Quantum Minerals Corp. (QMC-TSX.V)

Transcription

1 Site Visit: NA Published: Oct 17 th, 2012 Quantum Minerals Corp. (QMC-TSX.V) Investment Opportunity Results from a recent drill program on the Rocky Lake project have excited the management of Quantum Minerals. They believe they have discovered the sulphide source of a large (1,500 metre-long) deep-seated conductive anomaly at the 100%-owned Rocky Lake project. The project is located in the famous Flin Flon, Snow Lake Volcanogenic Massive Sulphide (VMS) mining district in north-western Manitoba. Quantum Minerals believes that Hudson Bay Mining & Smelting (HBM&S) did not drill deep enough and missed the main conductor when they drilled 10 holes into this same target in the late 1980 s. Extensive Geophysical (VTEM) surveys on the company s surrounding ground have so far identified 41 targets with similar geophysical signatures seen at Rocky Lake. With over 40 years experience in the industry and numerous success s under his belt, Mohan Vulimiri, Director and the company s Qualified Person, commented the project has tremendous potential to host significant copper mineralization. All we need is a systematic follow-up of all the VTEM conductors and especially drilling of the main Rocky Lake Target at depth, now that we know where exactly it is present. This exploration scenario reminds me of the blind discovery that VMS Ventures made in 2007 on their Reed Lake project located 52 kilometres south of Snow Lake, Manitoba. They targeted an 800 metre long VTEM conductive anomaly looking for VMS mineralization. The discovery hole cut 43 metres averaging 4.38% copper with a 10.5 metre section averaging 11.19% copper starting 197 metres down-hole. Stock Details As of Oct 16 th 2012 Market Capitalization $5.13 million 52 Week High/Low $0.28/$0.10 Avg 3 mo Trading Volume 45,040 Cash in Bank $200,000 Debt Enterprise Value NA $4.93 million Capital Structure Basic Shares Outstanding million Warrants 12.5 million Weighted Average Exercise Price: $0.40 Options 2.5 million Weighted Average Exercise Price: $0.23 Fully Diluted Share Structure million For more information refer to the Warrant & Option Details section at the end of the report. Page 1 of 12

2 Bottom Line: Why I like QMC Rocks To Riches Quantum Minerals has a proven management team with projects in pro-mining jurisdictions with low political risk Their flagship project is situated in elephant country. The Flin Flon and Snow Lake district represents one of the largest VMS districts in the world that has produced in excess of 118 million tonnes of ore from 25 deposits. The management team is stacked with highly respected industry professionals like Mohan Vulimiri, who was Founder, Chairman and Director of Frontier Pacific Mining which was purchased by Eldorado Gold. QMC has identified over 41 conductive anomalies in metamorphosed versions of the same rocks that host the massive Flin Flon VMS deposit (62.5 million tonnes averaging 2.19% copper, 4.2% zinc, 2.6 g/t gold and 41.3 g/t silver). Recent drill results indicate QMC has intersected the top of a sulphide zone at the Rocky Lake prospect. Assay results have yet to show economic intervals of mineralization but the target needs to be thoroughly drill tested. This type of VMS target can be narrow and plunge to significant depths. The Flin Flon deposit was a series of ore bodies stacked on top of each other. Each ore body averaged only 270 metres in length and 21 metres thick and 450 metres in vertical extent. With its current $5.13 million market capitalization and tight share structure any discovery will significantly impact the stock. This exploration play reminds me of a similar exploration play that resulted in the Reed Lake VMS discovery. On news of that discovery, VMS Ventures stock jumped from $0.22 cents to $1.60. Top Shareholders Major Shareholders % Ownership Officers & Directors 29% Most Significant Risks There is no guarantee that Quantum Minerals will discover an economic deposit. This is a high-risk venture but one that has the potential for tremendous reward if a discovery is made. In the current market conditions securing financing is always a challenge. There is no guarantee QMC will be able to fund continued exploration on its own. It may be required to joint venture one or more of its projects Upcoming Catalysts Additional VTEM geophysical results are expected for the Rocky-Namew Lake properties in Manitoba. Seven drill holes will be collared at a 100 metre spacing intervals at Rocky Lake to test the conductor along strike and at depth. Trenching results from Mugaha sediment hosted gold target in British Columbia Flagship Projects Rocky Lake Project and Surrounding Namew Lake Properties (Together referred to as Rocky- Namew Lake property) QMC s Rocky-Namew lake properties are located in northwestern Manitoba, 50 kilometres northwest of The Pas (Figure 1). Flin Flon is situated 65 kilometres to the north and the Namew lake Ni-Cu mine is located 11 kilometres to the northwest. The Flin Flon highway passes the property just 14 kilometres to the east. Page 2 of 12

