TORONTO (miningweekly.com) – Toronto-listed junior QMX Gold is on the prowl for a private equity partner, president and CEO Francois Perron told Mining Weekly Online during the Prospectors and Developers Association of Canada’s show.

The company operates the Lac Herbin mine, in Val-d’Or, Quebec, and owns gold properties in Quebec’s Abitibi district and in the Snow Lake district, in Manitoba.

Perron said he was looking for a joint venture (JV) partner to reactivate the Snow Lake mine, where a 2010 feasibility study forecast output of 80 000 oz to 90 000 oz from the property.

He said that while the company was working to raise the C$40-million needed to reopen the mine, the company’s geologists were using the time to understand the deposit’s geology better, while working from the surface.

“As soon as we secure funds, we will dewater the old workings and undertake underground drilling to tighten the results. When one looks at the historical mine data (at $400/oz prices) with current gold prices in mind, the numbers start to tell a different story,” he said.

He pointed to the property having significant upside potential to enlarge the existing National Instrument 43-101-compliant reserves and resources, owing to a new parallel trend discovered along the previously mined deposit. The company now plans to incorporate this potential deposit into the start-up plans of the reopened mine.

The Snow Lake mine was operated by Kinross and High River Gold as recently as between 1995 and 2005, producing 822 550 oz of gold. The total historic production was more than 1.44-million ounces of gold from the main mine, and the No 3 zone and Birch zone deposits.

All the surface installations were still in place and, while the mine was last rebuilt in 1995 under the Kinross/High River JV, the crushing, milling and mine infrastructure remained in excellent condition and the permitting and environmental licences were maintained.

The Snow Lake property had a proven and probable reserve of about 451 900 oz at an average grade of 4.04 g/t. Measured and indicated resources stood at 728 000 oz of gold at a grading of 4.14 g/t when using a 1.95 g/t cutoff, and the inferred resources stood at 336 700 oz grading 4.43 g/t.

The company’s proposed mine plan calls for an 83 000 oz/y operation at 93.3% recoveries over a five-year mine life. The mine is expected to produce gold at $640/oz over this period. The project has an estimated internal rate of return of 79% with a payback period of 1.7 years.

“Underground mining is becoming a lost art. People easily forget that on average, from the time an underground mine starts operations, the reserves grow by 2.5 times over the life of the mine,” Perron said.

The company has consolidated its land ownership around the project to 93 km², citing the possible continuation of the deposit to the north-east as the motivation.

QMX in May 2012 closed a $45-million loan facility at a London interbank borrowing rate plus 5%, over a 4.5-year term, which includes a hedging agreement with Credit Suisse.

In November, the company closed a one-year $17.5-million bridge financing from Third Eye Capital.

“The debt financing demonstrates the validity of the project,” Perron affirmed.

QUEBEC PROJECT TURNAROUND

Meanwhile, the company had completed a turnaround of its Lac Herbin mine, having produced 20 100 oz of gold from the mine in 2012, which was at the upper level of production guidance.

Recoveries at the Aurbel mill increased to 90% and the company continued mine exploration to bolster the current outlook and had identified upside potential within the Bonanza, FL and S1 zones.

Perron said QMX would continue to review the life-of-mine plan and reserve, with the aim of introducing a revised production and cash cost guidance.

QMX has a market capitalisation of C$5.56-million and its shares traded at 18 Canadian cents apiece on Wednesday on the TSX.