Saturday, January 06, 2018 Derek Macpherson

Site Visit: Urban Barry a New Gold Camp, Bonterra’s Tent Pitched, Building the Fire

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We view Bonterra Resources Inc. (TSXV:BTR) as having the potential to put together a sizeable high-grade resource in one of Canada’s most active exploration camps. On December 7th we visited Bonterra’s Gladiator Project in the Urban Barry Camp in the Abitibi Greenstone Belt, located approximately 170 km NE of Val-d’Or and 125 km SW of Chibougamau in the Urban, Barry and Bailly townships of Québec.

Key takeaways were that:
• Urban Barry is gearing up to be, if not already, one of the most active exploration camps in the world
• Bonterra has the potential to build a significant high-grade resource at Gladiator
• Bonterra is well positioned to execute in 2018

The Urban Barry Camp was put on the map for the investment community by Osisko Mining Inc. In 2016, Osisko (formerly Oban Mining Corporation), after acquiring Eagle Hill Exploration Corporation in 2015, excited the market with several attractive high-grade, thick gold drilling intercepts at the company’s Windfall Lake Gold Project. Osisko followed up with an aggressive drill campaign in 2016-2017, initially targeting 420,000m of drilling and increasing to 800,000m with 24 drills in October 2017. A resource update at Windfall is expected in Q1/2018 and should be a key catalyst for not only Osisko, but others in the Camp including Bonterra.

Key land holders in the Urban Barry Camp include Osisko, Bonterra, Metanor Resources Inc. (TSXV:MTO), and Beaufield Resources Inc. (TSXV:BFD). The Camp currently hosts approximately 4 million ounces of gold in total, expected to grow with resource updates from Osisko (Windfall), Bonterra (Gladiator), and Metanor (Barry Deposit) anticipated in 2018.

Bonterra was an early entrant into the Camp, securing prime ground along a regional structural trend on the greenstone belt, and made it a focus for the Company as early as 2012. 90,000m have been drilled by Bonterra on the Gladiator Project since the beginning of 2016. In 2018, 50,000m are initially planned for the Gladiator Deposit and greater than 15,000m are to be split over at least 3 other areas along the greater Gladiator Project trend (including “Eastern Extension”, “Coliseum”, and a yet to be named ‘Western Fold’ target).

We believe the Gladiator Deposit has the potential to reach upwards of 2 million ounces at high-grades. The Gladiator Deposit is described by the Company as a highly silicified and altered sheared mafic volcanic with smoky quartz veining containing the bulk of the mineralization and free gold. Using a 4 g/t Au cut-off grade, the project currently contains an Inferred Resource of 905,000 tonnes, grading 9.37 g/t Au for 273,000 ounces of gold. This resource estimate was based on a strike length of less than 250m, to a depth of only 250m. Extensive drilling has been conducted since the last resource estimate with the Gladiator Deposit currently sitting with a strike length of 1,200m, tested to a depth of 1,200m, and open in all directions to varying degrees. At least five distinct subparallel zones or mineralized horizons (North, Footwall, Main, South, and Barbeau) have been identified within an approximately 300 m wide vein system. Shear zones within the same system are another source of gold. Importantly, the steeply dipping nature of the deposit, continuity of the vein sets both laterally and with depth, mineable widths (~3 m on average) with visible sharp contacts, and potential for increased tonnage via shear zones (to be better defined with infill drilling this year), in our opinion, make the Gladiator Deposit amenable to cost effective underground mining techniques.

Beaufield’s Rouleau Block is notched into to Bonterra’s ground near the current western extent of the Gladiator Deposit (‘Rivage Gap’) and located within a few kilometers to the northeast of Gladiator (‘Rouleau South’) (see Figure 4). Beaufield drilled on either side of Gladiator in 2017 with some promising, but also some mixed results. As Beaufield continues to explore their targets here, this could one day be an additive source of gold ounces for Gladiator, though Bonterra still has plenty of room on their own ground to grow ounces at the Gladiator Deposit down-dip and on strike to the southwest and to the northeast.
Eastern Extension, Coliseum, Western Fold. The Company has budgeted ~5,000m for the Eastern Extension, approximately 3 to 5km east of (and on trend with) the Gladiator Deposit with a number of targets identified based on local geophysical conductors and strong gold in till results. 5,800m is initially budgeted for Coliseum to the west of the Gladiator Deposit where the Company had some preliminary drilling success in 2017 (including 13 g/t Au over 1 m and 4.7 g/t Au and 44.6 g/t Ag over 2.7 m). Another ~5,000m has been budgeted for other areas including the Western Fold, an exciting new high priority polymetallic target that sits on the hinge of a newly identified large fold structure. During our site visit, the Company’s management team had a ‘Eureka’ moment and are eager to get a road advanced to and drill the target here as soon as possible.
Pieces in place to execute the planned 65,000m+ of drilling. The Company recently completed construction of an all-season exploration camp (Figure 6) and have a strong operating team on the ground to efficiently execute a 5+ rig winter drilling program. ‘All-in’ drilling costs in 2017 (excl. camp costs) were approximately $130/m, impressive given the relative remoteness of the area (though accessible with an extensive logging road network), with power provided by diesel generators and gravel roads built/maintained by the exploration companies operating in the area. Weather has thus far cooperated early into the winter with ice building for drilling on the lake having commenced ahead of schedule.

