NQ Exploration
(TSX.V: NQE)
David Grondin, CEO
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Corporate Profile:
NQ Exploration Inc. is a new mining exploration company with a solid portfolio of 15 mining properties in the James Bay and Abitibi regions of Quebec. NQ Exploration Inc. is betting on Quebec’s excellent mineral potential and favourable investment climate to produce new world-class gold, base metal and uranium deposits.
TRANSCRIPT
WSR: Good day from Wall Street. This is Juan Costello, Senior Analyst with the Wall Street Reporter. Joining us today is David Grondin, CEO of NQ Exploration. The company trades on the TSX Venture, and the ticker symbol is NQE. Thanks for joining us today, David.
David Grondin: Thank you, Juan.
WSR: Talk to us about the company, and you are going to commence your drilling program on the Carheil property?
David Grondin: NQE is an exploration company that has most of its property in James Bay area and Abitibi region of Quebec. We have 15 mining properties in total that goes from gold, base metal and uranium. One week ago, we really put out this Press Release about the drilling campaign we will start very soon. It’s a 3,000-meter drilling program; we will do under one of our main properties called Carheil. And is basically — right now, we are looking for base metal. Basically, it’s a 12-claim property. It was owned before us by BHP Billiton, and we bought it back one year ago last summer — not this summer, one summer ago. So, we are starting this drilling program, which — we did the drilling program last winter and we had some really good promising results, and that’s why we are following truly with this drilling campaign.
WSR: Perhaps you can bring us up to speed on the company’s other main projects.
David Grondin: The drilling program is really important for us at this space because it’s one of the most advanced projects that we have right now. This is the only project we have a drilling campaign as we speak. We have other properties where we can drill, I will talk about it later, but as for this one basically the results of last winter showed that there was really good development at depth in the past in the ‘70s, ‘80s and the ‘90s. Other companies have worked on that property, but mostly did some drilling and they only went at 100, 150 meter of depth. So, last winter what we did is we drilled down to 350, 450 meters of depth, and that’s where we discovered like massive sulphide, we discovered mineralized zone of copper, zinc; stringers that showed. It’s the same geological environment as the Selbaie mine. I don’t know if you know that, but Selbaie mine was one of the biggest mines in Quebec back in the time. Basically, we are at the same level of 5 kilometers from there. So basically, that’s the main property. The other property that we have got, it’s a gold property, it’s called Opawica — if you go on the website you can see that – it’s a gold property for exploration, we have bought it back.
WSR: With Kinross?
David Grondin: Yes, we bought it back from Kinross in mid-last summer, and it’s mostly for gold. We had some really good results in the past, but some drilling showed some result of 87 gram per ton over only a couple of meters, but it’s mostly — it’s well disseminate all over the property. We have got 87.5 gram per meter, 5 gram per meter, 4.7. And basically, it’s located three kilometers from the former Lake Shore mine and Batchelor mine. So, there were these two mines used to have produced couple of millions ounce each, so we are right in the middle and it’s a new corridor that people are now looking into it. So, basically we decided that we will position ourselves in that area. We were already there in a partnership with this big player, but we bought back the property from them this last summer.
In total, we have 15 properties. Other than that, we have another gold property just a little bit north, it’s called GAND. In that property — it’s been worked on a lot over the years in ‘70s, ‘80s and ‘90s again. Again, it’s really well developed that property and we would like eventually to do another drilling campaign on that one to confront some results that have been done in the past. There is potential maybe for kimberlite, which is the rock that holds up the diamond. In the time, they were identifying the kimberlite is sometime mistaken for kimberlite. We will work on that in the near future probably in the next campaign we will do in that area. Other than that, we have three uranium plays that we are not working on. We’ve worked a lot on the last summer, in 2008. We did airborne geyser, we did everything. Basically, we have ten drilling targets we can go on. We need a little bit to do some more work on this property, but we have three uranium properties and we have also eight base metal properties that we can work on. So, we are a small exploration company, but with strong portfolio. So, that’s what we have right now.
WSR: How well positioned is the company to take advantage of some of these trends in the uranium and gold right now in market?
