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NQ Exploration: Actively Managing a 15 Property Portfolio

When looking at junior mining and exploration companies, it is all too common to see a company which holds perhaps two or three properties, focusing on one type of mineral, with the majority of progress being made at just one project.

It is not, however, the model undertook by NQ Exploration Inc (TSX-V: NQE), which holds a portfolio of fifteen mining properties, holding more than 1,400 claims, spanning gold, base metals and uranium. Most of these projects are 100% owned by NQ, although a few are held with a minority stake or subject to royalties, and are all in various stages of exploration. In addition, NQ ‘actively manages’ there various holdings, dropping claims that have yielded weak results, and acquiring new claims with good potential mineralization. This fluidity allows NQ to benefit from its broad church approach, without suffering too much from projects and properties that prove to hold less strategic value than originally thought.

NQ Exploration is a Canadian based mining and exploration company targeting exploration properties in the James Bay region of Quebec. The company has a highly qualified, motivated management and exploration, conducting targeted work on the most promising mineralized showings and structures to enhance the value of their properties. NQ have the stated goal of “aiming to rapidly establish itself as a significant player on the Quebec and Canadian mining scene by mobilizing the financial and human resources required to acquire, explore, develop and, if warranted, put into production mining properties with gold, uranium and base metal potential, for the benefit of its shareholders and other stakeholders”.

The company’s key asset is its diverse property portfolio, particularly it 13 100% owned projects; The Morand Uranium, Thorium and Gold Prospect, The Duncan Gold, Silver, Copper and Zinc Prospect, The Starlake Uranium, Copper and Gold Prospect, The Aylmer Gold, Silver, Copper, Zinc and Molybdenum Prospect, The Pine Hill Nord Uranium, Gold and Molybdenum Prospect, The Pine Hill Gold Prospect, The Le Moyne Gold Prospect, The Candlestick Gold, Copper and Zinc Prospect, The Conviac Gold, Copper and Zinc Prospect, The Eastmain Nord Gold, Copper and Zinc Prospect, The Carheil Gold, Copper and Zinc Prospect, The Gand I Gold Prospect, and The Opawica Gold and Silver Prospect. In addition to these properties, NQ has a 12.5% interest in The Rapide des cèdres Prospect, and a 5% interest in The Themines Prospect.

The benefits to holding such a wide and diverse portfolio are self evident. Although at this stage these projects are in the exploratory stage, as with any mineral based exercise, their current and potential value has a high correlation to the underlying price of the resource itself. Naturally in times of a bull market in those commodities, valuations generally benefit. However in times of sliding prices, value can equally suffer, often to a greater degree than the upside. By holding projects based on metals as diverse as gold and molybdenum, copper and uranium, NQ is limiting much of this underlying price risk. The driving factors behind base metal and precious metal prices for example, can be very different and even to an extent, opposite. Likewise what drives demand for say zinc, is not necessarily going to impact uranium.

As well as this resource based diversity, the shear number of properties NQ hold, also helps to limit their risk; specifically, those risks surrounding finding mineralization of such extent and grade to become an economically viable mining project. In many ways this can be one of the most severe risks facing junior exploration and mining companies. If the one prospect they own and have spent all their capital on, turns out to not be economically viable, all is lost. For NQ on the other hand, owning 13 properties means that if some of the prospective claims turn out to not be of sufficient value, they have many more to fall back on. As previously highlighted, NQ do not believe in ‘resting on their laurels’ when it comes to this aspect, and are happy to drop non viable claims as necessary, while always looking to expand into new prospects.

An example of this can be seen in the rationalisation and optimisation program the company undertook in autumn 2008, where it dropped 2,852 claims that were seen as disappointing in terms of resources, and adding an additional 248 new claims. At the time, this reduced NQ’s properties from the 19 they originally had when it formed in 2007, which totalled 3,959 claims spanning almost 2,000 square kilometres, to just 12 properties in early 2009, totalling 1,355 claims over 560 square kilometres.

A full assessment of all 13 properties, as one would expect, would take many, many pages to fully explore, and would be difficult for a reader to keep track of to say the least. It seems reasonable therefore, for a rather briefer overview of these prospects, with perhaps a closer look at the latest exploration results.

As of February 28, 2010, NQ assessed the total value of their mining properties to be around C$1.05 million, with the Grand I, Eastmain Nord and Conviac Project, the three highest valued (C$275,117, C$160,106 and C$140,651 respectively). Notably, the Grand I and Conviac Projects are not subject to any royalties, while the Eastmain Nord project is subject to a 1% net smelter return (NSR) royalty.

NQ’s most recent published exploration results come from their 2009-2010 fall-winter drilling program on the Carheil project, released in March this year. This consisted of six holes, totalling a combined 3,160.5 metres, each of which intersected zones mineralized in copper and zinc, with some of the holes also intersecting gold and silver.

NQ said that many of the intersections are among the richest in the region, with the highlight being CA-2009-05, which included 10.5m at 1.66% zinc and 550 grams per tonne (g/t) silver.

According to NQ, the high copper and zinc grades obtained from the program, as well as the associated high precious metal grades, including 550g/t silver over 10.5m and 4.78g/t gold over 1.3m, are among the most significant ever obtained in the region, and in itself is another indication of proximality and excellent potential.