More arrests and charges are expected to be laid after the discovery of hundreds of stolen cars and vehicle parts in a scrap yard north of Montreal, in what police are calling the biggest car-theft operation in Canadian history.

Police will continue their investigation Thursday as they comb through the hundreds of vehicles and parts at the Duvernay, Laval car-recycling business.

Authorities say they are not ruling out the possibility of gang activity.

"All the possibilities are on the table right now. Possibilities of some of these cars going overseas, the possibility of gang, criminal organizations," Laval police spokeswoman Nathalie Lorrain told CTV's Canada AM on Thursday.

"Everything is on the table right now, but what we are doing is ... trying to reconstruct all these cars, just to prove that they've been cut up here, and after that, we will be getting into the logbooks and all the bills and everything," she said.

Lorrain said the operation began Tuesday afternoon when investigators were conducting a routine patrol of the area.

Two officers observed numerous luxury vehicles going into a recycling business north of Montreal but not many leaving the site.

After a routine check of serial numbers, officers discovered three stolen numbers.

"That sort of led to their curiosity, and they went in yesterday and that's when we discovered all the stolen goods," Lorrain told Canada AM.

Police obtained a warrant to search the entire 100,000 square-foot-scrap yard packed with vehicles, many piled on top of the other.

Early estimates suggest more than 700 stolen cars, including luxury vehicles such as Jaguars, Audis and BMWs may be on the premises.

But police will only have an exact number after a thorough search of the yard, which could take a week.

"Some of the cars here were brand new, probably out of either a lot or wholesaler and with no mileage," Lorrain told CTV Montreal.

"Some of them had more mileage. But there were a lot of luxury SUVs, a lot of cars like Mercedes, Jaguars, you name it. They're all here."

Police believe some cars had already been dismantled after finding parts like airbags and engines throughout the yard.

The business has been operating for several years, buying and selling used and damaged cars, along with car parts.

Police have arrested the 39-year-old owner and one employee on charges of possession of stolen goods.

"Possibly there will be more arrests, and definitely more charges that will be laid on the owner of this place," Lorrain told Canada AM.

"Just yesterday, we found a small amount of cocaine inside the building, and we discovered things like that every few hours," she said.

The owner appeared in court Wednesday afternoon and will remain in jail until a bail hearing, scheduled for Friday.

Car theft is a huge business in Canada. In 2005, about 160,000 cars were stolen across the country, costing more than $1 billion in insurance claims and law enforcement.

Stolen cars also cost human lives. In a period from 1999 to 2001, drivers of stolen vehicles killed 81 people and seriously injured another 130.

With a report from CTV's Jed Kahane, Herb Luft and files from The Canadian Press