentives in Quebec result in Maple Gold receiving up to $0.38 back for every $1 the company invests into qualified exploration expenditures.

It’s a province with a rich mining history, which is the reason we benefit from skilled labor, established infrastructure, and communities that support exploration and mining activity.

When you land at the Val-d’Or [translation: Valley of Gold] airport, which is approximately a 2-hour drive south of our property – you’re greeted by advertisements for companies selling mining equipment and drill contractor services. Twenty minutes from the airport, you can peer into one of Canada’s largest open pit mines [Canadian Malartic] from a designated lookout.

The Fraser Institute ranks Quebec as the 4th best mining jurisdiction on the planet… but I’d argue it’s the best in the world.

MH: Sure, Mike. As a corporate finance lawyer by background, I started my career in Tokyo working with multinational conglomerates to finance and build projects worldwide.

I cut my teeth in the mining industry in 2005 when I began working for Robert Friedland when the Ivanhoe team was looking to develop what was then a late-stage exploration/development project known as Oyu Tolgoi. That project is located in Mongolia and boasts an incredible resource endowment and has now become one of the largest poly-metallic projects in the world.

After RIO Tinto bought control of that project, we went on to work in Africa as I began working at the senior executive level financing and operating large-scale mining projects.

When I learned of the Douay Gold Project, it very much reminded me of the elephant country and elephant hunting we were doing at Ivanhoe – except for one main point: Douay is located in one of the best mining jurisdictions anywhere as opposed to some of the more challenging environments we were used to [Mongolia, SA, DRC, etc].

When I joined MGM as CEO, I invited some of my colleagues to join the effort including Dr. David Broughton [a Lindsay Thayer award winning exploration geologist] and the one responsible for Ivanhoe’s discoveries at Platreef and Kamoa. David and I then together brought in our VP Exploration, Fred Speidel, who hails from Quebec and who started his career hunting for gold there, as did David beginning in the early 90’s.

Our Executive Vice-President, Joness Lang, and CFO, Gregg Orr, round out our executive group and bring significant capital markets and finance experience to the team.

MH: Mike, we drilled approximately 4,400 meters this winter. Given the COVID-19 pandemic, we did not ramp up with additional drill-rigs to reach our initially planned 7,000-9,000 meter program. This was done to ensure the safety and health of our employees and contractors and also to conserve capital and ensure financial flexibility given the uncertainty in the market.

We completed drill-holes at the 531, NW, Nika, and Porphyry Zones. Last year, we had a tremendous drill result from the only hole we drilled at the 531 Zone [51m @ 2.88 g/t Au and 28m @ 2.55 g/t Au].

This year, we deepeed that drill-hole to see if any additional higher grade might exist at further depth. We cut 3.5 meters @ 5.96 g/t Au (including 11.35 g/t Au over 1.7 meters) further down-hole. Given the very favorable IP results we just obtained from our geophysical survey this winter, returning to drill additional holes at the 531 Zone is certainly a priority going forward.

Keep in mind that there had been no drilling at the 531 Zone in almost 7 years and no significant drilling at this zone since the early 1990’s.

The IP results at the 531 Zone are compelling in that they appear to support the company's east-southeast (largely undrilled) trend for sulphide mineralization associated with higher-grade gold in the currently drilled area.

We were confident the IP would support our interpretation of the zone being open for between 350 to 1,000 meters to the east/southeast, which it did, but the results also indicate this zone is wide open to the W/NW as well.

On February 24th, we announced that our drill rig had shifted to the NW Zone — an area that, not unlike the 531 Zone, has seen very limited drilling over recent years. Our technical team identified a potential western extension of known higher grade (3.14 g/t Au over 8.9 meters) that starts near-surface.

So, just like last year at the 531 Zone, we drilled a single hole here at the NW Zone to test an intriguing concept.

Maple Gold tested a western extension of a 1994 drill hole at the NW Zone that returned 3.14 g/t Au over 8.9 m from only 41 m down-hole. This drill-hole is an example of Maple Gold targeting higher than deposit average grades near-surface.

Beyond that, we’ve drilled a series of holes in the Porphyry and Nika Zones within the known deposit area. These holes are primarily focused on cutting higher-than-deposit-average grades within the top 200 meters from surface.

Abundant delicate visible gold associated with highly altered, siliceous brecciated syenite, a few meters above contact with carbonate-hematite altered basalt (2005 drilling). Several additional areas with visible gold were also found in Porphyry and 531 Zones in 2018 and 2019 drilling. While the above intercept is not typical at Douay, it does provide an example of the potential for bonanza-type grades across the property.

All of the drill core is being sawed and logged at site right now. I expect samples to be shipped to the labs in April and May, and investors can expect assay results from us during May and June this year assuming Ontario labs continue operating normally.

