Intercontinental Gold and Metals (TSX-V: ICAU) – Bolivian Gold Play With No Exploration Risk

The Intercontinental Gold and Metals company logo
Intercontinental Gold and Metals
  • TSX-V: ICAU
  • Shares Outstanding: 18M
  • Share price C$0.28 (17.03.2020)
  • Market Cap: C$5M

We recently interviewed Gord Glenn, President and CEO of gold trader, Intercontinental Gold and Metals.

Intercontinental Gold and Metals tried to give investors exposure to the exciting upside of gold/precious metals investment, with none of the risk associated with the typical exploration, development and operation in the mining sector.

We’re a big fan of alternative mining-related investment opportunities here at Crux Investor, so how does this one stack up?

While you’re here, why not check out another one of our informative gold market articles, or maybe a different gold mining interview?

We Discuss:

  1. A Unique Business Model
  2. The Gold Market Outlook For 2020
  3. How Do Shareholders Make Money
  4. Delivering Growth

Company Website: https://www.intercontinentalgold.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Intercontinental Gold and Metals company logo

Gold and the ESG Revolution

John Mulligan, Director, Member & Market Relations, World Gold Council

We are witnessing a seismic shift in the world of investing which is redefining how investors perceive and approach assets, companies and sectors. A clear and pervasive reality has emerged where investment decisions are increasingly driven by environmental, social and governance (ESG) factors. The ESG Revolution may, in fact, have been more of an Evolution, and some would argue has been a long time coming, but it is now definitely mainstream. And a substantial body of regulation is just around the corner that will catalyse further change, redirecting very substantial sums of capital towards sustainable investments.

This is not to say that practical financial and investment principles have been abandoned in favour of purely political, philanthropic or altruistic motivations. Rather, investors (and policy makers) are seeking to drive positive societal and environmental outcomes via investments underpinned by robust business cases. We may face a daunting range of challenges in moving towards a more sustainable global economy but, concurrently, very significant opportunities are also unfurling before us.

 … there are many common misperceptions regarding the nature of modern gold production.

Green bonds, for example, may still be a miniscule part of the overall global bond market, but funds are flowing into them at an accelerating rate; the year-on-year value of green bonds issued in the first half of 2019 rose by 48%.[1]

So why might this be of such significance for the mining sector, and gold mining in particular? Because I believe that the opportunities for positive action are such that, if grasped, they might hold the key to transforming societal perceptions of – and wider investor interest in – the industry.

For those not involved in gold mining, or those only aware of its past reputation or the negative social environmental impacts associated with the worst aspects of artisanal gold mining, there are many common misperceptions regarding the nature of modern gold production.

As investors have moved to embed a greater understanding of ESG-related risks into their thinking, similar considerations have been shaping the evolution of the gold supply chain. To ensure that gold is produced sustainably and responsibly, key market participants across the industry have evolved a range of initiatives and standards to give stakeholders, consumers and investors greater confidence in the provenance of gold as a responsibly sourced product or asset. And, of course, this all starts at the mine.

To guide and support this progress, World Gold Council recently launched the Responsible Gold Mining Principles (RGMPs)[2], a comprehensive framework through which gold mining companies can set out their position on a wide range of material ESG factors. The Principles acknowledge and consolidate several guidelines and standards that already exist to address specific aspects of responsible gold production[3], but integrate them into a single coherent and detailed definition of what responsible gold mining should look like.

World Gold Council’s Responsible Gold Mining Principles

Independent validation of company conformance to the RGMPs should provide further confidence to investors and stakeholders that the gold production process adheres to high ESG standards, reinforced by external assurance on performance, which should help minimise the risk of “greenwashing”.

The World Gold Council’s Member companies[4], which together represent over half of all annual corporate gold production, have committed to adhering to these principles and, over the next few years, we hope the wider industry will join them in embracing the opportunity to demonstrate its ESG credentials.

There is also often a common misunderstanding regarding the nature of the gold value chain and, specifically, of mining’s role in creating and distributing value in host countries and communities.

Gold mining companies are often a major source of income and economic growth and can play an important role in stimulating and supporting local socio-economic development. Contrary to the assumptions of many, the vast majority of gold company expenditure typically remains in the country in which an operation resides, with 70% of that money paid to suppliers, contractors and employees. Typically, in most regions, over 90% of the employees at gold mining operations are from the host country. The economic value from employment and gold company payments to local suppliers, with associated tax revenues for local governments, create far more value for gold producing countries than they obtain from direct royalties on land use and minerals extraction[5].

Deriving societal benefit from the revenues created by gold mining will, of course, also depend upon responsible host governments and, for the development potential of the gold mining industry to be realised, all stakeholders need to work together in partnership. But arriving at a shared understanding of the potential value of a vibrant, responsible and sustainable gold industry might help us move from the transactional type of relationship that often exists between many industry, government and community stakeholders, towards more collaborative partnerships.

… gold mining in particular, might be in a constructive position to … make a positive contribution to achieving net zero carbon targets.

As investors seek to focus on longer-term socio-economic development outcomes, they often orientate their objectives around the United Nations’ Sustainable Development Goals (SDGs); 17 goals focusing on key social challenges that range from ending world hunger to increasing access to clean and renewable energy. Importantly, in defining these goals and the possible paths to their achievement, the UN explicitly acknowledged the major role to be played by private companies. Financial firms are therefore increasingly looking to identify or develop investment opportunities in the private sector that might address global needs and meet the goals outlined by the SDGs while also attracting investors of scale.

Mining has a very significant role to play in addressing many of the SDGs and, while this potential has been much discussed by academics, policy advisors and civil society, it might also be to the advantage of the global mining community to consider in more detail the practical and investment implications of the goals.

Perhaps the most obvious example of how the mining sector might contribute to a specific development goals is its current and possible future role in facilitating the transition to clean energy and a low carbon economy.

Last year, the World Bank launched its Climate-Smart Mining[6] initiative, drawing attention to the strategic role metals and minerals will play in the manufacture of cleaner energy technologies. The move to these technologies is likely to significantly raise the levels of demand for many metals, requiring both more mining and more minerals recycling. While gold was not identified in the World Bank report as a ‘climate-smart’ mineral, there are some promising signs that gold as an industrial product or input may play a useful role in technological advancements needed to help mitigate climate change.

And broader recognition of climate-related risks and potential impacts has undoubtedly been the galvanising force and key driver behind the widespread escalation of ESG factors in investment decision-making and the regulatory landscape.

There is no more pressing challenge facing humanity than that of climate change. The concentration of carbon dioxide (CO2) in the atmosphere caused by human activity is already wreaking havoc with environmental systems and weather patterns.  

The science is irrefutable and alarming. Atmospheric CO2 reached a high of over 415 parts per million in May of this year, a level not seen for 3 million years. According to the World Meteorological Organisation, the past 4 years have been the hottest on record (the 20 hottest years have occurred in the past 22 years).  Wildfires have raged across Siberia, Alaska, California and Australia and these fires appear to be getting larger and more intense. (The intensity and scale of destruction of the recent Australian bushfires has pushed the country to what has been described as an “absolutely seminal moment” in its history[7].)

Sadly, these fires also further exacerbate climate change – all that carbon literally goes up in smoke!

Last August, we also witnessed Hurricane Dorian, the most powerful storm ever observed in the North Atlantic. And over the last three years, the US has suffered three floods previously classified as once-in-500-year events. The global rise in floods is directly correlated with rising global temperatures.

