O3 Mining (OIII) - Very Attractive Acquisitions and Partnership

O3 Mining Inc (formerly Chantrell Ventures Corp.), an Osisko Group company is a gold explorer and mine developer. The company is well-capitalised and owns a 100% interest in all its properties (137,000 hectares) in Quebec. The company is focused on delivering superior returns to its shareholders and long-term benefits to its stakeholders.

Matt Gordon caught up with Jose Vizquerra, President, CEO, and Director, O3 Mining. Prior to his appointment with O3 Mining, Mr. Vizquerra was Executive Vice President of Strategic Development for Osisko Mining Inc. He joined the company from Oban Mining Corporation, where, as President and CEO, he played a leading role in the combination of Oban, Corona Gold Corp, Eagle Hill Exploration Corp, and Ryan Gold Corp. to form Osisko Mining.

Through ambitious drilling and prudent capital raising, Osisko Mining has become the highly valued proponent of the world-class Windfall gold project. Before that, Mr. Vizquerra was Head of Business Development for Comañia de Minas Buenaventura. Previously, he was a production and exploration geologist at the Red Lake gold mine in Ontario. He currently serves as a Director of Osisko Mining, and Sierra Metals Inc., and as an advisor to the Boards of Discovery Metals Corp, and Palamina Resources.

The Young Mining Professionals recognized him as one of their Young Mining Professionals of the year with the 2019 Peter Munk Award. Mr. Vizquerra is an alumnus of the General Management Program at the Wharton School of Business. He holds an M.Sc. in Mineral Exploration from Queens University and a B.Sc. in Civil Engineering from UPC Universidad Peruana de Ciencias Aplicadas. He is a Qualified Person pursuant to National Instrument 43-101. 

Company Overview

O3 Mining is a gold explorer and mine developer ready to produce from its highly prospective gold camps in Quebec. It is listed on the Toronto Stock Exchange (TSX-V: OIII) and the OTC Markets (OTCQX: OIIIF). OrCan Oilfield Services Ltd. and Harricana River Mining Corporation Inc. are the company’s subsidiaries.

O3 Mining is a development company with 2.3Moz gold in Quebec. It has a $423M PEA (Preliminary Economic Assessment) at $1,450/oz. The company has a CAD$130M current market cap.

The company has been focusing on marketing. It is currently in multiple discussions with various people in the real estate business. The company’s representatives recently visited the 121 conference. Following this, it is looking to enter infrastructure-related discussions in Madrid. Next, the company is looking to attend a mining conference in Frankfurt. It anticipates that the more people make money from the mining industry, the more likely they are to continue supporting the industry over time.

Currently, the market is observing a divergence in metal prices, and gold equity prices. As soon as the crisis began, people were either looking at margin calls or were looking to have money in cash. The company anticipates that whoever holds cash will be in a position to take advantage in the next wave.

The company has been transparent with its investors since the beginning. It had already planned to take the properties and put them in the right places. At the same time, the company has plans to advance its projects while being highly disciplined with its cash reserves. It anticipates that now is the time to relocate very large programs in areas where the most fundamental value can be generated while waiting for the markets to turn around. In the meantime, the company is focused on getting its PFS ready by September this year.

Divestment

O3 Mining recently divested one of its properties to Cartier Resources Inc. Agnico Eagle, one of the company’s major shareholders has supported O3 Mining with this decision. Notably, Cartier Resources had a 2Moz resource in a fairly restricted area which was surrounded by O3 Mining’s properties. The latter chose to facilitate the sale of the property to Cartier Resources. As a result, Cartier Resources now has a 5Moz resource, while O3 Mining retains a meaningful position.

As per the deal, Cartier Resources will acquire all of the issued and outstanding shares of Chalice Gold Mines, which own a 100% interest in the East Cadillac property, which is contiguous with Cartier’s Chimo Mine property in the Val-d’Or Gold Camp in Quebec, Canada. Cartier Resources paid 46,273,265 common shares, representing 17.5% of the company’s outstanding shares for the acquisition. The shares issued under this transaction are subject to a four-month and one-day hold period expiring on August 22, 2022.

Agnico Eagle is one of the top 5 gold companies in the world and a major shareholder in O3 Mining. The company has always been nurturing in Quebec and has been focused on stable jurisdictions such as Canada. The company has put in a lot of work in conducting deals and exploration in Canada. Notably, Agnico Eagle purchased the Canadian Malarctic mine 10 years ago in Val d’Or, for CAD$2Bn. Additionally, the company has invested hundreds of millions of dollars in the Osisko deposit, where the company has been extremely successful in finding over 14Moz.

