After gold failed to break and stay above $1,800/oz last week, we thought it could take some time before we broke through that level, and even with Friday's action where gold went as high as $1,814/oz., the gold price could go either way before breaking through $1,800/oz and sustaining that level. Last week we noted that it would likely take some time to breach that level and that we would see gold test the $1,800/oz level several times before we would see a sustainable breakthrough. Ideally, we would like to see gold break $1,800/oz next week and remain there for three or four days, closing the week and month above that level. If this is accomplished, gold should begin testing higher resistance levels and the uptrend trend marked by a series of higher lows and higher highs. If it isn't, we will likely continue trading in a range of $1,760-$1,800/oz and test the $1,800/oz level a few more times. Time will tell. The price action in the gold (and silver) stocks supports the thesis that precious metals should move higher soon, but this needs to continue.
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Aurcana: The Company announced another round of dilution. The Company announced $C15.22m in non-brokered private placements with a combination of C$9.72m in units [one share and one full purchase warrant, with an exercise price of C$0.90/share for 36 months following the close of the placement] and C$5.5m in secured convertible debentures. Aurcana will issue 13.891m units [potentially diluting the shares outstanding by 27.78m share [if warrants are exercised]. The Company also announced that its wholly-owned subsidiary, Rio Grande Mining Co. signed a subscription for a non-brokered private placement offering of a secured convertible debenture of $5.5 Million.
The Debenture shall have first ranking security over the assets of Rio Grande, including a pledge over the shares of Shafter Properties Inc., a wholly-owned subsidiary. The Debenture will have a maturity date of four years from closing and shall bear interest at a rate of 5.75% per annum, payable semi-annually. The principal sum of the Debenture, or any portion thereof, may be converted by the holder into shares of the Company at a conversion price of C$0.74. Each C$1,000 face value of Debenture shall come with 1,351.35 share purchase warrants, with each full Debenture Warrant entitling the holder to acquire one additional common share in the capital of the Company at C$0.95 per share for four years from closing.
B2Gold: Announced excellent Q3 production numbers, 7% above budget and 18% higher relative to the comparable period in 2020. The Company also increased its full-year guidance. Gold production in Q3 2021 of 310.25k oz (including 14,538 ounces of the attributable output from Calibre Mining Corp.), above budget by 7% (20.87k oz), and consolidated gold production of 295,723 ounces from the Company's three operating mines, above budget by 7% (20.08k oz). B2Gold generated revenue of $511m through the sale of 286.65k oz Au at an average realized gold price of $1,782/oz. The Company's flagship (and Tier-I asset) Fekola achieved record quarterly production of 165.55k oz Au and record quarterly production at its Otjikoto mine [Philippines] of 68.96k oz Au. As a result, the Company increased Fekola's and Masbate's production guidance; for full-year 2021, the Fekola Mine is now forecast to produce between 560-570k oz of Au (original guidance was between 530-560,000k oz) and the Masbate Mine between 215-225,000 oz (initial guidance was 200-210k oz).
Barrick Gold: Announced the progress for the ongoing life-extension project at its Tier-I asset, Pueblo Viejo, in the Dominican Republic. The Company is continuing to advance a plant expansion and tailings storage facility project designed to extend its life to 2040 and beyond. Barrick also announced it will make a final investment decision regarding its Lama project in Argentina in 2024 as the Company continues to aggressively explore for additional resources in the area. The production profile for a combined Lama-Veladero complex will fall far short of the initial Pascua-Lama project [Pascua being the Chilean portion of the deposit, which is far larger relative to the Lama side]. Barrick will invest $75m to explore the feasibility of a Lama-Veladero complex.
Should the finding of various technical studies outline a robust and viable operation, this creates shareholder value, but the question is to what degree? While Barrick stands to benefit, Wheaton Precious Metals has the most to gain as it has a 25% silver stream on the Pascua-Lama project. The FS for Pascua-Lama outlined average annual silver production above 31m oz for the first seven to eight years of operations and 25m oz over the initial 25-year mine life. It will be a big win for Wheaton Precious if the Lama project can produce anything over 8m oz Ag p.a. [or >2m oz Ag attributable].