Climate-related impacts threaten ecosystems, accelerate extinction trends and soil erosion, and contribute to greater food and water insecurity.  They are also a very major threat to public health, increasingly the likelihood of famine, and infectious and non-communicable diseases.

If we are to reduce these physical risks and stabilise the climate we need to act immediately and commit to actions that might curb global warming to a limit of no more than 1.5C above the pre-industrial average – we are already 1.1C degrees above that average! – by the end of the century.  This will require us to achieve net zero carbon emissions by around 2050 and, to do so, will require radical changes across all corners of the economy and society, including the restructuring of energy, land use, transport and buildings, with unwavering support from governments, businesses and individuals. These changes represent very substantial transition risks and some sectors will undoubtedly struggle to adapt.

In the World Gold Council’s recent report, ‘Gold and climate change: current and future impacts’[8],  we presented evidence that the gold supply chain, and gold mining in particular, might be in a constructive position to embrace these changes and make a positive contribution to achieving net zero carbon targets.  Overall, gold’s carbon footprint is relatively small, estimated at under 0.3% of annual global greenhouse gas (GHG) emissions. The vast majority of these emissions are generated by the mining and milling of gold and, more specifically, from the electricity and fuels used in powering these processes.

Fortunately, there are already a range of options, increasingly accessible and cost effective, to allow gold miners to move away from fossil fuels and decarbonise both their electricity and transportation. Many gold mining companies are already moving in this direction and our research indicates how, over the next few decades, renewable energy sources, such as wind, solar and hydro power, and complementary technologies might prove more cost effective for miners than the existing carbon-intensive options.

Illustrative potential emissions reduction and transition pathway for gold mining

As I have described, these are no longer peripheral issues for investors, bracketed with philanthropic CSR programmes and narrow sustainability specialisms, as was often the case in the past. At the risk of repetition, I think it important that the gold mining sector embrace the fact that consideration of climate-related risks is now a mainstream issue, core to business interests and increasingly at the heart of basic asset evaluation and selection processes.  Acknowledging this new reality, gold miners might now grasp the opportunity to demonstrate sectoral leadership in taking concerted action to further reduce their emissions and impacts, in line with science-based targets, to help curb the current climate trajectory and its potentially destructive consequences.

However, in addition to the question of how a company or sector might impact climate change, a key issue for potential gold investors – and, indeed, investors of all asset classes – is how possible climate-related risks and future scenarios are likely to impact the value of their investments and the overall performance of their portfolios.

Mercer, the world’s largest world’s largest institutional investment advisory firm, have been proposing that investment strategists integrate climate change risks into their asset allocation models for a decade or so[9]. More recently, the Task Force on Climate-related Financial Disclosures (TCFD) has been prompting organisations to implement effective climate-related financial reporting, emphasising the importance of transparency in evaluating climate-related risks to support efficient capital-allocation decisions. Only two years after its launch, nearly 800 organizations, including global financial firms responsible for assets of over US$118 trillion, have declared their support for the TCFD and its objectives.

Our findings suggest a relatively robust outlook for gold in the face of a wide range of climate-related risks.

This trend is mirrored by increased regulatory scrutiny and rising pressure from activist shareholders wishing to influence the environmental and climate policies of public companies. A very notable example of this trend is the investor group, Climate Action 100+, consisting of over 300 institutional investors who collectively manage more than $34 trillion in assets. The organisation’s stated aim is to “engage companies on improving governance, curbing emissions and strengthening climate-related financial disclosures.” They have already negotiated strategy changes from some very major GHG emitters.

With this context in mind, the World Gold Council’s research on climate change seeks to not only outline a credible path for the gold mining sector to move towards carbon neutrality, but to also offer insights regarding how gold’s value as an asset might be impacted by climate risks.

Collaborating with global sustainability consultancy Anthesis, we adopted a methodology broadly aligned with established analytical frameworks for institutional investors and focused on assessing the robustness or vulnerability of asset returns in the context of specific climate-related risks and scenarios. We considered how gold and a range of mainstream assets, representing a substantial proportion of current institutional portfolio holdings, might perform in relation to four different climate temperature scenarios: 1.5C, 2C, 3C; and 4C (above the pre-industrial average), and the potential impact on asset returns to year 2030, 2050, and 2100 (in comparison to our current, i.e. 2019, expectations).

In general, lower temperature scenarios (1.5C and 2C) will require rapid transition and therefore impacts will be more prominent in earlier timeframes. Physical risks, however, are more prominently borne out in the later higher temperature (3C and 4C) scenarios where direct tangible impacts overshadow transition aspects.

Our findings suggest a relatively robust outlook for gold in the face of a wide range of climate-related risks. Gold may face some initial headwinds in a rapid transition scenario due, in part, to the urgent diversion of investment to either build net zero carbon infrastructure or from a severe erosion of consumer confidence which would hit discretionary spending. However, many of these risks are perceived as a lower probability, and of less magnitude or duration, when applied to gold; compared with their likely impact on other assets.

Looking at possible outcomes for other key asset classes, transition risks may soon start to impact US equity valuations as the US economy appears to be less prepared for decarbonisation than, for example, the European markets. At the other extreme, inaction on climate change and consequent higher temperature scenarios will be very challenging in the longer-term for agriculture, food and soft commodities. Energy and utilities will also struggle as physical impacts become more frequent and destructive.

Gold’s relative resilience is broadly compatible with the World Gold Council’s wider research on gold’s role in contributing to optimal portfolio performance. We have repeatedly demonstrated gold’s potency as a diversification asset and its relative outperformance of many mainstream assets when specific risk factors impact their valuations. The wide-ranging nature of climate-related risks suggests heightened volatility and potentially destructive disruption across a range of markets and these conditions will likely bolster gold’s utility as a safe, stabilising asset and as market insurance. This suggests gold may increasingly come to be recognised by investors as having a positive role to play in balancing and moderating climate-related impacts on their portfolios.

The technicalities of institutional investment portfolio construction in the face of climate change may, admittedly, seem somewhat far removed from the perspective of an investor looking at a particular gold mining asset or company. But these factors are highly relevant if gold is going to continue expanding its role as a financial asset, and if gold mining is to reassert its credentials as a credible and attractive sector for a wider set of investors.

And there is cause for optimism; the whole gold supply chain, from mine to market, is now in a strong position to demonstrate high ESG standards and contribute to climate change mitigation. If the industry seizes these opportunities, then all its participants, investors and stakeholders should be able to face the future with greater confidence. Whether it’s a Revolution or an Evolution, now is the time to commit and act!

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.


[1] Source: Climate Bonds Initiative

[2] https://www.gold.org/about-gold/gold-supply/responsible-gold/responsible-gold-mining-principles

[3] United Nations Guiding Principles on Business and Human Rights; the OECD Due Diligence Guidance for Responsible Business Conduct; the Extractive Industries Transparency Initiative; Guidelines for Multinational Enterprises and the International Council on Mining and Metals’ (ICMM) Performance Expectations

[4] https://www.gold.org/who-we-are/our-members

[5] The socio-economic impacts of gold mining, World Gold Council, 2015

[6] https://www.worldbank.org/en/topic/extractiveindustries/brief/climate-smart-mining-minerals-for-climate-action

[7] Sydney Morning Herald, January 10, 2020

[8] https://www.gold.org/goldhub/research/gold-and-climate-change-current-and-future-impacts

[9] See, for example, Investing in a Time of Climate Change; The Sequel (2019), Mercer.