3 Rocky Lake Prospect Copper mineralization at Rocky lake was originally discovered by Hudson Bay Mining & Smelting (HBM&S) while testing a 1,500 metre long conductivity anomaly that was outlined on rock claims HBM&S drilled 10 holes, totalling 2,292 metres, in the late 1980 s and early 1990 s to test a 1 kilometre section of the conductive anomaly. The best intersection cut 10.3 metres averaging 0.38% copper, including 4.3 metres averaging 0.67% copper, starting 200 metres down hole. This grade was too low for HBM&S to consider further exploration and the ground was subsequently acquired by a private numbered company which vended the project into QMC in Figure 1) Property Location Map Very Promising Geology The rocks that host the Rocky Lake and Namew Lake mineralization are known as the Namew Gneiss complex and are believed to be a highly folded and metamorphosed version of the Amisk Group volcanics. This means Namew Gneiss rocks are the same rocks that host the world class volcanogenic massive sulphide (VMS) deposits of the Flin Flon and Snow Lake mining districts. The Flin Flon camp and Snow Lake deposits comprise one of the largest VMS districts in the world and by the mid 1990 s produced more that 118 million tonnes of ore from 25 deposits. An additional 64 million tonnes of mineralized rock has been defined in 43 sub-economic deposits. The Flin Flon deposit (62.5 million tonnes averaging 2.19% Cu, 4.2% Zn, 2.6 g/t au and 41.3 g/t Ag) consisted of 6 ore bodies that extended down plunge 1,650 metres. Each ore body was stacked on top of the next and averaged only 270 metres in length and 21 metres thick and 450 metres in vertical extent. This is not a large target and means that small conductive targets identified at surface could hide very economic deposits. Page 3 of 12

4 QMC discovered that HBM&S missed main conductive zone at Rocky Lake Rocks To Riches After conducting a detailed 23 line kilometre Pulse Time domain Electromagnetic (PEM) survey in 2007, QMC identified a 1,000-metre-long deep seated conductor (200 metres vertical depth) which was not identified by HBM&S. (Refer to Figure 2). Figure 2) PEM survey results The conductor in the diagram above, (hot colours), was ranked as the highest priority target. The closest HBM&S drill hole was RES-259 and it failed to intersect the target. This hole intersected 2.5 metres averaging 0.47% copper starting at a depth of 250 metres down-hole. The grid spacing in the diagram above represents 100 metre intervals. QMC believes HBM&S intersected the lower-grade mineralization that is typically present beneath a VMS deposit. Since the host rocks are now intensely folded and overturned the drills have potentially intersected the underside of a deposit or what is commonly referred to as the Footwall rocks. QMC s most Recent Drill Results Prove HBM&S missed the Rocky Lake conductor Recent QMC drill results intersected semi-massive sulphides in hole RL11-2 at a vertical depth of 193 metres (301 metres down-hole) (Photo 1). Page 4 of 12

