Sprott’s Thoughts: This Area is the ‘Future of the Mining Industry… I’m Not Interested in Anywhere Else’

We see ourselves like the ‘Indiana Jones’ of the modern era, looking for treasures hidden for billions of years….


Submitted by Henry Bonner, Sprott’s Thoughts

“Saint Lawrence River in winter”. Licensed under CC BY-SA 3.0 via Wikimedia Commons. Link

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André Gaumond has led the discoveries of six gold deposits in his career.

His flagship discovery, Eléonore, earned his company around C$420 million when they sold it to Goldcorp Inc1. He retained a royalty interest, which earned Virginia a buyout from Osisko Royalties for around C$520 million2.

They turned C$18 million spent on exploration into a discovery that earned them around C$1 billion.

André’s repeat successes don’t come just from being lucky. He’s been exploring the same region in Northern Quebec for his entire career, making him the leader for exploration and development in that region.

André’s company, Virginia Mines, has announced a merger with Osisko Royalties Ltd. this year.

Now he’s planning to get his hands dirty once again and aims to put another significant discovery to his name.

As Pierre Lassonde once told him, “Land possession is not something. Land possession is everything.”

I spoke with André about how insights he had as a young man led him to some of the most valuable – and overlooked — land for mineral exploration in the world.

Henry: André, if you were just now entering the exploration sector, where would you be most interested in going and what do you think you would do to start out?

André: Well, as you know, we decided to focus in Northern Quebec. Virginia Mines decided to focus in Northern Quebec right from the beginning.

In fact, I took a year to study opportunities around the world and I quite rapidly realized that Northern Quebec was virgin and unexplored. It also had the same geology, which means the same potential, as the ‘Abitibi belts’. The Abitibi belts are in Ontario and Quebec and are known as one of the richest places on Earth to find and develop mines.

As I found the same type of geology in Northern Quebec as in the Abitibi belts, it was very easy to decide that my niche, and the game plan for Virginia Mines, would be to explore there– to explore this prolific territory, and to find and develop mines in that area. And that’s exactly what we did.

James Bay, where we are mainly located, has great geology. It also has road access, airports, villages, and one of the cheapest costs of electricity in North America. The infrastructure was built there in the 70’s. They built huge hydropower dams — among the largest in the world. Quebec now has among the lowest costs of producing electricity in North America.

Having access to that cheap energy was key to exploring in that area. You also have excellent drillers in Quebec. You have agreements with the First Nations. You have coal mining regulation. You have universities. You have engineering firms. You have smelters. What else can you ask for in a jurisdiction to explore and develop mines?

So to answer your question precisely, for a geologist that wants to start a career, it’s always the ‘first mover’ that gets most of the value. Be a pioneer in an area. We were able to acquire a huge land possession that we control inside the most prolific belt in James Bay. We have hundreds of kilometers of land in James Bay along these prolific volcanic belts. We have found thousands of showings and six deposits so far.

Of course, among them there’s Eléonore, a world-class deposit. But Eléonore was not the only one.

We are the main landowner in the James Bay area. So if you can be the first one there — if you can be the leader — then you can be the pioneer in an area. Pierre Lassonde (the founder of Franco-Nevada Corp.) once told me “land possession is not something. Land possession is everything.”

When you control the land on a prolific, high-potential territory, over time you’re going to find mines there. That’s exactly what we have done and that’s exactly what we will continue to do.

Maybe I should add that there are certain helpful programs. You have the Super Flow-Through Program. You have tax credit reimbursement. As an example, for each dollar we spent in James Bay, the Quebec government reimbursed 36.5 cents.

So you’re in the best mining jurisdiction in the world, with very high potential, in virgin territory that has never been explored. So it means that you can acquire a huge land possession and you have all the expertise you can ask for. You have First Nations agreements, cheap electricity, and cheap energy — all in the same area.

So that’s where I started and that’s where I would start if I were launching a business.

Henry: At what point did you choose Northern Quebec? When did you start realizing the potential of the area?

André: When I was on my first year creating Virginia, I traveled around Africa, South America and the US. At the same time, I had sent a small team of geologists around the roads of James Bay. I asked them to collect what we call “till samples”. Till is just soil that has been ground down and then spread out by glaciers. These soils incorporate a lot of rock from the mineralized zone that glaciers have scratched.

A glacier is like a bulldozer. It grinds the rock and incorporates the rock into the ice. When the ice melts, it spreads it like pepper over a large area, and the soil contains whatever the glacier picked up along its journey.

We rapidly realized that this soil contained numerous gold grains. I remember the first highlights we had – we had found 70 gold grains in a till sample. So you take three shovels of soil and you count 70 gold grains. This is spectacular and it led us to our first discovery, called The Grand South (“La Grande Sud”): 350,000 ounces in a small gold deposit right at surface, half a kilometer from the road.

Of course, I had decided to go into James Bay before I discovered the deposit. I was going because of very preliminary exploration signals, sent from Mother Nature herself, that these volcanic belts were pregnant with gold mineralization.

