Osisko Takeover Attempt Highlights Quality Of Quebec Mining Projects

While investor interest in gold stocks has waned for some time now, there has been recent signs of life in this sector. Even at the current gold price of US$1250 an ounce, some of the bigger gold producers have been looking to acquire the more promising smaller miners and juniors, which have seen their share prices beaten down by even larger percentages.

On January 13, 2014, for example, Goldcorp (TSX: G) announced a $2.6-billion, or $5.95 per share,unsolicited takeover bid for Osisko Mining OSK, a substantial discount to the more than $15 per share stock market valuation it was commanding a couple of years earlier.

Osisko is an attractive target for Goldcorp seeing that the company’s Canadian Malartic mine (10 million plus ounces of Proven and Probable reserves) is already producing at a cash cost of C$760 per ounce and, arguably more important, is located in Quebec, one of the most mining-friendly jurisdictions in the world.

All of this bodes well for some of Quebec’s othergold juniors, especially Eagle Hill Exploration EAG. Eagle Hill is developing its Windfall Lake gold deposit in that province and a July 2012, resource estimate outlined an Indicated mineral resource of 538,000 ounces of gold at 10.1 grams per tonne(g/t) as well as an Inferred resource of 822,000 gold ounces of gold at 8.8 g/t.

This places the depositin the top 7% (in terms of grade) of resource-stage gold projects worldwide, according to the company, which describes it as well-defined from surface to 500metres depth, and open laterally and at depth.

“In a depressed market where most gold projects are trading at a significant discount, Goldcorp chose to pursue a Quebec project, highlighting that Quebec has high-quality projects and is one of the best mining jurisdictions in the world. This potential takeover has also breathed a spark of life into the market, implying that perhaps we’ve hit the bottom and things are starting to turn around,” said Eagle Hill’s Vice President of Communications Rhylin Bailie in an interview with SmallCapPower.com.

A recent Reuters article argued that reserve cuts and associated write downs by the large gold miners are “seen helping nurse the sector back to longer-term health by discouraging miners from seeking low-margin growth at the expense of profits.” This could shift investor interest to higher-grade projects, such as the one being developed by Eagle Hill Exploration.

Guiding Eagle Hill in its exploration and development is Southern Arc Minerals, which owns a 26% stake in the company, along with Dundee Corporation, which has a 30% interest.

Ms. Bailie added that Eagle Hill drilled 28,000 metres between September and December 2013, and plans to release the remainder of those drill results by the end of January, and will then proceed to update the resource estimate before the end of the first quarter of 2014. The company has more than 57,000 metres of new drilling to incorporate into the updated resource estimate, with 28,000 metres from the recently completed drill program, and 106 holes totalling 29,208 metres that were drilled after the 2012 resource estimate and before the Fall 2013 program.

“Once we’ve seen the results of the updated resource, we’ll plan the next steps for the project. We completed a flow-through financing for $2 million in December 2013, which will of course be used for additional exploration in 2014. The question is whether we focus on expansion drilling to test prospective areas that could expand the resource, or focus on infill drilling to upgrade the existing resource to a higher category,” she said.

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To learn more about Eagle Hill Exploration Corporation, you can view their initiation research report, research bulletins, analyst commentaries and CEO video interview on their SmallCapPower.com Investor Hub: HERE.

About Eagle Hill Exploration

Eagle Hill Exploration Corporation EAG is a Canadian mineral exploration company focused on the exploration and development of the high-grade Windfall Lake Gold Deposit, located between Val-d'Or and Chibougamau in Quebec. In August 2013, Southern Arc Minerals and Dundee Corporation invested an aggregate of $12 million to purchase a controlling interest in Eagle Hill, consolidate ownership of the Windfall Lake property and fund an aggressive exploration program.

Disclosure

Ubika Research has received compensation from Eagle Hill Exploration to provide analyst research coverage.

About Ubika Research

Ubika is an investment research and capital market services firm based in Toronto and Vancouver with a proven track record of identifying and launching coverage of high potential small cap stocks at an early stage, thus offering timely market insights. Its specialty is small-cap companies with a market capitalization of <$5 billion.