eResearch | Renforth Resources (CSE:RFR | OTC:RFHRF | FSE:9RR) is a Canadian-focused gold & base metal exploration company.
It is both asset and cash-rich with a collection of four projects within the Abitibi Greenstone Belt, a world-class mining region, with 3 projects in Quebec (Parbec, Surimeau, and Malartic West) and the Nixon-Bartleman property in Ontario.
Surimeau – Polymetallic Potential
Although Renforth’s principal asset is the Parbec Gold project, the Surimeau project is of interest to the battery metals enthusiasts.
In 2020, Renforth created the Surimeau project by extracting existing claims with polymetallic showings from its copper-silver West Malartic project. It then increased the size of Surimeau to 215 km2 (over 53,127 acres) by adding new claims to the south.
Surimeau’s northern boundary is approximately 4 kilometres (km) south of the Cadillac Break and contains both a north and a south trend. The project represents a regional-scale opportunity, as the northern trend covers approximately 30 km of strike while the southern trend spans almost 20 km of strike.
In the early 1940s, road building to support the construction of a hydroelectric generating station south of Surimeau exposed zinc and nickel mineralization in the area, but there was no extensive follow-on exploration.
With the historic reports and recent work on the project, Renforth believes that Surimeau hosts a large scale sulphide nickel & platinum-group elements (PGE) system as well as the potential for a copper-zinc Volcanogenic Massive Sulfide (VMS) system.
Copper is an important element in electric vehicles (EVs) and nickel is critical for the battery technology in EVs.
A small exploration drill program was launched in the fall of 2020 and hit polymetallic mineralization but weather cut short the program to only 2.5 holes. The drilling targeted surface mineralization and geophysical anomalies and returned assays of 0.156% nickel over 13 metres and 1.16% zinc and 0.132% copper over 4.0 metres.
The project also attracted the attention of Dr. James Franklin, who joined the company in January 2021 as the principal Technical Advisor on the Surimeau discovery. Dr. Franklin has worldwide expertise in the identification of VMS deposits and is a member of the Canadian Mining Hall of Fame.
Location, Location, Location – the Abitibi Greenstone Belt
Renforth is in the right region for finding mineralization.
The Abitibi Greenstone Belt, an area that spans eastern Ontario and western Quebec, is reported to have produced over 180 million ounces of gold in its history, plus millions of ounces of silver, and billions of tons of copper and zinc.
Mineral deposits are commonly located along or near the fault zones. The two most prolific and well-known fault zones (also called “breaks” or deformation zones) are the Porcupine-Destor in Ontario and the Larder Lake-Cadillac in Quebec.
Renforth projects in Quebec are on or near the Larder Lake – Cadillac Fault Zone and, in Ontario, the Nixon-Bartleman property straddles the Porcupine – Destor Fault Zone.
FIGURE 1: Renforth’s Properties in the Abitibi Region Border Agnico Eagle & Yamana Mines
Volcanic Massive Sulfide (VMS) and also Sulphide Nickel
Why the excitement?
Commercial-sized VMS deposits are often desired for their potential value because (1) the size of the deposit often results in a long-life mine and (2) the deposits are polymetallic, often containing various elements such as gold, silver, copper, lead, and zinc.
A good example of a VMS mine in the region is Agnico Eagle’s LaRonde Mine, currently mining at depths of more than 3 km. With gold-copper and zinc-silver mineralization, the LaRonde mine has produced over 6 million ounces of gold and operated for over 30 years.
Renforth believes that Surimeau hosts a nickel-bearing central anomaly in addition to the VMS occurrence and compares it to the geology of the Outokumpu region of Finland.
Parbec Gold Project – Growing Resources
Renforth’s main project is the Parbec gold project which is adjacent to and on strike with the Canadian Malartic mine operated by Agnico Eagle (TSX:AEM |NYSE:AEM) and Yamana Gold (TSX:YRI | NYSE:AUY | LSE: AUY). The Canadian Malartic mine is Canada’s largest gold mine and, in 2019, produced over 669,000 ounces of gold.
In May 2020, Renforth published an updated, pit-constrained, resource for Parbec of a total resource (Indicated and Inferred) of 281,000 ounces of gold at an average grade of 1.77 g/t gold. As a near-surface resource, the company believes this asset would be attractive to any gold producer (Canadian Malartic, Wesdome, or Eldorado) in the area that is looking to add or replace depleting ounces.
The company is in the midst of a 15,000-metre winter drill program and expects to spend approximately C$1 million this winter. It is focused on building ounces for a planned updated resource by infill drilling, undercutting previous holes, and twinning holes drilled in the 1980s and 1990s.
With the current backlog at the labs, the company still awaits the results of 22 holes drilled at the end of 2020, so lots of news still to come. Recent drill results include 1.72 g/t gold over 13.0 metres and 1.09 g/t gold over 13.2 metres.
The Sale of New Alger, a Blueprint for Parbec
Management has extensive experience and the company is led by Nicole Brewster, President and CEO, who takes her compensation in shares so her interests are aligned with those of shareholders.
In 2020, Renforth focused drilling at New Alger to produce an updated total resource (Indicated and Inferred) of 250,000 gold ounces, catching the attention of Radisson Mining Resources (TSXV:RDS).
In August 2020, Renforth completed the sale of its New Alger project to Radisson and subsequent C$3.24 million investment by Radisson into Renforth, at C$0.135 per share, well above its current market price.
Under the New Alger deal terms, Renforth received C$0.5 million in cash, 12 million shares of Radisson (currently trading at C$0.30), and a C$1.5 million cash contingent payment.
With Renforth’s current focus on growing the resource at Parbec, management has expressed an interest in selling Renforth and the Parbec project in the next 12-18 months, and then spinning the remaining assets into a new company.
Merger & acquisitions activity in the area is strong, highlighted with recent deals of Eldorado Gold (TSX: ELD) announcing a C$132 million agreement to buy QMX Gold (TSXV: QMX) and Yamana Gold (TSX:YRI) closing its C$152 million acquisition of Monarch Gold.
Valuing Renforth
One method of valuing a mining exploration company is to look at the sum of its parts.
Parbec currently contains a NI 43-101 total resource (Indicated and Inferred) of 281,000 ounces of gold. Management estimates the updated resource, expected by June, could double the resource to at least 500,000 ounces.
Recent transactions with exploration companies in the area have valued gold resources in the US$44-US$140/ounce range.
Using US$40/ounce as a conservative estimate for a resource valuation, this price per ounce implies an Enterprise Value of approximately C$25.4 million, and with $6.3 million in cash and securities, results in a Market Cap of C$31.7 million or approximately 80% higher than the share price is today.
In addition, the potential of Surimeau should be added with similar VMS-focussed junior mining companies in Canada commanding valuations in the C$5-$15 million.
The combination of Parbec and the early-stage Surimeau, but giving no credit for Malartic West or Nixon-Bartleman, could peg the Market Cap in the C$40-$50 million range and well above its recent C$0.135 per share financing with Radisson.
Fully-Funded For 2021
With its recent financing and deal with Radisson, Renforth has C$2.7 million in cash and approximately C$3.6 million in Radisson shares.
The company is fully funded for its 2021 exploration and drilling programs at Parbec and Surimeau, and investors should anticipate drill results over the next couple of months.
Renforth closed last week at C$0.07 per share and a Market Cap of C$17.6 million.