Blackrock Silver: Announced a non-brokered private placement (Offering) of 7.5m units at C$0.80 per Unit for gross proceeds of C$6,000,000. First Majestic Silver Corp. has agreed to purchase C$2 million of the Offering. Each Unit will be comprised of one common share and one-half of one share purchase warrant. Each whole warrant will entitle the holder to acquire one additional common share in the capital of the Company at C$1.20 for two years from the date the Units are issued. Blackrock has been returning some excellent drill results at Tonopah West. It is also great to see First Majestic increasing its ownership stake in the Company. Ownership is still relatively low, but First Majestic's 2021 acquisition of the Jerritt Canyon Gold mine and its investments in Blackrock Silver illustrate that the Company is trying to diversify away from a sole focus on Mexico, and Blackrock could be First Majestic’s first silver deposit/mine outside of Mexico.
Discovery Silver: Announced an updated MRE at its flagship Cordero Project, Mexico. The Resource is pit-constrained with an estimated strip ratio [waste-to-ore] of 1.1 and based upon 224,00 m of drilling. 87% of the contained metal is in the Measured and Indicated category. The Resource will be used to support an updated PEA scheduled for completion later this quarter. The size of the Resource positions Cordero as one of the largest development-stage silver projects globally. While the strip ratio is very low, ideal for any open-pit mine, the average grade is also very low. In other words, for Cordero to become a project of scale [>=10m oz AgEq], bulk-tonnage mining will be necessary, which will require hefty initial capital costs. Highlights include:
- Sulphide Resource: Processed mill/flotation]
- M&I Resource of 837m AgEq oz @ 48 g/t AgEq [20 g/t Ag, 0.06 g/t Au, 0.29% Pb and 0.51% Zn].
- Inferred Resource of 119m AgEq oz @ 34 g/t AgEq [14 g/t Ag, 0.03 g/t Au, 0.19% Pb and 0.38% Zn].
- High-grade subset: 509m AgEq oz @ 101 g/t AgEq [42 g/t Ag, 0.11 g/t Au, 0.64% Pb and 1.04% Zn].
- Oxide/Transition [processed via heap leach]
- M&I Resource of 74m AgEq oz @ 23 g/t AgEq [19 g/t Ag, 0.05 g/t Au].
- Inferred Resource of 22m AgEq oz @ 20 g/t AgEq.
The Company is looking to build a project with average annual production of at least 15m AgEq oz annually for at least fifteen years.
Elevation Gold [Formerly Northern Vertex]: The Company announced a 36% increase in M&I gold resources at the Moss mine in Arizona. The Company began an aggressive near mine and regional exploration drilling program in March of this year to deliver new resource ounces while demonstrating the property's potential. We don’t view this and the accompanying land position as a high-quality operation; instead, a mediocre project lacking scale. However, if the Company successfully expands resources and mining operations, the stock price could do very well in a rising gold price environment.
IAMGOLD: Provided preliminary Q3 operating results. The Company produced 153k oz Au during the quarter, and that attributable production is trending towards the high-end of full-year production guidance. At the end of Q3, cash and equivalents totaled $748.3m, which together with ongoing cash flow generation will fund the development of the massive and transformational Cote Gold mine [70% interest], which is on track to reach commercial production in the 2H 2023. It will dramatically increase the Company's attributable production, considerably lower companywide AISC, resulting in tremendous growth in operating and free cash flow generation.
The Cote Project is 36% complete, with detailed engineering 85% complete. The majority of mine heavy mobile equipment orders have been placed. The NPV5% using a $1,600/oz gold price is approx. $1.6B on a 100% basis [$1.12B attributable]. However, there is ample room to increase the NPV. For example, IAMGOLD announced an initial resource estimate at Gosselin Zone [1.5km northeast of Cote], growing the Cote Gold district by 3.4m oz. Au (Indicated) and 1.7m oz Au (Inferred). This represents a 33% increase in contained M&I resources and a 45% increase in contained Inferred gold resources. The deposit is only drilled to half the depth of the Cote Gold deposit and remains open at depth and along strike, allowing for the potential for a substantial future resource expansion. The Gosselin resource isn't part of the Cote mine plan but once included; it will increase the NPV of the Cote project.