Bonterra also has the Larder Lake Gold Project in Eastern Ontario, straddling a 9km strike length of the Cadillac/Larder Lake break on 2,165-hectares in Ontario east of Kirkland Lake with historic inferred resource estimates totalling 960,800 ounces over two deposits (Bear Lake Deposit and Cheminis Deposit). The Cheminis Mine is a past producer with a vertical shaft to a depth of 1,085 feet. Gold Fields entered into an option in 2012 to earn a 60% interest in the Bear Lake properties, but after 1 year of work ($6 million/59 holes), Goldfields pulled exploration activities world-wide, and terminated their option in 2015. The 59 holes are not included in the resource estimate. Bonterra is currently modelling the Larder Lake Gold project to update the resource to a current 43-101 Compliant Resource. The Company is mostly quiet about this asset, focusing on Urban Barry; however, Larder Lake could prove to be an important asset within Bonterra or spun out into another vehicle to create shareholder value.

An updated Mineral Resource estimate for Gladiator is planned for mid-2018, with plenty of news flow from winter drilling ahead of that. With over $24 million in cash and cash equivalents at August 31, 2017, strategic and supportive shareholders such as the Van Eck Gold Fund (~12.0%), Eric Sprott (~10.0%) and Kirkland Lake Gold (~9.5%), a drilling budget of $8 to $10 million, and an early freeze to build drilling pads on the lake, the Company is well positioned to execute on a robust winter drilling program. Given the likely resource growth potential and high-grade nature of the resources in general being defined at Urban Barry, we believe the companies operating in the Camp should trade at a premium to their peer groups. However, based solely on gold resources that are reported, Bonterra at $60/oz seems to be trading at a slight discount to wider peers ($71/oz), but a significant discount to Osisko ($113/oz) (whose resource numbers are also understated). Assuming Bonterra reports Gladiator at 2 million ounces this year, Bonterra is trading at closer to $26/oz. 

As of market close on January 5, 2018.

Site visit completed by Chad Gilfillan, note completed by Chad Gilfillan and reviewed by Derek Macpherson.

Chad Gilfillan | SVP
Derek Macpherson | VP Mining Analysis
Alex Pitcher | Associate
Red Cloud Klondike Strike Inc.
105 King Street East, 2nd Floor
Toronto ON, M5C 1G6

About Osisko Mining Inc. (TSX:OSK). Windfall is Osisko’s flagship asset and the focus of one of the largest gold exploration programs on Earth (over 800,000m budgeted to date). Windfall currently sits at 748,000 ounces Indicated and 860,000 ounces Inferred as reported in 2014 (SRK Consulting, November 13, 2014) but is expected to grow meaningfully with a resource update in Q1-2018. In 2018, drilling is to be focused on extending the Windfall Deposit and the adjacent Lynx Deposit on strike to the SW, NE as well as at depth via a new exploration ramp. At Quevillon, ~108 km west of Windfall, Osisko is proposing a milling complex for their mining assets in the Urban Barry Camp. News flow in 2018 that should benefit all of the Urban Barry players include the resource update in Q1-2018, a feasibility study in H2-2018, advances in permitting throughout 2018, and a construction decision in 2019. Osisko also has the Garrison Project in Ontario (1.2 million ounces Measured & Indicated and 0.8 million ounces Inferred, east of Timmins with ~80,000m of drilling completed since mid-2016) and the Marban Project in Quebec (1.6 million ounces Measured & Indicated and 0.1 million ounces Inferred in close proximity to Val d’Or, Quebec).

About Metanor Resources Inc. (TSXV:MTO). Metanor produced ~35,000 ounces of gold over last 12 months at the company’s Bachelor Gold Mine in Le Sueur Township, Quebec. The company is currently assessing the potential for a parallel vein system at Bachelor as well as potential for the Bachelor deposit to connect with the adjacent Moroy deposit at depth. The mine has a mill with a capacity of 800 tpd (estimated by the company to be expandable to 1,200 tpd for ~$4 million). Metanor’s Barry Deposit in the Urban Barry Camp is located ~110km from the Bachelor mill, the closest active mill to the Camp. A resource upgrade to envisage an underground deposit (currently 282,000 ounces Measured & Indicated and 659,000 ounces Inferred at September 2016 in an open pit scenario), ramp development/bulk sample and pre-feasibility study is expected for Barry in 2018. Other prospective Urban Barry exploration targets include the Bart Zone and Moss. Eric Sprott (14.3%) and Kirkland Lake Gold (12.2%) are significant shareholders of Metanor.

About Beaufield Resources Inc. (TSXV:BFD). The Urban Barry Camp has been Beaufield’s most recent focus, however, the company has several gold and base metal projects in Ontario and Quebec. At Urban Barry, Beaufield recently completed a 10,000m drill program at the company’s Rouleau block (Rouleau South drilling targeted the potential extensions of gold mineralization from Bonterra’s Gladiator Deposit and drilling at the northwest corner of the block targeted Windfall-like targets) and Macho block (no significant results recorded). In the upcoming months, Beaufield has budgeted for a 7,500m winter drill program with a minimum of two drills focused on priority areas on the Rouleau block that could not be drilled during the summer including the potential deep extension of Osisko’s Lynx zone and the Rivage Gap near Gladiator. Osisko (18.8%) is a large shareholder of Beaufield.

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Company Specific Disclosure Details
Bonterra Resources Inc. - TSXV:BTR - 1, 2
Metanor Resources Inc. - TSXV:MTO - 1,2,3,4
Osisko Mining Inc. - TSX:OSK - None 
Beaufield Resources Inc. - TSXV:BFD - None

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