Vizsla Resources (TSX-V: VZLA) – Lucrative Potential?

The Vizsla Resources Logo.
Vizsla Resources Corp.
  • TSX-V: VZLA
  • Shares Outstanding: 49M
  • Share price C$0.55 (06.03.2020)
  • Market Cap: C$27M

We recently conducted an interview with Michael Konnert, the president & CEO of Vizsla Resources (TSX-V: VZLA). It was a very interesting interview with a gold-cooper-silver explorer.

While you’re here, why not check out one of our recent articles covering the gold space, or even an interview with a gold producer?

This is a risky investment opportunity at its most transparent. It is an early-stage exploration play with many hurdles to clear. However, the prize at the end of the tunnel is, potentially, enormous.

Vizsla Resources is a Mexico-based mineral exploration company listed on the TSX-V. It was founded in 2017, and is engaged in the discovery, development and acquisition of precious and base metal assets in what it claims to be safe jurisdictions. 

We Discuss:

  1. Vizsla Resources’ Gold, Silver And Copper Assets
  2. Business Model, Including Cash On Hand, Remuneration Policy and Burn Rate.
  3. Financing Plans
  4. Reasons For Investors To Be Optimistic In 2020

Company Website: https://vizslaresources.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Vizsla Resources Logo.

Novo Resources (TSXv: NVO) – An Unconventional Mining Story

The Novo Resources Corp. Logo
Novo Resources Corp.
  • TSXv: NVO
  • Shares Outstanding: 179M
  • Share price C$2.58 (06.03.2020)
  • Market Cap: C$461.5M

We recently conducted an interview with Quinton Hennigh. He’s the President of gold explorer, Novo Resources Corp. (TSXv: NVO).

While you’re here, why not check out another gold investment article, or another gold investment interview?

Not all stories in the world of gold mining are easy to understand, especially when they don’t open themselves up to understanding via conventional investment measures. Novo Resources does not have a producing gold asset yet, but the market has given it a sky-high valuation. Why?

We discuss:

  1. The Novo Story: One Hefty Valuation
  2. Novo Resources’ Portfolio Of Gold Assets
  3. Potential For Gold Exploration
  4. Plans To Solidify And Evidence The Share Price In 2020

Company Website: https://www.novoresources.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Novo Resources Corp. Logo

Trans-Siberian Gold (LON: TSG) – What Are Investors Missing?

The Trans-Siberian Gold Logo.
Trans-Siberian Gold plc
  • LON: TSG
  • Shares Outstanding: 110M
  • Share price GB£0.66 (05.03.2020)
  • Market Cap: GB£57M

Crux Investor recently interviewed Stewart Dickson, Non-Executive Director of Gold producer, Trans-Siberian Gold (LON: TSG).

Trans-Siberian gold is a gold producer located in the eastern recesses of Siberia. Dickson is pleased that Trans-Siberian gold is paying healthy dividends, but the market isn’t responding. Why?

We’ve got multiple gold articles for you to read on this website, in addition to many gold interviews for you to check out.

We discuss:

  1. Russia As A Mining Jurisdiction: People’s Perception vs Reality
  2. Burn Rate And Remuneration
  3. Managers Buying (Or Not Buying) Shares
  4. Telling The Story Differently: Getting The Excitement Back

Company Website: http://www.trans-siberiangold.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Trans-Siberian Gold Logo.

Serabi Gold (LSE: SRB) – Ready or Not At All, So Close Enough to Taste It (Transcript)

The Serabi Gold PLC company logo.

CLICK HERE to watch the full interview.

Interview with Michael Hodgson, CEO of Serabi Gold (LSE:SRB, TSX:SBI)

Apologies for the quality of the internet connection, Mike was dialling in from the country-side.

Off the back of yesterday’s press release, Mike spoke to us to give us a bit more colour on the details about :

  1. The Public Hearing
  2. The result of the first months test on the new ore sorter. Link here to a video of the ore sorter working: https://www.brrmedia.co.uk/broadcasts-embed/5e3a8fe1397af40afa52b27e/event/?previewEventId=5e3a8fe1397af40afa52b27e&popup=true

Interview Highlights:

1:30 – Public Hearing: A Positive Outcome
3:43 – Ore Sorter: How Does it Work?
9:56 – Focus for 2020: Exploration, Drilling and Building Value

Company page: https://www.serabigold.com/

Matthew Gordon: Hello, Mike, how are you, Sir?

Mike Hodgson: Hi, Matthew, very well, thank you.

Matthew Gordon: Good. Well, look, we saw the press release this morning, thought we’d try and catch you, and it sounds like we caught you at a good time, you’re off to Brazil tomorrow. So, why don’t we talk about the public hearing first of all which you told us about last time we spoke, but it seems to have gone well?

Mike Hodgson: Yes, yeah, I mean, you don’t get a definitive answer in the actual public hearing itself but you obviously… it could go very wrong on the day, so I mean if you have a positive public hearing in terms of like, everyone sits down and listens and all the stakeholders have the conversations and are all heard over 6-hours and there’s no… you know, it’s all done in a cordial manner, which is exactly what happened, you can’t have anything more.

So what we actually have there. It’s chaired by the State Environment Agency, called SEMAS, and they chaired it and all the various stakeholders had their say and we had pretty much overwhelming support, which was great. So they will now go away and digest all of those comments, people’s concerns, people’s wishes, people’s wants, and they will then make a recommendation to a governing body which is called KOHIMA. They’re the guys that actually, ultimately, either ratify it and take it to the board. So they’ll listen to all of the, as I say, all the comments and concerns and they’ll come back, hopefully, with an LP for us, we hope within the next sort of six to eight weeks. That’ll be a great result, we’ll be delighted to get it done so quickly.

Okay, it’s slipped a bit compared to what we hoped, but you’ll remember we had to live through all of those tailings dam problems of 2019 with Brumadinho and how that affected everybody in the mining industry in Brazil. We’ll obviously get the EIA resubmitted and the public hearing still early in 2020 and seemingly gone through in such a positive climate in a way. Yeah, I think we did a really… we’re very pleased. Very pleased.

Matthew Gordon: Well I guess you had the benefit of obviously Palito, existing business, running without any issues and you obviously had the support of the local community from that, so that all helps. And I think people mustn’t underestimate the importance of this, and we’ve certainly spoken to a few companies in the last couple of weeks who are suffering from not being able to get through the process, as it were.

Let’s talk about the ore sorter, because I’ve watched the video which kind of explains it all to me and we’ll put the link up above here now so people can go to that. Can you tell us the impact? You’ve been running it for the best part of a month and it seems to be delivering quite well. I’m looking at some numbers here, so you fed in 1,266 tonnes and you’ve identified 1,076 tonnes of waste, so that’s significant.

Mike Hodgson: Those numbers aren’t really terribly indicative. I put them in there because obviously we switched it on just over a month ago and we’ve been putting through some pretty miniscule tonnages, and we’re just playing around with it really, trying to find the sweet spot. And we’re using different types of ore. Some of the ore is actually sort of more massive sulphide ore. So really, I put those numbers in there to show people, hey, you know, it was a pile of rubbish, basically, sub-economic, very uneconomic material.

