Galiano Gold (GAU) – Turnaround Story Ramps Up Exploration Excitement

Galiano Gold Inc.
  • TSX/NYSE: GAU
  • Shares Outstanding: 222M
  • Share price US$1.17 (22.06.2020)
  • Market Cap: US$259M

Interview with Greg McCunn, CEO of Galiano Gold (TSX/NYSE: GAU)

McCunn is a sharp operator. When a gold producer turns its focus away from searching for ounces in favour of creating cash, it allows the company to leverage the current gold bull environment rather than looking for potential that may go unfulfilled. Ounces in the ground are all well and good, but free cash flow gives a company options. This has been reflected in Galiano Gold’s share price recently: it is up 50% since when we last spoke in June.

Galiano Gold used to be known as Asanko Gold. The company has established itself as a mid-tier gold producer having started production in 2016 at its Ghanaian gold mine: Asanko. The gold mine is operated in a 50:50 JV with Gold Fields (JSE, NYSE: GFI). It is throwing off around 250,000oz gold pa, solidifying the company’s status as an established mid-tier gold miner.

So, this is a strong and stable gold mining operation, but where does the sex and sizzle come from in this story? The answer appears to be an exploration. In fact, McCunn has just signed off an additional $10M on top of the original $10M exploration budget as the company continues its hunt for economic gold ounces. Here is the real growth story for investors. Pay attention.

We Discuss:

  1. 2:42 – Company Overview
  2. 4:05 – Cash vs Ounces: Development and Changes
  3. 9:23 – Run Through of Q2 Results
  4. 12:10 – What’s Next? Optionality, M&A, $300M Facility
  5. 14:22 – Cost Mitigation & Cash Generation: AISC Still on Target?
  6. 19:34 – Exploration: Plans and Allocation of Capital
  7. 23:08 – The Future: Predicted Cash Generation and Allocation
  8. 26:23 – Shareholder Relations and Likelihood of Selling
  9. 28:55 – Relations and Conversations with Goldfields

CLICK HERE to watch the full interview.

Matthew Gordon: Can you give us that one-minute overview?

Greg McCunn: I’m Greg McCunn, I’m the CEO. Galliano is a Gold-producing company. We operate the Asanko Gold mine. It’s located in Ghana, West Africa. The mine is a 50:50 joint venture between Galiano and Gold Fields with Galiano as the operator. Last year, the mine produced about 251,000oz of Gold at an All-in Sustaining Cost of around USD$1,100 p/oz. We expect more of the same this year in 2020. I’ll talk about that as we get into it. Looking at Galiano corporately, we do trade under the ticker GAU on both the New York Stock Exchange and the TSX. I think our market cap this morning when I walked into this interview, was about USD$375M. I think that’s up about 50% since the last time we spoke in early June.

Corporately, also from a balance sheet perspective, we did have a great second quarter, which I’m sure we’ll talk about, we continued to build cash on the balance sheet. We are sitting with about USD$68M in cash at the end of Q2, and of course, no debt.

Matthew Gordon: Can you just talk us around that time? What were the things that you had to instigate and put in place?

Greg McCunn: Just going back about a year and a half, when I came back to the company as CEO, which we went through in my last interview and how I ended here, as you said, there was a real culture that had developed at the Asanko Gold mine. This mine has been in production for 4 years, just over 4 years now of commercial production. During the first 3 years, the company essentially eroded its balance sheet. The mine didn’t distribute any cashback to the parent companies, the joint venture partners, and any cash that was generated all went back into the ground in terms of capital improvements. And it was really actually a pretty decent EBITDA margin at the mine with about USD$300M in EBITDA generated over the first 3 years of production. All of that and some of the company’s treasury actually got reinvested in the mine.

Last year we set about trying to make the most of those investments and looking at the development of the mine going forward in conjunction with our joint venture partners trying to optimise the assets that we already have, which is that 5.4M ton p/a Nkran mill, CIL processing facility, multiple open-pit operations. And we came up with this plan, we published it back in February and the new technical report. We’ve got a 10-year mine life, very little development capital being spent across that 10 years producing, anywhere between 230 and 250,000 oz p/an of Gold at an All-in Sustaining Cost of just over USD$1,100 p/oz on average for those 10 years. Obviously, what this has allowed us to do is to really, instead of focusing on making the mine bigger and better, it’s focusing on generating cashflow.

I think that’s really shown over the last 9 months. In the last 3 quarters, the mine has distributed USD$95M to the joint venture partners. So, USD$47.5M to Galiano’s account, and that’s allowed us to really prepare a balance sheet which was quite strained in the middle of last year with less than USD$10M of the treasury to where we are today, which is a much stronger position.

Matthew Gordon: It’s a question of how you go about building up a big and meaningful mine, how you allocate that cash when you allocate that cash and what the expectations are around the returns on that cash invested.

Greg McCunn: I think one of the most significant changes that we’ve made it really, again, the discipline around it and how you spend that capital and looking at the return on invested capital very carefully and realistically. Mining is inherently a capital-intensive business. I think we talked about it last time and there there’s really no way around it; we will have to invest some capital, and you will certainly see here in the second half of the year, we’ve got tailings storage facilities, we’ve got new pits that we are shifting into. There is sustaining capital to get spent, but that capital is allocated carefully. And we target at a minimum, a 15% rate of return, at what we consider to be reasonable Gold prices at USD$1,300 p/oz Gold.

If you stay focused on that and really focused on generating that return, I think that brings that discipline, but also what you need to avoid having an unintended spend of capital is, and again, this is the second change that we really made is in round climbing. If you don’t have a good solid plan in front of you, with a four-year going, right now we’re working on a really highly-defined three-year business plan, ideally, that would be five, a 43-101 technical report life of mine plan is not a business plan. It’s an indication of what the asset is capable of. It’s a backup for your reserve statement that shows that your reserves in the ground can be economically extracted, but it doesn’t have all the details that are required to carefully plan out and allocate capital. And that’s one of the biggest changes that we’ve made in the last year and a half, is really working on our forecasting, our budgeting, going back and looking back against the forecast that we made and finding ways we went astray and where we could make improvements, and continually improving that forecasting and planning process and stretching it out from your annual business plan. Right now, we’re working on the three-year plan.

Matthew Gordon: Clearly you didn’t know what was coming down the line. So how have things been?

Greg McCunn: Q2 was really a solid quarter at the Asanko Gold mine, as you said, we were expecting when we spoke in June, that it was going to be a decent quarter. We had another record quarterly production from the mine – 69,000 oz of Gold production, that brings our total year to date up to just over 135,300 oz. We’re well on track to achieve our guidance of between 225,000 and 245,000 oz for the year.

Similarly, for costs, we were off to a good start in Q1. In the second quarter, our All in Sustaining Costs were slightly higher as we started to lift on the tailing storage facility. And they ended up at USD$1,067 p/oz. So that brought our year to date total to about USD$930 p/oz. Again, well below our guidance of between USD$1000 and USD$1,100.

The cashflow continued in the quarter; we distributed USD$30M to the joint venture partners from the mine in Q2, we continued to build our balance sheet. I think also very importantly in Q2, which was something we’ve been pushing for a while, really one of the challenges that this company had maybe gone back two or three years is that it didn’t have access to capital when it really needed it. And that can happen in the mining business, especially for junior mining companies. One of the things that I tried to do when we came back was to make sure that never happened again. Late last year, we took our first step, which has we put in place a USD$30M revolving line of credit at the joint venture level. That just gives us improved access to working capital. And you would’ve seen this quarter, certainly, investors would have seen that we filed a USD$300M base shelf prospectus in conjunction with a USD$15M at the market financing perspectives.

Clearly, we don’t need any money right now. We’re generating lots of cash flow, but these are really important tools to have in your financial toolkit to give us flexibility in the future going forward. What we’re trying to do here, I think the message we’ve been trying to get across, certainly in these interviews is we’re trying to build a proper business here and strong business requires access to capital at the right times. I think you can look for us to have those financial tools in place all the time, as shelves expire and ATMs expire, we will renew them. I think its good business practice right now so that was also an important milestone that we hit strong operational performance, strong financial performance, and then continuing to put the business in a position where it could be successful going forward.

Matthew Gordon: Should we read anything into this USD$300M facility? Any M&A activity?

Greg McCunn: I think what we’ve been trying to do for the last year and a half, we really tried to position ourselves for what’s next, which as the title that you see on our webpage is ‘building a sustainable business’, and fundamentally, mining has risks and challenges associated with it. It has got periods of capital investment that are required where you’re going to be pushing back a pit or doing some sort of significant investment. Having a single asset, it inherently exposes you to the timing on Gold prices and whatnot. So absolutely we wanted to put ourselves in a position where we can now look to grow the business, to add a second operating asset. 

If you go back a year and a half, we were in no position to do that. We didn’t have a credible life of mine plan. We didn’t have any money. We didn’t necessarily have the right people in the right places. And certainly, we didn’t have the financial tools to be able to finance or do anything like that. What we’ve been trying to do over the last year and a half has been to put ourselves in a position where we’ve been able to do that. Now we’ve been adding personnel and board members to build that management team and that credibility and experience of building businesses. We’ve improved our financial position considerably, and you saw some of the final pieces being put in place there in Q2. In conjunction with it, we’ve got the mine running with a credible life of mine plan in front of us. For the first time, and certainly, in the last year and a half, we’re in a position where we can now start to have those conversations and do that work. Certainly, we’re active and we’re looking at opportunities. I think we said, last time we spoke, we want to make sure that when the opportunity presents itself, that we’re ready. We don’t have to do anything, but it’s not a switch that you can just flick on to go to the ready stage. We’ve done a lot of the good work here in the first half of this year and I think we’re in a good position for Q2.

Matthew Gordon: Can we just talk about the cost component? Are you on target to consistently deliver Gold ounces at less than USD$1000?

Greg McCunn: Let’s talk about the outlook for the second half and maybe where we’re going for next year because absolutely, this is critical and was one of our main objectives when we spoke last time was trying to drive the cost structure down. First and foremost, I think everyone should take note that we did reiterate our production and cost guidance for 2020. We are tracking according to our plan, but without giving quarterly guidance specifically here, I think everyone can do the math, the first half of the year was very heavy production-loaded and very low cost because we weren’t spending much of anything in terms of sustaining capital.

