Gold and silver both had a nice week, but this isn't exactly unexpected as both were oversold. The metals reacted favorably to this week's C.P.I. number, which showed that consumer price inflation is picking up, albeit marginally but the highest in some time. The P.P.I. was also hotter than expected. The C.P.I. showed consumer prices rose by 2.60% year over year. Behind G.D.P., the C.P.I. is the second most heavily manipulated data set, so the fact it was above 2.50% indicates inflation is multiples higher. Why wouldn't this be the case as the expansion of the money supply has been very substantial from this time a year ago?
Aided by the central banks, governments show no signs of slowing down the printing press, and accelerating inflation should be expected (the timing of which is impossible to know, however). It is remarkable how anyone believes the C.P.I. is even a remotely accurate gauge of inflation given all the doctoring involved via substitutions, geometric weighting, hedonics, and other gimmicks. Food prices have been soaring, as have housing prices, equity prices, most commodity prices (especially gasoline prices, up 22.50% from a year ago while the overall energy complex is up 13.20%), yet inflation is only up 2.60%; from a year ago? Not a chance.
Company news started to pick up once again after two quiet weeks. Earnings season is about a month away, so company news could turn down again before picking up. Q1 numbers won't be as strong as Q4 due to the lower average gold price, but silver miners and should see excellent cash flow generation and several record quarters. Click here to sign up for our premium service, 30-day risk-free trial.
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B2Gold: Q1 production remained strong at 220k oz. Au, 9% above guidance, keeping the company on track to meet annual production guidance of 970k-1.03m oz Au. The 220k oz. Au in inclusive of 15k oz. Au from Calibre as B2Gold continues to hold a material interested. Based on current production, cost, and gold price assumptions ($1,800/oz.), the company expects to generate a full-year operating cash flow of $630m. Production will be weighted more heavily towards the 2H of 2021. 1H 2021 production is estimated at 365-385k oz. Au (220-230k oz. from Fekola, 100-105k oz. from Masbate and 45-50k oz. from Otjikoto) and 555-585k oz. Au in the 2H (310-330k oz. form Fekola, 100-105k oz. from Masbate and 145-150k oz. from Otjikoto).
Calibre Mining: Reported Q1 gold production, starting the year strong with output of 45.45k oz. Au. This is the highest quarterly production since Q3 2016, back when B2Gold owned and operated these assets. Production includes the first ore delivery from the Pavon Norte mine to the Libertad mill, which demonstrated the company's ability to advance new satellite deposits from permit to plan in less than 18-months. This illustrates the efficiency of Calibre's Hub and Spoke model and provides investors with a rough idea of what to expect when new "spokes" are added to the mine plan. Eastern Borosi is one to watch.
Calibre’s free cash flow is lower than it otherwise would be as growth and exploration capital costs are more heavily weighted to the first half of the year. Nonetheless, Calibre’s cash position increased $5.1m to $58.2m. In Q1, the company also announced a 200% increase in reserves to 864k oz. Au, which is the largest reserve base since 2010 with the highest grade on record, 4.49 g/t Au. High-grade drill results at Limon reported during Q1 include (in addition to the ongoing 60,000m exploration and resource growth drill program):
- 6.8m @ 7.98 g/t Au (Atravesada underground).
- 9.8m @ 8.92 g/t Au (Atravesada underground).
- 1.0m @ 251.90 g/t Au (Limon Norte open-pit); and
- 6.1m @ 6.97 g/t Au (Panteon Underground)
Eldorado Gold: Reported Q1 production results, which was in line will full-year production guidance. In Q1, the company produced 111.7k oz. Au and the company maintained full-year guidance of 430-460k oz. Au. The future is looking bright for El-Dorado now that it has gotten the go-ahead to advance and expand its operations in Greece. It has done an excellent job with its Canadian assets, which are continuing to grow. Eldorado greatly enlarged its footprint in Canada through Ormaque and the closing of the acquisition of Q.M.X., increasing the company's overall land position by 550%. Guidance from Lamaque for 2021 is 140-150k oz. However, after implementing optimization and expansion measures, we see gold production from Canada achieving and eventually surpassing upwards of 200k oz. Au p.a.
Equinox Gold: Commenced development of the Bermejal underground and completed the Los Filos community agreement. The Bermejal underground development is one of three planned expansion projects. The Bermejal underground will provide higher-grade ore, contributing to higher production beginning in 2023. Equinox will also be enlarging the Los Filos pit and re-phase the Bermejal open-pit into two sections, Bermejal and Guadalupe. Lastly, starting in 2H 2021, the company will begin constructing a 4ktpd C.I.L. processing plant, complementing the existing heap leach facilities. Equinox is evaluating the benefits of constructing a larger C.I.L. plant, which would impact the current F.S. estimate for construction capital, including the C.I.L. plant, power and tailings filtration system, and the associated deposition area. Studies relating to the C.I.L. plant should be completed in the 1H 2021.
