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Silver Seeker #74: Q2 Production Results, Gold Can't Decide Which Direction to Move

Gold continues to trade in a range, failing to break out. It will break to the upside or downside sooner or later. Gold may have bottomed, but this is a seasonally weak period, and the charts aren't particularly conducive for higher prices, so we wouldn't be surprised to see lower prices before heading higher. The silver chart continues to weaken as we broke the $25/oz. level if only for a short while. That will be a key level to watch, and there is some support at $24.50 and $24/oz. If those are broken, we could test the next strong support level around $22/oz. The mining stocks are remarkably cheap, most notably mid-tier producers down to junior exploration companies. News flow from mining companies has picked up and will do so much more as we enter earnings season in August.

$BRC, $BSR, $EXK, $EXN, $FSM, $IAG, $KNT, $LAB, $MAI, $ORE, $ODV, $RIO, $SKE, $SSVR, $AUY

Blackrock Silver: Announced that it has increased its land position to the north and west of the existing patented lands. The company has staked an additional 260 unpatented lode mining claims covering approximately 21 square kilometers, more than tripling its land position within this prolific mining camp. The claims cover the northwest extension of the Pittsburg-Monarch fault system, an area known to have the thickest veins in the Tonopah district and are directly associated with this structural zone. Historic underground stopes along the Victor vein were up to 24m where the vein intersected the fault. Blackrock has confirmed this with RCV drill hole hitting 965 g/t silver equivalent over 29m, later followed up with core drill hole hitting 18.5m @ 295 g/t AgEq. A similar scenario at the Ohio vein occurred where stopes were up to 14m thick where the Ohio vein intersected the Pittsburg-Monarch fault system.

Bluestone Resources: Announced an updated MRE for its Cerro Blanco Gold project in Guatemala. The Cerro Blanco project is the next sizeable project to be developed by the Lundin Group of companies. The MRE is just an update to the resource disclosed earlier this year when the company announced the PEA for an open-pit development scenario when the company pivoted away from developing a less valuable underground operation. M&I gold resources total 3.1m oz. @ 1.50 g/t, an increase of 142k oz. from that announced earlier this year, while silver M&I resources total 13.4m oz.

Endeavour Silver: Following in First Majestic's footsteps earlier this year, Endeavour silver signed an agreement to acquire a primary gold asset in Nevada. The company entered into a definitive agreement with Canamex Gold to acquire the Bruner Gold project for $10m in cash. In 2017, a PEA was completed, outlining a low cap-ex, open-pit, heap leach operation. This project is unlikely to see much work done until Terronera comes online, at which point Endeavour will be generating significantly more cash flow. 

Excellon Resources: Announced Q2 production results. The company produced 296k oz. Ag, 1.9m lbs. Pb, and 2.5m lbs. Zn. Head grades were lower in Q2 2021 than Q2 2020 due to higher mining dilution in narrower sections of the ore body. The Miguel Auza plant continues to focus on improving metal recoveries. Zinc recoveries improved relative to Q1 2021 following plant upgrades in the zinc flotation circuit. More generally, metal recoveries were impacted by weather conditions, power outages, and metallurgical variances. The combination of mill maintenance in early June and weather conditions in late June resulted in sizeable stockpiles of ore (1,634 tons) and concentrate (154 tons of lead and 134 tonnes of zinc) at quarter-end, which were processed and/or delivered in early July.

Fortuna Silver: Reported Q2 production of 1.892m oz. Ag, 31k oz. Au, 8.14m lbs. Pb, and 11.76m lbs. Zn. Gold production was impacted by a surge of CV-19 in Argentina in Q2, with the infection rate peaking at 41k cases/day. Extended travel restrictions and limited onsite access affected ramp-up activities at Lindero. The COVID-19 infection rate at Lindero increased during the second quarter and significantly impacted the operation´s performance as 160 personnel tested positive, equal to 18% of the workforce. During the quarter, the company intermittently voluntarily suspended onsite operations for 16 days, directly impacting ramp-up progress and reducing the amount of ore delivered to the heap leach pad. The operation is on track to achieve full production capacity in Q4. Fortuna will see marked growth the remainder of the year as the acquisition of Roxgold has closed, and Yaramoko will contribute to production in Q3. Further, the Seguela development project remains on track to achieve production in 2H 2022, setting the stage for additional production growth in 2023.

