On the Frotet-Evans greenstone belt, 100km from Chibougamau, Troilus Gold Corp. (TSX:TLG) has moved to acquire UrbanGold Minerals Inc. (TSX:UGM) in a deal worth C$19m. The sale will make the company the largest claim-holder in the area and bring them into direct contact with the Discovery project owned by Durango Resources Inc. (TSX:DGO, OTCQB:ATOXF, Frankfurt: 86A1).
Durango is best known for its Windfall Lake properties (Barry & Trove) on the Abitibi Greenstone Belt, where Osisko Mining Inc. (TSX:OSK) this year found itself on a Bank of America mergers watchlist, and last year Bonterra Resources Inc. (TSX:BTR) rebuffed a takeover bid in favour of continuing development.
At the same time, situated just 1.5km from the famous Whabouchi Lithium Project is Durango’s NMX East Québec Critical Metals deposit, which features every metal targeted by Canada’s newly updated critical metals list. As merger & acquisition (M&A) activity ramps up in 2021, takeovers may very well be on the cards for any number of Durango’s current properties.
Mergers on the Horizon
Analysts are widely predicting another round of consolidation for the industry this year. In a January 2021 report, Bank of America analyst Michael Jalonen and his team said they believe there is major pressure to replenish reserves that have been falling since 2012, and that the fragmented industry would likely undergo a period of increased merger & acquisition (M&A) activity.
Gold miners strode into this year with their best balance sheets in nearly a decade, and as the realities of a post-covid economy settle in, the price of the metal is expected to rally further. The gold mines of the near future will soon be accelerated into production, and every developer wants to be able to offer a large number of ounces at competitive grades.
When exploration produces solid results, a company looking to maximise its chances of getting snapped up might move to acquire any claims that are likely to boost its resource estimate; something that recently played out on the borders of Durango’s Discovery property in Quebec.
Frotet-Evans Consolidation
A number of prominent mining companies are currently active in the area, including Osisko Mining Inc., Kenorland Minerals (TSXV:KLD), Durango Resources and Troilus Gold Corp, the latter on its way to becoming the largest claims holder in the region through its acquisition of UrbanGold Minerals Inc.
The site covers a geological structure with a profitable history of gold and copper production, and just 60km northeast of Durango’s Discovery project is the past-producing Troilus Mine. Exploration of this southwesterly region stopped when the previous operators discovered what would become their primary pit, which produced more than 2M ounces of gold and 70,000 ounces of copper before closing down in 2010.
Troilus Gold has since resurrected the southwest exploration program, which has confirmed that high-grade mineralisation exists to the southwest of the previous pits, yielding a resource estimate in the millions of ounces. The company believes this trend continues southwest into territory owned by UrbanGold Minerals Inc.
Minimal drilling has been done on the UrbanGold property and no resource estimate has been established for it, yet Troilus has opted to acquire all outstanding shares in UrbanGold, giving the company majority ownership of the local area and bringing it into direct contact with Durango’s Discovery project.
The property lies on-strike to the southwest of the historic Troilus mine and current lucrative exploration program. Durango’s technical team is in the process of preparing to explore the 6,700-hectare property, which is expected to begin in June 2021, after the company completes its exploration program at Windfall Lake. Plans will be announced in more detail as they become available.
Further Reading:
Limestone, the outlier of Durango’s portfolio
Windfall Watchlist
In the aforementioned BofA report, Jalonen and his team listed a series of junior and intermediate producers as well as exploration and development companies they saw as potential takeover targets, with Durango’s other Windfall neighbour, Osisko, finding itself on the list.
This isn’t at all hard to believe given the slew of positive results coming out of Osisko’s Windfall sites this Spring, with headline grades reaching an astonishing 696 g/t Au during March & April. These new drill results were not included in the positive PEA update that Osisko released on April 8th, however, suggesting that a further-improved PEA will be released late-2021.
Although positive share price movement is almost guaranteed upon acquisition, it sometimes makes more sense to stay long. In 2020, Bonterra Resources, rebuffed an unsolicited takeover bid in favour of proceeding with exploration, even though the bid was for roughly double the company’s share price at the time. Apparently, the company expects to attract a far higher valuation once the PEA is published in late 2021.
As was the case with Troilus, a company that creates such a large degree of confidence in the region it explores is likely to want to control as much of that region as possible. Given its potential as an acquisition target, its size relative to its neighbours, as well as its much higher grades, Osisko is ostensibly best-placed to take control of the Windfall Lake region.
Durango is currently in the midst of its inaugural drill program at Windfall, and results have so far been encouraging. Visible native silver has been identified in multiple drill cores, suggesting that Durango’s claims do host a hydrothermal system. The company intends to drill deeper and look for the denser gold that explorers tend to find beneath the lighter silver.
A Critical Metal Chaser
Durango also holds claim to the NMX East Québec Critical Metals deposit, where the company is looking for cesium, lithium, tantalum and rubidium. As well as the obvious benefits from forecasted escalating lithium demand, the critical metals property contains four metals that appear on the Canadian, US and European critical metals lists, meaning they are widely considered essential for energy and economic security.
A survey conducted by Durango indicated distinct lithium-bearing geology. The neighboring Whabouchi deposit has 36.6M tonnes of measured & indicated LiO at 1.48% in-pit, which bodes well for Durango given its extreme proximity. Durango intends to apply for a drilling license to help define this strategic lithium property, and updates will be available soon.
Additionally, the Whabouchi Lithium Deposit and Hydromet Plant Project is owned by a consortium that includes The Pallinghurst Group, known for the acquisition of strategic battery metals properties. Whabouchi is slated to be developed into an open pit mining and conversion operation, meaning that a great potential future offtake partner is sitting right next door.
With lithium prices in China rising strongly (over $13,848/tonne), Durango’s property is only expected to increase in value. In addition, merger activity in the sector is already on the up: In mid-April 2021, lithium producers Orocobre Ltd (ASX:ORE, TSX:ORL) and Galaxy Resources Ltd (ASX:GXY) agreed a binding deal that will result in a global top-5 lithium chemicals company. As high prices drive the need for scale, consolidation in the industry is expected to snowball, and being positioned so close to a funded asset places Durango’s NMX property in a highly strategic position as a takeover target.
It appears that Durango Resources has a talent for picking strategic properties positioned next to cash-rich intermediates. As we move further into 2021, it’s entirely possible that one or more of these properties could find itself on the shopping list of any of Durango’s neighbours.
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