Maudore’s new management tries to right the ship

It has been a bit of a whirlwind over the past five months for Quebec-focused gold mine developer Maudore Minerals (MAO-V).

The majority of Maudore’s board and management team were replaced following a challenge by dissident shareholders in late July. Now under the control of CEO Howard Carr, Maudore has pledged to re-establish shareholder value by expediting production at its wholly owned Comtois gold property, 150 km north of Val-d’Or, Que. 

A group of investors owning 18% of Maudore’s outstanding shares has wrested control of the company from outgoing CEO Ronald Shorr and his team during an annual general meeting on July 19. After the dust had settled, the only remaining member of Maudore’s board nominees was mining engineer Raynald Vezina.

Led by activist investor Rex Harbour, the dissident group focused on Maudore’s poor market performance over the first half of 2012. The share price plummeted 51%, or $2.59 per share, from mid-January through July. The Harbour group cited a lack of technical expertise on Maudore’s board and slow progress at the Comtois property as its main concerns.

Following the change in management, Maudore announced a 100-day plan that included updating the resource estimate at Comtois’ Osbell deposit, as well as reviewing exploration targets and regional programs. The company took its first step on Oct. 29 when it released the Osbell update — the first at the project since September 2010.

Resources now stand at 8.5 million indicated tonnes grading 2 grams gold per tonne for 546,000 contained oz. gold. 
Maudore reported that almost all of the indicated resource lies within its newly defined open-pit shell.

Inferred resources remain relatively unchanged at 8.1 million tonnes at 4.6 grams gold for 1.26 million contained oz. gold. Only 4.9 million tonnes of the inferred resource sits in the pit shell at an average grade of 2.7 grams gold.

Resources within the pit shell were calculated using a 0.5-gram gold cut-off, while resources below the shell assume a 2.5-gram gold cut-off.

“We’ve devoted considerable time and effort to ensure the integrity of this report, and . . . our understanding of the morphology and geostatistical characteristics of the Osbell deposit has considerably improved,” Carr says, adding that the Whittle optimization study completed on the potential open-pit resource “increases our confidence in the economic viability of the deposit.”

In late November Maudore released results from 25,000 metres of drilling that aren’t yet included in the Osbell resource. This drilling targeted Osbell’s mineralization at depth, with highlights including: 1.5 metres of 19.4 grams gold from 282 metres depth in hole 12-896C; 1.5 metres of 8.5 grams gold from 1,341 metres in hole 12-885B; and 1.2 metres of 22.9 grams gold from 1,231 metres depth in hole 12-890A.

The company also released results from two satellite deposits. Drilling at the Greer gold target located 1.9 km southwest of Osbell cut 7.6 metres of 3.6 grams gold from 356 metres depth in hole 12-895, including 38.7 grams gold over 0.5 metre.

Drilling at the Mafic North target, located 250 metres north of Osbell, confirmed gold mineralization that sits partly within Osbell’s existing pit shell, but has yet to be included in the resource calculation. Highlights from the Mafic program include 3 metres of 2.9 grams gold from 136 metres depth in hole 12-903, and 3.9 metres of 14.3 grams gold from 456 metres depth in hole 12-909.

“Our meticulous approach is proving its value, and we are encouraged by the results,” Carr says. “We will continue to focus on further delineation of the deposits as we move forward with our exploration plans.”

Perhaps the biggest news came on Dec. 5, however, when Maudore announced two financings and a merger proposal. 
The company entered into a non-binding term sheet with a private equity group to secure a senior loan facility of up to $35 million. Maudore signed two more commitment letters for a bridge loan totalling $3.25 million with lenders including Rex Harbour and his City Securities firm.

The loan proceeds will be used to complete two acquisitions. Firstly, Maudore signed a purchase and sale agreement with Noront Resources (NOT-V) wherein Maudore will buy Noront’s 25% stake in the Windfall Lake gold project, which is also located in the Val-d’Or region. Maudore will pay Noront $10 million in cash plus $3 million in warrants for its stake.

The Noront deal is just a smaller piece of a larger play that involves a proposal to acquire Eagle Hill Exploration (EAG-V), which owns the remaining 75% of Windfall Lake. The Noront agreement includes a clause that stipulates Noront must exercise its right to reacquire Eagle Hill’s interest in Windfall Lake, after which Maudore will pay Noront another $6 million.

Maudore’s offer for Eagle Hill would allow shareholders to exchange each Eagle Hill share for 0.0773 of a Maudore share. Eagle Hill shareholders would thus own 33.7% of the merged company.

The offer represents a 42% premium on Eagle Hill’s Dec. 5 closing price of 17¢ per share.

Maudore speculates that due to Windfall’s proximity to Comtois, it could be advantageous to run a central processing facility for both deposits. Windfall Lake hosts 1.7 million indicated tonnes grading 10 grams gold for 538,000 contained oz. gold, as well as 2.9 million inferred tonnes of 8.76 grams gold for 822,000 contained oz. gold.

Eagle Hill’s board has acknowledged Maudore’s proposal, but made no public statement regarding its intentions.

“These proposed transactions would collectively transform Maudore into a well-funded exploration and development company with 100% ownership in two projects containing significant gold resources in one of the world’s most prolific gold mining regions,” Carr says.

It’s not clear how many have bought into Maudore management’s new vision. The company’s stock has dropped 40%, or $1.14, since the proxy battle wrapped up on July 20, and shares were trading at a 52-week low of $1.65 per share at press time.

Maudore has 27 million shares outstanding for a $44-million press-time market capitalization.