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Silver Seeker Issue #62 ~ This Week In Mining: M&A Picks Up, Early Q1 Earnings

M&A continued to pick up, this time with Fortuna Silver making a bid for Roxgold. The metals traded within a narrow band this week as both gold and silver can't make up their minds to move higher or lower. A couple of mining companies have announced Q1 financial results, with more to follow over the coming four weeks.


Agnico Eagle Mines: The company reported Q1 financial results, which came in strong. Agnico produced 504k oz. Au (excluding 12.26k oz. from Hope Bay) at cash costs and AISC of $729/oz. and $996/oz. The company remains on track to produce approximately 2.05m oz. Au for the full year at cash costs and AISC of $700-$750/oz. and $950-$1,000/oz. In Q1, operating cash flow was $415m (before changes in non-cash working capital).

Agnico provided two asset updates, one for the East Gouldie zone at Canadian Malartic and Hope Bay. At the Odyssey project at the Canadian Malartic mine, a 970m step-out drill hole intersected the eastern down plunge extension of the East Gouldie Zone. This hole intersected 10.90m @ 2.7 g/t Au. This new intercept suggests that the current mineral resources at East Gouldie could be expanded significantly down-plunge towards the east. Drilling is also underway to infill the East Gouldie Zone to 75, spacing. The Hope Bay management team is focused on optimizing the underground mine and mill operations, with a longer-term view to developing a larger-scale production center. During the first quarter of 2021, exploration activities were focused on the Doris area, which is the current source of mill feed. Highlights include 16.7m @ 9.8 g/t gold at 343 meters depth in the BTD Extension and 11.6 g/t gold over 7.4 meters at 203 meters depth at the DCN Zone.

Alamos Gold: Reported Q1 2021 financial results. Alamos started the year strong with production of 125.8k oz. Au, a 14% increase relative to Q1 2020 due to higher production at Young-Davidson and a record quarter at Island Gold. Cash costs and AISC came in as expected at $757/oz. and $1,030/oz. Alamos generated operating cash flow of $119.6m. Alamos ended the quarter with $238m in cash, $26.7m in equities, and no debt. With Alamos Gold's strong cash position, $500m undrawn credit facility, and cash flow generation, the company could undertake a mine build through its existing portfolio of assets or via acquisition.

Argonaut Gold: Announced it received all necessary regulatory approvals, including a modification to the existing Air Quality permit, to allow for the construction, installation, and operation of a new conveying and stacking system at its Florida Canyon mine in Nevada, USA.  The equipment associated with the conveying and stacking system is expected to begin arriving on site in May. It is estimated that the new system will be operational and ramped up to design capacity during the third quarter of 2021. This will eliminate multiple re-handling of ore and put material downward pressure on operating costs. This will also increase production at Florida Canyon. The Florida Canyon’s production and cost profile should improve markedly in 2022.

In our view, the future of Argonaut is a takeover target given its high-quality development project, Magino, which will likely be a significant mine in Canada once optimized. In the meantime, Argonaut is exploring the potential at its high-cost Mexican operations, most recently announcing it discovered high-grade gold veins below the El Creston pit at its La Colorada mine. Highlights from the most recent press release include:

  • 16.3m @ 3.88 g/t Au
  • 16.5m @ 44.59 g/t Au and 274.9 g/t Ag
  • 29.3m @ 3.71 g/t Au (From 13.7m)
  • 17m @ 3.92 g/t Au (From 27.4m)
  • 10.8m @ 4.86 g/t Au and 188 g/t Ag
  • 16.1m @ 5.45 g/t Au and 111 g/t Ag
  • 2.2m @ 6.23 g/t Au
  • 9.9m @ 98.85 g/t Au
  • 4.8m @ 18.39 g/t Au
  • 40.2m @ 5.22 g/t Au and 43.8 g/t Ag

Eldorado Gold: Gold production totaled 111,742 ounces in Q1 2021 @ AISC of $986/oz., in line with 2021 annual guidance. Eldorado is maintaining its annual guidance of 430,000 - 460,000 ounces of gold @ $920-$1,150/oz. sold. Eldorado generated operating cash flow of $90.9m and free cash flow of $24.6m, bolstering its already strong balance sheet with $533m in cash and equivalents and $100m available under its revolving credit facility.

The company has reported good news over the last year, including the acquisition of QMX, publishing a maiden mineral resource updated (MRE) at Oramaque, and an amended investment agreement with the Hellenic Republic ratified by the Greek parliament, officially becoming law. The Agreement provides a mutually beneficial and modernized legal and financial framework to allow for investment in the Skouries project and the Olympias and Stratoni mines.

Elemental Royalties: The small royalty company set records across the board as it reported FY 2020 results. Revenue increased 112% to $5.1m, attributable AuEq oz. an increase of 69% over 2019 at 2.89k oz. Cash and equivalents stood at $10.9 at year-end plus royalty receivables of $1.1m. In 2021, the company expected attributable production of 4-4.4k AuEq oz. and revenue of $7-$7.9m.

Fortitude Gold: announced exploration drill results at Scarlet, including 16.76m @ 2.23 g/t Au gold and 24.4m @ 1.60 g/t Au. This mineralization is associated with the northwestern structural extensions of its Isabella Pearl mine located in Mineral County, Nevada. During the first quarter of 2021, a ten-hole reverse circulation program targeted the south Scarlet area located approximately 650 meters northwest of the company's operating Isabella Pearl mine.