We passed it through the ore sorter and we just pulled out 200t at, like, 7g/t and the rest of it is a big pile of waste, and that just shows what this thing can do. And the video shows it, that it’s going in, you know, it’s crushed material which is 80% waste rock and if you look at underground face, underground, if you just eyeball that you can see, well hello, 80% of that face there is waste and 20% of it is a band of ore. That’s exactly what the ore sorter does. When that thing’s all been crushed it can actually eliminate all that waste and just scavenge out that sort of high-grade band of the sulphides where the Gold sits, and that’s what it does.

So I think we can see straight away it’s a very… it’s great at just scavenging out the ore out of the waste. And we won’t put our best material through it because it’s not an exact science, there are always going to be losses. Like, you will get ore going into the waste system and you will get waste going into the ore system, but I think the best way of describing it is, it is a waste remover. That’s what it is, it’s a waste remover and it’s an ore scavenger.

So we are only really using it at the moment and will be only using it until we’ve got this absolutely nailed, we’ll only be using it on our lower grade ore development, which is where we’re just driving along the [inaudible 00:06:06] in its most diluted materials, that’s the material with all the waste rock in, and it’s great for just recovering the ore out of that material and not having to pass all that stuff through the process pond which up until now had been completely constipating our process plans with this material.

So if we get rid of that, first of all we save ourselves, just by getting rid of that material and going for 500 tonnes a day at 7g/t, 400t per day at, say, 9g/t, you’re going to save yourself about USD$1M a year at cost which means the payback on this machine is about 18 months. But, more importantly, what it will do is it will liberate 100t a day of free space, which we can then use again to add more high grade or make our little process plant produce, instead of 40,000 ounces, which it can do today, the same plant with the same size and through-put can do 50,000 ounces. That’s the beauty.

Matthew Gordon: That’s truly remarkable. But it doesn’t actually identify Gold per se, does it? Explain to people what it’s actually doing? They can watch it in the video but I thought it was interesting to…

Mike Hodgson: Very, very important, the distinction. When you look at that video you see that yellow shiny stuff, people I know would be very excited if that was a band of Gold. It’s not. That is a band of sulphides, mostly charcoal pyrites which is a copper sulphide and pyrites which is an iron sulphide. And all of our Gold is very fine-grained contained within those sulphides. So, our ore sorter has two metals that actually split differentiating between ore and waste. What you’re always after with any type of ore sorting, whether it be diamonds or, as we’re doing, Gold, or whatever, you need contra between your ore and your waste, dark contrast. So it won’t work terribly well on a disseminated ore body? On an ore body like ours, which is very sharp, it will. So, what it’s actually doing, you crush it down to about a quarter of an inch, half an inch, so you can see there, an inch to half an inch, and you pass it through either a colour sorter or an x-ray sorter. So, let’s take the colour sorter first. In our case as you’re dealing with video, pink-based and the rest is ore. So you can just simply say, right then, I want to collect anything that’s not pink and it will just literally identify any stone that’s not pink and throw it off on to different belts as you saw in the video and the pink, the granite, will just fall off the edge as waste. Alternatively, you can sort on atomic density which is where you use the x-ray sorter, so it’s a piece of equipment not dissimilar to what we have at airports, you pass through it, and it’s actually penetrating every stone on 1mm centres, so it’s hugely detailed. And there’s a 3D sample so every stone gets analysed for a percentage or its atomic density and, of course, the granite rocks are much less dense than the sulphides and the ore rocks so, again, there’s a big contrast in density between what is the ore and what is the granite. So, again, we can sort on x-ray as well. And, if we really want, we can’t do it at the same time but we can – we haven’t tried that yet – but what we can do, we can sort once on, say, density, save the pile, and then you can pass the pile again and sort on colour. So, the permutations are endless and we’re just at the beginning of this journey really. But we’ve just simply by sorting on x-ray. It seems to be brilliantly separating the waste and putting some more add to the waste. The closing shot of the video you see that little pile and the big pile. We pulled that little pile. That’s now a big pile and before it was just lost in that big pile.

Matthew Gordon: It’s amazing. We were talking to a lot of companies about bringing ore sorters in to improve their productivity and throughput. As you say, the savings are, or can be, immense. You had a great year last year in terms of the share price. Obviously, shareholders, the share register must be quite pleased with your performance. I know you’re excited obviously about the ore sorter here but you’re obviously more excited about bringing Coringa into production. You’re off to Brazil tomorrow you tell me, before we started the call. What are you going to do?

Mike Hodgson: Well, we’re closing in on our sort of three-year, we’re doing, we’re updating our mine plans and our resource estimations. So that’s basically what I’m going down there to actually sort of oversee, have a good look at that. We’ve got some exciting drilling going on at Sao Chico. I just to make sure we can as much of those results into this resource estimate we’ve just done There will be an update coming out too some very couple of intersections on the further step outs yet. That’s not probably get the results on, quite, even the official results, but certainly it’s looking very good. We’ve got some very nice-looking introspection, visual at this moment in time so I’m going to be looking at all of that.

Coringa, a year, well that’s obviously going on very well. We’re, as you know, we talked about this last time, we have Greenstone the convertible loan note coming in at the end of next month, and that will, of course, be the catalyst to us to start work at Coringa, start on the decline and getting on the ground. And, again, the exciting thing about that is getting underground, getting the bulk sample done or getting that earth moving, see how that responds to ore sorting as well. So, I’m completely sold on the whole thing. I mean I must admit when it was all, when we all talked about it, it was about two years ago the scary thing was it basically going to amount to USD$2M on something like this was you know… Well, I don’t want it just to be an ethical success. We really hope it works in earnest. I’m completely sold. I think it’s a paradigm shift in this part of the world with all of its sulphite hosted Gold deposits. It’s going to be terrific.

Matthew Gordon: I think that’s what the shareholders bought into last year when the share price was moving rapidly up having been stagnant for so long. A couple of million bucks and a payback of, as you said, less than a couple of years, 18 months to 24 months. Fantastic. But, also the ability to double your production and get up towards that wonderful 100,000 ounce a year number it has got to be in the crosshairs for you. I mean Coringa could get you up to 80,000 and with your exploration at Sao Chico you’ve got to be aiming higher, haven’t you?

Mike Hodgson: Yes definitely, I think the ease of mining at Sao Chico ore body, that’s why we put a lot of effort on exploration now. We obviously get a bigger bang for our buck with our exploration work that we do there. If we do get a bit of a tiger by the tail there and, at the same time, the space that we’re liberating by cleaning up the Palito ore creates more space to put through more Sao Chico ore, but we’re not dismissing the possibility of being able to sort the Sao Chico ore as well. It might be a different way of doing it, but we are beginning to get some pretty good results on that. So, it’s three deposits. Coringa, Sao Chico and Palito as being sortable in the end. We’re going to squeeze, I was always saying, my comment there, low-grades and tonnes cost, we’re always going to try and get the grade up as much as possible and not just chase scale but chase quality so we can actually get to, you know, 100,000 ounces with mining as high a grade as possible so we don’t actually have the enormous through points that a lot of 100,000 ounce producers have to have to get that level of production. That’s the name of the game.

Matthew Gordon: And that’s the focus for this year or, have you got more surprises on the horizon?

Mike Hodgson: I think if we get a nice big resource increase at Sao Chico and we get successful or we get on the ground at Coringa and we bring back a bulk sample and that works very well with the ore sorter and Palito’s achieving its 45,000oz, I’d be very happy with that outcome.