Impact Silver: Announced high-grade silver results from an underground development drilling program in the Pachuqueno area of its Guadalupe Mine in the Royal Mines of Zacualpan District, Mexico. The Pachuqueno area is located in the west workings of the Guadalupe Mine and is connected to the main shaft by 900m of underground railroad on Level 195. This area is host to a swarm of veins that were last mined over 30 years ago. Current drilling tested extensions of previously mined veins but also discovered new veins not previously mined. Highlights of recent drilling in Pachuqueno include:
- 6.04m @ 464 g/t Ag
- 3.44m @ 300 g/t Ag
- 3.38m @ 2,186 g/t Ag
- 3.47m @ 425 g/t Ag
- 1.63m @ 527 g/t Ag
- 3.12m @ 427 g/t Ag
- 2.51m @ 274 g/t Ag
- 1.38m @ 344 g/t Ag
- 3.21m @ 493 g/t Ag
- 5.26m @ 324 g/t Ag
- 2.41m @ 368 g/t Ag
Integra Resources: Announced drill results from Sullivan Gulch at the DeLamar deposit. Highlights from this release include:
- 160.33m @ 0.66 g/t Au, 66 g/t Ag
- 124.06m @ 0.55 g/t Au and 34.51 g/t Ag
- 5.19m @ 12.04 g/t Au and 63 g/t Ag
- 115.52m @ 0.66 g/t Au and 65.50 g/t Ag
K92 Mining: The Company announced strong Q3 production results with Stage 2 expansion run-rate throughput achieved in September. Highlights include:
- Record quarterly plant throughput with 87.62k tons processed a 35% increase from Q3 2020. In addition, during September, Kainantu achieved Stage 2 Expansion run-rate processing throughput, averaging 1,100tpd, while also delivering a notably finer than required product size.
- Following the performance of the existing process plant, K92 announced the approval for a Stage 2A Expansion to increase annual throughput +25% to 500ktpa or 1,370tpd with commissioning in Q3 2022. The stage III expansion will be completed in late 2023, after which average annual production will achieve a run-rate of approx. 318k oz Au p.a. Furthermore, once stage III is complete, there will be excess capacity from Stage II, allowing K92 to further increase production to approx 400k AuEq oz p.a.
- Q3 production of 24.12k AuEq oz or 21.91k oz Au, 802.5k lbs. copper and 19.7k oz silver and quarterly sales of 24,057 oz AuEq or 21.68k oz gold, 868.18k lbs. copper, and 20.44 oz silver.
- A +50% increase in development meters in Q3 vs. Q2 is set to improve access to high-grade stoping areas in the future, including the establishment of the first stope from the Judd #1 Vein.
Maverix Metals: Announced it has reached an agreement with Omolon Gold Mining Company LLC, a wholly-owned subsidiary of Polymetal International, to increase and expand Maverix's royalty interest in the Omolon hub operation located in Magadan Region, Russia. Maverix has increased the royalty from a 2.0% NSR to a 2.50% GRR royalty. Maverix will make a cash payment equal to $23.5 million to increase its effective interest to a 2.5% gross revenue royalty and expand the royalty coverage to include all 13 licenses that currently comprise the Omolon hub and potentially an additional three that are in the application phase. Before this transaction, Maverix's 2% gross revenue royalty covered two licenses. In 2020, Omolon produced 210k oz Au @ AISC of $773/oz.
New Pacific Metals: Announced the 2020-2021 metallurgical test program results at its flagship Silver Sand deposit, Bolivia. The Company achieved an 80% silver recovery rate through heap leach processing. Heap leach process flowsheet demonstrates significantly superior performance due to anticipated lower capital intensity and operational costs versus other alternatives to produce silver doré on site. Adoption of a heap leach process flowsheet may allow for a lower cut-off grade in the updated Mineral Resource Estimate, which will be determined through continued test work. At 120 days, testing achieved an 80% final recovery, which complements the heap leach study undertaken in 2019, demonstrating 84% and 87% recoveries for low and median-grade oxide material. Results indicate the heap leach performance of oxide and transitional material is similar, such that the two types of material may potentially be processed as a single metallurgical entity.
Osisko Development: Announced drilling results from the 2021 exploration and category conversion drill program campaign at its Cariboo Project in central BC. A total of 6 diamond drill rigs are currently active on the Project. A total of 147,000m have been drilled thus-far in 2021. Assay highlights from this release include:
- 3.40m @ 15.48 g/t Au
- 6.55m @ 20.40 g/t Au
- 2.40m @ 48.10 g/t Au
- 12.25m @ 5.50 g/t Au
- 0.50m @ 97.40 g/t Au and 0.50m @ 63.40 g/t Au
- 5.80m @ 9.85 g/t Au
- 6.3m @ 8.27 g/t Au
- 2.25m @ 35.68 g/t Au
- 6.50m @ 6.23 g/t Au
- 2.70m @ 16.39 g/t Au
- 4.15m @ 7.61 g/t Au
Outcrop Silver & Gold: Announced the results of four core holes designed to test the northwest plunge of mineralization within the vein and extend the Megapozo shoot on its 100% owned Santa Ana high-grade silver project in Colombia. The northwest plunge of the Megapozo shoot is confirmed as an essential control to mineralization that will be applied to extending other known shoots. Highlights include:
- Four core holes extended the Megapozo shoot 100m to the northwest and confirmed interpreted high-grade controls to mineralization, including:
- Hole 72: 2.18m @ 1,098 g/t Ag
- Hole 73: 1.42m @ 3,151 g/t Ag
- Outcrop continues to expand known shoots at depth and along strike successfully.