Right now, in the third quarter, we’re in a very important transition period for the mine. This is actually the most important three months of the mine over the next two and a half years. What’s happening is we’re transitioning out of one of our main pits called Nkran, which we’ve been mining. We’ve been mining out for the last four years. We finished mining the second phase of ore there at the end of Q2. And we moved out of that page now and shifted to a smaller satellite called Akwasiso. Obviously, supporting Akwasiso, supporting where the main driver of production is going to come from now, what do we have? About 1.5M oz of our 2.4 Moz of resources, the main pit, where we’ve been mining out for a year and a half. As we’ve shifted out of Nkran and into Akwasiso, what that means is we’re going to be faced with lower grades, the reserved grades of Akwasiso are lower as they are at Esaase. We’ll be producing between 1.25 and 1.35g p/t, along with our reserve grade from those two pits, which means our production levels are going to come down slightly.

If you look at our mill throughputs and our recoveries, we’re going to be sitting in that 60,000oz per quarter, that’s 240,000 oz p/a. And when things go a little bit better, they will be a little bit stronger. When they are going little slower, they will be a little off that, back and forth. You can expect basically, for the next two and a half years are production levels around that.

And certainly, the other important transition here in Q3 is that this is an important quarter for a couple of key sustaining capital expenditures. We are doing a push back of the Esaase main pit. That’s going to really benefit us throughout the second half of the year and into 2021. You can expect stripping costs to be higher there. And importantly, we’re finishing up the fifth raise of our tailings storage facility, which started at Q2, but really the bulk of that work is happening in Q3. You’re going to see that Q3 will be certainly our highest All-in Sustaining Cost quarter for the year.

We are comfortable that we’re still going to hit our guidance. This was going according to the plan, but the nature of the All in Sustaining Cost metric, unfortunately, when we do things like stripping, we capitalise it and amortize it from an accounting perspective over the ounces that are open. But for All-in Sustaining Costs, we adhere to world council standards and run all those costs through the quarter that are incurred. There’s some bumpiness in the AISC.

But importantly, when we talked about the life of mine, I think your question, Matt, was where are we heading in our cost reduction strategies? And certainly, we were very keen at the start of this year. We published life of mine plan and showed All-in Sustaining Costs over the 10-year period, averaging just over USD$1,100 p/oz. In our mind, that is too high. Where would we set ourselves an objective to be able, where we feel like we can drive the cost structure down to about that USD$1000 p/oz level or reduce the cost by USD$100 p/oz -it’s a big target. The bulk of that was targeted by our mining operations, which are contract mining. We felt we could possibly take USD$0.50c p/t out of our mining costs, which to put that in perspective, we move about 30M tons p/a so that’s USD$15M in savings right there.

Unfortunately, due to COVID, retendering these strategic mining contracts hasn’t been as easy as we would have liked. It’s really difficult to mobilise contractors into Ghana, the borders have been closed there. Whilst we’ve been able to keep the mine running and keep the existing contractor going it’s been somewhat challenging running a proper tender process because we’re limited to those people who can supply equipment within countries. What we’re doing is we’re working now on a modified version of that. We’re really trying to optimise 2021 to capture as much of the cost as we can and trying to drive mining costs down. If we can get between 50% and 70% of those savings for 2021, I think that would be a really good outcome in the backdrop of where we’re at.

Matthew Gordon: Have you had to reassess how you allocate capital against exploration specifically?

Greg McCunn: Yes, fortunately, switching gears to exploration is one of the things that we’ve been able to keep going very strongly. Our second quarter was a really good start to our exploration program, and we were quite excited about it. When we spoke back in June, we didn’t really have any of the results coming out yet. We’ve now published two news releases. From our exploration perspective, in Q2 we were focused on trying to expand our reserve-based around these two satellite pits that we’re going to be using for the next two years. Instead of Nkran, we’re going to be mining out of these two satellite pits to support the Esaase deposit. One is called Akwasiso, which we mentioned, and we’re mining. The other is called Abore, which is located about 10km north of the processing plant.

At both, we ran pretty extensive drill programs at both of those pits. We were successfully able to expand the reserve base and those numbers will be quantified in our year-end reserve update, but we’re now busy doing the mine planning. We published all the drill results. We’ve added a third phase of mining at Akwasiso where we’re mining now. We were meant to be finished up there in January we are busy working on the new plan for 2021. And I think we’ll be mining there well into the year. That’s a tremendous improvement to the business. It means we don’t have to go and open up a new pit, establish new haul roads, put in fuel bays, all the things that contractor mobilisation, et cetera, that go along with moving the operations. Those are things that we’ve been successful at in exploration and we might have found only 300,000oz or 400,000 oz of additional reserves there so it’s not an overly dramatic change, but it dramatically improves the business over the next two years, which is what the whole purpose of that Q2 program was. We’re very happy with the way that’s turned out.

For Q3, we’ve shifted gears now to something to more sizzle perhaps in terms of finding a new discovery. We’ve shifted the drills twofold, first to our target, which is about 10 km south of the processing plant. It’s called Miradani, and we haven’t had any reserves declared on here. We have had some historical drilling that we did last year in 2019. It was very successful. It’s some nice wide intercepts of higher-grade mineralisation. This has a strong potential to be the next pit that we bring into production.

And we’re focusing our drilling right now on a starter pit, which we think has the ability to maybe have a couple of hundred thousand oz of short-term reserves that we can even get into the mine plan next year or in 2022. Trying to make that business better. But really, Miradani is a 3km-long mineralised trend. It’s going to require us to continue to work on it for probably the next year and a half of running drilling programs.

We’re quite excited about this. This could be the next multi-million-ounce deposit that we find on the Sikagrava Gold belt. I think that’s where some real sizzle is going to come for investors who are following this when we start to get some results from this. And hopefully, we’ll see some similar results to what we saw in 2019, which were quite nice.

All of that is beginning to develop again into this three to five-year business plan to try to improve upon what we have now, drive the cost structure down, find higher-margin ounces in the ones that we had in our existing mine plan.

Matthew Gordon: You’re sitting on 21,000 hectares? What do you think you’ll end the year with on the current plan?

Greg McCunn: Let’s just assume we continue at today’s Gold prices; you’re looking at margins where we’re going to continue to produce significant amounts of cash flow. In theory, we could finish the year USD$80M in cash on the balance sheet, continuing to spend on exploration at the mine site and maybe even accelerating that exploration program. We had a budget of USD$10M this year. Our board approved us to increase that to USD$20M for the year, which would allow us to really get at some of the higher, the longer-term targets that we are currently not working on. The joint venture still needs to approve that budget. We’re working with getting that through Gold Fields, but they have the same view that we do; that this is a tremendous land package. We’ve gotten most of one of the up and coming Gold belts on Ghana tied up here in our 21,000-hectare land package. Unlocking that potential is something that could create a lot of value for shareholders.

Matthew Gordon: How do you apportion that? You can’t go wild, you’ve got to be rigorous, thoughtful. What are you going to do with that extra USD$10M?

Greg McCunn: We’re going to continue to develop Miradani, which we think is very important. The original plan had us just really focusing on this starter pit. Our intention would be to continue to drill there beyond the end of Q3, keep going into Q4, go for the whole year, continue to run our drill program. We can increase the number of drills that we have turned there, that’s something that right now we’re sitting with three drills turning. We’ve been slowly increasing our capabilities on-site, our geological capabilities and building our exploration team, which are very strong, local, Canadian geologists who we’ve been able to bring on board. Our SVP exploration, Paul Klipfel, who joined the company in April, he is leading this program, we did manage to get Paul into Ghana. He’s on the mine site, and he’s expecting to be there for a big chunk of time this year, overseeing this program.

Focusing on Miradani, but also continuing to advance some of the targets immediately to the west of the processing facility. We did acquire a new concession, which we slotted in. It’s an exploration level concession. It’s got three advanced targets on it. We are busy doing the groundwork on. That’s something that we acquired earlier this year. We’ve been getting ready to start to drill those. And I think we could be in a position, subject to JV approvals and budget, which we’re busy developing. The drill goes in the fourth quarter, which would just continue to build the story, to improve the business through exploration.

Matthew Gordon: Four or five names hold 60% of the company, they are meaningful, they are with you. Are they all still with you? Are you seeing any issues with any of them?

Greg McCunn: Not that I’m aware of. During the last filings and certainly all the meetings we’ve had in the back of Q2, I think genuinely our biggest and most supportive shareholders are all still there. We’ve got their backing to continue with our strategy here. We’ve put a tremendous amount of work into our investor relations activities in Q2, and really trying to get this story out on the street and what we’re trying to do here in building a sustainable business. I think it’s working; if you tracked our volumes and our liquidity, our trading volumes quarter over quarter, certainly Q2 has been the best quarter we’ve had since 2015. The volumes have almost tripled since where they were in the fourth quarter of last year. And partly that’s the macro environment, obviously. Retail investors are becoming interested in the Gold space, generalists are starting to return. I think we’re just seeing the tip of the iceberg of that now. And our volumes now are sufficient that we would qualify for readmission to the GDX-J, which we’re not a part of right now. The trend towards passive investment it’s very important to be a part of the indices. You certainly meet the market cap criteria; we did meet three of these periods in a row where we met the liquidity criteria. The first one under our belt here on the September rebalancing, we’ll admit for the first time in a long time to liquidity constraints.

Matthew Gordon: Are you seeing some selling from some parties? I guess it’s a normal part of trading business. People have different strategies, but any unexpected selling?

Greg McCunn: Surprisingly, we haven’t. I’m actually fully expecting it. And I certainly wouldn’t blame any of the bigger investors who were astute enough to invest in a company when we were trading it USD$0.85c a share and we’re now trading well over USD$2. That’s a very short turnaround in a year and a half. But we haven’t seen that. I think the bigger names have maintained their positions. We haven’t seen anything other than a few hundred thousand shares trading around the margins, which is typical in any environment. It does mean that we’ve got to work hard on that 30% to 40% that does really free trade. We need to work hard to improve that liquidity there. And I think we’ve met our objectives, certainly for the last quarter.

