Qubec: Looking in All the Right Places

In its first decade, Virginia Gold Mines Inc. has become known as a very active Quebec explorer, particularly on virgin ground. The company has had considerable success, discovering significant gold and base metal deposits and partnering with several major mining companies. The budget has risen steadily, with over $9 million to be spent this year on seven main and numerous other projects.

Company founder Andr Gaumond is a maverick in targeting Quebec alone, and in locating his office in the governing centre of Quebec City rather than the business centre of Montreal. CMJ interviewed president & CEO Gaumond in Qubec City in June. His conversation was so compelling that we reproduce part of the interview here.

Where should I start? In the beginning I traveled all around the world to identify a niche. Eventually I realized that right in my backyard, here in Quebec, there was enormous potential, especially in northern Quebec. In the James Bay area, Hydro Quebec had built infrastructure for its electricity. I realized that here were practically untouched, virgin greenstone belts.

My first budget was $5,000 to go to the James Bay area, to sample the overburden by the road, just to see if there was any indication of mineralization there. One of the samples had 67 gold grains. When we traced back to the source of this gold grade we found a depositzone 32 of the La Grande Sud property. There are 350,000 ounces from thaisdeposit. It is located 2 km away from the initial ample and the deposit is half a kilometre away from the road. That was our first technical success and definitively proved to us that we were in the right environment and geology.

Since then weve discovered thousands of gold showings, among them the Poste Lemoyne deposit discovered 18 months ago. It has a resource of 200,000 tonnes. Its very small, but the grade is very good at 14.5 g/t Au and its still open at depth, so were going to continue to investigate this. If these gold deposits were in Val-dOr, we would mine them, but because they are up there, there are not enough ounces to justify building a mill. The day the mill were built, these two deposits would become satellite deposits.

The area is quite virgin. Every year we find new greenstone belts or extend known volcanic belts that have not been mapped. The quantity of greenstone belt shows there is much more prolific volcanic ground than what you see on any published map.

There is a diversity of mineralization. We found nickel-platinum mineralization at the Gayot project in Archean komatiites. Its a Kambalda/Raglan-type of mineralization in an area well south of the Raglan belt with no relationship to the Ungava Belt.

This winter for the first time, we found very exciting base metal, polymetallic mineralization on the Coulon project, in a rhyolitic dome in a felsic greenstone belt. There we have intersections of 15% Zn, 3% Pb, 0.5% Cu over 10 m with 3 oz/t Ag, which is part of a 20-m intersection of 10% Zn, and this is only the first lens. We have found another lens 33 km away that gave us 1.2% Cu over 38 m. There was no known showing in this area before we explored there, and now we are talking about economic intersections.

This discovery is 15 km away from the road and an airport. Theres absolutely no doubt in my mind that going north is the future of the mining industry in Quebec and in Canada. You will see mines and mills in the James Bay area for years to come, and probably gold mines as well as base metal mines, because the geology is very similar to the Abitibi belts in the south.

This winter we announced a third gold deposit on a new project called Corvet. We have two zones. The last intersections on the first zone gave us 5 g/t Au over 13 m including 7 g/t over 8 m. On the second zone, the last hole gave us 10 g/t Au over 5 m, and its open in all directions. Maybe this last discovery is the one that will help us justify building a mill in the La Grande volcanic belt. We would work out of the town of Radisson.

The James Bay Agreement was signed in 1975 between the Cree Nations and the Quebec Government, and the second agreement called Paix des braves was signed in 2002. These two agreements regulate the territory in terms of the rights of the native communities. You dont see these types of agreements elsewhere in Canada. Most of Quebec has been covered by agreements with the First Nations, which is a very positive development compared with many other provinces. These people are living in the territory so any mining company that would develop a mine would employ people from these First Nation communities.

Altogether the area has everything. Its low-cost exploration in Canadian dollars. All the services are there. Furthermore you can find very good expertise in Quebec. There are tax incentives from the Quebec government that are very attractive. Its not risky in the sense that Quebec is very pro-mining and there are very good mining laws. There are not a lot of uncertainties; everything is very clear in Quebec.

The geology of northern Quebec is very favourable. We have in the James Bay area the same geology that you find in the main mining camps to the southsame age, same geology, same potential. Its just that its totally unexplored.

If you deduct the participation of our partners and the tax credit from the Quebec government, Virginias real expenditures this year will be around $3.0 million on a budget of $9.5 million, so you see the leverage. We have $17 million in cash, so we have the flexibility to be quite aggressive for years to come.

Our strategy is very simple.

— We focus: Quebec, Quebec, Quebec.

— Its a risky business, so we encourage partnerships, usually with Virginia as operator.

— By seeing a lot of diverse geological contexts we are developing our expertise. We have around 15 full-time geologists and technicians, but this summer we are going to have 45 people in the field. We also have strategic alliances with two universities, with staff and students coming in the field with us.

— We are diversified. I take every good project that is available in Quebec. I take what Quebec offers me, whether its a nickel play or a typical VMS play or a gold play.

— A solid financial situation is important to explore the projects that deserve to be explored. When its time to negotiate, the big companies know that if the deal is not good for us we can continue alone.

Over the years, we have gained a reputation of managing money very well. The dollars really go into the field. Bank interest pays for the entire office including the annual report and other corporate expenditures. The market likes that. We receive offers of financings every year, and we usually say no unless there is an opportunity. Were crossing our fingers that in five, ten years the market will continue to like us and be willing to finance us. Spending between $2 and $3 million per year, with $17 million in the bank account we can last a certain number of years, and if we are successful we can go to the market anytime.

Since all my projects are located in James Bay or the northern part of Quebec, it would make no difference if I were here in Quebec City or in Montreal, so its a personal choice to be based in Quebec City. Quebec City is beautiful, probably the best place on earth to raise a family. I just love Quebec City. All my partners are coming hereits a treat for them to visit us in such a beautiful city. Im close to the Quebec Government here, so in terms of mining and geology its even better than being in Montreal. Montreal is perhaps a better financial centre, but I go to Montreal every week to meet with members of the financial community. So Im traveling a little bit more, but thats the price I have to pay to be located in Quebec City. Its more advantageous than disadvantageous.

Weve been working in the James Bay area for practically 10 years so we have an edge up there. I welcome all companies to come. There is a lot of good ground, but by the time they find out what is going on up there, we feel they wont want to wait so long and they will come and make a deal with us
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