Luc Lessard and Vincent Metcalfe, respectively President & CEO and CFO of Falco Resources (V.FPC) are staring at a $900 million-plus CAPEX right in the face at the company’s Horne 5 project in Quebec’ Abitibi Greenstone Belt. They don’t seem a bit worried.
“We’ve done this before,” said Metcalfe referring to the fact that most of the management at Falco are alumni of Osisko’s Canadian Malartic gold mine. Another billion dollar CAPEX, which Lessard was in charge of building.
“We are completing our feasibility study and expect to release it during the summer,” said Lessard. “Think July. So now we have to finance the project and permit it. The Quebec government has recently invested $10 million dollars and usually, when they make that sort of commitment, down the road, they take a substantial portion of the overall project financing” said Metcalfe.
“Having Bryan Coates, who is the President of Osisko Gold Royalties, come on the Board is very important. Bryan has extensive project financing experience worldwide and he is in Quebec City a couple of times a month. He knows the people in the Quebec government and he’ll be helping introduce Falco’s project.” said Lessard.
“Hélène Cartier will be stepping away from the Board to become our Vice President Environment and Sustainability. She was responsible for all the permitting at Canadian Malartic. Which was quite a job because Osisko had to move a quarter of a town. And we are adding two key members of the Osisko tech team as VPs of Technical Services and Metallurgy.” said Lessard.
In the press release announcing these appointments, Lessard commented, “As Falco continues to advance the Horne 5 Project to feasibility, the addition of these key individuals with various backgrounds in project financing, mine development and operations in Québec, will make them great assets to the Company.”
Lessard and Metcalfe laughed when I noted that recent Board and Management changes really meant putting the old Osisko band back together.
While Falco is spooling up for feasibility, financing and eventual mine construction, the company also announced a 40,000 meter drilling program.
“The last three or four years we didn’t have a lot of money,” said Metcalfe. “So we were very focused on Horne 5. Now we have $10 million in flow-through money and can look at other targets.”
“There are eight different “brownfield” targets in the area,” said Metcalfe. “Horne 5 is the flagship but, in parallel, we want to focus on the entire camp. The area has been explored for over a hundred years but without much exploration in the last thirty years. Falco owns 68,800 hectares of land in the Rouyn-Noranda mining camp, which represents 70% of the entire camp and includes 13 former gold and base metal mine sites. There has been drilling but it’s been shallow.”
“The Osisko group is very strong on drilling,” said Metcalfe. “With the new drilling we’ll really be running two, parallel projects. By the end of April we will have seven drills in the camp.”
Those drills will not just be looking for gold. “These are polymetallic deposits in many cases. Which may give us the ability to hedge long term,” said Metcalfe.
With the main focus on Horne 5 and a secondary focus on the brownfields exploration, Falco is beginning to attract serious investor interest. With that interest comes analyst coverage such as BMO Capital Market’s announcement that it was beginning coverage: Initiating Coverage With Outperform Rating: Falco to Soar the Horne 5 Mine. BMO writes, “We are initiating coverage of Falco Resources with an Outperform rating and $1.90 target price. Falco holds 100% ownership of the past-producing Horne mine in Quebec and delivered a PEA on the Horne 5 resource showing potential for 230,000oz/yr of gold at a low US$427/oz AISC. 2017 will see potential catalysts from a feasibility study, initiation of permitting, and shaft de-watering.”
For Lessard and Metcalfe this sort of coverage will make it all the easier to put together the less than a billion dollars it will take to make Horne 5 a mine. “Having Osisko Gold Royalties and the Government of Quebec on board is important. In the mining sector, the most important thing is to have access to capital,” said Metcalfe.
In the current market, that access would likely include a substantial debt component which could be financed relatively inexpensively. But first Falco needs to complete its feasibility study which Lessard expects in the upcoming months.
Overall, Falco seems poised to repeat the success of the Canadian Malartic project where so many of its management proved they could bring in a project, on time and on budget.
At time of writing Falco was trading at $1.08 with 146.68 million shares outstanding for a market cap of $151.08 million.