Matthew Gordon: Are Gold Fields going to help you find an additional asset to put into the portfolio?

Greg McCunn: Potentially they could. We haven’t asked them for any help in that respect. They’re facing some of their own changes, as you probably saw it: senior management changes at the Gold Fields level. So right now, we continue with our relationship with Gold Fields as it is. We operate the mine, we’ve produced the plans, and we certainly work with them with joint venture structures to get those approved. We don’t have anything longer-term strategic that’s brewing with Gold Fields who are quite focused on their own knitting right now. And rightly so, they’ve got a really nice project in Chile that’s looking like it’s starting to get into development. And certainly, Nickel has transitioned to his predecessor next year, will consume some of their focus over the next 12 months.

Matthew Gordon: Great update. I like what you’re doing, I like that you are sticking to the plan. I also like that you’ve increased the exploration budget. It does bring that sex and sizzle to the party. Stay in touch, let us know how those drill results pan out for you.

Greg McCunn: Absolutely. You can look for some news releases coming out here in the short term on exploration. I think that will be the key catalyst as we go forward along with continuing to deliver, obviously from the mine and keeping the focus on cashflow

Company Website: https://asanko.com/

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Artemis Resources (ARV) – Copper-Gold Player Regaining Trust?

Artemis Resources Ltd
  • ASX: ARV
  • Shares Outstanding: 1.12B
  • Share price C$0.07 (11.09.2020)
  • Market Cap: C$83M

Interview with Alastair Clayton, Exec. Director of Artemis Resources (ASX: ARV).

We always have time to hear a good turnaround story at Crux Investor. Mining is mining, and many things can always go wrong, but it is the actions of the management team that determine whether a company tumbles into obscurity or whether it rises back to prominence. So, is it the former or the latter for Artemis Resources?

Matthew Gordon talks to Alastair Clayton, August 2020


Artemis Resource is a copper-gold explorer and developer with significant assets in the West Pilbara and new tenement acquisitions in the Paterson Range. To tell you the truth, the company had been nothing short of a trainwreck up until recently. Ever since the share price peaked at A$0.52 in November 2017, it has been on a constant, despairing fall. Having sold its non-core gold assets for A$4.8M in March, Artemis Resources has been focussing its time and resources on developing the 2 best assets within its portfolio. They are polymetallic assets spread across Western Australia: the Armada/Paterson Range and Carlow Castle. So, what exactly does the company have with these 2 projects?

Armada/Paterson Range

Is this really going to become the next tier-1 copper deposit? Artemis Resources certainly seems to think so. An airborne magnetic survey was conducted at the property in November 2018, covering the western 47% of the Paterson Central tenement. It identified no less than 8 exploration targets within a 22km radius of Greatland Gold’s high-grade copper-gold Havieron project (which Artemis Resources’ tenement is adjacent to). Armada/Paterson Range is also situated in close proximity (100km east) to Metals X’s Nifty copper mine. The geology and mineralogy of the region is undoubtedly positive and promising, but there is plenty of action needed before this potential can be monetised. With majors like Rio Tinto, FMG and Newcrest taking interest in the range, it is clearly for a good reason.

Carlow Castle

Carlow Castle is a gold-copper-cobalt play that is perhaps the most advanced of Artemis Resources’ portfolio projects. Moreover, it is located 28km Northeast of the 100%-owned Radio Hill processing plant: Artemis Resources’ strategic, centrally-located asset that is permitted for gold production. Artemis regards Carlow Castle as one of Australia’s most exciting Cobalt discoveries; now, it is time to prove it.

In March 2019, the company announced a JORC Resource update. This impressively grew the Resource by 71% based on 2018’s drilling up to an inferred resource of 7.7Mt grading 1.06g/t gold, 0.51% copper and 0.08% cobalt (260,000oz gold, 38,000t copper and 5,900t cobalt). Given the solidity of these numbers, despite their lack of real scale, it surprises me that investors have exhibited such little interest, especially given the current gold bull environment. I’m seeing some pretty average gold companies attract capital right now, so one would think any gold would be getting attention. Are these legacy issues or are there problems in the here and now?

Whilst Clayton is confident he can get an Artemis deposit up to 1Moz by conducting an aggressive exploration programme, he wasn’t quite able to clear articulate exactly what gives him the confidence to make this prediction.

Other Projects

Artemis Resources has plenty of other projects in its densely-packed portfolio, but I am unsure what value, if any, should be attributed to them.

Aside from the aforementioned Radio Hill Processing Plant, the company owns the following projects:

Mt Clement

Sitting just 30km from Northern Star’s Paulsens gold mine is Artemis Resources’ small-scale gold-silver asset, with a JORC-compliant resource of 64,400oz gold and 618,500oz silver.

Whundo

Copper and zinc have been historically mined at Whundo from the 60s all the way up until 2006. The company is currently developing the projects based on a mineral resource: 2.6Mt grading 1.14% copper and 1.12% zinc.

Mt Sholl East

The company claims that this asset gives investors access to the value of ‘nuggety gold from quartz veins.’ Impressively, the company once sent 27kg of quartz to the Perth Mint for minerals totalling 38.3oz gold and 5.3oz silver.

Nickol River (Au)

Four prospects at this project have reported historical gold production, but this is too early stage to be meaningful.

Ruth Well

Having been drilled previously, Artemis Resources has developed an upgraded JORC resource: 152kt at 0.63% nickel and 0.47% copper. There could be a bit of gold to throw into the mix too.

Monarch, Conqueror

This is the company’s youngest baby. It was discovered via geochem programme and is yet to be drilled.

When you take a look at this portfolio objectively, a slight lack of scale becomes apparent, but there should still be enough within this 1,659km2 of tenements across the Pilbara to get prospective investors excited about the company. So, let’s dig into why this hasn’t happened.

Clayton and his team became involved last October, immediately putting US$6M into the company to pay off debt and following it up with US$2.5M in January/February this year. Having fully transacted its former 50/50 JV at Purdy’s Reward to Novo Resources in March, Clayton and his team have clearly been cashing in on their Novo stake. He claims this straightforward decision was made because Artemis Resources’ team is not comprised of miners who operate on an eluvial scale. Furthermore, the company already has enough tenements on its plate.

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So, having just raised US$5.6M, how is Artemis Resources going to obtain a resource for Armada/Paterson Range whilst timing a financing perfectly to get its processing plant back up and running? This is a “rolling programme” or regional exploration. Using an RC rig at a cost of just over US$30/m, drilling 25-40 8m holes, Artemis Resources will be focussing on its eight exploration targets. Is this the best path to creating accretive value for shareholders? He claims this is efficient, rapidly-progressing exploration that will return value in an accelerated timeframe. Let’s hope so.

With some members of the senior management located in London, and with the majority of the recent fundraising coming from the city, could Artemis Resources list on the LSE? Clayton believes there is already enough interest on the ASX.

As Clayton tries to build momentum behind this story, he’s going to really struggle to break through the multiple inevitable overhangs. However, Clayton is confident his company has avoided a tsunami of selling. He acknowledges this will remain an issue for the company as it chews through the register, but he believes very few people are offloading gold stocks right now.

Can Clayton and his team monetise Artemis after so many years of share price obscurity? Comment below and we will respond.

You can more copper & gold investing content and exclusive views from experts from all over the world at cruxinvestor.com/club, along with company reports and research, interview summaries and a thriving community of like-minded intelligent investors sharing investment ideas and thoughts in a considerate way.

Company Website: https://artemisresources.com.au/

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.

GoGold Resources (GGD) – High-Grade, At-Surface Gold and Silver in Latest Drill Results

GoGold Resources
  • TSX: GGD
  • Shares Outstanding: 224M
  • Share price C$1.57 (08.09.2020)
  • Market Cap: C$352M

I penned an article regarding GoGold Resources last week. It is shaping up to be a really encouraging gold value proposition.

GoGold is a gold-silver mining story with cash flow from a tailings facility. The company owns 2 projects in Mexico:

Los Ricos

This is a 22,000 ha, 35-concession gold-silver exploration project. The numbers for GoGold Resources’ initial mineral resource estimate announced on July 29th at Los Ricos South got the market fairly excited, and GoGold looked like it could fairly comfortably turn Los Ricos into a solid 2.5-3g/t gold eq. bulk tonnage mine. GoGold is targeting a PEA by the end of the year as it looks to leverage the gold bull market whilst it is at its most accretive. However, recent news is even more promising.

Paral Tailings

Providing the company with a stable base of cash flow from an investment class we really appreciate, the Parral Tailings operation utilises a heap leach processing facility to produce silver from historical tailings at a low cost. This means 600,000z silver eq. at a reasonable AISC of around US$14/oz. Tailings is mining without the risk, and whilst it doesn’t quite have the sex and sizzle of exploration, this is US$2M PQ added to the company’s bottomline after G&A.

Enough about the tailings; let’s talk about what you’re here for. This story of a stable, bulk-tonnage gold silver value proposition reinforced by tailings-induced cash flow has now started to sizzle a little more vigorously.

GoGold has been hard at work on a drill programme targeting high-grade gold-silver ore and resource expansion potential for much of the last 16 months. In total, GoGold has spent US$6M, using up to 6 drill rigs. 4 were operating in Los Ricos South, the source of the maiden resource, but now it appears to be the turn of the north to have its time to shine. The company now has 3 drill rigs operating at Los Ricos North, and the potential is becoming clearer by the day.

Today, the company released the assay results from an additional 6 holes drilled at the La Trini silver-gold deposit, which forms part of Los Ricos North.

One hole, ‘Hole LRGT-20-004,’ was drilled; it intersected a ‘silicified and altered quartz rhyolite unit’ from 7.3-36.7m for 29.4m of 254g/t, yes 254g/t, silver equivalent (consisting of 122 g/t silver and 1.77 g/t gold).  Moreover, the intersect included a pleasing 8.8m of 670g/t silver eq., comprised of 286g/t silver and 5.11g/t gold.   