Excellon Resources: Announced Q1 production results of 328k oz. Ag, 2.1m lbs. Pb, and 2.4m lbs. Zn. Production in Q1 2021 improved relative to Q1 2020 as the changes and enhancements made in mid-2020 continued to be refined, including modified shift schedules, mining methods, and improved water pumping and mine infrastructure efficiency.
Fiore Gold: The company reported a 19% increase in its fiscal Q2 production of 10.91k oz. Au as heap leach pH levels improved during the quarter. Mined ore production in Q2 of 12,351 tons per day with the stripping ratio of 1.6:1.0 at a grade of 0.45 g/t. The Pan heap leach pad expansion project is progressing well, with the first ore expected to be placed on the new portion of the pad in fiscal Q3. The company ended the quarter with $17.5m in cash, a reduction from year-end as it continues to invest in expanding the Pan heap leach pad and ongoing drilling and feasibility study (F.S.) to advance Gold Rock.
First Majestic Silver: Reported solid Q1 production with 2.9m oz. Ag and 23.87k oz. Au (or 4.5m AgEq oz). During the quarter, the Liquid Natural Gas facility at Santa Elena completed all commissioning activities. At quarter-end, the L.N.G. power plant was supplying approximately 85% of power requirements to the Santa Elena operation. Underground development activities at the Ermitaño project near Santa Elena advanced another 1,453 meters during the quarter. The Company plans to start test stope mining in June and expects to extract between 50,000 to 60,000 tons of material over the next six months. Initial construction activities commenced for the access road, connecting the Santa Elena processing plant to the Ermitaño portal area. Santa Elena underground production exceeded budget. In 2020, Santa Elena underground averaged 1.3-1.5ktpd, though this spiked to 1.78ktpd in March.
San Dimas produced 1.7m oz. Ag and 17.45k oz. Au in Q1, a 12% and 13% decrease relative to Q4 2020. Throughput averaged 2.21ktpd with lower silver and gold grades of 285 g/t Ag and 2.83 g/t Au. The company increased ore development rates, and lower ore grade from development activities resulted in lower average ore grade processed. Two new areas are being brought into production (Tayoltita and El Cristo). Higher production is expected in the coming quarters and especially over the three years. Higher output at Santa Elena was negated by a 32% decrease in production at La Encantada. During February, the operation experienced a severe winter ice storm which elevated maintenance levels and temporarily reduced plant throughput rates.
Fortuna Silver: Reported Q1 production of 1.9m oz. Ag and 34.55k oz. Au. This is the first quarter of contributions from its Lindero gold mine in Argentina. Fortuna did spend far too much on Lindero. For the same price (acquisition and initial capital costs), Fortuna would have been able to buy a similar-sized mine in a safer jurisdiction. Regardless, things are looking up for the company as free cash flow is about to kick into high gear, courtesy of the Lindero ramp-up and higher silver prices. Fortuna is scheduled to produce between 6.8-7.6m oz. Ag and 178-202k oz. Au (140-160k oz. Au from Lindero) in 2021.
Gran Colombia: The company produced 49k oz. Au in Q1 2021, including 18.64k oz. in March. March marked the second consecutive month operating above the 1.5ktpd level at the Maria Dama processing plant at Segovia. The company remains on track to achieve full-year production guidance of 200-220k oz.
The expansion of Maria Dama to 2ktpd is proceeding as planned. This includes a new blending yard and crushing system, a new Merrill Crowe system, additional thickeners, and a second filter press at the El Chocho tailings storage facility, all of which are being added to the operations in stages over the balance of the year. In addition, the construction of the new polymetallic plant for recovery of zinc, lead, gold and silver from the tailings into concentrate at Segovia should be completed by mid-year. The overall reserve and resource grade is below that achieved in Q1 of 13.32 g/t. The updated M.R.E. as of year-end 2020 includes 1.43m oz. Au @ 11.2 g/t and 1.21m oz. @ 10.30 g/t Au. However, current reserves stand at 633k oz. @ 9.0 g/t Au. Looking forward, unless the company can successfully delineate reserve and resources with an average grade of 14 g/t Au or higher, production won’t increase nearly 30% or the size of the mill expansion. Instead, following the plant expansion and assuming an average blended grade of 10.30 g/t, production could increase 5-10%.
