Roulston says Canada is the place to be

INVESTMENT COMMENTARY

SPECIAL TO THE NORTHERN MINER

The Northern Miner asked Lawrence Roulston, a newsletter writer with geology, engineering and business training, and more than 20 years of hands-on experience in the resource industry, to comment on some of the noteworthy companies and trends in mineral exploration.

Roulston’s resume includes experience as an analyst, a chief financial officer and vice-president for an investment management firm focused on the resource industry.

I keep an eye on companies with projects around the world — however, I have to say that the more I see of the world, the more I’m attracted to companies with projects closer to home.

Canadian exploration companies continue to lead the worldwide search for mineral deposits. At the same time, there is a growing level of interest at home, in Canada.

In the 1990s, the Canadian exploration industry spread out around the world, and played an important role in many important discoveries. To a large extent, Canada was left out of the last exploration cycle.

Driven in part by the political situation unfolding in various parts of the world, the mining industry is rediscovering the enormous mineral potential in Canada. Exploration companies are discovering that it is sometimes easier to sort out the geological complexities of far-flung mineral deposits here than it is to deal with capricious government policies, corruption, civil strife and terrorism elsewhere, in a growing list of countries.

A lot of good work was done in Canada in previous decades. A few companies are now picking up on that earlier work and advancing those projects. Other juniors are doing early stage work and making new discoveries.

The most noteworthy of the new discoveries, of course, is Virginia Gold Mines’ lonore discovery in northern Quebec. News from the project has stopped temporarily as Goldcorp (g-t, gg-n) proceeds with its acquisition of lonore from Virginia. Once the paperwork has been completed and Goldcorp resumes an active exploration and development program at lonore, investor attention should return to the trend.

Several companies are active in that region and have already demonstrated the potential for additional discoveries. Those companies are going to attract investor interest once work gets under way and news begins flowing.

Of course, at the centre of interest will be Virginia Mines (vgq-t), the successor to Virginia. The company has the same exploration team that led to the lonore discovery, along with Virginia’s exploration portfolio. Virginia Mines is now trading, and will resume field work, now that the Goldcorp transaction is completed.

The Abitibi region of northern Ontario and Quebec is also coming back to life. The most interesting area to me is the belt from Timmins, Ont., through to Val d’Or, Que. Kirkland Lake Gold (kgi-t, kgilf-o) generated a big payoff for shareholders with their exploration success at the past-producing Kirkland Lake mines. Lakeshore Gold has also had considerable success at its Timmins gold project.

Much of that belt was mined for decades with no real exploration effort. Many of the mines were shut down in the 1960s, with the gold price fixed at $35 per oz. and costs steadily rising. We are just seeing the beginning of a revitalization of that rich gold belt.

Moneta Porcupine Mines (me-t, mpucf-o), one of the original miners in the belt with a history going back to 1910, has reawakened with new management. Moneta has a significant property position and is well positioned to be a consolidator in the trend.

Goldcorp will play an important role in the near-term exploration story in the Abitibi belt, as the company is acquiring interests in three mines from Barrick Gold (abx-t, abx-n) as part of the takeover of Placer Dome. It will be interesting to see how that story plays out.

Another region that is really starting to take off is northwestern British Columbia. Several of the majors were active in that region from the 1950s until the early 1970s, when the New Democratic Party government drove the mining industry out of the province. Several big discoveries were made in that period, highlighted by the Galore Creek deposit, which is now being developed by NovaGold Resources (ng-t, ng-x).

Galore Creek was discovered in the 1950s, and considerable work was done before the project was put on hold. NovaGold bought the project from two of the majors, and has outlined a 1-billion-tonne deposit with 13 million oz. gold, 156 million oz. silver and 12 billion lbs. copper.

Copper Fox Metals (cuu-v, cpfxf-o) has an option to acquire Schaft Creek, another billion-tonne porphyry deposit located east of Galore Creek. Canadian Gold Hunter (cgh-t, cghlf-o) and bcMetals (c-v, bmtlf-o) also have big deposits in the area that evolved from earlier discoveries.

Romios Gold Resources (rg-v, rmiof-o) has a considerable property position in the area that was explored in a flurry of activity following the rich Eskay Creek gold-silver discovery, now being mined by Barrick. Tenajon Resources (tjs-v, tjruf-o) holds a large molybdenum deposit that was outlined by Newmont Mining (nmc-t, nem-n) in the 1960s.

With projects like these available that provide excellent potential, it is no wonder that at least a few companies are bringing their exploration focus back to Canada.