These are just a few short holes, but they have already gone some way to confirming the high-grade, at-surface gold-silver mineralisation that precious metals investors crave. The exploration drilling programme will become even more focussed this autumn. Langille and his team will aim to confirm and expand on historical drill data whilst accelerating the company’s advancement towards defining a mineral resource for Los Ricos North with grid drilling. This resource has the potential to create a catalyst moment, sparking share price accretion.

There were some similarly high-grade numbers from several other holes, including 28.4m of 183g/t silver eq., comprised of 103g/t silver and 1.07g/t gold (with 11.4m of 332g/t silver equivalent).

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The initial focus for this drill programme at Los Ricos North continues to be on the La Trini, Mololoa and Solomon targets, though this will evolve as the geology of the deposit becomes clearer. I’m reserving judgement until I see results of their deeper drilling but so far it points to the possibility of an even better deposit than Los Ricos South. Then, it is a case of can they join the dots between the two.

A small diagram of the Los Ricos North exploration programme, courtesy of GoGold Resources Inc.

So, what is this likely to do for GoGold’s value? In the short-term, I can see this giving confidence to the market. Silver is especially hot right now, and with silver grades as high as they are, it would be little surprise to see investors backing a management team with this pedigree and track-record of making money for shareholders.

In the long-term, if anything, these results simply emphasise the value proposition we already expected was in play. We already knew this was a strong gold-silver project delivered in an accelerated timeframe by a management team with an exemplary track record. Moreover, we knew there was an exploration upside to look out for. It is this exploration upside that has now been shored up, and investors need to actively decide what they want to do with this information. I know where I’m placing my bet. Do you?

Company Website: https://gogoldresources.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.

Tesoro Resources (TSO) – Chilean Gold Explorer aims for FS by 2022

Tesoro Resources Ltd
  • ASX: TSO
  • Shares Outstanding: 476M
  • Share price A$0.16 (02.09.2020)
  • Market Cap: A$76M

Interview with Zeff Reeves, Managing Director of Tesoro Resources (ASX: TSO).

Is this just another company within the swathe of gold juniors currently coming into the market, or is there something more meaningful to uncover?

Tesoro Resources is a gold explorer with assets in Chile. If the recent share price performance is anything to go off, maybe this company really is one that investors should look at more closely. Since listing in February 2020, the share price has been heading north. There is clearly some excitement surrounding Tesoro Resources, and we were keen to get to the bottom of it.

Matthew Gordon talks to Zeff Reeves, August 2020


What is immediately apparent is that this is anything but a lifestyle company. Reeves and his team have already put in the hard yards, running a tight ‘private’ ship for 3 years and raising capital purely on a “friends & family” basis. I like this; these guys don’t look like they will be learning on the job with my money because they’ve already learnt with theirs. It was clearly the right moment for the company to go public from a liquidity and financing standpoint.

So, what does Tesoro Resources have that is getting investors excited? It has one project, the El Zorro Gold Project, acquired in mid-2017. It covers in excess of 10,000ha, and also features a strong degree of infrastructure, such as a nearby road connection (140km) to the city of Copiapo in Northern Chile.

With the option to earn up to an 80% interest in El Zorro, Tesoro Resources plans to push ahead with an aggressive exploration and development campaign in the second half of this year, targeting a Maiden Resource by the end of 2020 and a Feasibility Study by the end of 2022. However, it is worth noting that with exploration constantly expanding the deposit along strike, this timeline may be pushed backed.

Now into its third round of drilling, Tesoro Resources is clearly not a company that is satisfied with standing still. Without a Maiden Resource, what exactly are investors buying in to? Reeves thinks his initial drill data, compiled while the company was private, has been integral to this positive sentiment, and he’s probably right. It is also clear that many investors believe in the geology of the region too. The company has classified El Zorro as an intrusive Related Gold (IRG) system, which has affinities to the Tintina Province in North America. It’s not like Reeves has any historical data to fall back on, and this is because historical mining by artisanal workers at El Zorro was limited because it was largely concentrated on early-stage quartz veins in and around Ternera within the El Zorro Tonalite. However, with the company’s initial exploration efforts returning a number of holes reporting over 100g/t gold intercepts, it’s clear that the market has followed the grade.

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With 476M shares, we were curious why Tesoro Resources has not yet sought to tidy up its share register with a consolidation. It turns out that they have. Reeves thinks this is just a part of being a junior miner on the ASX. He also sees some benefits: this could be an exciting ride full of volatility for investors because of the strong liquidity in the stock.

Retail investors currently comprise c. 50% of Tesoro’s share register. Prior to its IPO, the company had raised and spent $3.5M from friends and family. Since listing for proceeds of $5.5M, the company has recently raised another $6.5M. It is sitting at around $6M in the bank today. Reeves claims the majority of the c. $10M that has been spent so far has gone into or on the ground, for example, c. 3,000 surface samples at El Zorro.

COVID-19 has had some logistical impacts for the company, including delays getting samples assayed, but it has caused no “direct impacts.” It is clear that Tesoro’s strong in-country team has come in handy. Reeves has worked with most of them before for many years and clearly trusts them.

Right now, Reeves thinks it is “too early” to speculate on the size of the Maiden Resource, though he does state that 500,000oz would create a candidate to be progressed through the production. However, he thinks El Zorro is actually a much larger system. He expects to be drilling for a long period of time, aiming towards 1Moz. It remains to be seen if the market gets excited about another company with a 1Moz Resource and no clear plan yet.

Reeves has a decent track record having already overseen a very similar operation in Brazil, delineating the project to find a gold system that was eventually sold to a mid-tier gold miner. This geology is highly unusual for Chile, so let’s hope it can deliver value for shareholders. In the meantime, Reeves and his team will be focussing on boosting the company’s market cap so it has better access to capital.

What did you make of Zeff Reeves and Tesoro Resources? Comment below and we will respond.

Company Page: https://www.tesororesources.com.au/

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.

Serabi Gold (SRB, SBI) – Strong Q2/20 Results & More Gold (Transcript)

Serabi Gold PLC
  • TSX: EQX
  • Shares Outstanding: 59M
  • Share price GB£0.83 (16.06.2020)
  • Market Cap: GB£49M

Interview with Clive Line, Finance Director of Serabi Gold following the Q2/20 Quarterly Results.

FULL ARTICLE AVAILABLE TO READ HERE.

We were keen to understand how this gold producer has been resolving their balance sheet balancing act of last year. This gold bull run has helped a lot of marginal gold producers build up cash reserve and resolve balance sheet issues. Serabi Gold has cash in the bank and are making money. The Sprott debt has now been paid. The company still owes Equinox $12M but has agreed to pay this off in instalments. And it seems to be coping with the COVID restrictions admirably. Line talks us through their thinking in terms of activity and sequencing to manage expenditure whilst they prepare their new asset Coringa.

We Discuss:

  1. 2:58 – Overview of the Press Release
  2. 4:38 – Run-Through of Numbers and Achievements
  3. 5:45 – Sprott, Equinox, and Greenstone: Debts, Partnerships, & Expectations
  4. 11:19 – AISC Up: Reasons & Mitigation
  5. 13:24 – Moving Coringa Forward: Priorities and Focus
  6. 17:15 – The Gold Market: Time to Talk to Lending Groups?
  7. 18:48 – Exploration Opportunities and Budget
  8. 20:26 – Post-COVID Normality and Additional Costs
  9. 24:17 – Optimal Productivity: Timeline & Balance
  10. 27:45 – Consolidation Talks?

CLICK HERE to watch the full interview.

Matthew Gordon: Clive. Good morning. How are you sir?

Clive Line: Good morning. I’m very well, Matthew.

Matthew Gordon: Where are you speaking from?

Clive Line: It’s a little bit warm.

Matthew Gordon: Oh yes. You’re in the UK like me. It’s absolutely ridiculous.

Clive Line: Yes, enjoying the enjoying the heatwave down here.

Matthew Gordon: I’m glad you are. My face is the wrong shade of red. It’s getting hotter by the moment. But anyway, less of that. Thanks very much taking our call this morning. We saw the press release. We wanted to take the chance to talk to you about some of those numbers. Generally, what are your thoughts?

Clive Line: I have to say, Matthew, looking in the context of these numbers and where we were at the beginning of the quarter, I think we have to be very, very happy. We went into the 2nd quarter, a huge amount of uncertainty, not even sure whether or not we were going to be able to keep the operations going for the next three months. So to come out of it with what has been a quarter where we’ve had best cashflow generation that we’ve experienced, best levels of profitability that we’ve experienced, has got to be a huge positive, and we’ve got to be very, very happy and very grateful for what we’ve managed to achieve. I think there will be disappointments here and the production is lower than we wanted, but that’s a direct impact of the pandemic and having to reduce staff numbers on site. We’ve already talked through that and what we’re doing and what we’re trying to address with that. But I think overall, it’s been a very satisfying quarter.

Matthew Gordon: Take us through a few of those numbers because I do want to talk about the impact of COVID and what additional costs you’ve had to, or measures you’ve had to put in place which do have a cost implication to them, because I specifically want to get on to the AISC number, because that is a lot higher than I think you had hoped. Why don’t we kick off first of all with some of the numbers which you’ve managed to hit?

Clive Line: We’ve got cashflow that has come through. We started the quarter at just over USD$9M. We ended the quarter at $9.6M in the bank. During that period of time, we paid off, using our cash flow, USD$3.5M out of the Sprott loan that was outstanding. We’ve got rid of that, and that’s why I look at it and say, that’s a fantastic quarter for us. We managed to get rid of USD$3.5M dollars’ worth of debt without any real impact on our cash balances. At the same time, we saw excellent profitability coming through, the best quarter for profitability that we’ve had ever since we started. EBITDA is up substantially, operating profit up substantially, earnings per share up substantially. There’s not a lot not to be liked about it.

Matthew Gordon:  Let’s talk about that before we move on to the AISC component, because like I say, that’s something I want to understand more. Let’s talk about those 3 moving parts: so, Sprott – removing them from the equation. You’ve still got Equinox that you need to remove from the equation and then Greenstone has come in for a larger slice of the pie. First of all, why did you want to get rid of Sprott? Why not refinance with Sprott?