- Recent drilling now extends Megapozo down-plunge over 480m to the west-northwest within the vein.
- Outcrop's six other shoots remain open laterally and at depth and are likely to show a preferential plunge within the plane of the vein.
- If all shoots can be extended down their controlling plunge similar to Megapozo, the current combined potential resource area could increase by 60%.
Santacruz Silver: Reported its Q3 operating results of 872.9 AgEq oz. Santacruz has entered into its second transformational acquisition [the first being the acquisition of the Zimapan mine]. On October 13th, the Company entered into a definitive share purchase agreement with Glencore whereby Santacruz will acquire a portfolio of Bolivian silver assets from Glencore, including a 45% interest in the producing Bolivar and Porco mining operations held through an unincorporated joint venture with COMIBOL, a Bolivian state-owned entity, a 100% interest in the Sinchi Wayra business which includes the producing Caballo Blanco mining complex, the Sorocaya project located in Bolivia and the San Lucas ore sourcing and trading business and certain related properties and assets.
According to the Agreement, Santacruz will pay initial upfront consideration of US$20 million, and an additional US$90M is payable in equal installments over four years from the closing of the Transaction, subject to certain conditions and adjustments. This will immediately increase Santacruz’s production and cash flow profile. Through the first nine months of 2021, the five operating mines produced 6.4m AgEq oz [100% basis]. They should increase Santacruz's AgEq production profile by 4.40-5m oz. in addition to cash flow generation through the San Lucas Ore Sourcing and Trading Business.
Tanzanian Gold: Provided an update on Buckreef Gold Company Limited's (Buckreef Gold) processing plant and the commencement of the commissioning phase of the newly expanded processing plant by 360tpd. The Company and Buckreef Gold continue to advance the previously disclosed +1,000tpd operation. In October, Buckreef Gold completed construction of the 360tpd processing plant expansion. Buckreef Gold continued to operate the 120tpd processing plant after concluding the test period, which achieved a 90% gold recovery rate, as previously disclosed in September 2021. The existing 120tpd processing plant has been integrated into the new processing plant circuit. The new expanded processing plant construction was completed in line with the scheduled completion date of late September/October 2021 and within project capital expenditures guidance of US$1.3-1.6 million. This includes completing all major construction activities associated with the processing plant expansion, including the ongoing execution of dry, cold, and hot commissioning performance tests.
Expanded throughput will increase production to 750-800 oz Au/month upon final commissioning and before the 1,000+tpd processing plant with total cash costs of $725-$825/oz. Operating cash flow from the expanded processing plant is anticipated to mitigate the negative cash flow from the testing period of the 120tpd processing plant. Anticipated cash flow generated from the larger plant will be reinvested in Buckreef Gold with a focus on (I) exploration, and drilling; (II) enhanced CSR/ESG programs; and (III) additional capital programs focused on growth and efficiencies. Tanzanian Gold Corp is advancing three value creation tracks:
- Strengthening its balance sheet by expanding near-term production to 15,000 - 20,000 oz. of gold per year from the processing of oxide material from an expanded oxide plant.
- Advancing Sulphide Development for a stand-alone plant substantially larger than previously modeled and targeting significant annual gold production.
- Continuing with a drilling program to further test the potential of its property, Exploration Targets and Mineral Resource base by: (i) infill drilling to upgrade Mineral Resources currently in the Inferred category in Buckreef Main; (ii) step-out drilling in the northeast extension of Buckreef Main; (iii) infill drilling program of Buckreef West; (iv) develop exploration program for the newly discovered Anfield Zone; (v) upgrade historical resources at Bingwa and Tembo; (vi) identification of new prospects at Buckreef Gold Project and in the region.
We've watched this Company slowly destroy shareholder value last decade through unnecessary dilution, and even if the Company achieves all its objectives, it is unlikely to garner a reasonable valuation as junior producers generally need at least 80-100k oz of annual gold production to get recognized, a far cry from the near-term target of 15-20k oz Au annually.
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