Pure Gold Mining Inc.
- TSX-V: PGM
- Shares Outstanding: 384M
- Share price C$1.7 (01.07.2020)
- Market Cap: C$652M
Gold investors want to see gold producers striking while the iron is hot. Pure Gold Mining claims that it is 32-weeks away from commencing production: ‘We’ll pour gold before Christmas.’ This is an exciting, high-grade gold story. Time for another re-rate?
Pure Gold Mining: a Canadian gold development company aiming for production by the end of 2020. Pure Gold Mining’s share price has skyrocketed in the last few months; recently, it looks more like a Tesla stock chart than that of a gold producer. Clearly, the market is appreciating the imminent high-grade gold production after years of slow progress.
Let’s get straight into the asset. The single focus for Pure Gold Mining is on building Ontario’s next major gold mine. The PureGold Red Lake Mine is a high-grade, underground mining operation that has an impressive production rate of 800tpd. An encouraging Feasibility Study was released in February 2019, outlining a 12-year underground life-of-mine (LOM). Pure Gold Mining made a construction decision in August 2019. Let’s expand on some of the excellent economics:
- CAPEX fully-funded.
- AISC is just US$787/oz. WOW.
- The average gold grade is a huge 9g/t, making the PureGold Red Lake Mine the highest-grade development stage gold deposit in Canada today.
- It will also place the project in the top 5 grade in Canada: 17th in the world.
- The NPV (5%) is US$390M with a 51% IRR and $1.9Bn revenue.
Amazingly, these impressive figures have been calculated at a low US$1,500/oz gold price. With today’s price of over US$1,700/oz gold, the operation could become even more profitable. This is a tier-1 project in a tier-1 mining jurisdiction. In fact, considering the company was founded by Oxygen Capital, it appears to have a tier-1 team too. This is all very exciting, but once phase 1 is concluded, what do investors have to look forward to in phase 2? How will Labrenz deliver growth and accretive value throughout the lifecycle of the resource?
Matthew Gordon talks to Darin Labrenz, 30th June 2020
Phase 1 is to get into early production for cash, as Labrenz sets out on his mission to turn Pure Gold Mining into ‘Canada’s next large-scale, iconic gold producer.’ The technically proficient team is confident it can achieve this with minimal fuss. It’s a consistent orebody that has already been significantly de-risked with 1.3M meters of drilling.
Phase 2 will involve expanding the resource. The orebody persists at depth, and Labrenz is confident it has more to give. It’s nowhere near its peak yet. The brownfield 42km2 land package has a huge mineral system. A structural mineral corridor that bisects the property runs for 70km. There is immense potential at the existing discoveries, and new discoveries in the South provide a further sprinkle of excitement. There are numerous high-grade zones that are soon to be drilled, including the 20-30g/t highly-accessible ‘8 Zone.’ Pure Gold has just initiated a 50,000m drill programme over the next 18-months that aims to convert resources to reserves in the footprint of the phase 1 mine. The next step will be to grow at surface resources and de-risk them. Ultimately, the productivity of the mining centres, and their ability to deliver into a decentralised milling facility, will become the preeminent focus, as Labrenz sets about delivering a high-grade gold mining ecosystem. In the long-run, he expects to more than double the resource. Impressive.
Moreover, eventual M&A opportunities could be aided by the cash flow from getting the PureGold Mine up and running; it will significantly enhance the company’s optionality. Labrenz is far too smart a cookie to allow Pure Gold Mining to remain a single-asset gold player forever, and while he is coy on what exactly he plans to do regarding potential land package acquisitions, it seems clear that once phase 1 and 2 are dealt with in their entirety, there is more to explore. For now, the company has more than enough on its plate and needs to demonstrate it can execute its phased approach properly.
The company has US$150M available in funding, and US$86M remaining capital expenditure to complete mine construction. This should be more than enough to carry the company through to full production in Q1/21 next year whilst it completes the aggressive exploration process.
Moving forward, Labrenz will continue with his attempts to drive liquidity into the stock as the company evolves through its phased approach and aims to take its spot on the GDXJ.
These are exciting times for the company and for shareholders. The high-grade potential is undeniable, and its being delivered in a systematic, logical fashion. This could be an exciting long-term hold, through investors may want to consider acting now if they want an optimal margin.
Company Website: https://puregoldmining.ca/
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