Clive Line: We went through a number of issues and ultimately, lenders such as Sprott are not the cheapest. We have had a very good relationship with them, and we want to go, we will go back to them when we come back to looking for financing with Coringa, I’m sure you’ve got some questions later on, you’ll ask me about that particular subject as well. But the essence here was that we needed to, we have to go back even further, when you go back into the 3rd, 4th quarter of 2019, at that particular point we had the debt with Equinox that needed to be settled. We were looking around at sources of finance. It was a difficult equity market, and ultimately the decision to go with Greenstone to put in place that convertible loan was to give us a little bit more flexibility in terms of how much money we’d need going forward, but to make sure that we had funds available to be able to meet that particular debt with Equinox, which at the time was going to fall due on the 31st December. Now, we pushed that back and pushed that back to the 31st March. Subsequently we’ve been able to renegotiate that very well into a series of stage payments because of the pandemic. And that’s given us a great deal more flexibility, which actually should be beneficial ultimately to shareholders.

I think the decision to want to get rid of, or pay down the Sprott debt rather than refinance, that is because we couldn’t see Sprott, given where our cash flows were going to be, wanting to extend a debt facility to us that was large enough to take care of that potential balloon payment to Equinox. Greenstone were able to step in into their friendly shareholder that’s providing financial support into the company with a little bit more flexibility than we were likely to get.

Matthew Gordon: It’s quite an interesting discussion when you owe people money, you can either be in a position of weakness or a position of strength, but in a way the market worked in your favour with your negotiations with Equinox. I think.

Clive Line: It did. Circumstances helped. We were clearly coming up to a point at the end of March where we needed to do something. We thought that we’d have the facility in place. Of course, then coronavirus virus hit us, but I think circumstances then, that did work in our favour in some ways because Equinox looked at the situation, were sympathetic to where we were as a small junior producer, and gave us the leeway to be able to look at a stage payment basis rather than putting the company into a difficult situation. We were very grateful for that and we’ve been very grateful for Greenstone to continue to support it as well because we couldn’t, again, fulfil all of the needs and requirements. Ultimately, although they’re a shareholder, they’re a business; they’ve got their own thresholds to meet with their investor groups as well. I’m sure that the convertible doesn’t necessarily meet all of those thresholds, but that’s the sort of gesture of their support and longstanding support for the company.

Matthew Gordon: Like I say, timing and luck come into this a lot. Equinox also have been going on quite a rally. I think it has also helped you that they’ve done exceptionally well at building out their business. But just on Greenstone though, because obviously they are a very well-known investment group with very specific mining skills. They are very clear about the sorts of companies that they will invest in. That’s a real endorsement to the market that you’ve got something going on there, but they’ve also come in for a pretty big stake now. So what are their demands of you as an organisation in terms of performance?

Clive Line: Clearly, we have to perform on a day by day, month by month basis. They are represented on the board as is Fratelli, who is another large shareholder with the company. We work both closely with both groups, trying to understand what their long-term motivations are. But they are both long-term investors looking for a window in 3, 4-years out. They’re not looking for an instant return tomorrow. They will weather the storms with us and take a view on near-term and longer-term macro issues that are going to affect the company.

Matthew Gordon: Let’s look at AISC. I mentioned it earlier. It’s up. It’s not where you want it to be. Why is it so high?

Clive Line: I think you’ve got to look at it in context, Matthew; at the beginning of each quarter, our production plans and our manpower requirements, et cetera, are set out and we’re not going to be able to change those now, although we weren’t sure where we were going to be in terms of production at the beginning of the quarter, we set out with a mine plan and we’ve continued to try and follow that. The consequence of that has been that we’ve had slightly lower production. We’ve had reduced manpower at site. I know Mike talked to you about the reasons for lower Gold production in the quarter, when he did an interview with you a few weeks ago, looking at our operational results.

Our production has been down some 15% over what we would like it to be. Our cost base, however, whether or not we’re trying to do 45,000t at 8g/t or 45,000t at 6g/t is pretty much fixed and there’s not a great deal we can do about it.

So, the production being down over the quarter has directly influenced our AISC. And as a result of that, the ASIC is higher. Looking forward at Q3/20, I think we’re probably going to see a similar sort of situation; we’re not anticipating that production will start to get up. We’re working in Q3/20 to get the manpower levels up so that we can get the mine back up to the production rates that we would anticipate. Then hopefully in Q4/20, once production starts getting up about 10,000oz again, per quarter, we’ll see the AISC start to come back down again.

Matthew Gordon: Mike did mention that. He said that there’s a plan and you can’t be bouncing around the property, just aiming for the high-grade stuff. You are systematically working through it. I know people should refer to that interview of a couple of weeks ago on that one.

Let me talk to you about Coringa please. I want to try to understand how you, I’m delighted we’ve got a CFO on, talking about proper numbers rather than generalities. So how do you go about planning and managing cash flows and having the funds in place to be able to move Coringa forward at the speed that the rest of the management team or the operational team is hoping to? The balance sheet seems to have been tidied up a lot with the discussions with Sprott, Greenstone, and Equinox, and you are generating cashflow, certainly at these prices. But there’s a plan for Coringa; this year you’ve got COVID to deal with, but you’ve also got to get this thing moving forward at some kind of pace. Have you got the cash to be able to do it? Is there going to be more balance sheet management activity to be able to get that through to the point where it can get into production?

Clive Line: The first priority for me is to get Coringa fully secured. Let’s get Equinox’s debt paid down. With that in place, we will be able to go out to lending groups, we’re already in conversations with various lending groups, we’re sharing with them our models for that. And they’re looking at that with a view to what sort of levels of debt they’re prepared to provide, what sort of terms they’d be considering and all the other parts that you would normally expect. But the first priority is to get 1 – Equinox paid off, because until that’s dealt with the lenders are not going to part with any money. And of course, as we’ve spoken about in the past that you’ve spoken with Mike about in the past, getting the licensing process up to a particular stage where the lenders will feel comfortable that everything is satisfied.

I think with COVID, we’ve had our challenges at Palito. I think we have to make sure that we’ve got the Palito, Sao Chico operations back up and running full steam before we want to start taking on another operational issue with Coringa. We’ve got to work that one into the equation at the moment.

Cashflow for the time being is going to be used primarily to get rid of the Equinox payments and pay those down. We’re going to try and do that as much as we can out of cashflow. We originally put Greenstone in place to give ourselves the ability to get rid of that in a single payment. Given how the situation has evolved we almost want to use that as a standby facility to draw down if and when we need to. And we will also have that funding available to use to start building Coringa, or developing Coringa, and doing some of the things once the licensing reaches its next stage. Once we get our LP approved, I know Mike’s talked about wanting to get in, do some underground development, get some bulk samples sorted, try and de-risk the geological aspects of the project for lenders – they’re all key parts of it, which will reduce our cost of borrowing going forward as well. I want to be able to blend that going forward and use a little bit of the Greenstone funding to be able to do that, provide sort of the equity capital, as it were, to get through those studies, and then we’ll go out to the lending groups to raise the debt capital that we need to be able to build the project and take it forward.

Matthew Gordon: It is interesting times at the moment, because obviously, this week it’s been interesting with regards to Gold price moving negatively. But the general trend has been phenomenal for the past couple of months. Isn’t this the time to be having discussions with lending groups because all sorts of companies, which I never thought would get funded are having money thrown at them, vast sums of money. Have you considered going and talking to some of these groups and taking Equinox out quicker? I know you’ve got this facility in place, but is that a discussion that you’re having?

Clive Line: We are having discussions with different groups to see what we can do. Whilst we’ve got a particular issue there with getting rid of Equinox and wanting to move things forward, there is a timetable within which we can move Coringa, and it’s not tomorrow. The immediate urgency is not there. That’s not to say that if we can’t find a new group to come in, it’s not the end of the world. We’ll continue to pay down Equinox according to the stage plan. If we can find a solution that is not going to be detrimental to existing equity holders, we don’t need to raise equity at this point to pay down the Equinox debt then it doesn’t seem appropriate to put dilution in place just for the sake of it.

Matthew Gordon: Exploration is something that Mike’s talked about, he’s very keen to work out what you’ve got on your properties. Obviously, there’s been some exploration happening, but it’s been restricted in the sense that you can’t get the crews in there. You don’t have the people to be able to do it at the moment. How much budget have you set aside for exploration for the rest of this year?

Clive Line: It will be limited and we’ll only really pick it up in Q4, and realistically in Q4, there’ll be a limit to how much we can spend anyway. It’s less about what budget can I set aside as to actually how fast can they spend it? Because there is a practical consideration there, that you can set aside a substantial budget, but actually if it’s not spent wisely, you’ll end up wasting 50% of that budget anyway. It’s always a case of making sure that we maximize the return that we’re getting on what we’re doing. We don’t want to bring in crews and half of them drilling blind and having just doing work for the sake of doing work. We know that this takes time, these sort of narrow vein deposits, you really need to understand them, and we need to work out what we’re doing each step of the way. It’s almost the pace at which we can do exploration sets its own budget. I think fourth quarter we’d be looking at spending USD$250,000, $300,000 on exploration and then looking to step that up into Q1/21.

Matthew Gordon: With regards to getting people back on site, getting back on location and actually working, Mike mentioned that you were building new dwellings, new facilities for people to be able to work safely and live safely on the camp. How’s that going? What’s that going to cost you? That’s an additional cost that you probably haven’t factored in, isn’t that?

Clive Line: It is. We’ve had a lot of additional costs here during this last quarter: we’ve had extra doctors on site to conduct testing. We’ve used third-party clinics to be able to test staff before they’re coming into site. As you said, we took a lot of the exploration staff away because we couldn’t control those 3rd-party contractors and how they were managing their own personnel. That was another reason why we stopped the exploration activity. In terms of the accommodation, most of this is containerized accommodation blocks, we’ll spend probably in the region of a few hundred thousand dollars on the upgrades that we need to do onto the camp. Hopefully they will get those through by the end of Q3 and we’ll then be in a position to accommodate a full complement of staff and start bringing those people back on site. I don’t think it’s going to happen instantaneously. Again, there’ll be a program to make sure that the rosters are working well and that these guys are coming in on a scheduled basis. We won’t be back up to the full complement on 1st October, they’ll come through and we’ll probably get there towards the beginning part of November.

