In the valley of gold

Access Asia’s Managing Director George McLeod is traveling through Quebec’s booming gold belt. McLeod heads Access Asia’s new mining practice, Access Mining, the first corporate intelligence service specialized for the mining sector. 

I am in Val-d’Or – a small, sub-arctic town in North Quebec surrounded by hundreds of miles of lake-filled wilderness. Val-d’Or r is also isolated from the global economic crisis: its economy is booming; fueled by rich gold deposits from the massive Canadian Malartic Mine; Canada’s largest. Gold prices are surging, having reached over US$1,800, up from about US$1,300 last year. As record government deficits and quantitative easing continue to undermine the credibility of global currencies, gold is expected to exceed US$3,000 per ounce, according to Bank of America estimates.

For Val-d’Or residents, that creates challenges that would be the envy of major cities. While rents plummet in the rest of Canada, a local restaurant manager complains that it’s impossible to find an apartment here for under $1,500 a month. Hotels are full and a budget motel room costs over $160 a night. Unemployment is nearly non-existent. A hotel manager I spoke with said her brother trained as a mining electrical engineer and at 22 is earning $120,000 annually. The problem for the mine’s owner Agnico Eagle isn’t securing bailouts or laying off staff – it is finding enough people to fill roles. During the days I was there, the local boat dealership sold out one-third of its stock and told me that it is struggling to keep up with demand.

The local watering hole was reminiscent of a frontier gold-rush town. Locals swapping rumors of gold companies quietly staking claims in an Ontario border town about 200 miles west, where mysterious arrivals are buying up all the land. “They know that if they find gold – all the land values will skyrocket. My husband is looking around there to buy,” says a local Cree woman. She says that a company built walls to muffle the sound of dynamite: “They are blasting to find gold and don’t want people to buy up the land before everyone else does.”

The Grand Canyon

The size of Val D’or’s mining operation can’t be fathomed without seeing the open-pit Canadian Malartic 25 km from town. From the outskirts you are struck by what appears to be a towering mountain amidst the area’s soft, rolling hills. A stairway leads to the top of the mountain where I’m met with the biggest man-made creation I’ve ever seen. Roads wind down a hole that’s over a mile deep and hum with mine trucks (themselves over 21 feet tall) winding their way out of the pit carrying over 65,000 tons of rock daily. Agnico Eagle is working frantically to expand the size of the Malartic Mine, and roads and machinery are already moving in to drill and dig. Last year saw over 600,000 ounces of gold come from this site, and with gold prices about US$500 higher – the company will likely earn more going forward. Its share price has jetted from about $51 in March to $92 currently.

The Gold Rush

Evidence of the gold rush is all around Val D’or. Small exploration companies have staked claims around the town, searching for new gold reserves. Signs along the highway mark junior mining companies sniffing for resources in the forest. Driving on the highway, much of the traffic is drill rigs and earth movers. Even viewing the sides of rock outcrops along the highway shows the area’s mineral potential. Red iron bleeds from the rock faces, and a closer look shows seams of green (possibly copper) and glistening gold-colored flecks (likely pyrite and galena).

Low gold prices between 2011 and 2018 put a cap on exploration as gold stocks fell out of favor. But 2020 has seen the beginnings of a historic bull market for both large gold majors and small junior explorers. Many gold stocks are rising by double-digits every week, and Wall Street is starting to take notice of what has been a Canadian bull market.

For Val D’or and other parts of Canada’s gold belt – this spells even better times to come. I would buy land here if I was you,” says a local drill operator. “But only if you can put up with 2 weeks of -40 degree weather, which you can’t because you are from Vancouver, he quips.