Vanstar Mining (VSR.V) and IAMgold (IMG.TO, IAG) have released the assay results from seven holes that were drilled during the winter months. IAMgold (which is covering 100% of the exploration expenditures) completed five holes on the eastern extension on the Nelligan deposit while it also completed two exploration holes on the southeastern portion of Nelligan.
As a reminder, Vanstar currently owns a 25% stake in the Nelligan deposit where IAMgold is spending 100% of the expenditures to keep the existing earn-in agreement alive. Once IAMgold completes a feasibility study on the asset (and that will take at least a few more years), Vanstar’s stake will be diluted to a 20% carried interest in the project and a NSR on the original claims of the project. This year, IAMgold will fund the entire 10,000 meter drill program at Nelligan as part of its earn-in agreement and about one third of the total anticipated meterage was completed in the winter drill program.
The mineralization continues towards the east
As you can see in the image below, all five holes drilled on the eastern extension encountered mineralization. Some intervals were excellent (with for instance 8.7 meters (true width) of 3.76 g/t gold in hole NE-23-202 starting very close to surface and the 1.5 meters (1.27 meters true width) containing 28.6 g/t in hole NE-23-204) while other holes were just mediocre. Hole NE-23-19 for instance returned just 0.69 g/t gold over 14.5 meters true width at a depth of almost 290 meters down-hole.
Of course there will always be grade variation and the main takeaway from the exploration update is that the mineralization encountered in most holes is outside of the pit shell and follow-up drilling is definitely warranted to figure out if and how the pit shell can be expanded to include the additional gold zones.
And as you can see above, the location of hole 199 is also very interesting. While the 14.5 meters of true width containing 0.69 g/t gold is not that great, it does indicate the gold mineralization is in excess of half a kilometer away from the currently known pit shell. And that confirms the excellent exploration potential outside of the current pit shell which already contains 2 million ounces of gold in the indicated resource category and about 3.6 million ounces in the inferred resource category.
IAMgold also completed two exploration holes in the southeastern portion of the Nelligan project (see the image above) but unfortunately both holes came up empty. This doesn’t mean IAMgold will give up on exploring the greater land package and the company has earmarked an additional 1,500 meters to follow up on additional exploration targets outside of the immediate vicinity of the pit shell. And as the company explained, although the two exploration holes came up empty, they did intersect what Vanstar calls ‘encouraging alteration indicative of potential gold bearing hydrothermal systems.
Gearing up for a summer drill program
IAMgold planned to complete 10,000 meters of drilling at Nelligan this year. The seven holes that were drilled as part of the winter drill program resulted in a total of just under 3,400 meters being drilled. As mentioned before, IAMgold is planning to complete an additional 1,500 meters of drilling which should help the company to figure out if any of the regional exploration targets warrant further follow-up programs in the next field seasons.
The remaining part of the 10,000 meter program (approximately 5,000 meters) will be used to complete an infill and extension drill program on the western and central portion of the Nelligan deposit. This will hopefully further increase the global resource at Nelligan and hopefully convert another portion of the inferred resources into the measured and indicated resource categories.
A new slate of directors
At the general meeting held on June 29th, the shareholders of Vanstar Mining appointed three new directors. Robert Boyd (the CEO of Endurance Gold (EDG.V)) and Natasha Dixon (capital markets experience) were added to the board, but we were most interested in the addition of Jean David Moore to the board of directors.
Investors keeping an eye on the insider filings of Vanstar Mining will undoubtedly already have noticed Moore’s insider purchases. Moore acquired an additional 199,000 shares during the month of June alone (ahead of his official election and appointment to the board of directors). Moore now owns 3.19 million shares and was recently issued 350,000 options as a new director. Needless to say Moore has already put his money where his mouth is and has a vested interest which makes him aligned with the (other) shareholders of the company.
Conclusion
Vanstar Mining is in an excellent position. Money is tight for most junior exploration companies and it doesn’t really look like a financing window will be opening soon. Fortunately, Vanstar’s agreement with IAMgold on the Nelligan project was a well-negotiated deal and Vanstar’s 25% stake (which will be reduced to 20% upon the completion of a feasibility study) will be carried to production. IAMgold will take care of the entire construction cost and funding and Vanstar will repay its 20% stake from the operating cash flows that will be generated during the mining phase. This puts Vanstar in an excellent position as IAMgold is currently funding every single dollar that’s being spent on Nelligan.
At the current share price of C$0.31, Vanstar’s market capitalization is C$17.9M. This appears to be pretty low for a company that will likely end up with a 20% carried stake in a deposit that already contains a combined 5.6 million ounces 2 million indicated, 3.6 million inferred) in a pit shell. As of the end of March, Vanstar had a positive working capital position of C$2.65M so there doesn’t appear to be an immediate need to tap the equity markets to raise money.
Disclosure: The author has a long position in Vanstar Mining. Vanstar Mining is a sponsor of the website. Please read our disclosure.