Matthew Gordon: When you say a few hundred thousand, do you mean at the $200,000 or the $900,000?

Clive Line: I think we’re looking in the sort of USD$250,000 to $300,000 range up towards the USD$500,000 range.

Matthew Gordon: So, Q4/20 you are starting to bring people back in and they will start to ramp up and you’ll get back to sort of, I don’t know what normal means anymore, but normal levels of operational productivity.

Clive Line: We’d like to think that we would be looking at a normal, if we’d have met our original guidance, Q2, Q3, Q4, we would probably be looking at sort of the 12,000oz a quarter. That’s probably with the ore sorter of working well, getting additional lower-grade ore out of the Palito and Sao Chico deposits, being able to upgrade that through the ore sorter. Working with the residual flotation tailings that we’ve got, that’s the sort of levels of production that we’d like to be looking at, what we would have been expecting to achieve. We’re looking at getting back up to the 10 to hopefully 10,000oz in Q4/20 and hopefully starting to build on that into Q1/21.

One thing that we do have to factor in there is again, because there’s been lower numbers of crews, we’ve got a mine development that we’re going to have to catch up a little bit on. We’ve been trying to do that as best we can. That’s vitally important for keeping the mine sustainable and sustainable production going forward and keeping development ahead of us. We’ll just have to balance that out and look at what we need to do in the early parts of 2021 to make sure that we’re not falling behind on that and that we’re back up to the levels that we need.

Matthew Gordon: One final one: you’re the guy that’s got to balance the books, right? You’ve got Palito, it is producing cash for you. We’ve talked about ramping up and optimizing, COVID conditions allowing, but is it producing enough cash for you to be able to develop Coringa? That’s kind of the balancing act, I’m assuming you’ll deal with Equinox in the best possible way. You’re saying that you are trying to do it in the most anti-dilutory way for shareholders, but what you’ve got is 2 assets: Palito, which is throwing off cash, which you’re going to need to spend to develop Coringa. At some point when you’re totally debt free, both sites will be operating at some sort of optimal productivity. When is that? When is that moment? And how do you balance that with all the money that you’re going to need to plough into the blue sky of the exploration?

Clive Line: It is a juggling act. As I say, we’ve got to look at where our priorities are and where we hope the best returns will be. We will push forward with Coringa. Where we’re sitting at the moment, I’d like to think that we can meet those commitments, certainly in the near term, USD$1M/pm from our existing cash flow and start paying those down. Now, that means that the facility that we have with Greenstone can effectively sit in the background, then as Coringa is ready to be developed and we do those first bits and pieces with, of course, with Greenstone’s blessing, but that’s part of the agreed use of proceeds for that convertible, we’ll be able to start drawing down on those funds if we think that that is the best source of capital available to us at that point in time.

We have that as a facility to utilise. Coringa, in the near term, we’re not into a suddenly needing USD$20M worth of cash available. And I wouldn’t want to get into making substantial commitments to the build of Coringa. The first bit is to deal with a little bit of underground development done, getting the bulk samples done and de-risking it from geological standpoint from lenders. And that is a USD$3M to $4M cost that we can deal with from our existing cashflow and the existing finance that we’ve got available to the company and continue to pay down the Equinox debt.

Exploration on top of that: exploration, unfortunately, is the tap that gets turned on and turned off when things get a little bit tough. If the cash flow is there, then we’ll try and step up the burn on the exploration and move that forward and accelerate it. And if the cash flow and the Gold price doesn’t stay where it is and the real doesn’t stay where it is, then that’ll unfortunately be the thing that probably will get turned down because it’s longer term, it’s more speculative and it’s not immediately being able to be turned around into cashflow.

Matthew Gordon: There’s a bit of consolidation happening in the marketplace. Have you had any inbound phone calls?

Clive Line: I wouldn’t be able to tell you, even if I could

Matthew Gordon: I just thought maybe, maybe Clive doesn’t know how this thing works, but apparently you do. It is interesting times at the moment around consolidation, M&A activity, and obviously, Gold being where it is today, there’s a lot of people sniffing around and having conversations.

Clive Line: I think what is interesting as well though with the markets is looking at people that have been starting to come to London looking for capital, realising that there is a lot of investors looking for opportunities. At the moment, maybe Serabi doesn’t register onto some of those radars. It’s a little bit small, and we’ve always said that we need to grow and that we are always looking for those opportunities to do it. It’s not lost on us that some of the bigger Canadian groups have suddenly decided that actually, London doesn’t have too many options when it comes to generalist investors and larger institutions looking for exposure into the Gold space. Hopefully we’ll be able to take advantage of that going forward.

Matthew Gordon: Clive, thank you very much. That’s a great update. Thanks for getting into the weeds with regards to these, they can be quite dry affairs. You have had an interesting year with regards to balancing books and moving money and liabilities around. It’s a good environment for you guys at the moment. So best of luck with the rest of this year, we’ll speak to you soon.

Clive Line: Thank you very much. Indeed. Matthew, take care.

Company Website: https://www.serabigold.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.

TriStar Gold (TSX-V: TSG) – Solid Brazilian Gold Developer needs to add some Exploration Excitement

TriStar Gold Inc.
  • TSX-V: TSG
  • Shares Outstanding: 224M
  • Share price C$0.42 (10.08.2020)
  • Market Cap: C$94M

With gold price shooting up to over US$2,000/oz, gold explorer, developers and producers are having money thrown at them. So, where do investors get leverage and maximise the returns?

TriStar Gold is a gold exploration & development company listed on the CVE. Its 100%-owned flagship gold project, Castelo de Sonhos, is situated in Pará state, Brazil. In August 2019, TriStar Gold completed a US$8M financing with Royal Gold to get the ball rolling. It intended to use the proceeds to advance Castelo de Sonhos up to a Feasibility Study this year.

Matthew Gordon talks to Nick Appleyard, August 2020


A November 2018 PEA for what could just be one corner of the project, based on a gold price of US$1,250/oz, indicate attractive numbers.

ParameterUnitPre-taxPost-tax
Cash FlowUS$ millions441372
IRR%5143
NPV (5%)US$ millions319264
NPV (10%)US$ millions233188
Cash CostUS$/oz660 
AISCUS$/oz687 
Initial CapitalUS$ millions184 
Life of Mine ProductionMoz gold1.1 
Average Annual Productionoz gold130,000 
Payback Period (Mine Life)years1.9 (of 8.1 years)

There are some seriously solid numbers in here. That AISC of US$687/oz is world class, and 130,000oz of gold pa could make TriStar gold a meaningful mid-tier producer. A 43% IRR is evidence of just how economic this opportunity could be.

We were expecting to see TriStar Gold complete a PFS by the end of this year or Q1/21 at the latest. Despite COVID-19, the plans remain the same as before, but Q1/21 has now been definitively earmarked.

TriStar Gold was already fully-funded for its PFS and planned permitting proceedings, but it chose to carry out a further financing in June/July in the form of a US$9.2M private placement with C$914,614 recently coming in from exercised warrants relating to a January 2018 financing.

TriStar Gold not only has the cash to accelerate the development of Castelo de Sonhos, now the company has the means to bankroll an aggressive exploration programme. The big bugbear with this story has always been the mediocre life of mine: 8.1 years. It has been a barrier for investors. Appleyard acknowledges that exploration is high-risk, but he is confident in the geology of the land package and thinks it will produce impressive results. Some of these resources may be added by the time TriStar Gold publishes the PFS, but it remains to be seen if they can bulk up the scale of this gold play and make it a bit sexier. It remains to be seen if new resources will be at the category required for inclusion before the release of the PFS.

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The PFS is only really going to shore up the PEA numbers, so where can investors look in this story for real growth? The exploration programme outside of the PFS is focussed on ‘analysing remote sensing data over the CDS area, including magnetic signatures, radiometric data, topographic variation, and mineral abundance… As more data stacks become available, machine learning models (AI) are trained to look for similar gold-coincident signatures elsewhere on the property.’ It is certainly an interesting, futuristic way to explore a gold deposit, and we wait to see if it can lead to more gold discoveries. Expect to hear more on that over the next few weeks as we track the results.

A lot of the deskwork has been done, even though COVID-19 is having a severe impact in Brazil. Appleyard is hoping to get back on the ground in late August/September. He is tracking the capacity of local hospitals; once they have sufficient space for new admissions, he thinks it will be an appropriate moment to get back to work. According to Appleyard, TriStar Gold is currently “screaming out” to get people out on the ground. The company’s staff are operating at full capacity, but they are now itching to get back into the field, discovering more gold. Let’s see if the quietly spoken Appleyard and his team can hit their deliverables. If so, with some exploration upside, this could be shaping up to be a bit of a dark horse.

What did you make of Nick Appleyard and Tristar Gold?

Company Page: https://tristargold.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.

Gowest Gold (TSX-V: GWA) – Things Finally Moving Forward for this Gold Developer?

Gowest Gold Ltd.
  • TSX-V: GWA
  • Shares Outstanding: 73M
  • Share price C$0.32 (20.07.2020)
  • Market Cap: C$23M

Interview with Greg Romain, President & CEO of gold developer, Gowest Gold (TSX-V: GWA).

We interviewed Romain in April and he was candid about the mistakes his company has made in the past. The share price has only crept up slightly relative to its gold developer peers, and there is still a huge way to go.

Gowest Gold is a long-running Canadian gold development story: 12 years, in fact. During much of this time, the Gowest Gold management team has made mistakes and missed several deliverables and targets. If one expects the market to trust and invest in your company, this isn’t a recipe for success. A sense of nervousness around Gowest Gold stock is tangible.