So I forgot the traveling to other places in the world. Quebec was my hometown, and my home province. There was a road there. There was electricity. And now I was proving that there was potential to find mineralization right in my backyard. That made the decision quite easy at the time.

Henry: Why do you think that the area had remained underexplored when it was so attractive?

André: Before 1975, there were no roads, no power lines — nothing. It was completely remote.

The mines in Quebec were mainly controlled by the major mining companies. There was Barrick, Placer Dome, Noranda, and Falconbridge. They controlled the main mining camps through the South Abitibi belts.

These major mining companies had mills and mining infrastructure. They needed to feed their mills and they didn’t want to go too far away from their infrastructure.

It didn’t make sense for them to go 1000 kilometers north. They could not really transport ore that far to feed their mills. So they were concentrating most of the exploration to the south.

When the Quebec government decided to build these hydroelectric dams, some of the areas along the rivers were banned for exploration because they didn’t want to have mining companies blasting or drilling at the same time that they were building these huge dams.

It happens that these big rivers tend to follow the main volcanic belts, probably because there were faults (cracks in the surface of the Earth which can lead to mineralization, such as gold).

So a lot of the areas were banned for exploration for numerous years. Eventually the area re-opened but still didn’t receive a lot of exploration.

So there were probably several reasons why nobody went there. It happens that we were the first ones who decided to explore the area seriously year after year, and to put money there. We developed the best geological database in the world for James Bay, had a long-term perspective, and a long-term commitment there. We were the first ones to do this.

Now, are there other places on Earth worth exploring? Probably, but I haven’t made that exercise. I’ve decided to concentrate my expertise in Northern Quebec for 22 years. Quebec is 3 times the size of France3 and almost 4 times California4.

It’s huge. So my grandson will still discover deposits there. It’s just the beginning. This is the future of the mining industry in Quebec and in Canada.

I think that there’s a huge potential and I’m not interested in going elsewhere.

For a young geologist, I would probably try to do the same type of thing again. But there’s not that many of these remote areas. There’s maybe Russia, but I have no interest in going there.

Henry: How do you go about finding the next prospective piece of land where you will conduct exploration?

André: The type of exploration work we do in James Bay is very professional. There is lots of thinking behind our research and exploration activities. We have two full-time research geologists.

These research geologists are doing compilations and comparing the geology in Quebec to similar parts of the world where world-class deposits have been found. For instance, we look at the geology of South Africa, Australia, Russia, and China, and we apply the same geological models that we have in Quebec to those areas.

Deposits are like dogs. There are many kinds. But they are very similar within the same race. One Labrador is very similar to another Labrador. It is the same for deposits. The deposits we look for are part of a species formed around 2.7 billion years ago. Even if they are now in Africa or in South America, they may have been very close to each other at the time they were created, because the continents were still all together.

We apply the same model for the geology in Quebec as has been applied with a lot of success in different areas in the world. We apply the same ‘recipe’ that has worked elsewhere.

We see ourselves like the ‘Indiana Jones’ of the modern era, looking for treasures hidden for billions of years. Mother Nature gives you tips and you need to solve the puzzle, using geochemistry, geology, geophysics, glacial displacement — all these specialties in geology.

You take one tip, and then another, and another. Then you try to understand what happened 2.7 billion years ago. It’s extremely motivating. To me it’s the best and most exciting job in the world — because you’re looking for treasures. We’ve made six discoveries in the past 15 years.

Of course Eléonore is our world-class discovery, the dream of every geologist, and we worked quite hard to find it. It took us 13 years to find that one.

I always say we deserve every discovery we made. When it’s minus 40 Celsius in the winter, we are there. When it’s plus 30 Celsius in the summer with billions of mosquitoes, we are there. But chance also plays a role because you don’t know if the discovery is going to be rich, poor, small, or big — and that’s why chance plays a role.

There’s always a probability game. If you find numerous showings, you increase your chance to find a big one. If you find many deposits, you increase your chance to find a big one. At Eléonore, we spent a total of C$18 million. We then sold the deposit for half a billion dollars and later we sold the royalty on the deposit for another half a billion. So we turned C$18 million into C$1 billion for the shareholders. There’s nothing like creating that kind of value.

Again, we’re very, very systematic. We know our geology. We know the geological model. We know the glaciations. We know the best geological, geochemical and geophysical tools that we can use.

For James Bay, we have the best geological database in the world. If you were to look at the map in our office and you compared it to the geological map of the Quebec government or any other mining company, you would understand what we do. The geological mapping that we have and database that we have here is unique. It’s completely different from what is in others’ files.

Why? Because we’ve been doing this for 20 years, and spent millions of dollars every year to get data to compare and tweak our model. After a certain number of years, you finally start to pinpoint the hottest spots on the territory and you find deposits. That’s how it works.

Henry: In trying to find these deposits, you mentioned that you have a team working for you. What are some of the challenges that you’ve run into managing a team of exploration geologists? Is it hard focus on delivering value for shareholders versus chasing an idea or project – one that might not generate a substantial return?

