Mining: Why the Abitibi Gold Belt is Highly Prospective for Gold Production

The demand for gold comes from diverse sources. Gold has experienced the best year-over-year growth since 2010. Despite the pandemic, annual gold prices increased 24 percent in 2020. As a result, experts at Citigroup believe prices could reach as high as US$2500 in 2021, which is notably higher than the 2020 year-end close of US$1,895.

As the demand for gold is expected to outpace supply, investors and mining companies are seeking exploration projects in politically stable jurisdictions with access to infrastructure, including water and power. A region which is projected to meet these criteria is the Abitibi gold belt. The region spans northern Ontario and southern Quebec and represents the world’s largest mineral-rich greenstone geological belt. In 2019, both Ontario and Quebec were responsible for over 75 percent of the gold production in Canada.

The Abitibi gold belt is one of the most prospective gold regions in the world with estimated gold resources of 300 million ounces, including production, reserves and measured and indicated resources. The area is also highly regarded due to its mining-friendly policies.

Mining history of the Abitibi gold belt

Since 1901, the Abitibi gold belt has inspired the creation of over 100 mines and the production of over 200 million ounces of gold. Since the 1920s, the belt has been continuously mined and remains one of the largest and best-preserved Neoarchean greenstone belts in the world, making it one of the most economically important metamorphic terranes in the entire world for investors and mining companies.

At least 15 of the 124 mines in the Abitibi gold belt have produced more than 3.5 million ounces of gold. Gold deposits found in the area have been considered “world class,” as the average gold deposit grade is higher than the global average. Historical drilling results and sample assays also show lower-grade, open-pittable deposits at shallow depths in addition to higher-grade gold at depth.

Key players in the Abitibi gold belt

The Abitibi region hosts several key players in the gold mining and exploration category including Kirkland Lake Gold (TSX:KL,NYSE:KL,ASX:KLA), Agnico Eagle (NYSE:AEM,TSX:AEM), and Vanstar Mining Resources (TSXV:VSR).

In 2014, Agnico Eagle and Yamana spent C$3.6 billion to each acquire a 50 percent stake in Osisko’s flagship Canadian Malartic gold mine located in the Abitibi gold belt. The mine is not only one of the largest in Canada but ranked first in gold production in the country in 2019 with 662,918 ounces of gold produced. Agnico Eagle’s fully owned LaRonde mine in the Abitibi gold belt was ranked third in gold production in 2019 with 343,254 ounces of gold produced. In 2020, the LaRonde mine increased gold production to 349,913 ounces of gold whereas production at the Malartic mine dropped to 568,634 ounces of gold.

In 2019, Kirkland Lake’s Detour Gold mine ranked as the second largest gold mine in Canada and was second in gold production in Canada with 601,566 ounces of gold produced. The Detour Lake mine, located in the Abitibi gold belt, was acquired by Kirkland Lake Gold in 2019 for C$3.7 billion; at that time it had produced five million ounces of gold to date.

IAMGOLD operates the Westwood mine in the Abitbi gold belt. In 2020 it produced 79,000 ounces of gold and is expected to produce 45,000 to 65,000 ounces of gold in 2021.

Amex Exploration has made a high-grade gold discovery on their Perron project in the prolific Abitibi gold belt. Recent assay results include 79.22 g/t Au over 6.15m including 929.24 g/t Au over 0.50m.

As mining and exploration companies seek more gold, one project is on track to become a world class deposit in the Abitibi gold belt. The Nelligan project, a joint venture with IAMGOLD Corporation and Vanstar Mining Resources, contains approximately 3.2 million ounces of gold and is expected to grow following drill programs in 2020 and 2021. The 5,806 hectare project won the “Discovery of the Year” award at the 2019 Quebec Mineral Exploration Association XPLOR Gala and features four major gold zones.

Vanstar Mining Resources is a junior mineral exploration company led by a highly experienced management team. In addition to its flagship Nelligan project, the company has exploration projects located in Northern Quebec at different stages of development, including the wholly owned Felix project scheduled to be drilled in the fall of 2021 to test geophysical targets that coincide with a fold in an iron formation.

Vanstar’s gold exploration efforts also extend beyond the Abitibi greenstone belt to other gold-producing regions in Quebec, including the James Bay area, where other gold deposits were recently discovered. The Nelligan flagship asset and its exploration portfolio in prolific gold regions, provides Vanstar with diverse gold exploration projects which are relatively low risk and uniquely positioned for growth.

Takeaway

With gold being the most valuable mined mineral in Canada in terms of production value, production has trended upwards from 2010 to 2019 and can be expected to continue trending up in the long run. As the hunt for gold continues, investors who are seeking to take advantage of the rich and growing gold opportunity should consider mining and exploration companies in the Abitibi gold belt.

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