5 These holes were interpreted to have hit the top of the conductor. Mineralization consists of pyrrhotite and pyrite and visible chalcopyrite. The hole was stopped in mineralization as a result of drilling problems. Assays from mineralized core at the bottom of the hole returned 0.26% copper over 30 cm within a semimassive sulphide section containing about 20% iron sulphides. Photo 1). Core from RL11-2 with pyrrhotite, pyrite and visible chalcopyrite The second hole, RL-12-5, intersected a 9 metre interval of semi-massive sulphides at a vertical depth of 171 metres with significant but uneconomic values of copper. These holes indicate the strong conductor at depth is related to sulphide mineralization and more drilling is warranted. QMC plans to drill another 7 holes into this target to test the conductor thoroughly along strike and to depth. Two other holes were drilled to test the anomaly (holes RL11-01 and RL11-03) and returned low grade copper values. Unfortunately they were not drilled deep enough to intersect the conductor. Refer to Figure 3 for plan map of recent drill holes superimposed over conductive anomalies. Earlier this year, QMC completed a VTEM electromagnetic survey over the entire Rocky Lake-Namew Lake property to see if they could identify other similar conductive targets as seen at Rocky Lake. QMC identified 28 other conductive targets on the Rocky-Namew Lake property! (Refer to Figure 4) Mohan Vulimiri, QMC's Director and Qualified Person, again emphasizes that the project has tremendous potential to host significant copper mineralization. All we need is a systematic follow-up of all the VTEM conductors and especially drilling of the main Rocky Lake Target and depth. Page 5 of 12

6 Figure 3) Namew Lake very prospective for additional VMS style mineralization In addition to the Rocky Lake target. QMC drilled five other holes on conductive targets on its Rocky- Namew Lake property. Three of the holes (RL12-6, RL12-8 and RL12-9) intersected low-grade copper mineralization on three different targets: T11A, T12A and T12B (shown in figure 3). Hole RL12-4 drilled into target T14 was too shallow to intersect the conductor. Hole RL 12-7 was aimed at target 11B but appeared to miss it. There are 41 quality targets to drill test on the Rocky-Namew property. In intensely folded VMS districts massive sulphide ore bodies behave in a ductile fashion and tend to be flattened during deformation. Thicker zones of mineralization typically form in the nose of folded rock sequences. QMC has identified multiple promising target areas that are both conductive and are associated with folding. (Figure 4). Page 6 of 12

7 Figure 4) Red zones represent prospective zones of conductivity in Namew Lake property Ownership To exercise its option to earn a 100% interest in the Rocky Lake property (rock claims 1-21) QMC agreed to pay a total of $242,500 and issue a total of 450,000 common shares or pay an additional $195,000 in lieu of shares. The company has made all payments and now owns a 100% interest subject to a 2% NSR, 1% of which can be purchased for $1 million. The remaining claims (Licences 358A, 359A, 360A, 361A and 981A) are referred to as the Namew Lake property. QMC was granted a 100% interest in these licences in return for paying an aggregate of $485,000 and issuing 900,000 common shares. These properties are subject to a 2.5% NSR, of which 1% can be purchased for $1 million Mugaha Property QMC s 55 square kilometre Mugaha property is located 15 kilometres north of the town of Mackenzie and 160 kilometres by road from Prince George British Columbia. The property has seen several years of grassroots exploration and extensive geochemical sampling. Results from this work have identified 25 gold-in-soil anomalies spanning an area measuring 5-by-3 kilometres. In one geochemically anomalous area trenching has identified narrow, mineralized quartz veins hosted in sheared and faulted slate and siltstone. These veins can be traced along strike for about 120 metres and remain open for expansion in all directions. Assay results from these trenches returned erratic gold numbers that ranged from less than 1 g/t gold over a metre to g/t over a metre. Page 7 of 12

