Soquem: The Soquem shuffle continues

There are a small number of mining companies with head offices in the province of Qubec–Alcan, Quebec Cartier and Cambior spring to mind. There are a larger number of exploration companies based in the province, mainly in mining camps such as Val d’Or and Rouyn-Noranda. And then there’s Qubec City-based Soquem Inc., an exploration group owned by the province, but that behaves like a company.

The mandate of Soquem is to discover mineral deposits that will attract companies to develop mines in Qubec.

The company’s president and CEO, Yves Harvey, explains how Soquem has evolved in pace with the politics and the economy of the province. “In 1965, the Qubec government created Soquem as a crown corporation to enable Qubec as a nation to develop its mineral resources, and allow for French Canadians to participate in the development of the province’s assets,” says Harvey. “Crown corporations were seen as tools to develop the economy, and for French Canadians to be part of it.”

From 1965 to 1985, the crown corporation was very successful in discovering and putting mines into production, including Doyon, Niobec, Mouska, Pascalis, Louvem, Montauban and the Magdalen Island salt mine. At that time, the company had up to 1,000 employees. In the early 1980s the Magdalen Island mine had technical problems during the development stage that doubled the costs and eventually put the company in a precarious financial situation. This forced the government to question whether it should be involved at all in building mines. In 1985 all the revenue-producing mines (except the salt mine) were spun off to form Cambior Inc., and in return Soquem received 40% of the shares of Cambior and roughly $150 million in cash. The salt mine was finally sold in 1988.

From 1985 to 1998, Soquem had an entirely new look, as a small mineral explorer, no revenue sources and only 50 employees. Its activities were financed by selling off its limited assets, mainly Cambior shares.

Of particular interest in this period was a 50/50 joint venture agreement signed with Ashton Mining of Canada Inc. in 1996 for diamond prospecting in northern Qubec. “I don’t think Ashton would have gone ahead without Soquem,” says Harvey. “They needed a good partner to share the risk.” The risk was substantial, with a large territory to explore in an area poorly explored for diamonds.

The sophisticated agreement made Ashton the operator, but allowed Soquem to supply half the employees, to participate actively in project management, and to have access to Ashton’s diamond expertise and laboratory. “We are pleased with the results, but all along it has been a positive experience,” Harvey says. The “results” that he refers to was the discovery of a 1.5-km-wide cluster of six kimberlite pipes (Renard 1-6) that have been drilled to 100-200-m depth, all of which are diamondiferous. The first report of diamonds from this joint venture, in December 2001, caused an unprecedented staking rush that is still going on (see Diamond Exploration in Qubec, page 10). The Ashton/Soquem property in the Otish Mountains area of Qubec now covers 250,000 ha.

In 1998, Soquem again shifted gears, as it was swallowed by the giant Qubec crown corporation Socit Gnrale de Financement du Qubec (“SGF”), whose mandate is “to carry out economic development projects in cooperation with partners, and in accordance with accepted requirements of profitability.” The workforce was boosted to 75, and the company began to look for good mineral investments. Soquem and its partners invested more than $30 million from 1998 to 2001 in exploration projects in the Abitibi-Tmiscamingue, Appalachians, Chibougamau and Northern Qubec, and is spending a further $13 million there this year.

Besides its large portfolio of exploration joint venture properties, Soquem has acquired stakes in several current or former producing mines since 1998. These include a 11.5% indirect interest in the Niobec niobium mine through a $10 million investment in Socit Minire Mazarin, a production royalty in the Jeffrey asbestos mine, a 26% interest in the Copper Rand former copper-gold mine, 40% of the Sigma-Lamaque former gold mine (to reopen November 2002), and a 45% interest in the Baskatong Quartz silica deposit.

“Our mandate has changed, because the Qubec economy is different now,” says Harvey. “Companies can explore everywhere in the world today, so if we in Qubec want to maintain our reserve base it is important to keep a minimum level of expertise here, to entice big companies to spend money in the province. Not to do so would leave our mining future entirely dependent on third party decisions.

“Soquem’s purpose now is very clear. We leverage and accompany the private sector in developing the mineral industry in the province, always as the minority partner. The development itself has to be done under the umbrella of private industry.”