Matthew Gordon: Very good. Thanks very much. I appreciate you taking our call with regard to this morning’s press release. We were keen to speak to you because it was one of the stories, success stories, of last year, certainly in terms of share price, which is the name of the game after all. So, we’re kind of keen to see how you get on this year and see if you can repeat that success. Stay in touch.

Mike Hodgson: I will Matthew. 

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The Serabi Gold PLC company logo.

Equinox Gold (TSX: EQX) – Gotta do it, gotta do it big, Big, ba-ba-bi-big (Transcript)

The Equinox Gold company logo.

CLICK HERE to watch the interview.

Interview with Christian Milau, CEO of Equinox Gold (TSX: EQX)

Equinox Gold, listed around 2 years ago with Ross Beaty as the main shareholder, with goals to become a multi-jurisdiction, large-cap gold mining company.

Equinox has a promising portfolio of assets: Mesquite Gold Mine, a Californian project producing 125,000-145,000oz gold per annum with an AISC of US$930-$980/oz and a grade of 0.46g/t gold (exclusive of reserves), Aurizona Gold Mine, a Brazilian gold mine producing 75,000-90,000oz per annum with inferred resources of 1.1Moz @ 1.98g/t gold (with an exploration upside) and an AISC of US$950-1025, Castle Mountain Gold Mine, an under-construction gold mine with a PFS and production potential of 200,000oz per annum and a 16-year life-of-mine, and a copper-focussed spin-out operation in the form of Solaris Copper Inc.

Equinox has had a quite remarkable rise over the last few years, with its share price hovering around CA$5 at the start of 2019, now standing at CA$10.95 today. The market cap is an impressive CA$1.24B.

We spoke with Milau about a variety of topics. Targets that were set have been well and truly delivered. Mesquite and Aurizona are up and running, producing at a reasonable scale with a good AISC. Castle Mountain should be ready to rock by Q3/20. Equinox has kept things simple and it is reaping the rewards.

The portfolio is focussed; thus, projects aren’t lying around waiting to be put into production like they are for so many mining companies. Equinox’s message is simple: make good acquisitions, and get that gold out of the ground! 11% insider ownership is another reassuring fact for investors, alongside a more diversified shareholder base than when we last spoke with Milau.

We then move into Equinox’s spending strategy, in addition to the gold macro story. What does the outlook for the gold market look like for 2020? Milau states that his thesis denotes this is only the beginning of this new gold cycle. Milau is conscious it won’t all be plain sailing, but this is an early stage of the turn (US$17T of negative-yielding debt, solid stock markets and slowing global growth). The best is yet to come? Equinox has no intention of being taken out. It plans to become a long-term investment opportunity that can last through several cycles. Equinox appears to have the leverage to make use of a rising gold price. We appreciate Milau’s pragmatic take on gold margins: Equinox is not rushing to produce; there is no spike in production. Equinox is managing a steady, structured increase. To continue to grow, Equinox will proceed with developing its current assets and look at new acquisitions when the time is right. It recently announced a (28th Jan) merger with Leagold Mining Corporation that will combine the companies, ‘creating one of the world’s top gold producing companies operating entirely in the Americas.’ This should position Equinox even more strongly. Equinox has recently had debt repaid to it by Serabi Gold, so it is in an even stronger position as it looks to become more than just a 1Moz per annum producer. Equinox is proceeding cautiously and isn’t getting ahead of itself. As far as remuneration, one of our favourite elements of the story, Equinox continues with its remuneration policy of mainly shares as opposed to a conventional cash salary. Milau claims he hasn’t cashed any in yet.

Interview Highlights:

1:59 – Company Overview
3:17 – Targets Set & Achieved
8:57 – Running a Large Company: How are They Monitoring Spending?
12:49 – Market and Gold Price: Will it Continue?
15:07 – Cost of Production: No Mention of AISC in the Presentation
16:29 – A Means of Being Profitable
19:54, 27:11 – Lessons Learned and Moving Forwards: How Will They Grow the Business?
26:03 – Remuneration: Any Changes?

Company page: https://www.equinoxgold.com/

Matthew Gordon: Hello Christian, how are you, Sir?

Christian Milau: Very good. Good morning from Vancouver.

Matthew Gordon: Yes, good afternoon here from London. Long time no speak. I think when we last spoke, you were one of those tiny little USD$400M companies, right? How times have changed.

Christian Milau: Right. The world has changed very significantly; both the market and Gold, but also I think with this recent merger, it has really given us some scale that has come on the radar for a lot of people right now.

Matthew Gordon: Brilliant. Okay. Well, we are going to get into that. Let’s kick off with that usual one-minute summary for people, unbelievably, who may not have heard of your story.

Christian Milau: Yes, so it’s Equinox Gold. We started it about 2 years ago. Ross Beaty is the core shareholder and the largest shareholder. This is kind of bookending his career; building his company basically in parallel to Pan American Silver. So our goals do really create that multi-asset, multi-jurisdiction, larger cap, eventually, investable Gold company that will see through many cycles. We started in Brazil and in California with now two operating mines and a third one being built, being Castle Mountain. And then, with this recent merger here, we are going to add a large mine in Mexico, in Los Filos, and then as well, another three operating mines in Brazil with a fourth one to be built. So, we will have 6 operating mines and 4 growth or development projects with 600,000oz or 700,000oz in annual production now, going towards 1Moz in the next couple of years as we build our profile and portfolio of the company. So really going from, you know, as you said, smaller cap, mid-cap space into that good size mid-cap, to maybe even the lower end of a larger cap space.

Matthew Gordon: Okay. Thanks for that summary and we will get into some of those moving parts in a second. I remember when we talked, as I said, you were only a USD$400M company, but some of the things which we quite liked at the time were the fact that you guys were taking very  small remuneration packages in terms of salaries etc, but you were taking a lot of this in shares. You laid out your plans for us then and you seemed to have delivered those so that is all positive. And I think with Mr Beaty on board, and you talked about Mudabala  as well; there’s potential there. Those things have come on board, Ross has followed his money. You are talking to a lot more institutional players at the moment and you kind of have in a way, buying your success. You are capable of buying the success. Can you just tell us about some of the targets that you set yourselves then and whether or not you feel you have met those today?

Christian Milau: Yes. In a way, they come in two baskets: we set some targets to basically finance and build out our portfolio, which we did, we built Arizona and got it into production in northern Brazil last year and it has been producing very nicely for a couple of quarters now, so that was the first target. Second one was to finance and get Castle Mountain into production, which is basically half way through construction now and will be ready to pour Gold in the third quarter of this year; so months away. And continue to operate that smallish portfolio and deliver some value to shareholders through some liquidity and increased scale. Getting into some of the indices eventually. And I would say that we are well on track to be doing that, but our second sort of basket of growth and opportunity, was really on the acquisition front and merger front and that’s where the Leagold deal falls into this. It sort of doubles the scale of this company and as you said, Ross has followed his money: he’s putting another USD$40M into this deal at market, and you know, we continue to hold a significant portion of the shares and on a proforma basis, I think we will own 11% as insiders, Ross obviously being a large proportion of that. I think that our next closest peer in the 500Moz to 200Moz per year production range is about 1.7%, is what I’ve heard from a couple of commentators. So, really differentiates people. This is long-term business with a long-term course of owner-managers.

Matthew Gordon: Yes. That’s absolutely the case. You set that out at the time and I’m glad to see that continues to be the case today. But can you tell me about some of the targets you have set yourself and why you have set yourself those targets? For instance, you have obviously got a greater institutional shareholder, the Register is much more institutionalised. Why was that important to you?