8 So far only one of the 25 gold-in-soil anomalies has been trenched. None of these targets have been drilled. (Refer to Figure 5) Figure 5) Gold-in-soil Anomaly Geologically, the Mugaha property has numerous similarities to what is known as a Sediment-Hosted Vein gold deposit (SHV). These deposits are typically large low-grade bulk tonnage deposits. SHV gold deposits are some of the largest in the world. In Asia, examples are Muruntau (>80M oz), Sukhoy Log (>20M oz), Amantaytau, Daugiztau, Kumtor, Bakirchik, Olympiada, Nezhdaninskoe, Natalka, and Maysky (all > 5M oz). Typical Characteristics of SHV gold deposits 1) SHV deposits usually occur in rocks of late Proterozoic to early Paleozoic age along passive continental margin settings 2) often these belts of rocks have undergone fold and thrust deformation 3) Gold is typically hosted in quartz and quartz-carbonate veins and low in sulphide content 4) SHV deposits are often associated with prolific placer gold fields 5) SHV deposits occur in groups, usually with one large deposit associated with numerous satellite deposits. 6) Granitic rocks commonly, but not always, occur in spatial association with SHV deposits. 7) The age of most SHV mineralization is mid to late Paleozoic. Some are younger. QMC s Mugaha property is hosted in a thick sequence of Proterozoic-aged siliciclastic and minor carbonate rocks that was deposited on the western margin of ancestral North America. Gold discovered to date is associated with quartz veins hosted in sheared and faulted slate and siltstone rocks that contain sporadic pyrite and base metal sulfides. These potential host rocks are highly deformed. The Mugaha project is a classic Sediment Hosted Vein gold target that warrants further detailed exploration and drilling. Towards that end, QMC is in the process of Back-hoe trenching and sampling key prospects to identify high-priority drill targets. Page 8 of 12

9 Option Agreement Details: QMC has the right to earn a 100% interest in the project by making the following payments: One year from the effective date $100,000 cash and 200,000 shares Two years from the effective date $100,000 cash and 200,000 shares Three years from the effective date $200,000 cash and 300,000 shares Four years from the effective date $200,000 cash and 300,000 shares Subject to a 2% NSR of which the Company has the right to purchase one half for $1 million at any time within a five year period commencing on the later of the exercise of the option in the Agreement and the date a bankable feasibility study is prepared and delivered to the Company. The Company has the right to accelerate the payments to reduce the time it will take to earn the 100% interest in the Property. Other Projects Highlights of the Cinder Lake Rare Earth Element Property This 50 square kilometre property is located in north-central Manitoba is 100% owned by QMC The tectonic setting, petrography and size of the Cinder Lake Intrusive Complex are similar to the Maoniuping complex in China, which is the second largest REE deposit in the world. An intrusion that appears to be enveloped by pegmatites measures 10 kilometres long and 5 kilometres wide and could be a significant REE source. Pegmatites are important because they often contain weird and wonderful minerals including Rare Earth minerals. (Refer to figure 6 below). Figure 6) Regional Geology and magnetic landscape for Cinder Lake project The circular magnetic anomaly could represent a hidden intrusive complex Page 9 of 12

10 Samples from a base metal survey conducted by Inco in 1992 returned up to 2,300 ppm lanthanum, 1300 ppm neodymium, 140 ppm samarium and 44.3 ppm europium. A rock chip/channel sampling program performed for QMC returned strongly enriched REE mineralization on Wickstom Island. Mobile Metal Ions soil geochemistry and vegetation geochemistry based on the analysis of alder twigs also reflects this REE enrichment and suggests there are REE enriched intrusive rocks at depth. The sampling survey also indicates that these REE-enriched zones may trend off of the island in a number of directions. Highlights of Carrot River Gold Property This 30 square kilometre property is located in the Carrot River belt 140 km southeast of Thompson, Manitoba Gold mineralization discovered to date is similar to many structurally controlled mesothermal lodevein Archean-aged gold deposits found in Timmins and Red Lake Ontario. A scout drilling program (1,337 metres) on various gold and massive sulphide geophysical targets intersected anomalous gold, copper and zinc values. More systematic drilling on strike and down-dip is warranted for a potential discovery. QMC is interested in forming a JV partnership on this property in order to focus on its Rocky Lake and Mugaha projects Valuation With a current enterprise value of only $4.93 million, the market is giving little value to Quantum Minerals projects. Its flagship Rockey-Namew Lake project is in elephant country situated in the same geological environment as the major mines in the Flin Flon Snow Lake district and they have access to excellent infrastructure. Due to its tight share structure, if QMC makes a discovery similar to what VMS Ventures made in 2007 on its Reed Lake property, QMC s value will be driven significantly higher. VMS Ventures made a blind VMS discovery 52 kilometres south of Snow Lake, Manitoba, in September of They ultimately outlined an indicated resource containing 2.6 million tonnes averaging 4.52% copper, 0.64 g/t gold, 7.86 g/t silver, and 0.91% zinc. On news of the discovery VMS Ventures stock jumped from $0.22 cents to $1.60. The VMS Ventures discovery hole intersected 43 metres averaging 4.38% copper with a 10.5 metre section averaging 11.19% copper starting 197 metres down-hole. The discovery was made targeting an 800 metre long VTEM conductive anomaly. The discovery hole intersected 34 metres of near solid sulphide mineralization containing copper, zinc and iron sulphide minerals; Chalcopyrite, sphalerite, pyrrhotite and pyrite. Page 10 of 12