Matthew Gordon talks to Greg Romain, August 2020


So what are the positives? Gowest Gold has a large land package in Ontario, which is regarded as ‘the city with a heart of gold,’ within the Abitibi Greenstone belt. The primary focus? The development of the 100%-owned Bradshaw Gold Deposit into the next gold mine in the larger North Timmins Gold Project, which covers a total of 109 square km in the Timmins gold camp. The Bradshaw Gold Deposit is advanced-stage, and the last we were told was that the company intended to process its bulk sample by Q3/20 and start production by mid-2021. It was an ambitious deliverable, but is COVID-19 going to be the excuse for the company missing another target? That looks to have slipped already.

After drilling and analysis in excess of 65,000m of core, Gowest Gold released its PFS in 2015. The project appears to have room for an exploration upside, but what are the key figures right now?

PFS Highlights at US$1,200/oz gold (USD):  

Gold Price$1,200/oz
Pre-tax Net Present Value (“NPV”) (5%)$39.8 million
Pre-tax Internal Rate of Return (“IRR”)32%
After-tax NPV (5%):$29.2 million
After-tax IRR27%
Initial Capital$21.5 million
Sustaining Capital$21.4 million
Pre-tax Payback Period3.5 years
Life of Mine (“LOM”) Operating Cost$821/oz
All-in Sustaining Cost$891/oz
Ore Mined1,787,295t
Avg. Mineable Ore grade4.82g/t
Development Rock Mined (additional mineralized rock)666,253t
Avg. Development Rock grade1.31 g/t
Initial LOM (includes bulk sample)8.5 years
Total Gold (extracted in initial phase)305,058oz
Total Gold Recovery93%
Avg. Annual Recovered Au Production40,500oz
Gross Revenue to Operation$341 million
SOURCE: https://www.gowestgold.com/north-timmins-gold-project/overview/

The project has likely become much more economic at a gold price now touching US$2,000/oz after today’s long-overdue correction, and the AISC is good. However, this is a small scale, average grade gold project that is unlikely to excite the market when investors could be throwing their money at more prospective gold plays.

What has Gowest Gold been up to since April, then? The bulk sampling and financing arrangements were active priorities. The company is currently gearing up to start the ore sorter on the bulk sampling front. There has been a little delay because a “technical person” was required from the U.S, and (you guessed it) COVID-19 created some delays. The ore sorting will start in the “next couple of weeks.” On the back of that, the company will start shifting ore to the mill and the end of Q3/20. The mill needed permission from the Canadian government, which Gowest Gold expects to have by mid-September. All things considered, it does appear that Gowest Gold should fulfil its bulk sampling deliverable. Hopefully, this is a sign of things to come.

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On the financing side of things, the company had just raised US$1.6M from a couple of its Chinese partners when we last spoke, and now it has raised more in debt. Now, Gowest Gold has raised an additional US$1M in debt; it expects to close a further US$1.5M by the end of this week. The company has now raised US$4.1M. It has a little over US$1M in the treasury right now. The company’s burn rate is quite high considering what it has: US$400,000 per month. The company is planning to conduct another raise to see the project through to production and to fund some exploration programmes. The company claims its main Chinese partner is fully in support of its attempts to raise capital. The ore sorter has been up and running over a year ago, but because of delays, the company shut everything down. It has had to spend some capital to get things back online, and this looks like a strategic error/waste of money to me.

The bulk sample will be up to 30,000t. The company currently as c. 28,000t of mixed development ore at surface at roughly 2.5g/t. The plan is to sort this ore, get it into the mill whilst simultaneously starting the underground development.

Is the recent accretive growth down to the company or the gold market? Romain is once again honest, stating that more companies have been knocking on his door recently than at any time in the 12 years previously. It is clear the maniacal bullishness of the gold market is fully in play here. The company has been working on restructuring its balance sheet, and Romain projects some catalyst moments going forward beyond the bulk sampling, though what these moments will be is unclear. The main option available will be converting the debt, because investors are clearly concerned that Gowest Gold will be using any incoming capital to service its debt rather than create growth. Romain claims that his shareholders and lenders like where the company is at. It is time to see some evidence.

The company is definitely an advanced stage developer, and Romain was keen to emphasise this. It has completed over 2km of underground development and expects to have its production permits in order within the next “month and a half.” He is confident on the permitting front because of support from the local first nation communities and favorability with the government.

The bulk sample should take 3-4 months. Then, the 6-month pre-production process begins, based on many internal models, which will tie the technical data with financial and commercial arrangements. Within 14-16 months, the company expects to be in production at 50,000oz pa, though he expects to do more than that based on what he knows. What does he know and why can’t he tell us? There have been murmurs of up to 100,000oz pa, and this appears to be an eventual target for the company, though quite how it gets there remains to be seen.

Moving forward, the aim is to find a strategic partner, ideally a North American one, that can add nicely to the Chinese component and would spread the risk. The figure that has been earmarked is “conservative,” US$20-30M. between On the technical side of things, it doesn’t look like there will be any more hitches; the mill needs its permission to process, and should have it by mid-September, but that is about it. Even a Biden presidency shouldn’t be detrimental to things.

In order for this bulk sampling to be truly successful, the recovery rates will need to be what Gowest Gold predicted: 98% after the smelting, all-in inc. processing 93-94%. However, if the company doesn’t hit these numbers, Romain doesn’t think it will be a failure.

What did you make of Greg Romain and Gowest Gold? Comment below and we will respond.

Company Website: https://www.gowestgold.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.

GoGold Resources (GGD) – Silver & Gold. Hitting Targets & Deliverables

GoGold Resources Inc

  • TSX: GGD
  • Shares Outstanding: 222M
  • Share price C$1.68 (19.08.2020)
  • Market Cap: C$380M

Interview with Bradley Langille, President & CEO of GoGold Resources (TSX: GGD).

We first became interested in the story of GoGold Resources when CEO, Langille, described the company’s flagship Los Ricos project as the best thing he has seen in his entire 20-year career. Fresh on the back of the company’s initial mineral resource estimate for Los Ricos South (LRS), we spoke with Langille to discuss their findings. Gold and silver are incredibly hot and topical right now, so what can this do for GoGold’s share price?

Matthew Gordon talks to Bradley Langille, August 2020


In case you have forgotten, GoGold is a gold-silver mining and tailings story with 2 projects in Mexico: the 22,000ha, 35-concession ‘Los Ricos’ exploration project, and the cash-generative Parral Tailings operation, a heap leach facility that processes historical tailings and produces silver at a low cost: 600,000oz silver equivalent at an AISC of just over US$14/oz, providing the company with a unique source of cash flow compared to its peers: almost US$2M per quarter after G&A. The company has an attractive management team with a strong track record of delivering value for shareholders, and the early numbers that were coming through the drill bit at the north end of Los Ricos South were getting the market excited: 11m of 424g/t silver equivalent and 18.4m of 889g/t silver equivalent, including 3.2m of 4,335g/t. GoGold Resources holds a district-scale, 35km land package in a geologically and geophysically prospective area.

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The company has been drilling for the last 16-or-so months, working towards its maiden resource, spending US$6M and using up to 6 drill rigs. 4 were operating in Los Ricos South, and the company has started work at Los Ricos North. In total, the long-awaited and anticipated maiden resource comprises of data from over 200 drill holes. It was announced on July 29th. Let’s see the numbers for GoGold Resources’ initial mineral resource estimate at Los Ricos South.

  • Measured & Indicated Mineral Resource at Los Ricos South of 63.7Moz silver eq. grading 199g/t gold eq. contained in 10.0 million tonnes
  • Inferred Resource at Los Ricos South of 19.9Moz silver eq. grading 190g/t silver eq. contained in 3.3Mt
  • Total Company Measured & Indicated Mineral Resources of 108.6Moz silver eq.
  • Proven & Probable Mineral Reserve at Parral of 31.6Moz silver eq. grading 64g/t silver eq.
  • contained in 15.4Mt
  • Measured & Indicated Mineral Resource at Esmerelda of 13.3Moz AgEq grading 72g/t silver eq. contained in 5.7Mt
  • Los Ricos South Mineral Resource is amenable to both open pit and bulk underground mining methods
  • Los Ricos South Mineral Resource Estimate will form the basis of a Preliminary Economic Assessment (“PEA”) expected to be completed by the end of 2020
  • Inferred out of pit grades range from 355g/t silver eq. to 512 at higher cut-off rates.

There are some extremely encouraging solid-grade gold and silver numbers on display here with good widths, and the market, as expected, has responded with excitement, pushing the share price up towards C$1.80. This maiden resource has now shored up the value proposition on offer for investors. By targeting a PEA by the end of 2020, Langille is targeting an aggressive, accelerated path towards production. This is great for gold investors because it means GoGold could still well hit this gold bull cycle in the nick of time if it gets its skates on. The exploration drilling has by no means stopped, and there could be plenty more catalyst moments in store. Having already built 3 mines in the past, Langille clearly has the ability to turn Los Ricos into a solid 2.5-3g/t gold eq. bulk tonnage mine.

Expect to hear a lot more on the north in the coming months. GoGold started drilling there back in June, and the focus right now remains drilling around 15 structures beneath the headframe (the previous mine). The initial drill results for Los Ricos North came out on August 5th, and they are as good as investors could have hoped for. Once again, the market has responded. GoGold can now continue looking at the north whilst exploring the south, aiming to connect the dots and create a single cohesive, extremely economic deposit. Langille is now keen to accelerate the exploration drill programme, with up to 10 drill rigs on the cards; he is not messing around.

What did you make of Bradley Langille and GoGold Resources? Comment below and we will respond.

Company Website: https://gogoldresources.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.

Serabi Gold (SRB, SBI) – Strong Q2/20 Results & More Gold

Serabi Gold PLC
  • LSE: SRB, TSX: SBI
  • Shares Outstanding: 59M
  • Share price GB£0.92 (17.08.2020)
  • Market Cap: GB£54M

An interview with Clive Line, Finance Director of Serabi Gold following the Q2/20 Quarterly Results.

Serabi Gold is a really solid Brazilian gold production story that we have been following. Brazil is country where lots of gold juniors have struggled, but this management team seems to know how to operate in country.