With the pending close of the Gold-X acquisition, the development of Toroparu will increase production significantly and approx. double cash flow, if not more. Gran Colombia’s balance sheet has improved with $122.5m ($89.5m excluding $33m in Aris) in cash at year-end 2020 (and reasonable to expect an increase, though it will be negated in part because of expansionary capital costs for the mill expansion and other capital projects). Gold notes outstanding at year-end were $35.5m, giving the company a net cash position of $54m. Gran Colombia also owns a 44% interest in Aris Gold (worth approx. $100m) and other investments worth approx. $9m. With ongoing cash flow generation, over $160m in cash, the ability to obtain a larger debt facility ($150-$200b), and $100-$110m to be remitted by Wheaton Precious Metals should allow the company to complete the buildout of Toroparu with minimal or no shareholder dilution.
Great Panther: Reported Q1 2021 production results. Consolidated metal production totaled 30.56k AuEq oz. (24.98k oz. Au and 360k oz. Ag), with 23k oz. Au from its flagship asset gold asset, Tucano, in Brazil. Great Panther completed annual maintenance at Tucano, including replacing the primary crusher and realignment of the S.A.G. mill motor. Production was lower in Q1 due to heavy stripping, which likely also resulted in higher AISC. Production is expected to ramp up quarter-over-quarter for the remainder of the year as mining progresses into sectors with lower strip ratios at lower costs. Grades at Tucano fell 27% relative to Q4, and a 12% decrease in ore processed, leading to a 28% fall in production.
Jaguar Mining: announced gold production results for the first quarter of 2021. Consolidated gold production decreased 14% with 18,161 ounces compared to 21,008 ounces in Q1 2020. Grade also fell to 3.10 g/t compared to 4.15 g/t in Q1 2020. Pilar gold production decreased 16% with 9,643 ounces compared to 11,521 ounces in Q1 2020, and Turmalina gold production decreased 10% with 8,517 ounces, compared to 9,487 ounces in Q1 2020. At quarter-end, the company's cash position stood at $38m, a $1m decrease relative to year-end 2020. The company also paid $4.6m in dividends in Q1. Brazil has been hard by CV-19 recently, which impacted the company as approx. 30% of employees and contractors have either contracted the virus, been quarantined, or been sidelined for health risk factors.
K92 Mining: Announced Q1 production results of 18.54k oz. AuEq, consisting of 17.77k oz. Au, 426k lbs. Cu and 7.9k oz. Ag. K92 achieved this via record plant throughput at the Kainantu mine despite a much lower feed grade @ 8.50 g/t Au vs. the average for 2020 @ 14 g/t. Throughput consisted of six consecutive weeks in January and February, achieving average throughput of 1ktpd, 18 days exceeding 1.1ktpd, 8 days exceeding 1.2ktpd, and a daily record of 1.315ktpd over this period. Despite the lower head grade (which likely led to higher costs), K92 generated $20m of free cash flow, paying down the remaining $5m. The company remains in a strong financial position to fund its expansion project (Phase III), ending the quarter with cash of $66m and no debt.
Lundin Gold: Reported strong Q1 production numbers, totaling 104k oz. Au, comprised of 70.6k oz. from concentrate and 33.67k oz. as dore. The average grade was 11.36 g/t, with an average recovery rate of 87.80%. Lundin remains on track to achieve full-year guidance of 380-420k oz. Au. Throughput is expected to increase from 3.5ktpd to 4.2ktpd in Q4 2021, upon completion of the mill expansion.
Magna Gold: Reported Q1 operating results and updated the ongoing ramp-up at its San Francisco mine. The operational ramp-up at the San Francisco mine has been progressing well. Production levels have benefited from the accelerated stripping program, which has increased productivity and efficiency at the mine. As a result, Q1 2021 has shown progressive month-to-month growth in gold production with 3,085 ounces in January, 2,670 ounces in February, and 4,030 ounces in March. Magna continues to see growth in production post Q1 2021 and anticipates the mine will return to full-scale commercial production by June 2021, starting H2 at a production run rate of over 6,000 ounces per month and exiting the year with over 7,500 ounces per month (86-90k oz. Au annualized).
New Pacific Metals: The Bolivian-focused silver company continues to put together some excellent land packages. In addition to Silver Sands, which is delineated over 120m oz. Ag with its maiden M.R.E., New Pacific has added the Silverstrike project and the Carangas project. Highlights of the project include:
- 5,000m diamond drill program planned for 2021.
- Near-surface bulk tonnage and high-grade vein targets identified.
- Former silver mining district, located on La Ruta de la Plata, containing broad zones of outcropping silver mineralization and historically exploited high-grade silver veins.
