Peter Vermeulen's European Perspective on Targeting Mining Winners

http://www.theaureport.com/pub/na/14626

TGR: Probe Mines has the Borden Lake gold project in Ontario, Canada. It has outlined about 4 Moz gold in the Indicated category there. This used to be chromite play, and now it's a gold play. Tell us about that evolution.

PV: It's very interesting because Probe Mines was sitting on this Borden Lake concession that wasn't its flagship asset. That was indeed a chromite play. But then the company poked a few holes into the Borden Lake project in 2010, and came up with this gold discovery. Now, it is the flagship property. The management team managed to get this project from 0 to 5.8 Moz in all categories in just two years' time. That's an amazing accomplishment. The resource is still growing, but the market hasn't shown the company any love because ounces in the ground are only valued at about $11/ounce (oz). People dismiss this as an ultra-low-grade, bulk-tonnage play that will never turn into a mine, but they should have a closer look. This deposit has a higher-grade core zone that's running at 1.4 g/t that bodes very well for the upcoming PEA/scoping study. The study will be a big near-term catalyst, and one that will, in my view, open people's eyes to the project's viability.

TGR: So you're getting the gold at a discount—and the chromite for free.

PV: Exactly. The chromite play is a well-defined resource, and is one of the higher-grade chromite resources in that area. Cliffs Natural Resources Inc. (CLF:NYSE) plans to put its chromite deposit in production. While Cliffs has enough resources, higher-grade resources will run out at one point. So it would make sense for it to buy the assets of Probe, which are basically lying next door. Probe also has a royalty on Agnico-Eagle Mines Ltd.'s (AEM:TSX; AEM:NYSE) Goldex mine. Agnico actually announced that it might put the zone on which Probe has a royalty into production. So that's also going to provide some cash flow and monetizing opportunities for Probe. Apart from that, Probe has $27 million (M) in the bank.

TGR: Didn't Agnico-Eagle suspended operations at Goldex?

PV: It did, but it is now assessing if a few zones can be accessed in a different way. This end zone on which Probe has a royalty will come into play in that case.