IAMGOLD: Announced Q2 production, reduced production guidance for 2021 at increased costs. The capital cost estimates for the Cote mine build also have increased. In Q2, the company produced 139k oz. Au, bringing the first-half production to 295k oz. Full-year production guidance was reduced from 630-700k oz. at AISC of $1,230-$1,280/oz. to 565-605k oz. at AISC of $1,395-$1,435/oz. Lower production is due to lower first half 2021 production from Westwood and Rosebel and their forecast output in the 2H. Expected capital costs for its 70% interest in Cote have increased to $1.125-$1.175B from $875-$925m, which isn't immaterial. The project remains on schedule and was approx. 27% complete at the end of Q2.

K92 Mining: Announced high-grade drill results at Kora as the company continues to prove that this is a tier-1 asset. Highlight drill results from this release include:

  • 3m @ 71.22 g/t Au.
  • 2.90m @ 11.71 g/t Au.
  • 5.35m @ 37.56 g/t Au.
  • 6.30m @ 24.86 g/t Au and 4.44% Cu.
  • 4.46m @ 33.77 g/t Au.
  • 2.4m @ 19.11 g/t Au, 82 g/t Ag, and 6.97% Cu.
  • 7.20m @ 16.05 g/t Au, 92 g/t Ag, and 3.28% Cu.
  • 8.93m @ 22.75 g/t Au.

Labrador Gold: Published additional drill results from its ongoing drill program. The company intersected high-grade intercepts near surface at its Kingsway project. Highlights include:

  • 0.5m @ 276 g/t Au
  • 0.65m @ 13.14 g/t
  • 0.5m @ 16.44 g/t Au
  • 0.21m @ 37.72 g/t Au
  • 3m @ 3.83 g/t Au
  • 2.5m @ 2.05 g/t Au
  • 3.77m @ 2.03 g/t Au

Minera Alamos: The commissioning work at the Santana mine continues to proceed according to schedule, with the gold recovery plant tested thoroughly and operational. This has occurred despite the significant rainfall covering southern Sonora in the first half of July. Minera is pleased to report that overall, the project proved resilient to an exceptional rainfall event. The mine site saw more than an entire month of above-average precipitation and often in concentrated windows. Some minor delays occurred with final electrical hookups, but the company reported all required plant electrical infrastructure is now in place and operational.

Orezone Gold: Announced additional results from its ongoing drilling program to test the expansion potential of the P17 trend at its Bomboré Gold Project, located in Burkina Faso, which is currently being built. The focus of this latest drilling was to test the continuity of high-grade mineralization into the Gap Zone between P17S and P17. This area had not been previously subject to any drilling and represented a 600 m gap between the P17S NE extension and P17 to the north. With the success of these new results, the strike extent of P17S is now over 600m outside of the existing reserve pit and remains open at depth. Drill highlights from this release include:

  • 50m @ 1.40 g/t Au
  • 21m @ 1.56 g/t Au
  • 9m @ 2.06 g/t Au

It is believed that the P17 mineralization has the potential to host a large gold resource (at higher grades) and increase production and an increase in Bomboré’s mine life. 