O3 Mining sold its Ontario property to Moneta Gold. The former understood that its property was bounded as the mineralization went to Moneta’s claims. O3 Mining convinced Moneta Gold to combine the land package. As part of the deal, O3 Mining acquired 30% of Moneta Gold. Notably, Moneta has conducted drill operations, which has led to the growth of O3’s 5Moz resource to a 10Moz resource, where O3 Mining retains a 30% stake. Notably, O3 Mining sold its claims to Moneta for CAD$40M, which is now worth around CAD$65M.

Ongoing Operations

O3 Mining has a CAD$130M market cap, with CAD$100M accounting for cash and equivalents. Once the PFS is complete, it would take $10M-$15M to reach the Feasibility Study. In order to finance the project, the company can get private equity involved in the project development. As per the company, there isn’t a better time than now to minimise the risk and maximise the value, while moving from a PEA to a PFS.

A PEA is also split 50-50 between the engineering side and the resource itself. When conducting a PFS, the first change is in the resource. A PFS cannot be conducted without having an M&I (Measured and Indicated) resource. O3 Mining has converted its entire 2.3Moz gold resource into the M&I category.

The next part of the process is to determine the PEA pricing. Given the current market landscape, the price used in the PFS may or may not work in the company’s favour. It used $1,450/oz as the gold price for its PFS. However, due to inflation, it is expected that some of the costs will be much higher.

The company has decided to conduct a PEA in order to demonstrate the least amount of investment while producing the highest amount of IRR (Internal Rate of Return). Based on the market trends, it has been realised that the companies that have shown over 150,000oz/year have been viewed as more favourable. As a result, the company is working on reaching a 150,000oz/year production target. This enables it to have a higher CapEx (Capital Expenditure), and a lower IRR. However, as long as the NPV (Net Present Value) is maintained, it can demonstrate the project’s potential. O3 Mining is looking to showcase that the project is much larger and can be scaled higher in the next stage, moving from a 150,000oz to a 200,000oz production, in case an opportunity arises.

At the same time, the company is looking to show its investors that the Marban Property is not a restricted project. Although the company has drilled extensively at Marban, the asset still offers plenty of exploration opportunities. In order to be disciplined with its cash reserves, the company has drilled at depth to demonstrate the existence of mineralization without going into the resource. This was done because the ounces will pay in the future. Once the company starts drilling at depth, it can easily add ounces.

If a project has a great discovery, it will find corporates and big funds to invest. This has been highly evident for companies including Osisko Mining and Great Bear Resources Ltd. O3 mining is looking to demonstrate that it can produce 150,000oz gold on an annual basis. The company seeks to showcase that the NPV is close to the value provided in the PEA.

Currently, the PEA for the Marban Property is $423M. The property currently has a 5Moz resource. The company is looking to balance exploration at the moment as the markets are down. The company’s strategy has been to divest when the markets are down and focus on the Marban Property. It had plans to conduct a massive 150,000m drill program between the Marban Property and the Alpha asset. However, due to the current market situation, it decided to showcase the potential resource and the possibility of new discoveries at Marban. O3 Mining has invested significant resources over the past 2 years in order to find a discovery. The company believes that Marban has the potential to add the most fundamental value. 

Acquisitions

O3 Mining has invested heavily in properties that Agnico Eagle, its major shareholder was interested in. These acquisitions include Alexandria Minerals and Harricana River Mining. Notably, the company has recently bought additional property in the area. It is open to new acquisitions if the opportunities are present.

Through the Cartier deal, the company has built a strong working relationship. Cartier Resources now has one seat on O3 Mining’s Board. Furthermore, O3 Mining is helping Cartier Resources with the environmental and sustainability aspects of the operation. The company recently sold its Golden Valley asset to another royalty company.

The companies that are based within the district conduct bi-monthly meetings. O3 Mining is currently working on a JV (Joint Venture) with Probe Metals. Here, the company has the project with 40% ownership, while Probe Metals is focused on finding additional ore. Notably, Probe Metals had optioned the Cadillac Break East property from Alexandria Minerals Corp., now O3 Mining in 2016. In 2021, Probe Metals earned a 60% interest in the Cadillac Break East Property by way of a Joint Venture with O3 Mining. This property includes the Sleepy deposit, which has a 1.85Moz resource at 5.1g/t gold, for a total of 307,350 inferred ounces of gold. Beyond the Sleepy area, exploration work since the 1920s has consisted of primarily early-stage exploration programs consisting of geophysical surveys and limited drilling.

To find out more, go to the O3 Mining website