Silver Seeker #71 ~ This Week In Mining: All Quiet On The Mining Front

It was another quiet week for both the metals (which continue to trade in a range) and mining stocks (which remain extremely depressed relative to their cash flow generation). This isn't surprising as the volumes die down during the summer, but there are several upcoming price catalysts, the most prominent of which remains the heavily doctored CPI. If inflation, per the CPI (not real-world inflation), is in the neighborhood of where it’s been in April and May, the metals could move a bit higher, but for them to explode higher, we would likely need to see the June CPI year/year increase reach 6.0% +/-, up from 5.0% and 4.20% in May and April. Alternatively, if we see an acceleration in the month/month increase, that could also drive the precious metal prices higher.

$BSR, $EQX, $FSM, $ROXG, $ODV, $MGR, $MMX, $NFG, $RSLV, $RGLD, $SAND, $WM

Bluestone Resources: Provided an update at its Cerro Blanco project in Guatemala. This comes after the company pivoted away from developing a smaller underground mine into a much larger open-pit development project. This pivot I) doubled the gold resource and production profile and II) tripled the NPV5% to $907m. The feasibility study remains on track to be published in Q1 2022, and the company expects to receive approval for project development in the 2H 2022, at which time construction will commence.

Equinox Gold: The mid-tier producer with the highest 5-year production growth profile (approx. 24% CAGR) announced it has begun mining at Santa Luz, with the first gold pour still on track for Q1 2022 increasing production an average of 110k oz. Au over the first 5-years. Mining activities are currently focused on removing waste from two locations and developing access roads, ramps, dumps, and ore storage areas in preparation for a pre-stripping campaign before mining ore in late 2021. To make room for the mine expansion, U&M (mining contractor) is also relocating an existing ore stockpile with an average grade of 0.9 grams of gold per ton, which will be used for commissioning activities in Q4 2021. Overall, the project is 41% complete (engineering & procurement ~ 96%, plant construction and refurbishment ~ 46% complete, primary grinding circuit ~ 75%, secondary grinding ~ 52%, concrete foundations and pedestals for new ball mill ~ 100 complete, pre-conditioning; leaching and detoxification ~ 46% complete, electrical and substation upgrades ~ 90%, and earthworks for the primary crushing area is underway).

Fortuna Silver (Roxgold): announce the completion of the previously announced business combination between Fortuna and Roxgold to create a global premier growth-oriented intermediate gold and silver producer. This deal immediately increases the scale of Fortuna, giving the company four operating mines and two excellent development projects (one near-term (production in 2022) and one earlier stage project). Under the terms of the Transaction, Fortuna acquired all the issued and outstanding common shares of Roxgold in exchange for 0.283 of a common share of Fortuna and C$0.001 in cash for each Roxgold Share held. This also gives Fortuna the capital base from which to compete for assets via future M&A.

Osisko Development: Announced additional drill results from its 2021 200,000m drill campaign, the majority of which is focused on category conversion (infill) and some exploration drilling. A total of 16,000 meters in 52 holes have been drilled thus far in 2021 on the Lowhee Deposit Zone, the strike extension of the Cow Deposit, located on Barkerville Mountain. Recent drill highlights include:

• 16.2m @ 3.07 g/t Au
• 3.6m @ 11.35 g/t
• 2.80m @ 11.79 g/t
• 3.45m @ 17.44 g/t
• 2m @ 15.15 g/t
• 4.15m @ 14.65 g/t
• 2.65m @ 20 g/t
• 7.5m @ 16.05 g/t
• 4.40m @ 11.70 g/t
• 4.85m @ 15.20 g/t
• 4.25m @ 19.04 g/t
• 2.35m @ 27.45 g/t

Manga Gold: Announced it achieved full-scale and steady-state commercial production at its 100% owned flagship San Francisco Mine, located in Sonora, Mexico. Commercial production was achieved on schedule on June 1, 2021, as outlined in the company's press release dated April 13, 2021. Furthermore, the company is on track to achieve and reiterates its earlier stated 2021 guidance of 55,000 – 65,000 oz of gold production. In the first half of the year, the company completed the necessary pre-stripping. It substantially lowered the mine strip ratio from 8:1 to 3:1, continuing to trend downwards towards the life of mine average of 2.5:1. Moving forward, the company anticipates further decreases to the strip ratio and increased recovery rates which will lead to cost improvements.

At San Francisco, the company anticipates a production run rate of 6,000 Au oz/month in Q3 and looks to exit the year at a run rate of ~7,500 Au oz/month (90k oz. Au annualized).

Maverix Metals: Announced it acquired a royalty portfolio from Pan-American Silver. This is essentially completing the acquisition of the entirety of Pan-American’s royalty assets. Maverix Metals was initially launched on the back of the company’s 1^st acquisition of royalties and streams from Pan-American. This acquisition is considerably smaller, comprised of six small royalties in exchange for 491k shares of Maverix and a $7m cash payment. The key assets include:

• 1-2.50% NSR royalty on Fenn-Gib (Exploration). Only covers a portion of the project.
• 3% NSR royalty on Recuperada (Producing with material expansion potential). At 600tpd, production is expected to be 1.7m AgEq oz. Silver X sees up to a 3ktpd operation, potentially in 2025. Assuming similar head grades, at 3ktpd, AgEq production would be approx. 8.5m AgEq oz. However, the royalty only covers a portion of the property.
• 1% NSR on Juby (Exploration). Owned by Aris Gold with unlimited resources of 2.3m oz. Au. Aris can buy back 0.50% of the royalty for $5m.