Fortuna Silver: Made a bid for Roxgold before the market open on Monday, which caused the stock price to sell off 16%+, followed by further selling on Tuesday. We like this acquisition as it prevents production from falling off after 2021 and provides Fortuna will a nice pipeline of development projects. The initial implied equity takeover price was $884m but has since fallen along with Fortuna's stock price. This isn't shocking as the acquiring company generally sells off when they offer a 40% premium to the previous days closing price and the 20-day volume-weighted average price (VWAP). This acquisition will increase annual production in the immediate, short, and medium-term while putting downward pressure on costs. The Yaramoko mine will increase production by 62k oz. Au in 2021 (assuming 6-months of production), 120-125k oz. Au in 2022, 225-235k in 2023 (Seguela comes online before year-end 2022), and 260-270k oz. Au in 2024. All of Roxgold's assets have significant upside, notably the Seguela development project. Fortuna likely paid a bit more than it had to, but it is accretive on every metric at a gold price above $1,670/oz. This merger is also unique in the sense that it's difficult to find a junior or mid-tier gold producer with operations in North America (Mexico), South America (Peru, Argentina), and West Africa (Burkina Faso, Cote d'Ivoire). Fortuna's silver production will maintain but decrease significantly as a percentage of silver equivalent production, dropping to or below 20% in 2024. Visit and sign up for our free 30-day trial to read our analysis and appraisal of Roxgold and next week our Pro-forma report on the Pro-forma Fortuna-Roxgold.

Galleon Gold: Reported near-surface intercepts at West Cache gold project. Highlights include 6m @ 9.37 g/t Au and 2.1m @ 3.17 g/t.

New Found Gold: The company continues to release drill results as part of its 200k meter 2021 drill program, this time releasing the results of four more holes at the Keats zone and its Queensway project. Highlights include:

  • 2.50m @ 8.41 g/t Au
  • 2.50m @ 16.93 g/t Au
  • 8.45m @ 63.71 g/t Au

The high-grade intervals (>10 g/t Au) extend the Keats high-grade zone approximately 50m down plunge from the deepest previously reported hole, which returned 13.70m @ 61.80 g/t. The zone remains wide open in the down plunge direction. 

Newmont: Reported solid Q1 results. Newmont produced 1.5m oz. Au and 317k oz. AuEq during the quarter at cash costs and AISC of $752/oz. and $1,039/oz. The company generated $841m of operating cash flow and $442m of free cash flow. Production continued to be weighted more heavily towards the second half of the year. The company ended the quarter with $5.5b of cash and $8.5b of liquidity, and a net debt/EBITDA ratio of 0.20x. Other highlights from the first quarter include the acquisition of GT Gold, located in the Golden Triangle, adding future gold and copper production.

Osisko Development: As the company continued to advance its three development projects (Bonanza Ledge II, San Antonio and Cariboo), Osisko continued to drill out Cariboo, its flagship asset. Drill highlights include:

  • 7m @ 22.76 g/t Au
  • 13m @ 7.73 g/t
  • 6.5m @ 6.97 g/t
  • 9.45m @ 5.62 g/t
  • 1.35m @ 30.70 g/t
  • 4.50m @ 15.45 g/t
  • 4.30m @ 17.84 g/t
  • 8.35m @ 11.48 g/t
  • 6.75m @ 12.36 g/t
  • 2.50m @ 59.70 g/t
  • 6.00m @ 9.31 g/t

Sandstorm Gold: Announced record Q1 2021 results. We knew the quarter would be strong following the company's announcement of Q1 attributable gold equivalent production (17.44k oz.). Sandstorm set records across the board, including operating cash flow generation of $23m. At quarter-end, Sandstorm had over $140m in cash and around $52m in equity and debt investments, giving the company over $410m in liquidity from which to consummate additional royalty and streaming transactions.

Skeena Resources: Reported diamond drill core results from its 2020-21 exploration drilling at its Snip gold project. The exploratory program focused on resource expansion and delineating additional mineralization in previously unexplored areas of the near-mine environment. The surface-based program was comprised of ten drill holes totaling 5.36k meters. Highlights include:

  • 0.50m @ 45.4 g/t Au
  • 5.60m @ 45.76 g/t Au
  • 4.03m @ 29.52 g/t Au
  • 2.86m @ 37.78 g/t Au
  • 2.00m @ 5.82 g/t Au
  • 1.20m @ 12.40 g/t Au

Yamana Gold: With standout quarters from Canadian Malartic and Minera Florida, Yamana gold produced 232k AuEq oz. (201.1k oz. Au and 2.3m oz. Ag). Yamana generated operating cash flow and free cash flow of $183.4m and $76m. The company ended the quarter with $678m in cash and $750 in available credit. The company’s quarterly dividend is $0.02625/oz., which is 110% higher relative to Q1 2020 and 425% higher than Q1 2019. The company continued to make progress at its Jacobina optimization project. The phase II expansion will increase throughput to 8.5ktpd and has begun a conceptual study on a phase III expansion, which would increase throughput to 10ktpd.

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