- Highlights of due diligence sampling include 30m at an average grade of 101 g/t Ag, 15m @ 252 g/t Ag, and 8m @ 512 g/t Ag.
Osisko Gold Royalties: The company reported attributable production of 19.96k AuEq oz. in Q1. This excludes the AuEq oz. earned from the Renard diamond stream, given the net proceeds from the diamond stream were reinvested through the bridge loan with the operator of the mine. Osisko will begin to receive its diamond stream next year, in 2022. This was an impressive quarter as new assets will come online later this year, and attributable production from its 5% N.S.R. eagle royalty was lower as the operators deferred ore stacking at the mine during the three coldest months of the year (Jan-Mar). Osisko Gold Royalties also announced it entered into binding purchase agreements to acquire six royalties and one precious metals offtake, from two primate sellers, for $26m. These royalties include:
- A sliding scale 2.5% N.S.R. royalty (with the maximum royalty percentage of 2.5% applicable when the gold price is above US$700/oz. This royalty is payable once 500,000 ounces of gold are recovered from Spring Valley) on claims overlying the core of the current Spring Valley deposit. Along with its existing 0.5% N.S.R., Osisko now holds, in aggregate, a 3.0% N.S.R. over these core claims.
- Two separate 1.0% N.S.R. royalties (for a total 2.0% N.S.R. royalty) on key Spring Valley claims overlying the prospective high-grade northeastern portion of the deposit.
- A 0.5% N.S.R. royalty over the broader Spring Valley property, which is additive to the two royalties covering the northeastern portion of Spring Valley.
- Osisko has agreed to acquire a 1.0% N.S.R. royalty on the Moonlight Project, which lies immediately to the north of Spring Valley. The Moonlight Project, which Waterton also operates, is a large, prospective, exploration-stage property along the same structural trend as Spring Valley, Rochester, and Relief Canyon mines.
- Osisko has also agreed to acquire a 0.5% N.S.R. royalty and a 30% precious metal offtake covering the Almaden Project in western Idaho, U.S.A., which is 100% owned by Gold Mining Inc.
Osisko can focus on smaller royalties in perspective areas, providing excellent optionality as it has a robust four-to-five-year organic production growth profile. That isn't to say the company won't engage in more significant royalty or streaming transactions.
Silvercorp Metals: Reported production for its fiscal year 2021. During its fiscal year, the company produced 6.3m oz. Ag, 68.4m lbs. Pb and 28m lbs. Zn. The Ying Mining camp continues to perform well, producing 5.6m oz. Ag and 57.8m lbs. Pb @ 290 g/t Ag and 4.30% Pb.
Silvercrest Metals: The high-grade development company announced additional high-grade infill and expansionary drill results from the Babi Vista veins splay, Babi Vista vein, Granaditas 1 vein, Granaditas 2 vein, and adjacent hangingwall and footwall veins in the Babicanora area of its Las Chispas project. Highlights from this press release include:
- Confirmation of the southeastern vein continuity and convergence of the Babi Vista, Splay, and Granaditas veins. With high-grade exploration footprints, Mineral resources can now be traced for an estimated 1.3 kilometers of vein strike length.
- The latest 31 drill holes within the high-grade footprint of the Splay have an average estimated true width of 0.91 meters @ 16.12 grams g/t Au and 1,351.5 g/t Ag.
- The seven mineralized drill holes in the Granaditas 1 Vein, included in this release, have an average width of 1.57m @ 19.24 g/t Au and 5,095.1 g/t Ag. This compares to the vein's Inferred Mineral Resource that contains 1.1 million AgEq oz @ 3.20 g/t Au and 260.0 g/t Ag, or 538 g/t AgEq with an E.T.W. of 0.61 meters.
- Significant drilling results:
- Splay - Hole BV21-252 intercepted an ETW of 2.27m @ 87.05 g/t Au and 6,469.2 g/t Ag.
- Granaditas 1 Vein – Hole BV20-221 intercepted an E.T.W. of 3.65. @ 40.42 g/t Au and 6,089.4 g/t Ag.
- Granaditas 1 Vein - Hole GR21-28 intercepted an ETW of 0.40m grading 114.00 g/t Au and 78,872.0 g/t Ag.
Wesdome: Reported Q1 production of 22.56k oz. Au. Eagle River grades were slightly below the low end of guidance. However, it increased through the quarter, reaching 15.3 g/t in March. The company expects to be within guidance for the year. Underground operations showed steady improvement in improving efficiencies throughout the quarter, which is expected to continue. Mill throughput increased by 6% over Q1 2020 due to higher mill availability. Quarterly gold production is expected to increase for the remainder of the year.
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