David Grondin: Actually, we are very, very well positioned because like I told you with the portfolio we own has right now it’s four gold properties, eight gold and base and three uranium, that represents 559 square kilometers of land. If I go and breakdown these properties, I can fairly say that Carheil is a drill-ready because we are really drilling this property that will bring back some results for base metal. So basically, we are taking advantage of the market strengthening of the price in the base metal. For that, I can go into gold also, I am really well positioned in gold, so basically everything that’s related to gold. Opawica property, Gand, which are kind of historical result of drilling, there is a lot of — because in Quebec we have a strong public database for all these pass work, so basically I have a lot of historical work that has be done. Resource calculation has been done already on Gand, but just on neighbor, not on Gand directly but on a neighbor. So, basically NQE is really well positioned to take advantage of these new market trends because –. Uranium is different. Uranium, the price now it’s a little bit better, but there is a lot of concern about environmental, green group. But right now, I think the mining industry in Quebec has shown that most of companies are really responsible when they are doing exploration. A lot of companies are also really responsible when they are putting mine into production. So, uranium will be in the second phase for us. Right now, we would like to take advantage mostly of the gold and the base metal because they are in a really advanced stage right now, we can drill in, it’s really accessible. Uranium properties are up north, so it’s a little bit farther, more difficult to access. But all the other properties we have got for gold and base that I told to you about earlier are accessible by road, train or whatever.
WSR: What makes NQ Exploration unique from some of the other players in the sector?
David Grondin: Unique in a way that — like I told you, I am very well diversified, we are not lithium or rare earths right now. We have considered looking into it, but right now we are really considering gold as the place to be. Base metal, even in this recession, India and China and most of the developing countries need base metal. So why we are so unique is, right now what we have got is, we have one property in drilling phase, if it comes into position or start off in a better way I can have three or four properties drilling within six to 12-month period. If you consider a junior company that might have three to four properties in a drilling phase, it’s kind of huge, usually it’s mostly major that can have three or four different properties. Having three drills on one property is one thing, but having three different properties or different resources because now I am drilling for base, but I can also drill for gold and we can go also drill for uranium. So basically, I can take advantage of this market, strengthening the price on every commodity. Whatever it is, I can be on these properties and generate results, generate eventually resource calculation and if we make a discovery have a mine in whatever the commodity we are exploring right now. So, that’s what makes us unique.
We are kind of a small player, we are very well positioned and diversified. I am not only focused on gold. Some people might say it’s a disadvantage, I will take it as an advantage because if you consider that it’s not always the commodity that moves along, sometime — like we saw couple of years ago, uranium was really high then it crashed, but at the same time gold was going up right. So, we are right now — because of this diversification I can really take advantage of any price improvement on the pricing and give a better return eventually to the shareholder, when we will have a mine. But right now, we are in the drilling phase that looks very promising, so that’s good for us.
WSR: Perhaps you can walk us through your background and experience, as well as that of the key management team over at NQ Exploration?
David Grondin: If I start for just for — beginning with my VP, Exploration, his name is Jack Gauthier. Jack used to be the Chief Exploration for Kinross in Russia for gold, so basically was really in charge of developing the gold field for Kinross in part of Russia near Magadan. So, he was in charge of doing the exploration. So, he is 20 something years and more experienced. He was also — at the beginning of his career also President of Azimuth. He has been VP, Exploration of many, many companies. He has also worked, in his early years, at BRGM. I don’t know if you know that, it’s a French company; basically, the French company for the French government to do mining first in all around the world. So, he has acquired a strong experience for many environments for gold and base metal. Basically, he is really a key for us.
After that, my CFO, his name is Jean Rainville, 35 years experience in mining, investment banking. He used to be lead in investment banking in many national banks in Montreal and Quebec.
And as for me, I have been now doing financing and investment banking for 13 years. I have started my career as a Financial Analyst and then I moved up to the investment banking, and after that I was independent doing consultation and structured financing for mining, industrial, tech and biotech. But in the last five years, I concentrate mainly on doing on mining financing. So, when I decided I would take that job, it was very clearly to make a discovery.
WSR: What are some of the goals and milestones that the management team hopes to accomplish over the course of the next 12 months?
David Grondin: The main goal is to really strengthen the position of the company in the lower base where we are working right now on Carheil in these three or four properties that we have got in that area. So, the main goal is obviously continue to develop that current property, which we think is under-evaluated right now by many people. It had been working in the ‘80s, but it’s been abandoned for many, many years, nobody has worked on that property for a while. So, when we went back last summer based on new assumption, new hypothesis of work and geological interpretation, we’ve not hit big, but we hit some sweet spot, basically the discovery we made. The hypothesis of where we went drilling on that property was — our hypothesis was it will be better at depth. Basically, we start hitting good results after 150 meters down to 350 and it’s not finished. The only reason we stopped drilling last winter is because we were off our budget and because of the recession was really — the financial market was difficult to raise money for mining, exploration stage.
