Virginia Mines: a ‘Perfect Portrait’ of a Company

 

Virginia Mines is approaching a cash flow bonanza, as Goldcorp moves towards production at its 7.7m ounce Eleonore gold mine in James Bay, Quebec. Goldcorp estimates a resource in excess of 9m ounces and Virginia holds a 2.2 to 3.5 per cent royalty on the deposit, which compares to its market cap. of C$328m ($330m).

 

“We are totally convinced that this is the birth of a new mining camp,” the company’s founder and chief executive Andre Gaumond tells Global Mining Observer. Gaumond is considered something of a genius by his admirers, having discovered Eleonore by retracing the path of a gold-rich boulder 6km to its original outcrop, no larger than a wastepaper basket.

 

“It’s Mother Nature that decides,” he says, “but if you are on the territory for a long period of time you open the door to chance. You are increasing your expertise, eliminating territories, but pinpointing the hottest spot, so eventually you really increase your chances of high quality discoveries.”

 

Franco-Nevada’s founder Pierre Lassonde has described Virginia Mines as the “perfect portrait” of a company: it has twelve other royalties and twenty active exploration projects, largely drilled in partnership with mining majors including Anglo American. More than half the company’s budget this year will be funded by its partners.

 

Before founding Virginia, Gaumond worked as a mining analyst. “It taught me what criteria investors are looking for: not too much dilution, cash, non-risky countries.” Virginia has C$42m in cash and is tightly focused on Quebec’s James Bay. Tax incentives allow the company to issue equity at a premium to its share price.

 

Eleonore is due to enter production in 2014, with an initial mine life of 15 years, pouring cash into Virginia’s exploration portfolio. Expenditure will not rise automatically however: “I always say to my geologists, ‘You have to spend every dollar like it will be your last.’ We will spend more if the projects deserve more, but we will not spend more because we have more.”

 

The royalty does however assure Virginia’s dominance on the James Bay frontier, allowing Gaumond’s team of geologists the prospect of further Eleonore-scale discoveries: “I wake up every morning to live again that type of success.” 

 

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