In a rare opportunity for investors, Vanstar Mining Mining Resources Inc. (OTXQX: VMNGF) and Iamgold Corporation (NYSE: IMG) are partners on the Nelligan Gold Project in the Canadian Province of Quebec. While the Project is still in the “exploration phase” according to Vanstar, the partners will see a revised resource calculation that some watchers believe could increase resources from the current 3.2 million ounces to somewhere approaching to exceeding five million ounces of gold later this year.
Why This Is a Compelling Opportunity For Investors
Under the terms of the joint venture agreement between Vanstar and Iamgold, Vanstar currently holds a 25% fully carried interest in the project. This means that Vanstar does not have to put up any capital for the exploration, development and construction of a mine if a production decision is made. Potential investors should appreciate what this means for Vanstar and its shareholders. While other exploration companies will need to dilute shareholders to raise considerable funds to advance their projects, Vanstar’s share of the project is fully funded by its partner.
With only 65 million shares issued on a fully diluted basis, Vanstar’s tight capital structure offers an extremely undervalued opportunity at the current share price. Iamgold can earn a further 5% of the Project upon delivery
of a Bankable Feasibility Study reducing Vanstar’s interest to 20%. If you do the math, considering that the cost of a feasibility study for this size of deposit can be many 10’s of millions of dollars, Iamgold’s advancement of the project implies a value for Vanstar’s share of the project that is many multiple of its current market valuation. For example, if we assume that Iamgold will spend $50 M to advance the project to a bankable feasibility study to earn its last 5% interest, this would imply a value of $200 million for Vanstar’s share of the project. Compare that to its current market value of less than $20 million.
Vanstar's Further Royalty Opportunity
In the event that Iamgold decides to buy out Vanstar’s interest, Vanstar would then receive a 1.5% Net Smelter Royalty (in addition to existing royalties) over the entire project over the life of the mine. This would effectively convert Vanstar into a cashed-up royalty company, which often command premium valuations in the market. It should also be noted that Iamgold has never taken a project into production with a joint venture partner so it will be highly likely to see Iamgold buy out Vanstar’s interest.
About The Nelligan Project
Vanstar says the Nelligan Project is still in its ‘exploration phase and the project operator Iamgold has reported a gold resource of 3.2 million ounces of gold. The total resource, it believes, will be much larger than the currently reported resource. According to the results from a recently completed diamond drilling program at Nelligan, Iamgold found all eight of its drilling holes intercepted ‘multiple wide intercepts of gold mineralization at higher-than-average grades.
J.C. St-Amour, President and CEO of Vanstar, says on a YouTube video,
“These intercepts demonstrate that the Nelligan Project is continuing to grow at depth, in addition to the growth that we’re see out to the west from previous drill programs. I would imagine that by the end of this year we will see significant additions to the current resource but beyond that this project can continue to grow with additional exploration drilling.” He added, “The Project will continue to see some exploration. There’s still a lot to do here and this Project will grow considerably from here.”
The Future Of The Nelligan Project
J.C. St-Amour addressed the future of the Nelligan Project. “The next steps for this Project, Iamgold will update the resource for this Project this year incorporating all the numbers that you see in the latest Nelligan news release including the drilling from the past couple of years. The last resource was calculated at 3.2 million ounces back in 2019. We would expect to see some significant additions to that. We expect to see that resource updates by the end of this year.”
He said he anticipates future expansion of the deposit in numerous directions — East and West — and also at depth. He added that a summer prospecting program was completed to help ‘identify more targets’ on the property for future drilling beyond the existing deposit. He says there may be more deposits on the property.
“Nelligan is a fantastic asset,” he declared. “It continues to grow and I am confident that this will be developed into a mine.”
Vanstar also has several other exploration projects in the Province of Quebec with the most advanced being the Bousquet-Odyno Gold Project which is an advanced exploration project within one of the world’s most prolific mining districts.
CONCLUSION
Investors have historically invested in gold as a hedge against the volatility of stocks, bonds and other equities. This joint gold mining effort between Vanstar Mining and Iamgold offers investors a rare and compelling opportunity for several reasons: a fully carried 20% interest in the project, continued success from continued exploration at Nelligan and a NYSE gold mining company as operator. The accompanying royalties are also a highly valuable feature once Nelligan goes into production. An investment in Vanstar means investors will participate in perhaps one of the hottest gold mining projects in Quebec. More can be learned about all of the projects including Nelligan by visiting www.vanstarmining.com.
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