AEX Gold (TSX-V: AEX) – 18g/t Gold & Ready to Rock Within 24 Months?

Aex Gold Inc.
  • TSX-V: AEX
  • Shares Outstanding: 79M
  • Share price C$0.62 (27.05.2020)
  • Market Cap: C$49M

Interview with Eldur Olafsson, CEO of AEX Gold (TSX-V: AEX).

AEX Gold is a Greenland-focussed mining company that is engaged in the identification, acquisition, exploration & development of gold properties in Greenland. The company targets high-grade gold: 18g/t!

The key asset is the past-producing Nalunaq Gold Mine, with total inferred resources of 446,900t at 18.7g/t. The company also has a land package of similar properties (20-30). Olafsson claims that this is THE high-grade gold Greenlandic company.

Olafsson himself is an experienced Icelandic business entrepreneur. He has previously built up a successful geothermal business in oil & gas, but he is now “solely” focussed on the gold opportunity at hand. He claims that AEX Gold has slowly and gradually assembled a full-scale team with relevant experience, not only as an exploration team, but also as a development/production team.

What was the aim from day one? What sort of company did Olafsson want to build? Greenland started opening up for exploration around 2005, and Olafsson identified it as a highly-prospective region in terms of mineralogy despite being high-cost. Olafsson claims several international majors have exhibited an interest in the region lately.

He came to the table when the gold cycle had started to turn down. He found the “best geology” he had “ever seen.” All of the deposit is “out-cropping” on surface, and there is minimal need to conduct geophysics and other costly, time-consuming ground studies; “you can just see it.” However, the lack of infrastructure and climate-related difficulties have resulted in the operation being significantly more expensive.

How will Olafsson monetise Nalunaq? This appears to be a small resource, so what is the plan. He claims the key to the plan is making sure that the operation is economic as possible. He states that the abnormally high grade gives AEX Gold a distinct financial advantage.

However, investors and strategic partners care about scale. If AEX gold can’t offer this, what else sets it apart? It appears a big positive is the fact that Nalunaq is a past-producing mine, which accelerates AEX Gold’s pathway towards production. The timeframe appears to be 14 to 24-months (once AEX Gold is a “fully-funded company”); does this include shortcuts? The short-cut appears to be the existing infrastructure. There is already a full history of processing and mining methods. Olfasson claims that in all of his team’s calculations, they do not plan on doing anything differently.

Right now, AEX Gold has a 43-101 resource, but no PEA. However, AEX Gold will be submitting a PEA post-development by leveraging “actual (previous) data.” Once the development is done, AEX Gold would already be in production. Interesting. He argues that this risk profile is significantly reduced because the company isn’t “doing anything new.” He claims the company already has 1-year of production covered via at-surface ore and existing inventory.

So how will AEX Gold get funded? Most investors will not fund off the back of a PEA, because it is an early stage document with a large margin of error: ±20-30%. However, Olafsson suggests the company may not bother with a PEA and may go straight to a feasibility study. Even so, this appears to be something of a moot point. If funders have already given AEX Gold their backing, they are clearly happy to take the risk.

Olafsson owns 10% of AEX Gold’s total share, and has invested in public financing rounds. He claims this core insider ownership has reassured many institutional investors who like the story, but would perhaps have worried about the risk profile.

AEX Gold had been quite stagnant for a while but the share price doubled at the start of this year. What did the market react to? Olafsson explains he can’t totally explain the reaction. However, he states that AEX Gold always delivers on promises, particularly exploration commitments, delivering for 7 years in Greenland on-time and within budget. He also claims the capital structure is extremely clean: the company has hardly any warrants outstanding and the shareholding group is held tightly: c. 80M shares. He claims the company chose the TSX-V because at the time it was the largest junior mining market in the world. However, AEX Gold is looking at the possibility of doing a dual-listing on the AIM.

What is the plan for the rest of this year? AEX Gold is currently sat on a respectable C$4-5M, but the company will need to raise capital at some point. COVID-19 is currently wholly disruptive; however, Olafsson is confident the company can finalise all of its studies and conduct an exploration program. He also wants to close the financing for the build of the mine at the end of this year or the start of next. Thankfully, Greenland is starting to get going again.

What is the exit strategy? Olafsson claims he “doesn’t like to think about exits.” He is building a full-cycle gold company that he will build up like a major company in case of JV/take-put opportunities. However, the focus is on making the company strong enough to stand on its own two feet.

What did you make of Eldur Olafsson? Comment below and we will respond.

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