Chris Marchese
Chief Mining Analyst, GoldSeek & SilverSeek
Week Ended April-17, 2020
$AEM, $CXB.TO, $KOR.TO, $EGO, $AG, $FSM, $GCM.TO, $HL, $JAG.TO, $MUX, $NUAG.V, $OSK.TO, $ROXG, $RGLD, $SILV, $SSRM, $TXG.TO, $WDO.TO, $WPM, $AUY
Agnico-Eagle: The government of Quebec declared mining an essential business, which has a significant impact on Agnico as several of its highly profitable operations are located there. The company has resumed operations at the LaRonde Complex, the Goldex mine, and at Canadian Malartic (50%).
Calibre Mining: Following last week’s very encouraging drill results from the Panteon deposit at La Libertad, the company announced a 30% increase in its cash position to $43m from Q1 operations. Having recently talked with the company regarding its voluntary shutdown of mining operations, the current estimate is for operations to resume in July, although June is possible. The company is burning cash at a rate of roughly $2.5-$3m/month by placing its assets on care and maintenance (C&M), so the company will able to withstand this planned prolonged shutdown.
Corvus Gold: The company continues to expand the main zone at its principle asset, the Mother Lode deposit in Nevada. Two highlights from its on-going infill deposit expansion (phase IV) include 47.2m @ 1.43 g/t Au and 42.7m @ 1.98 g/t Au. Corvus and other companies (such as Gold Standard Ventures) with economic deposits in Nevada are ripe for consolidation.
El-Dorado Gold: As a result of the declaration by the government of Quebec, the company has restarted operations at Lamaque.
First Majestic Silver: Reported Q1 production results, which totaled 6.2m AgEq oz., consisting of 3.2m oz. Ag and 32k oz. Au. At the Ermitano project near Santa Elena, development activities are approx. 600m away from reaching the first access point of the high-grade Ermitano Splay orebody.
Fortuna: The company re-commenced construction at Lindero, which is important as it was essentially a race against the clock, reaching commercial production before running out of capital without violating its debt covenants or having to dilute shareholders. The company announced Q1 2020 production results totaling 1.82m oz. Ag (19% decrease over Q1 2019) and 10.1k oz. Au (24% decrease over Q1 2019). Lower production from San Jose will continue as the veins narrow and the company must use narrow vein mining methods. Production should bounce back some but lower output will be a continued trend, at least for a time.
Gran-Colombia: The company produced 19k oz. Au in March, bringing Q1 production to 56.25k oz. Au relative to 60.6k oz. in Q1 2019. The company continues to operate its mines in April but at reduced production rates.
Hecla Mining: With the Quebec government’s decision to allow the resumption of mining activities, Hecla is able to restart its primary cash flow engine, Casa Berardi. While Greens Creek is able to make a little bit of money at current silver prices, Lucky Friday isn’t able to do the same because of the ramp-up costs and San Sebastian has been suspended in Mexico. In other words, absent Casa Berardi, due to lower silver prices and on-going mining suspensions, the company was more or less going to break even. Expect higher costs at its silver mines due to a decrease base metal credits as the price of lead and zinc have fallen by a fair amount.
Jaguar Mining: Announced Q1 production results. Production totaled 21k oz. Au, a significant increase year over year (+28%). Its cash and unsold bullion balance at the end of Q1 is $15.6m.
McEwen Mining: Reported Q1 production of 29.18k oz. Au and 553k oz. Ag. Production as its San Jose mine in Argentina is restarting production and the company will also be restarting mining at its Black Fox mine.
New Pacific Metals: Reported an incredibly robust Inaugural resource estimate for its Silver Sands deposit in Bolivia. I was expecting a maiden resource estimate (MRE) of 225-250m oz. Ag @ 115 g/t Ag but the M&I resource was 156m oz. Ag @ 137 g/t Ag and an additional 36m oz. Ag Inferred @ 112 g/t Ag, or a total resource of 191m oz. Ag @ 132 g/t Ag. This was based on a 90% recovery rate and 45 g/t Ag cutoff. While a bit lower than expected, it is still robust. Furthermore, there is so much more potential waiting to be unlocked through additional drilling and the inclusion of drilling post-2019 i.e. the recently discovered Snake Hole Zone. Mineralization remains open to the north and south and at depth. Metallurgical test work had yielded recoveries of up to 97% for the various oxide – transition and sulphide ore, so the MRE could have been larger. There is still a strong probability this project ultimately becomes a 1B-2B+ oz. silver deposit. Lastly, technical studies to facilitate the PEA commenced in Q1-2020 and are ongoing using independent subject matter experts. No matter how the PEA turns out, the PFS and FS will most certainly outline a larger project as the resource increases several multiples relative to the MRE. This is without a doubt the most exciting silver exploration company in the world and for the time being, remains an excellent call option on silver.