Christian Milau: Yes, I mean I think the capital pools out there, certainly sit the larger ones in institutional hands and a lot of our peers, and certainly in the USD$1Bn to USD2Bn market-cap sort of range, you know, they are heavily supported by some of the precious metal specialist institutions, but also some of the generalists out there, looking for exposure to Gold, particularly as the cycle turns and it looks like it’s going to continue to turn. And our goal really was to diversify that shareholder base. We have been supported very heavily by the Ross Beaty’s, Lucas Lundin’s, Richard Wark’s of this world, high net worth’s. And I think it is time to also be hopefully give an opportunity for those institutions to come in, and we have seen that slowly happening and I believe that in the next 6 to 12 months, as we become that sort of scalable producer, and we start getting into the indices, you are going to see more and more of these institutions buying in. There’s even anecdotal evidence recently with this high liquidity since we announced the merger, that a few of those funds are already dipping their toe in the water.

Matthew Gordon:  Yes, I think that is the case but these funds have thresholds that you need to be, your share price needs to be over USD$1, or USD$5, or USD$10 for them to come and play. But you mentioned the indices there. That is a game-changer. You now, well, once the Leagold deal goes through, I think you are waiting to hear from the Mexicans as to whether or not that will happen. Was that a big target that you set yourselves back in August, September time when you were looking at, you know, how do you advance this thing?

Christian Milau: Yes, certainly as Equinox Gold, one of our targets was to get into the indices and on a stand alone basis, I know Leagold had the same target in the sense we were a similar size. By getting our assets into production, doing some exploration, continuing to build up our portfolio; both of us and on an individual basis, we were very close and on the cusp of that. You know, needing daily liquidity was probably the key threshold for both of us to meet. We were both doing give or take, maybe USD$1M, maybe up to USD$2M a day on occasions, and now since the merger has happened, you know, quite often we have been doing USD$10 to USD$20M a day. Which is a huge step change and that kind of threshold has really opened the eyes of a lot of larger investors and certainly, we have talked to Joe Foster in New York, who runs VanEck and who potentially could be the largest, or the second largest shareholder in the next 6 months as we come into the indices.

Matthew Gordon:  So it is nothing short of good news all around and when you close the Leagold deal, life is great. I’ve looked at you share price, obviously, like a lot of producers, in August your share price went up, which is great news and the announcement of the potential of the deal around December time, you saw another big spike. So that’s fantastic. So I want to talk to you today about running big companies because, as you know, with size you get cost savings but you also see companies get a little bit lazy, they get a bit fat, they get a bit casual about it because times are good, there is a lot of cash around. And we have seen the industry is littered with such stories. So what are you guys doing? What’s the plan here? Are you going to continue; you want to get to this million oz production a year, which is a great threshold to aim for; very few companies, very rarefied air. But do you feel that with that comes a responsibility to look after the pennies, as it were? Because margins start getting eroded. You are a bulk, low margin business, so how do you, or as a company look at that?

Christian Milau: Yes, I think you are absolutely right and one of those keys is not to lose that focus as you grow. Part of it is about building a culture and a support base that has got that entrepreneurial spirit and flare that continues on. And again, having that largest shareholder being the chairman and sitting on the boardroom table does focus the mind in a sense. And owing shares ourselves: we have been through this a few times before and you learn some lessons along the way. When we looked at this deal, this merger, we set ourselves some targets here, a certain level of synergies to have some cost discipline in it. I think we set a reasonably low threshold because we wanted to be able to deliver on it. And we will look at cost-savings of corporates and in-country levels. There are going to be purchasing synergies. There’s obviously going to be the cost of capital savings and I think that the announcing of the refinancing on the back of this deal already shows that savings potential will come through on day 1.

All the global banks are coming in and reducing the cost of capital. Mudabala continues to support as well. And Ross has been investing at market – no discount, so I can say that we are already showing some of the potential synergies that just will be basically brought into place as soon as we close in probably late February.

Matthew Gordon: Can you just share with us some of those variables? Okay, the cost of capital is usually one of the most single expensive components, you know, that companies have to endure. What are the other areas in terms of the savings you talk about with the completion of this merger and obviously earlier mergers?

Christian Milau: Yes. When we announced this, this was at market, nil-premium merger. In the last year, I think there have been two of them: us and Barrick and Rangold. And both of us were up almost 30% within the first month, so the reaction has been very good. The way we looked at was that neither side was giving away or taking a premium. We were both getting the upside and sharing in it. And I think the synergies required were not necessarily, they don’t have to be large. And what we have articulated is, you know, up to $10M of synergies, I believe there’s probably more there in the mid-term, but you are certainly going to be having two head offices in Vancouver combing into one so there will be I guess, fortunately, some opportunity there to combine and use the best skillsets of both parties.  In Belo in Brazil, we will be combining offices and using the best skillsets there. We’ve got actually the extra scale there now in Brazil and we will be looking at saving on purchasing. And interestingly, Neil Woodyer, he will be the CEO, and I’ll be supporting him here. We did this together in Africa; we sort of went from 1 mine up to 4 or 5. You start getting your purchasing synergies, your scale and your ability to leverage profits, and then there’s the cost of capital savings on the side.

Matthew Gordon: Right. But there’s a couple of things that you can’t control which will impact you hugely. One is obviously spot price for Gold – what’s it actually doing in the market place. And the second thing being that you are a bulk, low-grade operator here, I think your grades with some of these acquisitions, we were talking about 0.3 when we talked last. Obviously, they have gone up a bit so that gives you a bit more room to make a bit more money, but those two components, you have got to closely, well, I suppose with the price of Gold, you can only understand it and have a view in the future. Do you have a view on how long this price is going to sustain for? Let’s start with that one.

Christian Milau: Yes, I guess part of our theory and thesis here is, I know that Ross uses a baseball analogy but in the fourth of 9 innings, you are still in the first part of this cycle turn. You know, Gold has had a decent run, I’d say that it has probably run a little faster than I expected at this stage. We are preparing the business to see through the cycles. We don’t believe it is one way and it only goes up. We think we are in the early stages of this turn here; there are still USD$17Tr of negative yielding debt out there. Stock markets are still doing well, generally. Global growth is slowing a bit. It’s lining up fairly nicely for things like Gold and other commodities generally.  I think our business is going to have the leverage and the ability to take advantage of that Gold price, but it doesn’t need it. We will manage the costs. Particularly at the moment, you are not seeing a lot of inflation coming through in terms of imports for our business at the moment. So you know, it has been a fairly nice and steady environment on that front.

Matthew Gordon:  What do you mean you don’t need it? Everyone wants to make as much money as they can, don’t they? When you say you don’t need it..?

Christian Milau: I guess when you see what has happened in the past in a few of the cycles, if Gold runs up quickly, you tend to see everyone kind of saying,  I remember when I was working in Africa; everyone is making ‘super profits’ which may or may not be the case, Governments tend to want a bigger piece of the pie, employees obviously want more of it, communities do. And the problem is that they don’t recognise that quite often, the oil prices are going up, the input cost is going up, the labour costs are going up. So margins tend to expand and contract as the Gold price moves up. And they do widen when the Gold price moves up but it’s not just a linear relationship where if the Gold price moves up, your costs stay flat. Quite often they move somewhat in tandem, although I agree that your margins can widen if the price goes up. So a steady increase that is slowly happening or managed rather than some spike because of some event or incident is much better for the industry.