New Found Gold: Announced the second-best (width x grade) drill hole to date at its new discovery, the Golden Joint zone, 1km north of Keats. Two highlight drill holes include: 4.85m @ 10.36 g/t Au and 5.25m @ 430 g/t Au.

Reyna Silver: Announced the start of a 10,000m drill campaign at Batopilas. This historic mining district is believed to be the highest-grade silver system in Mexico's history, producing an estimated 350m oz. Ag @ 53oz/t. (1,500 g/t). The drill program is following the targets established by Reyna's technical team in the spring of 2021 exploration campaign, which discovered multiple extensions to the 30 known veins in the district, as well as two new veins with multiple high-grade silver and gold sample results of up to 42,302 g/t Ag and 21.4 g/t Au. Most of the veins in the district have seen little to no modern-day exploration. Reyna Silver now owns the historic mine and controls the entire district. Reyna also added a second drill rig at Guigui, its flagship assets, at least for the time being. Reyna Silver has already completed 8,000 meters of the 12,000 meters planned for this first stage of exploration. The second rig will allow Reyna to speed up the completion of the entire Phase 1 drilling by the end of July and release the program results soon after.

Royal Gold: The company announced it entered into a precious metals purchase agreement for gold produced from the NX gold mine in Brazil from Ero Gold Corporation. Royal Gold will make an advance payment of $100 million at closing and up to an additional $10 million of further payments depending on meeting success-based targets related to regional exploration and resource additions, in return for 25% of the gold produced from the NX Gold Mine until the delivery of 93,000 ounces, and 10% after that. Royal Gold will pay 20% of the spot gold price for each ounce delivered until the delivery of 49,000 ounces and 40% of the spot gold price after that. Through the rest of 2021, Royal Gold will increase attributable production by 6k oz. and 10k oz. Au in 2022. There is also over 40% excess capacity at the processing facility, so if exploration efforts are successful, average annual attributable production to Royal Gold will increase.

Sandstorm Gold: After a long hiatus and Sandstorm building up a sizeable cash position, the company announced a gold streaming transactions and multiple iron-ore royalties for total consideration of $138m.

1. In exchange for $30m, the company added immediate cash flow through a gold stream agreement on the Vatukoula mine in Fiji. The mine has been in production for approx. 80-years, constantly maintaining a 5-9yrs mine life based on reserves. In other words, this operation is likely to remain in production for many years, if not decades to come. The gold stream is a combination of fixed deliveries followed by a smaller tail stream once the fixed deliveries have been satisfied. Stream deliveries are fixed for the first six years, growing from 2,280 oz. per year during the first 24 months to 5,340 oz. per year for the remainder of the fixed delivery period of four years, followed by a variable stream for the life of the mine (2.55%-2.90%). Sandstorm also received a 1.0% NSR royalty on VGML's interest in certain prospecting licenses, plus a five-kilometer area of interest. The ongoing purchase price is equal to 20% of the spot price. 
2. Sandstorm also acquired a royalty package on a portion of Vale’s operations (Iron-Ore) for a total purchase price of $US108m. Given that Iron-ore prices have appreciated significantly thus far, the deal was made such that if Iron-ore prices fell 40-50%, the investment would still have a fair internal rate of return. The reserve life of these royalties spans several decades solely based on reserves. The royalty’s units purchased from Vale include the following:

• 0.03 NSR on the Sossego copper-gold mine, and 0.06% NSR on copper and gold, and 0.02% NSR on all other minerals from certain assets.
• 0.04% NSR on iron ore sales from the Northern System; and
• 0.04% NSR on iron ore sales from a portion of the Southeastern system after the cumulative threshold is met (expected in 2024). Sandstorm estimates the royalty will cover approx. 70% of the Southeastern System production after the threshold is triggered.

Given the recent deal, Sandstorm has increased 2021 guidance to between 62-69k AuEq oz. These royalties (using consensus prices) will increase revenue by $12-$15m annually for the next five years.

Wallbridge Mining: The company announced additional assay results from its current drilling program on the Fenelon Gold Property. Expansion drilling continues to reveal additional bulk mineable, near-surface mineralized corridors in the western part of Area 51, while definition drilling continues to define steep, high metal factor (grade x thickness) gold shoots within the Tabasco-Cayenne Zones. Drill highlights include:

• 24.90m @ 23.70 g/t Au (Area 51, Near-Surface Expansion Drilling)
• 15m @ 6.83 g/t Au (Tabasco-Cayenne-Contact Zone, Definition Drilling)
• 11.35m @ 6.61 g/t Au (Tabasco-Cayenne-Contact Zone, Definition Drilling)
• 0.50m @ 91.80 g/t Au (Area 51, Near Surface à 300m depth, potential O/P resource)
• 33.70m @ 1.02 g/t Au (Area 51, Near Surface à 300m depth, potential O/P resource)
• 38.50m @ 1.97 g/t Au (Area 51, Near Surface à 300m depth, potential O/P resource)
• 3.25m @ 15.37 g/t Au (Area 51, below 300m depth)

Drilling is currently focusing on multiple areas within the approximately 1.0 km by 1.2 km central portion of the Fenelon Gold System to expand and better define the mineralization supporting the maiden mineral resource estimate. Over 200,000 meters of drilling will be incorporated into the MRE.