Right place, right time for this gold play

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Right Place, Right Time

With gold breaking through $2,600 and aiming for $2,700, generalist investors are beginning to scour the sector for undervalued assets.
 

And, sooner or later, they are likely to find their way to Bonterra Resources (BTR.V; BONXF.OTC), an under-the-radar gold explorer that has access to 3 million ounces of gold resources and a prime location in the Abitibi Greenstone Belt’s newest gold camp.

For proof of the adage that the best place to find gold is near where it has already been found, look no further that the Abitibi Greenstone Belt.

This macro geological structure transects the border between Quebec and Ontario and has been responsible for fully 200 million ounces of gold production, with yet another 100 million left in reserves and resources.
 

And since the early 2000s, the Urban-Barry gold camp in Quebec has stood out as a place of new gold discovery, with 10 million ounces unearthed over that short time frame.

As it happens, Bonterra Resources (BTR.V; BONXF.OTC) has secured a key position in the camp, with two gold deposits located near the multi-million-ounce Windfall deposit.

In late 2023, Bonterra entered into a joint venture with Osisko Mining, dubbed the Phoenix JV, that encompassed Gladiator and Barry, the junior company’s two deposits in the area.
 

Then, just this past August, gold mining major Gold Fields turned its own JV with Osisko on the Windfall deposit into a C$2.16 billion, all-cash acquisition of Osisko.
 

The deal will make Gold Fields Bonterra’s new JV partner, with an opportunity to continue with the C$30 million Osisko had committed to exploring the Phoenix JV over the three years from 2024 to 2026.
 

As you’re about to see, that JV is already producing results, with more than C$10 million in exploration already spent by Osisko on Phoenix and work ongoing on Bonterra’s 100%-owned Demaraisville project to the north.
 

The Gold Fields acquisition of Osisko puts Bonterra in the right place at the right time. In short, the company’s Phoenix JV looks ripe for a takeover of its own — and one that would likely be done at a high premium to Bonterra’s current share price.

Three Million Ounces Of Gold

A key to the potential leverage Bonterra Resources could provide investors is the access it has to over three million ounces of gold, spread over four deposits.
 

Those deposits include Gladiator and Barry at the Phoenix JV and the Moroy and Bachelor gold deposits at Demaraisville.

They collectively host 1.24 million ounces of measured and indicated gold and 1.78 million ounces of inferred gold.

Moreover, ongoing drilling at both the Phoenix JV and Demaraisville could soon add to those totals.

60,000 Meters Already Drilled
This Year At Phoenix

Over 500,000 meters of drilling has been historically drilled on the Barry and Gladiator deposits to date.

That does not include the 60,000 meters that Osisko has drilled on the Phoenix JV this year alone.

The majority of that drilling has focused on outlining a target called Moss, which has similarities to the nearby Windfall deposit’s high-grade Lynx zone.
 

Lynx has produced two high-grade bulk samples, one from Q4 2019 of 5,716 tonnes grading 17.8 g/t gold and another from Q4 2022 of 4,809 tonnes grading 65.6 g/t gold.
 

As you can see from the comparison slide below, Moss has produced its own high-grade results (i.e., 38.3 g/t gold over 1.1 meters, including 69.6 g/t gold over 0.6 meter in Hole 78 and 7.37 g/t gold over 4.2 meters, including 28.6 g/t gold over 0.4 meter in Hole 96).

Click image to enlarge
Bonterra’s Moss discovery at Phoenix compares well with the ultra-high-grade Lynx zone at the nearby Windfall deposit

More work on Moss is expected as Gold Fields takes over the JV. Needless to say, further high-grade results from Moss in the current gold environment could have a big impact on Bonterra’s valuation.

Existing Gold Deposits
Plus An In-Place Mill

At Demaraisville, the drills are turning on a 4,000-6,000-meter program that will test areas outside of the deposits at Bachelor and Moroy.
 

To date, 90% of the historical diamond drilling has taken place on those two deposits with only 10% dedicated to regional exploration.
 

The project is the site of two major regional deformation corridors, so the chances for new discoveries here are high.

And the hurdle is low for any new discovery: The area is surrounded by quality infrastructure and the project itself boasts the Bachelor Mill Complex, which includes a tailings facility and has processed more than 350,000 ounces of gold.

Bonterra estimates that over C$100 million has been spent on the mill and related infrastructure, providing the company with a great head start on the capex of any future mine at Demaraisville.

Trading At A Discount To Recent
Canada Gold Exploration Deals

To give you a sense of the exciting upside for Bonterra Resources, take a look at its enterprise value in U.S, dollars per gold-equivalent ounces in the ground.
 

At $10 ($30 post earn-in on the Phoenix JV), it’s woefully undervalued relative to recent M&A activity in Canada. Consider that the recent Gold Fields-Osisko transaction alone rated Osisko at over $300 EV/oz. gold-equivalent.

Click image to enlarge
Considering other recent M&A transactions, Bonterra’s current valuation shows the potential for a very significant, and profitable, rerating.

Other recent transactions follow a similar pattern, with most projects selling at an EV/oz. in the triple-digits.
 

With Gold Fields showing a clear interest in the Urban-Barry Camp, it wouldn’t be a shock to see the company acquire the Phoenix JV outright at a price that would bring Bonterra more in line with the valuations of these other recent deals.

And as the simple math shows, that would translate to a considerable multiple of Bonterra’s current share price.

Bottom line: Bonterra Resources’ Abitibi address and its access to millions of gold ounces makes it a premier way to leverage today’s sky-high gold prices.
 

And with Gold Fields already in acquisition and consolidation mode, any due diligence on Bonterra should begin ASAP.

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