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Last November the company closed bridge financing of US$17.5 million, with net proceeds of $15.5 million. About $10.3 million was used to pay off a previous loan, leaving the rest for general corporate purposes.
The tentative $45-million Credit Suisse deal speaks to Snow Lake’s promise, Perron emphasizes. “Normally you can’t get credit even if you have some equity,” he says. “The project itself has been reviewed by a third party to the satisfaction of the bank, but they need more money to backstop the project on top of what they’re willing to lend.”
Right now the market’s decided that, because the market is broken, nothing can happen with that asset. I’d respond that I’m not looking to do it in the public markets. I am actively looking for a partner. Once that gets done, people will have to look at this company much differently.—Francois Perron,
president/CEO of QMX Gold
Among possible sources are private equity, a joint venture or royalty streaming. “We’re open and flexible, which is what you need to be in this market.”
The mine sits within the municipal limits of the town of Snow Lake, which also hosts HudBay Minerals’ TSX:HBM Lalor mine. Last March HudBay was granted a court injunction dispersing native protestors who were blocking access to its gold-zinc-copper project. But the QMX project, Perron says, hasn’t had similar problems. “Clearly, the community is supportive. They’d probably like it if we were in production because we could probably do more for the community.”
In Quebec’s Val-d’Or region, meanwhile, Perron keeps a cautiously optimistic eye on his company’s Lac Herbin mine. After failing to meet guidance in 2011 the operation bounced back with 20,100 gold ounces in 2012—within the year’s target, despite a Q4 setback attributed to lower grades. But cash costs, averaging $1,555 last year, continue to plague the project. Mine expenses largely contributed to the company’s 2012 net loss of $16.2 million.
Guidance for 2013 has been set at 20,500 to 23,500 ounces, with cash costs between $1,200 and $1,400. But Perron has the project on probation, saying a shutdown is possible should the turnaround fail. Assays released last year suggest expansion potential for the FL, Bonanza and S1 zones. Some 42 holes totalling over 4,500 metres of definition drilling in the S1 deep zone showed grades “typical of Lac Herbin economical mineralization throughout the mine,” the company stated in January. Production from that zone is slated to begin in Q3.
But Snow Lake, with anticipated annual output nearly four times that of Lac Herbin, at significantly lower cash costs, remains “the company-making project, a very, very competitive project,” Perron says. “Right now the market’s decided that, because the market is broken, nothing can happen with that asset. I’d respond that I’m not looking to do it in the public markets. I am actively looking for a partner. Once that gets done, people will have to look at this company much differently.”
QMX Gold closed April 23 at $0.115. With 30.9 million shares outstanding, its market cap came to $3.55 million. The 52-week high and low were $1.00 and $0.085.
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