MH: Mike, as you know, I come from the Ivanhoe-world where our group was constantly challenged to generate new discovery targets with game-changing potential. We’re deploying that same approach here at the Douay Gold Project.

We will continue to drill compelling targets within the established resource area, but we’re also allocating 10-25% of our annual exploration budgets toward making brand new gold discoveries across our very large land package.

One of the areas we’re currently evaluating is located approximately 6 km [3.7 miles] to the northeast of the 531 Zone. We defined a 3 km long chargeability anomaly there last year and have just recently completed further IP work in this area to firm up drill targets.

Further drilling could expand higher grade areas on edge of current resource, as happened previously for Nika & 531 Zones

In fact, for your readers who are interested in learning more about that particular area-of-interest, they can check out our press release from April 8. We’ve identified a 1,500 meter long drill-ready target, and we should be able to get some scout-holes put in there, I’d say, within the next 6 to 12 months.

The target concept for this area is analogous to the Vezza Mine, which is located just 12 km to the east of our property and recently finished operating with approximately 500,000 ounces of gold at roughly 6 g/t Au produced life-of-mine.

New discovery drilling is higher risk with lower probabilities of success, but the prospect of adding one or two Vezza-type gold zones to our current resource base makes the potential reward well worth the risk.

MH: Mike, the first phases of our plan were to bring the quality of the technical and modeling work to the same standard that one of those larger gold companies expects to see when evaluating a new opportunity.

I think it’s fair to say that we already have their attention. Our task now is demonstrating that our hard work and updated interpretations can lead to the discovery of additional higher-grade ounces to delineate as potential starter pits within the known resource area and beyond.

If we’re successful in doing that while defining a resource with strong economic viability — I’ve no doubt that the larger gold players will fight to gain control of the asset.

MH: We closed more than C$1,000,000 in funding at the end of last year that brought our treasury to slightly more than C$4,000,000 as of December 31, 2019. We also received a tax refund from Revenu Quebec of approximately C$400,000 in early March.

Mike… you asked about the benefits of working in Quebec — and there’s your prime example!

Working in a part of the world where the government puts money back in your jeans – as opposed to trying to take dollars away – is just one of the wonderful benefits we enjoy operating in Quebec.

With the capital mentioned above, we are fully funded to execute our current drilling and exploration plans this year and will determine timing for a next financing based on exploration results and market conditions going forward.

MH: Yeah, it has been a challenging market for juniors to gain traction and build momentum – and it’s been that way for the better part of a decade. Many resource specific funds have closed, and the brokerage industry has consolidated with fewer houses having the analytical expertise to pick individual gold stocks.

The proliferation of ETF’s has also provided another initial entry point for investors into the gold sector – and the general frustration with gold equities lagging the spot price before this recent COVID-19 pandemic has no doubt created deal fatigue for many that have entered the sector over the last 2 to 3 years.

From a value perspective, I think the fact that juniors like Maple Gold are still trading in the same range (or lower) as they have for the past year while the gold sector shows very strong signs of entering a sustained bull market run is what makes the investment opportunities in high-quality junior gold companies so unique and compelling right now.

MGM is trading at a valuation of roughly C$15M right now. To put that in perspective, and I think I mentioned this, the historical exploration and drilling investment at this project would cost around C$60M to complete in today’s dollars.

Another simplified metric one can consider is market capitalization per ounce of gold in the ground:

Maple Gold currently trades at approximately C$5 or C$6 per ounce. For context, the Casa Berardi Mine [40 km to the west] and the Canadian Malartic Mine [150 km to the south and closest geologically to Maple Gold’s Douay Project] were both acquired for more than $200 per ounce. Our current resource is largely (85%) inferred and these mines were in production when acquired, but these examples provide some context for where things could go with further exploration success.

Our team has put in an enormous amount of work to optimize the existing resource estimate and establish a quality foundation that included the re-logging of old drill core and bringing historical drill data into a modern 3D model.

This work took us time, and perhaps wasn’t that exciting for investors — but those hard yards are completed, and now we’re in position for further exploration and drilling breakthroughs.

New drilling or resource modeling successes all have the potential to significantly impact and improve our per ounce valuation… not to mention a higher gold price. So there are several ways to create shareholder value as we advance and de-risk the Douay Gold Project going forward.

MH: Mike, as we discussed… investors can expect more exploration and drill results within the near-term, including follow-up data from our North IP target where we’re targeting new Vezza-type gold discoveries.

We’ll also have drill results from our winter campaign out to the market starting as early as late-April with final results expected to be released by June. Further drilling and exploration work may commence again later this year.

Lastly, we continue to forward different strategic alternatives, so there is potential for M&A or a new strategic investment from a mid-tier gold producer to happen later this year as well.

MH: It’s been my pleasure, Mike… you as well.