So, right now we have a lot of cash and we are just going back to drill that. Basically main goal is to develop deposits from the current area, if it’s not exactly on that — really the 200 meters. It’s really in that area where we have a strong position right now, so it’s to develop something new base or new model that we have developed internally with Jack and us and some independent consultants. So, the goal is obviously to make a discovery or something significant in that area. So, that’s the main goal for the next 12 months and that’s where we will concentrate our energy right now.
WSR: Will you look for any sort of strategic alliances or joint ventures?
David Grondin: Yes. We always look into that. Basically, we will consider any partnership with more advanced stage project like a near-production project. We will eventually consider a partnership after discovery because as a small exploration company or a big exploration you cannot really consider at some point just go and develop 15 projects, which is impossible. Yes, we will consider going into partnership with bigger company or other exploration company to give some value to the portfolio we have got because like I told you 15 properties is a huge advantage, it’s a nice asset so we can leverage on that and generate recurring cash flow position. We are considering partnership with major, smaller, but it has to make sense. It has to be same mentality, so like to take risk. We are not afraid to test new model and that’s how we made this discovery for Carheil. So, that’s exactly what we are looking to do for our next properties.
WSR: In terms of investors, do you think right now that investors understand the general message and direction of NQ Exploration?
David Grondin: Right now, like I told you — yes and no. I would say a yes, mostly understand, 80% of my shareholder right now is institution so I will say that institution fund, mutual fund or mining fund understand very well the strategy we have put out, so basically to concentrate on these main properties and the strategy of diversification of the resources we are looking into it. May be retailers are not understanding it yet, but that’s why we are doing a lot of presentation, we explain the game plan to everybody we come across because we think that’s a really good opportunity. We are starting a 3,000-meter as we speak, but we have budget to do another 3,000 to 6,000 meter, it’s just that we are just doing this small — beginning Phase II to do another survey of the area and then we can drill more. So, I think this is a huge opportunity, it’s a really good time to go in. If you go back in my Press Releases, you will see that again most of the financing came from institution, very well our investor that has been in the market for many – sometime, more than 30 years in the mining area. So, they really understand what we are doing, but because we are not like just in — on a one specific resource like pure gold play or pure base metal play, some people don’t see exactly how it’s going to unfold. But for us, it’s very clear, it will unfold on the base metal, it will unfold also on gold and eventually on uranium. So, basically it doesn’t mean because we are developing base metal as we speak, that I cannot develop the gold area too. So that’s the advantage we have got. Most of the institutional investors understand that because they have seen the results and they understand what’s going on. And then, after that it’s because it’s really technical right now, but I think that retail base will come to understand the model and that’s why we are putting a lot of information on the website. We have a lot of map explanation of how it’s shaping up.
WSR: Great, so it’s more of a three-pronged attack and approach?
David Grondin: Yes, exactly.
WSR: Joining us today is David Grondin, CEO and President of NQ Exploration, which trades on the TSX Venture exchange, ticker symbol is NQE, currently trading at $0.18 a share. Before we conclude, just to kind of rehash everything, what are some of the key reasons why investors should consider the company as a good long-term investment opportunity?
David Grondin: Three things. We are beginning a drilling campaign right now, this drilling campaign is based on really positive results of the last campaign. We are on the same property, the Carheil property, so basically this is the time to go in. Usually, it’s when – it’s not after result so you go in, you position yourself before, we are drilling the same target again. The first time we produced good results, so we would like to go in again.
Second, we have a good shareholder base, mostly constituting of institutional investor that demonstrate that the business model we have put in place is strong, they believe in the management. And third, the capital structure and the cash position of the company; right now, we are well-capitalized exploration company, we have an exploration budget of — we can do approximately $750,000 work. We have hot cash for operations company of more than $0.5 million and the capital structure is 31 million shares outstanding right now. So, it’s tightly held, management and escrow partner control more than 55% of the company. Other than that it’s controlled by other funds, so basically 80% of the float is controlled either by the management or key shareholder or still under escrow. So, basically it’s a good reason to go in. You have all the key, with good results that will probably help position the investor and produce good results in the near future.
WSR: We certainly look forward to continue to track the company’s growth as well as report on some of your upcoming progress and projects. I’d like to thank you for taking the time to join us today and to update our investors, David. Thank you.
David Grondin: Thank you, Juan.