11 Management Team Directors Balraj Mann, BA. CA., CEO, President Mohan Vulimiri, M.Sc., B.Sc., P.Geo, Harvey Stark Ian Laurent, M.Sc.,(Econ Geol), MAIG, RPGeo. Simon Ma, B.A., CA. CFO Brett Kagetsu, Bcomm., LLB Corporate Secretary Rocks To Riches Advisors Jim Dawson, P.Eng., Kevin Ernst, B.A., M.B.A., CIMA Chart 1. Warrant and Option Pricing and Expiry Dates Warrants Exercise Price/Share 12,503,200 $0.40 Expiry Date Options Exercise Price/Share Expiry Date Feb (subject to acceleration period) 1,246,800 $0.20 Feb 28, ,300,000 $0.25 Mar 19, 2017 Page 11 of 12

12 All references to material contained in this Rocks To Riches report is public information sourced from the company s website, press releases, personal communication with Management. Thomas Schuster, the author of the Rocks To Riches Report, was only compensated for his time to write this report about Quantum Minerals. Thomas currently holds no securities in Quantum Minerals. To receive an electronic copy of this report and future reports please contact Mr. Schuster at [email protected] About the Author With a degree in Geological Sciences from the University of Toronto, Thomas started his career in the early 1990s as an exploration geologist in the famous Timmins mining camp in Northern Ontario. He then moved to Vancouver and took a position as staff Journalist at the well-known mining publication, The Northern Miner, reporting the merits and shortcomings of Canadian exploration and mining projects worldwide. This built a foundation for his later work as a Mining Analyst for the Toronto-based institutional investment firm, Fraser Mackenzie. Thomas is currently based in Vancouver working as an independent consulting mining analyst. Content Disclaimer. Information contained in this Rocks To Riches Report - and referenced links- (the Material ) are obtained from third party sources believed to be reliable, but the accuracy and completeness of this information are not guaranteed, nor in providing such information does TMS Enterprises assume any responsibility or liability for the accuracy and completeness of the information contained in the Material. The information in this Material is current as of the date appearing on specific reports or links within this Material and TMS Enterprises assumes no obligation to update the information or advice on further developments relating to any securities or matters contained on this Material. Furthermore, TMS Enterprises assumes no liability for any inaccuracies that the information may contain in the links provided. The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. This Material is not intended to provide legal, accounting or tax advice and should not be relied upon in that regard. This Material may contain content which may include or constitute forward-looking statements related to the operations of certain third party companies or entities, and which are based on TMS Enterprises research, estimates, forecasts and projections. Such statements are not guarantees of future performance, and involve risks and uncertainties which are difficult to predict, and which are beyond TMS Enterprises control. Such statements relate to the date on which they are made. Content on this Material using worlds such as "outlook", "anticipate", "expect", "estimate", "forecast" and similar expressions will constitute such forward-looking statements. TMS Enterprises expressly disclaims any obligation to update, amend or revise such statements, whether as a result of new information, ongoing developments, or events occurring following the date of such statements or otherwise. Copyright (c) Thomas Schuster, TMS Enterprises All rights reserved. None of the Material, or its content, or any copy of it, may be altered in any way, reposted online or reprinted without the prior express written permission of TMS Enterprises. Page 12 of 12