Snow Lake Mine closer to opening Firm to borrow $45M toward project
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Alexis Minerals' Snow Lake Mine has yet to begin extracting gold. The firm plans to change its name to QMX Gold Corp.
ALEXIS Minerals has got much closer to its oft-delayed goal of extracting gold out of the Snow Lake Mine, but it's not there yet.
The Toronto-based company announced Tuesday it has an agreement to borrow $45 million toward the Snow Lake project, but it is contingent on the company raising more equity.
"This is a significant achievement," said Franßois Perron, Alexis's president and CEO. "We are very pleased that the team in Snow Lake has been able to demonstrate this is a bankable project. With this in hand, the company today is very different than it was a week ago."
So different, in fact, the company is going to change its name.
Shareholders will vote next month on a 20-to-one stock consolidation and the company is changing its name to QMX Gold Corp.
The Q stands for Quebec where the company operates a mine in Val d'Or, the M is for Manitoba and the X is for exploration, which the company intends to keep doing.
Industry officials say the debt-financing announcement is good news for the company, but it does not yet mean the Snow Lake Mine is a go.
"Whilst it is a good announcement, they still have some challenges ahead to get to Snow Lake," said Michael Fowler, an analyst with Loewen Ondaatje McCutcheon Ltd.
When the company's feasibility study on the mine came out in November 2010, the confirmed reserves only gave the mine a five-year lifespan with about 80,000 ounces of production a year.
Officials say that short lifespan likely scared off potential investors.
Perron said much work has been done to expand the declared reserves of 450,000 ounces of gold.
"I would say it is in its infancy," Perron said. "People have to understand the nature of underground mines. You can't drill them efficiently from surface, necessarily. We'll have detailed work going on to improve the plan once we get underground."
Chris Beaumont-Smith, a senior official in the province's mineral resources division, said Alexis's success at Snow Lake is critical for the company.
"These are low-cost ounces," Beaumont-Smith said, referring to the cost of production at Snow Lake compared to other gold mines. "That property has so much potential."
The Snow Lake Mine was supposed to be much further advanced by now.
Alexis's problems have had much more to do with its experience in Quebec. Many in the industry say they believe it pulled the trigger on its Lac Herbin mine in Val d'Or too early and it is paying the price for that.
Perron said the company has finally got production costs at its Quebec mine under control, but it still posted a net loss of $11.6 million in the first quarter.
Earlier this month, it sold another of its Quebec properties for $5 million to further bolster its capital position to be able to get Snow Lake up and running.
As if to answer the industry skepticism, Perron said, "We want to make sure when we start (Snow Lake) we can reach the finish line properly. When you hit the go button, everything has to be lined up and planned."
Fowler, for one, is taking a wait-and-see position.
"This company has had a troubled existence," he said. "They put a mine into production (in Quebec) and that did not go so well. The property in Snow Lake is good. It is just that it is in a weak company at the moment."
Perron is determined to show the company is up to the challenge.
Now that it has an agreement from Credit Suisse for a $45-million, 4 1/2-year term loan, it has to go to the equity markets to raise additional funds.
"If you can show you have a bankable project, it dismisses a lot of questions," Perron said.
He would not say how much he needs to raise. Fowler said he believes it is likely between $10 million and $30 million.
martin.cash@freepress.mb.ca
Republished from the Winnipeg Free Press print edition May 30, 2012 B4
Alexis Minerals of Toronto has received formal credit approval from Credit Suisse for a US$45-million, 4.5-year term loan to hasten development of the Snow Lake (formerly New Britannia) gold mine 80 km east of Flin Flon.
Since Alexis became owner of the Snow Lake project in 2009 with its acquisition of Garson Gold, Alexis has increased the mineral resources and completed a feasibility study (November 2010). The measured and indicated resource now stands at 728,000 tonnes and the inferred resource at 336,700 tonnes. There are an estimated 1.1 million oz of contained gold in the resources.
Alexis has called a special meeting of shareholders for June 13 to approve a proposed 20:1 share consolidation and to approve a name change to QNX Gold Corporation.
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