Osisko Development: Announced the receipt of the Notice of Work permit to commence development to collect an underground bulk sample at its Cariboo Gold Project in BC and conduct underground diamond drilling. The company also reported additional drill results from its ongoing 200,000m exploration program. A 10,000-ton bulk sample will be collected at the Cow Mountain deposit, and 2,200m of development is planned. The ore will be processed in the ore sorter to improve confidence in ore sorting technology. Recent drill results include:

  • 7.4m @ 11.76 g/t Au
  • 7.35m @ 6.96 g/t
  • 2.5m @ 21.59 g/t
  • 5.6m @ 8.90 g/t
  • 2.85m @ 13.27 g/t
  • 5.50m @ 6.73 g/t
  • 1m @ 63.90 g/t
  • 1.15m @ 47.4 g/t

Rio2 Ltd: The company announced it had arranged a financing package (totaling $125-$135m) to construct its Fenix Gold Project in Chile. The financing package has three components:

  • A 6%/4% gold stream with Wheaton Precious Metals for $50m
  • A senior debt facility of $50-$60m
  • Equity offering for gross proceeds of approx. $20m and a $5m private placement with Wheaton Precious Metals.

Skeena Resources: Announced outstanding results from the pre-feasibility study for its Eskay gold-silver project. Highlights include:

  • High-grade open-pit: 3.37 g/t Au and 94 g/t Ag
  • After-tax NPV5 of $1.1B and 56% IRR using $1,550/oz. Au and $22/oz. Ag price decks.
  • Low initial capital investment (relative to the scale of the project) of $381m
  • Avg annual production of 249k oz. Au and 7.22m oz. Ag over an initial 9.8-year mine life
  • LOM cash costs and AISC per AuEq oz. of $509/oz. and $548/oz.

Summa Silver: Announced the discovery of high-grade silver and gold mineralization in the first two holes drilled at the Hughes property near Tonopah, Nevada. Drilling in Tonopah has caused somewhat of a rebirth for silver exploration in the silver state, Nevada. Blackrock silver has been successful thus far, and early indications are Summa is on its way. The key drill highlights from the first two drill holes include:

  • 2.80m @ 2,252 g/t Ag and 21.60 g/t Au
    • Including 0.9m @ 5,969 g/t Ag and 60.2 g/t Au
  • 15.1m @ 79 g/t Ag and 0.76 g/t Au
    • Including 1.2m @ 269 g/t Ag and 2.56 g/t Au

Yamana Gold: Announced the results of several studies on the company’s Wasamac project in the Abitibi Region of Quebec, Canada, intended to corroborate diligence reviews conducted by the company on its purchase of the Wasamac project in early 2021 and update a historical feasibility study. These studies form the new feasibility level studies of the company and the baseline technical and financial aspects of the Wasamac project that now underpin the decision to advance the project to production.  

Results from all studies are consistent with the company's conclusions in its diligence reviews relating to the purchase of Wasamac and, in some cases, are better than the conclusions from those reviews. While a prior feasibility study was recently completed on Wasamac in 2018, the company relied on its diligence reviews relating to the purchase of the project, using the previous feasibility study as a reference only and applying its standards and approaches as a complete update of the prior study. These studies now form Yamana's feasibility level work relating to the project.

Optimization Highlights:

  • Mineral reserves of 1.91 million gold ounces at an unchanged average gold grade of 2.56 g/t with an initial mine life of 10 years.
  • Rapid production ramp-up in the first year, followed by sustained gold production of approximately 200,000 ounces per year for at least the next four years. Including the ramp-up phase, average annual production for the first five years of operation is expected to be 184,000 ounces.
  • Optimized mining method and mining sequence, utilizing a combination of longitudinal and transverse stoping with paste fill, which resulted in a higher production rate, reduced dilution, and a 26% reduction in LOM development meters.
  • Initial capital costs are expected to be relatively modest for a 7,000tpd underground operation, at approximately $416 million. The company undertook extensive due diligence relating to the acquisition of Wasamac and identified several opportunities for optimizations and improvements; the updated studies confirmed the opportunities for optimizations.
  • LOM cash costs and AISC of $640/oz. and $828/oz., respectively, remaining well below the company average, reflecting the application of more conservative cost assumptions to de-risk the project and align with benchmark costs from Yamana’s other operations.
  • NPV5% of $254 million with an after-tax IRR of 16.1% @ $1,550/oz. and NPV of $470 million and after-tax IRR of 24% at $1,850 per ounce of gold based on mineral reserves and excluding future upside potential from encouraging exploration prospects.

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