André: Here, we do brainstorming sessions. We do that three times per year and it lasts two to three days at a time. Every geologist brings his or her ideas to the group and together, we choose priorities. So it’s a debate within the group of geologists and that’s how we vote the budgets. That’s how we prioritize.

The decisions are taken together as a team. It’s not like one geologist is running after his own thing alone – no, no, no. It doesn’t work like that. It’s a team analysis, a team decision, and a team effort. Of course we have two research geologists that are very much involved in this brainstorming.

So – voilà! It’s simple, but it’s extremely well-run.

Every dollar is extremely well-spent. I say every time we meet together, “You should spend each dollar — every dollar — like it will be your last one.” It needs to be optimized. These are the dollars of the shareholders. They are not yours. Make sure that they are well spent and that you’ve done the right program. You’ve mobilized the right camp, used the right driller, and so on in order to make sure that it’s well-optimized.

That’s the reputation we’ve developed over the years — that we spend every dollar wisely on the ground.

Now, you cannot make any guarantees. It’s a risky business.

But we share risk with partners (for instance Virginia Mines partnered with MacDonald Mines Exploration Ltd. on certain projects5) and we have the tax credit from the Quebec government, which helps us reduce the risk of exploration. Again, that is something that has been part of our game plan — our strategy. We have a very precise exploration strategy, and a very precise corporate strategy. It has been defined extremely well and we have given it a lot of time. I could explain that if you want. But these are the mantras behind the company. That’s how we operate.

Henry: We’ve already given our readers a lot to think about. Let’s come back to your exploration and corporate strategy another time (look for a follow-up interview with André in the coming weeks).

A last question before we wrap up: I read that you initially came from a small town in Quebec. I was wondering if there was anything about the culture or the environment that affected your vision of being an exploration geologist and mining in general.

André: Yes and no. Yes, I was born in a very small town. You’re right. I had a very happy childhood and I spent a lot of my time when I was young with Mother Nature.

I spent a lot of my time in the forest along the Saint Lawrence River. All my summertime, I slept not in a house but in a tent outside — for years and years and years. I’m a nature lover. I want to be outside. Very young, I was passionate about rocks, volcanoes, dinosaurs, archaeology and paleontology — all these things.

I love the history of the power of Mother Earth: continents deriving, volcanoes and the forces behind all that.

I remember this story from when I was young — 10 years old maybe. I heard that there was a cow buried in a field, perhaps a couple of kilometers from my home. So I knocked at the doors of every house and I asked people there if they remembered where the cow could have been buried.

One lady said, “Oh, yeah, I remember. You should look in that part. I think that’s where the cow was buried.” So I went there with a shovel and one of my friends and we started to dig. We dug for days and days and days.

Eventually, we found the cow and I collected one bone after the other. I went to a butcher and I asked him: “Could you show me a skeleton of a butchered cow?” So he showed me a skeleton of a cow. He even gave me one. I completely rebuilt the cow and kept it besides my bed in my room. Eventually a biology department of a university called and asked if they could have the cow skeleton. I said yes.

This experience showed me that I was able to find treasures. It was an interesting experience for me.

But there were no jobs for archaeologists or paleontologists. There were no dinosaurs in Quebec. But there were geologists — Quebec is renowned as a very rich mineral province. That was an area to go into. So very young I started to focus on geology and collecting rocks. My passion developed from there. When I went to university, I applied for either geology or geological engineering.

Finally, I became a geological engineer. I was passionate about exploring virgin territory.

It’s adventure. It’s looking for treasures that have been hidden for billions of years and where you have to solve a puzzle. Mother Nature gives you some tips, but you have to solve it. It’s like being a detective. It’s extremely challenging. But it’s fun. You can create something from nothing.

We found Eléonore in a kind of swampy area beside a lake. There was nothing there and yet – within less than two years — we discovered C$13 billion worth of gold (7.7 million ounces6) in the ground. Isn’t that nice? Nothing beats that.

Henry: Monsieur Gaumond, thank you very much for sharing your comments with me. It’s a pleasure speaking with you and I look forward to our next discussion. Merci.

André: Merci!

P.S.: As noted, look for a follow-up discussion with André Gaumond in the coming weeks. If you’re not a subscriber, click here to receive regular insights from Sprott, free.

P.P.S: You can take a look at other interviews we’ve conducted with well-known figures in mining in exploration today, including Pierre Lassonde, Eric Sprott, and Rick Rule.



3 http://www.bonjourquebec.com/qc-en/portraitquebec0.html

4 http://www.worldatlas.com/aatlas/infopage/usabysiz.htm

5 http://www.macdonaldmines.com/index.php?option=com_content&view=article&id=53:macdonald-mines-enters-optionjoint-venture-agreement-with-virginia-mines-on-gold-property-in-northern-quebec&catid=14&Itemid=149

6 http://www.globalminingobserver.com/goldcorp-eleonore-72/


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