What is the latest news from Brazilian gold producer, Serabi Gold? The acquisition of Coringa this year looks set to double the company’s production profile to over 80,000oz pa with a cross-mine AISC below the magic US$1,000/oz figure. Earlier this year, Serabi Gold resolves its debt situation intelligently, securing US$12M Convertible over a 16-month term with existing shareholder Greenstone Resources to give it a 37.8% stake, whilst at the same time paying down the same amount owed to Equinox Gold. Sprott’s debt has now been paid off too, so they are debt free.

Matthew Gordon talks to Clive Line, July 2020


Extra exploration around San Chico, alongside the optimisation of an ore sorter, which continues to improve in efficiency and elevates the average grade around 7X and yearly ounces by up to 20%, allowed the company to achieve “miraculous” Q2/20 production results, despite being significantly hindered by COVID-19. Let’s have a little reminder of what exactly those looked like:

At 65% of its total workforce capacity, Q1/20 production was down c. 1,000oz from the original guidance, which is hardly a surprise as Brazil has been on lockdown. However, Serabi Gold emerged from Q2/20 with 85% of its budgeted production intact: 8,500oz gold. The grade dropped a little, c. 8g/t to c. 6g/t, but this was a planned operational decision to work through some lower grade material.

A few days ago, the company released its unaudited results for the 3 and 6-month periods ended 30 June 2020, and are strong.

  1. Cash Cost for ytd – US$961/oz
  2. AISC for ytd – US$1,265/oz
  3. EBITDA for Q2/20 – US$6.2M (Q2 2019: US$3.3M), an improvement of 89%
  4. EBITDA for ytd – US$9.4M (2019 ytd US$7.6M), an improvement of 24%
  5. Post-tax profit for ytd – US$4.2M (2019 ytd: US$1.7M), a huge improvement of 142%
  6. Earnings per share for ytd – US$0.0705
  7. Average gold price of US$1,647 received on gold sales in 2020.
  8. Outstanding loan from Sprott (US$6.9M at start of year) repaid in full at 30 June 2020.
  9. Agreement, concluded in April 2020, with Greenstone Resources II LP to subscribe for US$12M Convertible Loan Notes – US$2.0M drawn down to date with the balance available to be drawn until 30 June 2021.
  10. As previously mentioned, an agreement reached with Equinox Gold Corp. allowing the Company to pay, in monthly instalments, the remaining US$12M consideration for the purchase of Coringa, until travel restrictions caused by Coronavirus are lifted – US$2.5M settled to date.

Any gold investors would be encouraged by these sort of numbers. However, the AISC is problematic; it is not where the company or shareholders want it to be, but it is important to put this into context; COVID-19 has been immensely disruptive and production has been down c. 15% on guidance. This has directly influenced the AISC, and Serabi Gold has little control over this. It will look to over-mine to make up for the lost ounces in the coming months. Equinox is slowly but surely being taken out the picture and with a significantly strengthened balance sheet, Line and his fellow team members can now focus on the development of Coringa.

Ww want to see the company continue to operate as best it can in country. But the real upside will come when they start exploring with the drill bit as they can change the risk profile from purely underground miner to introduce open pit low-grade bulk tonnage. It is easier and cheaper than only chasing high-grade veins. And one last request, in these times of consolidation and mergers. Can this management team find an asset that needs their cashflow to cover debt financing get in to early production? We can think of a few names that might make sense. Then this company could become a very interesting prospect.

Serabi Gold will be heading out to lending groups (it is already in conversations with various ones) to discuss models for financing Coringa. Getting Equinox out of the picture remains the top priority because until then, a new lender won’t be interested in coming to the table. The second priority is to bring the licencing process up to a stage de-risked enough to ensure investor/lender confidence, driving the cost of lending down. Palito and Sao Chico have experience operational issues during the coronavirus pandemic, and the first port of call is to get these back operating optimally. Coringa is not on the back-burner, but Serabi’s cash flow, for the time being, is going to be primarily used to get rid of Equinox and rejuvenate Palito/Sao Chico. A little bit of the Greenstone funding will also come in handy.

Capital for exploration is going to be very limited for the time being, and explorative operations will only really recommence in Q4 with a modest budget of C$250,000-300,000. Additional expenditures have created some difficulties for Serabi; it has had to invest c. C$300,000, which it could have doubled the exploration budget with, in on-site doctors and new accommodation to ensure worker safety. This is a great shame because before COVID-19 threw a spanner in the works, a large number of geophysical and geochemical anomalies had been identified that demonstrated mineralisation at a depth of c. 200m below ground; Serabi’s land package looked like the dots could be connected and it could form a large, cohesive operation if consolidated. Investors will now have to wait a little longer to see if this materialises. The full complement of employees won’t be available until the start of November, so investors are going to have to be a little patient. It could well be worth it in the long run.

With gold as hot as it is right now, there has been a lot of talk about potential M&A in the space. It was nice to see that Line knows full well how this game works, and he kept his cards close to his chest.

What did you make of Clive Line and Serabi Gold? Comment below and we will respond.

Company Website: https://www.serabigold.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.

AEX Gold (AEX) – 18 Months to Production with No Study! How?

Aex Gold Inc.
  • TSX-V: AEX
  • Shares Outstanding: 177M
  • Share price C$0.85 (17.08.2020)
  • Market Cap: C$151M

How does a company get into production without a Definitive Feasibility Study (DFS), Feasibility Study (FS), Pre-Feasibility Study (PFS) or even a Pre-Economic Assessment (PEA)?

That is exactly what AEX Gold (TSX-V: AEX) intends to do. Eldur Olafsson is the CEO, and we recently spoke to him about this most accelerated of accelerated timescales. For those who want exposure to the gold bull market, this may be a company to watch.

Matthew Gordon talks to Eldur Oladsoon, August 2020


We spoke to Olafsson is May and he impressed us. He’s smart, young and enthusiastic, but whilst these are admirable qualities, are investors going to be confident in his ability to get into production inside 18 months? He has never run a mining company let alone a mining operation before. Is this youthful enthusiasm and inexperience talking? One thing is for sure, he’s well aligned with shareholders, owning c. 10% of AEX Gold before the most recent fundraising, so he is certainly committed to the cause.

AEX Gold is a gold explorer, developer and soon-to-be producer it would seem. Its sole focus is Greenland-based gold properties. It targets high-grade gold, with historical mined grades of up to an impressive 18g/t. They now need to prove scale.

AEX Gold’s flagship project is the past-producing Nalunaq Gold Mine, with total inferred Resource of 446,900t at 18.7g/t. The company also has a land package of ‘similar properties’ (20-30). Nalunaq may not have a big gold Resource, but the grade could make this an economic prospect. The company can leverage the high grades for marketing purposes, and it can also go some way to offsetting the relatively small scale of the project.

Now, this is the point in the interview when a CEO would usually talk about de-risking their asset. This would likely take the form of a protracted drill programme, eventually arriving at a scoping study/PEA, PFS, FS and DFS. These studies may also be consolidated by historical data to reinforce the value proposition and give investors confidence. However, AEX Gold is far from treading a conventional path of development. Rather than conducting these additional studies to derisk Nalunaq, it is going for broke: straight for construction.

This is all very exciting, but what is the rationale behind this sprint to production? Olafsson was keen to explain how unique a project Nalunaq is and the reasons behind their decision to bypass the costs and comfort of economic/planning studies. Because it has historically produced, the level of data is more advanced than the market understands, or so he says, but that isn’t all. Olafsson thinks Nalunaq exhibits the best geology his team has ever seen. If someone like Olafsson is going to make this remark, a young and vibrant Icelandic business entrepreneur, he needs to have an experienced team behind him.

Between 2004 and 2009, Nalunaq produced 350,000oz of gold: not a huge number, but not one to be sniffed at either, especially at today’s prices. The deposit shows at-surface, with Olafsson suggesting there is no real need to conduct expensive studies on geophysics and geochemistry; “Nalunaq is already there for all to see.” While Greenland is a very prospective area geologically, the lack of existing infrastructure and the challenging climate have slowed down AEX several times to this point and bumped up the cost.

Do you buy into this? Is the geology of Nalunaq really so idiosyncratic that no conventional studies are necessary? I wasn’t sure I did, but Olafsson was keen to state that the risk profile of his flagship gold project may actually be reduced compared to most conventional gold mining projects. This is because the company isn’t really trying to do anything new. It is simply restarting production with exactly the same process as was used over a decade previously. AEX Gold already has 12 months of production covered via at-surface ore and existing inventory. Interestingly, Olafsson does want to consider conducting a PEA or FS after production commences, and this is likely to shore up the value proposition and possibly add new ounces into the study, alongside reducing costs via optimisations. It looks like he wants to use the PEA/FS as a post-production marketing ploy rather than as the first step on the road to getting financed.

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Most institutions will never fund on the back of a PEA; it is an early stage document with an undesirably large margin of error: ±20-30%. So, how has AEX Gold managed to finance its gold project? Institutions have thrown their money into the ring, but why were they happy to do so without more data?

At the end of July, the company dual-listed by joining AIM having already listed on the TSX-v. This is an unusual decision for a company this small. Clearly, the company wasn’t getting all the attention it required on the CVE, so it felt London would give the company access to more European centric investors. Greenland might also be more understood as a mining jurisdiction by a European market considering its close proximity, and UK investors may better understand the concept of building a “full-cycle gold company.” Whatever way you dress this dual-listing up, it doesn’t look like the company is gaining traction with the market particularly well, especially considering management had to take the hit during its recent fundraising efforts…

On July 31st, AEX Gold closed a £42.5M financing, less than the company originally set out to raise. The total project cost (exploration and development of the mine) will consume £35M. The balance sheet looks strong and the company never runs below C$10M in the treasury. It is obvious that Olfasson runs a tight ship, and he has factored in the possibility of a 6-month delay, a drop in grade, a drop in volume and an increase in development costs. He says the permitting process should be simple. If Olafsson can pull off Nalunaq, he thinks he can bring similar operations to the market from the rest of AEX Gold’s portfolio. Time to get excited or wait to see if youthful enthusiasm converts to share price appreciation? in this gold bull market, anything seems possible.

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

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

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