QMX Gold (QMX, TSX): Don’t Let Their Sloppy Share Structure Scare Ya!

Dec 09

QMX Gold (QMX, TSX): Don’t Let Their Sloppy Share Structure Scare Ya!

After Eldorado Gold (ELD, TSX) buys 68 million shares of QMX Gold (QMX, TSX) at 6 cents per share, QMX have about 334 million shares outstanding.

Yes, that’s a lot of shares.  But once you get past the sloppy share structure there’s a lot to like about QMX.  And the upshot of having lots of shares outstanding, at least in this case, is liquidity. Average daily volume is currently 693,000 and I see it heading to 1+ million shares per day given anticipated news flow.

Regarding my thesis for buying QMX, let’s start with the big regional picture:

M&A activity has really been heating up lately across the entire sector, but it’s been especially hot in the Abitibi.  Kirkland Lake’s (KL, TSX) planned $4.5+ billion dollar acquisition of Detour (DGC, TSX) will probably remain the period, point, exclamation mark in terms of size, but lots of smaller moves have also been made.  Regions like Val-d’Or, which are considered “safe” yet highly prospective for high-grade Gold, are becoming increasingly attractive and strategic for the long-term growth plans of both major and junior miners.

Everybody wants a large claim block within an established mining camp, but there aren’t many left.  Take Alexandria, for instance.  The market couldn’t have cared less about Alexandria.  Its stock price languished and languished until May of this year when a bidding war developed!  All of a sudden, Osisko (OSK, TSX) and Agnico Eagle (AEM, TSX) both wanted Alexandria’s land (pictured in pink adjacent and south of QMX).  Starting with an opening bid of $12 million, over a few months time the bid was raised to $20 million, then $25 million, and ultimately $35 million before concluding with a sale to Osisko. The project covering portions of the Cadillac-Larder Break is now held within O3 Mining (OIII, TSX-V) whose strategy of land consolidation within the region is ongoing.

In 2017, with what Reuters called a “safe move” into a less risky geopolitical region, El Dorado acquired Integra for $590 million (those claims are pictured in yellow, adjacent and west of QMX).

Newmont Goldcorp (NGT, TSX) has a strategic stake in Probe Metals (PRB, TSX-V).  Their claims are pictured in green, and QMX’s ground cuts right through the middle of the claim block.

Location-location-location – that’s the big regional picture!

QMX owns a key piece to the overall puzzle in Val-d’Or.

45 g/t Gold Over 5.6 Metres And 137 g/t Gold

Over 3.7 Metres!

Along the northern portion of what QMX calls its “Eastern Zone” they’re in the early stages of defining what could be a 6+ km trend.  This is one of those stories where there’s a relatively high-grade open-pit deposit (Bonnefond has an estimated resource of 400,000 ounces at 1.75 g/t Au) that hasn’t seen much deep drilling.

If you look at QMX’s news flow throughout 2019 you’ll see the numbers kept getting better and better – probably a good indicator their geological models are working.

From December 5:  Results to date have returned better than expected grades within the Bonnefond intrusive and support the predictiveness of our geological model in the shear zones to the north and south of the intrusive.

“Naturally we are very delighted with these results (45 g/t Au over 5.6 m) as they have exceeded our expectation,” stated Dr. Andreas Rompel, VP-Exploration for QMX, “and it confirms our target generation process as a result of an advanced knowledge and understanding of the structural mineralization model. Furthermore, these results will not only increase the confidence level of our resource but may increase the ounces in the resource itself.”

From September 4: QMX intersects 84.8 g/t Au over 6 m, including 137.5 g/t Au over 3.7 m!

There’s a 4 km stretch between QMX‘s Bonnefond deposit and Bevcon that’s seen little to no drilling (New Louvre sits about halfway, results there include 10.6 g/t Au over 2.5 m and 8.4 g/t Au over 4.5 m).  Last year QMX discovered a new area north of Bevcon, 305 g/t Au over 0.7 m within a shear zone of 28 m core length.  Therein lies the potential and intrigue, I think, that motivated someone like Eldorado to take a 19.9% stake in QMX.

Probe and Osisko already owned approximately 14.1%, so you might say 3 “strategics” now have a toehold interest in QMX.

More than 20 km west of Bonnefond and the Eastern Zone is QMX‘s Bourlamaque Zone.

QMX‘s Poulmaque target is on trend with Probe‘s Courvan discovery.  The River target is also very interesting.  An intercept of 35 g/t Au over 6.5 m was just followed up on for the first time and assays are pending.  So lots of smoke and fire here – 12 past producers and 10+ million ounces near this 1 zone of the overall claims map.  QMX has 4 zones total.

By the way, QMX has a permitted 650 tpd mill (refurbished 2016) in the Bourlamaque Zone.  This opens the door to potential toll milling and/or bulk sampling opportunities for QMX to generate cash flow.

Bottom Line: The $4 million from Eldorado is a reassuring endorsement.  QMX is making progress in Val-d’Or, evidenced by improving assay results.  Since September QMX has announced 137.5 g/t Au over 3.7 m and 45 g/t Au over 5.6 m, and there’s a 4 km section of prospective terrain in between.  Drilling costs are low ($110 per metre) and QMX‘s treasury is now quite high (approx. $7.5 million cash), so they’re funded for 50,000+ m of drilling.  Assay results from drilling at Bonnefond and River are pending.