Osisko Mining: Osisko continues infill drilling and returns more high-grade values at Lynx. Exploration has been suspended but the company is ready to resume drilling activities at Windfall. Select new results from Lynx and Triple Lynx are as follows:
· 3.4m @ 153 g/t Au
· 2.2m @ 108 g/t Au
· 2m @ 99.2 g/t Au
· 2m @ 91 g/t Au
· 2.8m @ 51.6 g/t Au
· 2m @ 30.8 g/t Au
· 2.6m @ 39.2 g/t Au
· 2m @ 69.2 g/t Au
· 2.5m @ 16.3 g/t Au
· 2.7m @ 23.2 g/t Au
· 2.3m @ 38.1 g/t Au
Roxgold: Published the results of its preliminary economic assessment (PEA) for the Seguela Gold Project with an after-tax NPV5% of $268m and IRR of 66% using a gold price deck of $1,450/oz. If we use a more likely scenario, a $1,730/oz. gold price by the time production is reached, the NPV5% increases to $379m with an IRR of 88%. These are the economics attributable to the company (90%), not the project as a whole. Initial pre-production capital costs are estimated at $142m (inclusive of a $20m contingency). With an initial life of mine of 8.2-years, average annual production over the LOM is 103k oz. Au and 143k oz. Au over the first three years of production. All-in sustaining costs (AISC) over the LOM of $750/oz., with AISC over the first three years of $600/oz. In the base case scenario, the payback period is very rapid at 1.2-years and closer to 1-year at $1,730/oz. Au.
Royal Gold: The company announced its third fiscal quarter production results. It sold 62k oz. AuEq, comprised of 50k oz. Au, 466k oz. Ag, and 1,900 tons Cu related to its streaming agreements. Royal Gold has is being impacted due to mining suspensions. Centerra announced throughput a reduction in throughput to 50ktpd at Mt. Milligan (RGLD’s largest asset). Royal Gold’s key royalty is a 2% NSR on all metals on the large Penasquito Mine in Mexico, which has been suspended through at least the end of April.
Silvercrest Metals: Announced a non-brokered private placement of 10m common shares of the company at C$7.50/share for gross proceeds of C$75m. The company is reserving the right to increase the private placement to issues a total of up to 13.33m common shares at the same price, to raise a total of up to C$100m. The company likely won’t have to issue additional equity as it has secured a large part of construction costs to build out Las Chispas. The remaining capital required should be funded via debt.
SSR Mining: The company robust quarterly production in Q1, with output of over 107k AuEq oz. from its three operations. Its Seabee mine produced 29.5k oz. Au >10 g/t Au and recoveries of 98.10%. Throughput exceeded 1,050tpd in during the first two months of the quarter. Output would have been 30-32k oz. Au had the mine had a full month of operations in March. Its largest and most profitable asset, Marigold, continues to deliver, producing 58.5k oz. Au. Through march 20th 2020, its Puna operations produced 1.8m oz. Ag. SSR Mining continues to have one of the strongest balance sheets amongst mid-tier producers.
Torex Gold: Reported strong Q1 production results. Gold production and sales totaled 108.53k oz. Au and 108.06k oz. Au at an average realized price of $1,570/oz. Following the mandated suspension of operations, the company continued to advance Media Luna with design and engineering work for the feasibility study ongoing and permitting work continuing.
Wesdome: Steady as she goes, the company produced 25.1k oz. Au in Q1. The company is extremely over-valued based on its two producing assets, both of which are rather small. The value lies in the fully permitted Kiena complex. The company should release a technical report for the project this year, which could potentially translate into extreme volatility in the stock price if it should fail to meet expectations.
Wheaton Precious Metals: The company announced an at the market equity program for up to $300m. Moves such as this as well as the price action in base metals, comments from management teams from the big-5 royalty and streaming companies, lead to only one conclusion. That being, over the next 12-24 months, there will be a large wave of royalty and streaming deals. Financing is no longer hard to come by on the precious metals side, but will be very much needed on the base metals side, either for recapitalization purposes, funding for M&A activity, or to fund the construction for development projects. Wheaton in particular now has significant available liquidity, as does Franco-Nevada. Those will be the two major players for potential blockbuster streaming deals. Royal Gold could also be one of them but it will have to issue equity, which it doesn’t like doing. I have discussed this in past issues of GoldSeeker, but it is worth reiterating as there could be significant value creation in this industry niche.
Yamana Gold: Announced the Sale of Equinox Gold Shares and Warrants for up to C$201m. It entered into an agreement with Stifel GMP and Cormark Securities to sell 12m units at C$10/share for proceeds of C$120m. Each unit consists of one common share and one-half common share purchase warrant. In the event all warrants are exercised, total gross proceeds to Yamana would be C$201m. The company also announced two key developments, with the resumption of mining activities at the Canadian Malartic Mine (50% interest) and resumption of mining activities at its Cero Morro Mine.
Chris Marchese for the Gold Seeker Report
Chief Mining Analyst at GoldSeek & SilverSeek
Chief Mining Analyst with GoldSeek and SilverSeek. Previously he was the Senior Mining Equity and Economic Analysis at The Morgan Report. He was a Co-Founder and Director of Lemuria Royalties, before it was acquired in March 2018. He also co-authored The Silver Manifesto with David Morgan in 2015.
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