Matthew Gordon: Okay, so Christian, let’s talk about the converse there, let’s talk about the bit which you can control to a large degree, which is the cost. So you have got this kind of low-grade ore but it is quite similar across all of your projects? That is the style of ore that you are going to be mining? So how do you keep that under control? Because I’ve had a look at your presentation, you don’t talk about AISC, at all, and I wondered why?

Christian Milau: Yes. I think part of the hesitancy at the moment is that we would like to close the merger with the Mexican Anti-Trust, we expect later this month, maybe even the third week, then we can actually put out combined guidance. We want to be cautious here: theoretically, we shouldn’t be putting out some kind of combined guidance when it’s only been a closed deal. But I think people can see from our prior years’ production and costs, how both sets of assets have performed, you get a good idea, you can see our rough production levels at the mine sites. You can see our All In Sustaining Costs of the mine sites and analysts do a good job of covering us; I think we have 6 or 8 in total and 6 in common between the two. As soon as we close, we can then put out something fairly quickly thereafter that’s on a combined basis and is going to allow us combined board management to get behind it but it’s just a few days too early right now to put that out.

Matthew Gordon: Okay. Fair enough. Now I used the phrase earlier which was, ‘buying success’.  You are buying ounces, okay? You are building this into a large producer and I guess what people are going to be very keen to understand is, are you going to be doing this profitably, or is this just a case of producing enough dollars to be, you know, interesting? It’s a large machine that you are constructing here. You have got similar ore bodies, similar processes and as you say, you are very, very good at it. But if it’s low-margin, is that of interest to Family Offices? Retail? High Net Worth. Are you missing the fundamentals of business here, or are you just in the business of building scale? Again, if I looked back through history, you have got companies that have built themselves up into such a size that they feel they are almost too big to fail. But they do.

Christian Milau: Yes, I know. That’s a very fair question and comment. For us, we set a target of roughly 1Moz. Leagold wasn’t quite so specific, but we have similar goals of building a business in the Americas that is diversified, scalable, investable, and I would say that this transaction is the first catalyst in getting there. What it brings us is some scale, but really the goal of the company over time, is to create a company that, eventually. I suspect that we would sell or divest a couple of smaller assets. We will add a longer life or a new asset that will continue to improve the quality of the assets in the portfolio. And in the long-term, and I’m going to say 2 to 4 years here, we want to be paying dividends. Our largest shareholder wants dividends. Ross would like dividends like he is getting paid at Pan Am Silver and so one of the largest institutions. But we are still a growth company at this stage. We still believe that we can continue to extract some value, create some value through sort of enhancing the portfolio. And so we will continue to do that. And I think that a lot of companies have got caught in a trap of being either single asset or smaller, which I think can be an exciting story in that asset, and you can see some huge stories in exploration plays but they are few and far between at the end of the day, whereas this will be a very liquid, investable company for the long-term and through cycles. And we are not exposed to one single jurisdiction or asset that will cause us challenges if there is an issue. We can weather the storm, in a sense. The other piece of it that I think is really important here is the fact that insiders will own 11% of this which is a very significant amount for a company of this size. I think our next closest peer is 1.7%, in that sort of mid-cap or larger cap space. So it will also have an owner focus from the management team and the board as well.

Matthew Gordon: So, just to help me understand this because I think it’s important that people understand they type of company that you are or are trying to be, and where you are in terms of an investible company for them. So you want that scale. So you want to get noticed by buying these assets, you are saying to me, at some point then, you will take stock and go well, let’s take a look at our portfolio here as some of these things no longer meet the new criteria for this entity, we may offload them, you may cash in, as it were, to some degree, and then go after a different type of profile to make sure that your company continues to be I guess, profitable or more profitable, the grade goes up maybe? Is that the way you are picturing it? How does this evolve, is what I’m saying? I know what you were when we last spoke in August, I know what you are telling me you are going to be after Leagold but what is the thing that you are trying to be? It can’t just be, we want to be a 1Moz company, it’s got to be more to it than that.

Christian Milau: No, we want to be one of the most profitable, long-term companies that can actually see through cycles. We are not building a company to flip it, to sell it, etc. We are basically building something that people can in invest in long-term, and when you put these two companies together, we’ve used some charts that I think are a good analysis of this: combined market caps let’s say on the merger are USD$1.5Bn to USD$1.7Bn. We’ve already had a little bit of a re-rate towards that CAD$2Bn to just over that CAD$2Bn range Canadian dollars for market cap purposes. And when you look at a lot of our peers who are give or take 800,000oz, 1Moz in annual production, a lot of them trade between USD$2.5Bn to USD$3.5Bn up to USD$5Bn. We are only, give or take, half of that range at the moment so what we are creating is something that has some re-rate potential, long-term diversity and scale and investibility, with a growth focus to it at this stage. And eventually, it will become a little more income-generating as you get some yields from eventual dividends here, and that’s when investors have asked about that capital discipline, I think is really well rewarded as well; when you can pay some of that money back to shareholders at the end of the day.  

Matthew Gordon: Right, because I’m thinking about people like IAMGold – at one point, they were USD$9Bn, just under USD$2Bn now. You’ve got B2Gold who have been through the same kind of growing pains and falls in value. So scale gives you, well, I think scale gives you some options here but if you are not looking after the business fundamentals, if you are not looking after margins, if you are not looking after share price, because, let’s face it, when you are a big company, it gets harder to double in size every year, okay. You can buy some of that, sometimes, but again, the business fundamentals catch up with you. So, what are the lessons that you’ve learned by looking at what’s been going on out there? You are an experienced guy; you have worked in large and have built large companies before. And you have got some fabulous people on the board, but what are the things you are concerned about? Or have you just been focussed on M&A, M&A and M&A. What are you talking about, you guys?

Christian Milau: No, for us, there’s also got to be a shift to continue to execute internally, we have got 4 growth development projects where we will make sure that we’ve got a tension on those over the next couple of years. M&A becomes more opportunistic in the future, I would say, where it’s maybe not as front and centre as it was in the last couple of years here. And we’ve got to keep that culture, that spirit, that entrepreneurial style to the way that we approach things and part of that is being somewhat lean and mean, but also, you know, when you bring people into that culture, whether it be leadership at your mine sites or even at the corporate office, they really come with that mentality and experience and really knowing what we are about. And I’ve seen a number of companies overextend themselves where, you know, we are used to putting together that 100,000 oz to 300,000oz, maybe 400,000oz producers into a portfolio of assets. You know, building something now that is USD$1Bn plus in capital would probably be a different strategy for us, we really want to be careful of that right now. There are some deals in size; we have seen a few companies go, alright, now we are going to take on those big ore class projects, but they don’t have the balance sheet for the capital, maybe the experience to actually take it on, and it can very quickly blow up your balance sheet. So we have stuck to our needs in that sense and, you know, adding assets that can focus on our portfolio in that, give or take 400,000oz of annual production. You know, the smaller scale growth and development projects, which I think everything that we have been building and doing, is between USD$50M and give or take USD$100M. You can manage the capital, even if you have an overrun in terms of time or cost, it doesn’t blow up your balance sheet, so I think that’s also very important.

Matthew Gordon: Okay. So who is driving this? You talk about entrepreneurial spirit, okay? And that’s an easy phrase to use but the reality of entrepreneurial spirit is very different in a corporate environment; it can get killed, it can get forgotten. People can, as I said, get really lazy, really quick here, so who… I guess you are going to tell me Ross Beaty… but who is the guy that says, you guys have got to keep this lean and green and mean for a long-time coming? Because if you talk about timelines, we’re going to talk about keeping this thing running, there’s no end in sight, I think it’s hard to keep focussed, so what are the things that you are being told that drive this entrepreneurial spirit that you talk about?

Christian Milau: You are absolutely right: Ross is the key driver of that. I mean, he has built 15 companies over the last 30+ years and you know, it’s about putting a management team in place and keeping incentivising them also, in the right way and this tends to be that long-term link to share price and company performance, rather than big annual pay packages that ultimately reward us just for doing our jobs on a day-to-day basis. And I think that that helps keep that focus. And when we hire, it’s a very disciplined approach to finding people that will fit in with that culture and that really want to roll up their sleeves and be a part of it. You know, we don’t necessarily have a large corporate footprint because a corporate footprint can detach you from what is going on at the mines; if there are layers of people, regionally or even in corporate office, then you know, we have very direct contact on a regular basis with the mines, and to be honest, Ross is on every week or two, just getting an update on where we are going. He makes a tour of the mine site. He just loves getting out there; he is a geologist by background and he loves getting out to the rocks and wants to be out in the field. When you look at the way Pan Am has done, and I would say they have a similar style, and I would say that that is not a bad model that they are looking to emulate to a certain degree.

Matthew Gordon: Yes. Has your remuneration changed since we last spoke?

Christian Milau: No, no it wouldn’t have. I have been at the same all year: I’m still at the bottom quartile and we had a good year, so I did okay this year.

Matthew Gordon: Have you cashed any of it in?

Christian Milau: No, no. I’ve put USD$2M in. It’s still there. I continue to have my RSUs, or anything that invests in a way that I keep a hold on my brokerage account. You know, I see this going much higher. Part of this is the delivery on our business platform and on our strategy and our vision. But also, I believe the Gold price and our markets are at a really interesting point; look at Gold – it has been at USD$1,550 for a while now. I would say that the average person doesn’t recognise that it’s USD$400 higher than it was when we bought the scheme, less than 2 years ago.

Matthew Gordon: Yes, well what the Gold price will do? Who knows in today’s climate, but you know, when we spoke, it was around USD$1,250, USD$1,300, for a long, long time. But again, we will see what happens there. You want to hit this 1Moz number – are you going to be able to do that through organic growth now? By getting your current assets into production, or is there some more M&A on the horizon?

Christian Milau: Yes, we do have, as I say, those 4 development projects and those will allow us to get to that point in the next couple of years. It’s fully funded as well with our new refunding of the balance sheet, which was also a nice reason to be doing this deal, or helpful for doing this deal. Both companies are lightly capitalised; capable of delivering in a methodical way on their strategies, but now we can actually say that the balance sheet is sold and strong. The data at those ratios are very manageable and low, and the cashflow from the operating business will help to fund that as well. So it really will be deliverable in the next couple of years.

Matthew Gordon: And do you intend to keep the company leveraged at current rates or is the idea, to once you actually get cash flowing, to deleverage and actually make it slightly less reliant on debt? Because again, debt can kill companies, large companies, if things turn in the market.

Christian Milau: That’s absolutely the case: we do want to deleverage to a degree. I think this deal is starting to allow us to do that. As we get through these and develop the cash flow assets in the next 2 years, you’ll see that continue. Then obviously, it moves through more steady states and it allows you to start thinking about those dividends.

Matthew Gordon: Beautiful. Christian – great update. It has been a while since we spoke. You have delivered everything you said you were going to. The tone seems to be the same. I’m excited for you guys; this growth has been phenomenal. You just need to get yourself on the GDXJ and the GDX, and who else are you aiming for? The TSX composite, I hear? Stay in touch and let us know how you are getting on. If you come through London, obviously come and say hi.

Christian Milau: Yes. Stay tuned for the next 6 to 9 months; I think there’s a lot that is going to happen here.

Matthew Gordon: Buckle up. Buckle up, guys.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Equinox Gold company logo.

Rio2 Ltd (TSXV: RIO) – Pragmatism Is Often Overlooked

Rio2 Ltd.
  • TSXV: RIO
  • Shares Outstanding: 181.4M
  • Share price C$0.38 (24.02.2020)
  • Market Cap: C$68.9M

We recently sat down for a much-anticipated interview with Alex Black, President and CEO of gold developer, Rio2 Ltd (TSXV: RIO).

The management team has a good track record, but the market seems to have been deterred from Rio2 because of an adjustment to the company’s resource size. In its large feasibility study plan, Rio2 cut the scale of its gold resource in half: a lack of ambition, or sensible management? Watch and decide for yourself, though we lean towards the latter.

We discuss:

  1. The Water Permitting Situation: A Temporary Solution?
  2. The Gold Market: How Does 2020 Look?
  3. CAPEX, Resource Size And Other Stats.

Company Website: https://www.rio2.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Equinox Gold (TSX: EQX) – An Exciting Gold Opportunity

A picture of cartoon gold bars.
Equinox Gold Corp.
  • TSX: EQX
  • Shares Outstanding: 113.5M
  • Share price C$12.6 (21.02.2020)
  • Market Cap: C$1.43B

Equinox Gold, a multi-jurisdiction gold mining company, has had a quite remarkable rise over the last few years. Its share price hovered around CA$5 at the start of 2019 but has more than doubled today.

We recently sat down with Equinox Gold CEO, Christian Milau, to discuss why this could be one of the most exciting gold investment opportunities around. Alternatively, you can read one of our recent gold-related articles, or you can watch a different gold mining interview.

We discussed:

  1. The Gold Market: What Does 2020 Look Like?
  2. An amazing increase in share price: how?
  3. Gold grades and quantities.
  4. A unique remuneration policy.

Company website: https://www.equinoxgold.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A picture of cartoon gold bars.

Integra Resources (TSX-V: ITR) – A Renowned Team And Exciting Drill Results

A gold tinted photo of some US$100 bills and a pile of gold coins with a white Crux Investor logo in the top right, and a white Integra Resources logo in the top left.
Integra Resources Corp.
  • TSX-V: ITR
  • Shares Outstanding: 119.6M
  • Share price CAD$1.25 (20.02.2020)
  • Market Cap: CAD$150M

We recently conducted an interview with George Salamis, President & CEO of gold-silver explorer, Integra Resources Corp.

We regularly discuss interesting gold market proceedings on this platform. Check out one of our other recent gold company interviews, or maybe some of our recent informative gold investment articles.

The management team at Integra Resources is the former executive team of Integra Gold Corp, renowned for turning a C$15M gold company into a C$590 million (sold to Eldorado in 2017). What have they got this time around? We discussed:

  1. The share price increase: doubled in less than a year.
  2. Its flagship asset purchased from Kinross Gold Corp. in 2017.
  3. Promising drill results in 2019.
  4. Exploration plans for 2020.

We were also keen to ask why a gold-producing giant like Kinross Gold Corp. would sell its gold-silver asset to Integra Resources unless it was a dud? We explored some very impressive drill results and big plans for 2020. Do shareholders have a reason to get excited? With these results and a management team with such an impressive track record, maybe they do…

Company Website: https://www.integraresources.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A gold tinted photo of some US$100 bills and a pile of gold coins with a white Crux Investor logo in the top right, and a white Integra Resources logo in the top left.