Lucapa Diamond (ASX:LOM) and its partners Endiama and Rosas & Petalas reported on Wednesday positive results from the search for the hard-rock kimberlite source of the alluvial diamonds at the Lulo diamond field in Angola.
According to the company, the first stream bulk samples excavated from the Canguige tributary had resulted in the recovery of 45 diamonds weighing 30.3 ct.
“We are excited about the diamond recoveries from the Canguige stream bulk sampling and look forward to advancing the next phase of our kimberlite search within the Canguige catchment,” said Lucapa Managing Director Stephen Wetherall.
“We remain confident that the primary sources of the alluvial diamonds being recovered at Lulo await discovery and that our exploration efforts will be justified.”
The kimberlite exploration program along the Cacuilo River valley have achieved average run-of-mine sale prices of $1,900 per carat. Alluvial recoveries to date have included 14 +100 carat diamonds, including Angola’s biggest recorded diamond weighing 404 carats.
Long-suffering cobalt bulls were dealt another blow on Wednesday after reports that the world’s largest electric carmaker is shifting some production of its most popular model away from batteries that contain nickel and cobalt.
In a surprise move China’s top battery manufacturer CATL will supply Tesla with lithium iron phosphate (LFP) batteries for its Model 3 production at its newly built $2 billion factory outside Shanghai.
The Model 3 is Tesla’s most popular model and the US-made version uses the company’s nickel-cobalt-aluminum (NCA) cathode chemistry. Most other automakers favour nickel-cobalt-manganese (NCM) cathode chemistries.
LFP batteries are cheaper than batteries using NCA and NCM chemistries but lack the energy density, reducing driving range. LFP batteries power almost the entire electric bus fleet in China and is popular for smaller city runabout vehicles where range is not an issue.
According to Benchmark Mineral Intelligence, a battery supply chain and price reporting company, cobalt played no part in Tesla’s decision to use LFP cells:
The move is a specific strategy to balance the cost reduction of Model 3 with appropriate range and performance for China’s domestic market.
Benchmark believes LFP powered model 3s will qualify for China’s EV subsidies as range estimates with Tesla’s drivetrain efficiency will take it beyond the 250km (155 miles) threshold for the minimum subsidy payout of CNY 18,000 or roughly $2,600.
Benchmark estimates that the total cost saving for Model 3 made in the US using NCA cells will be in excess of 25%, but is unlikely that Tesla will produce LFP models outside China.
Cobalt miners may make up some lost ground if the Model 3 proves popular in China, which accounts for half the world’s EV sales. Tesla plans to use NCM 811 cells (~80% nickel, ~10% cobalt) supplied by LG Chem for its long-range Model 3s for the domestic market.
Benchmark domestic Chinese prices for cobalt sulphate jumped by more than 10% in January, to $6,900 a tonne. Measured from multi-year lows hit during the summer, prices for cobalt used in the battery supply chain have recovered 30%.
Chinese nickel sulphate prices fell an average of 5.8% on the previous month in January according the Benchmark data, but at CNY24,500 ($3,500) ex-works >22% nickel content, prices are flat year-on-year.
IAMGOLD (TSE: IMG) total attributable proven and probable reserves decreased by 6% to 16.7 million ounces at the end of 2019 from 17.9 million ounces of gold at the end of 2018. According to the company, the decrease was primarily due to mine depletion during the year given the company’s gold production of 762,000 ounces. There was no change in the $1,200 per ounce gold price assumption for estimating Mineral Reserves at the company’s owned and operated mines and development projects.
Total attributable measured and indicated resources (inclusive of Reserves) decreased overall by 2% or 0.7 million ounces to 27.2 million ounces of gold at the end of 2019.
IAMGOLD total attributable inferred resources increased by 38% or 3.3 million ounces to 12.0 million ounces of gold at the end of 2019, primarily due to the declaration of a Mineral Resource estimate at the Nelligan Gold Project in Quebec and the completion of an updated Mineral Resource estimate at the Côté Gold Project in Ontario. There were no changes in the gold price assumptions for estimating mineral resources at Essakane, Rosebel, and resource-stage projects ($1,500 per ounce) or at Westwood ($1,200 per ounce).
“At the Nelligan Gold Project in Quebec, we declared an initial mineral resource and continued to identify additional resources at the Côté Gold Project. We also announced an updated mineral resource estimate at Pitangui in Brazil, successfully converting 52% of its resources to the indicated category,” president and COO, Gordon Stothart, said.
“In addition to the ongoing resource development programs at our existing operations, the potential for delineation of additional resources from our planned 2020 exploration program is strong.” he concluded.
Rick, you, along with Sprott USA, are the most trusted and respected names in the natural resource space. That reputation has been earned with a proven pedigree of personal and investment success for the clients of Sprott USA by identifying companies and sectors that are selling at deep discounts. I would like to begin by asking you a two-fold question. What is a prospect generator and why should someone reading strongly consider the value proposition they may present for one’s portfolio?
Rick Rule: A prospect generator, as I define it, Maurice, is an exploration company that uses the management’s technical expertise and commercial acumen to generate investment ideas and an investment thesis, stake those ideas, stake the physical terrain and then bring in other partners to share the financial risk—often to bear the financial risk—in return for a carried interest in the property and or a royalty.
The idea is that the exploration business is very much like any other form of research and development business, and that the chief value is actually the intellectual capital of the management team—the idea being, with an exploration company, that you share the financial risk of developing a project so that you don’t dilute the shares and you don’t, as an investor, dilute your interest in the intellectual capital, which is, in fact, the most valuable asset that many of these small companies have.
As to success, I’d like to answer the question statistically. When I was in university, I was taught that a mineralized anomaly had a 1 in 3,000 chance to become a mine. That means the value proposition offered up on Bay Street and Howe Street is that you have a 1 in 3,000 chance of a 10 to 1 return—very poor math.
Now, the truth is that a reasonably intelligent speculator can reduce those odds somewhat by buying into companies that employ serially successful people or by confining one’s speculations to companies where they’ve already established the third dimension. That is where they have an ore body into a deposit, but still over 35 or 40 years of speculating in exploration.
I have invested in something over 65 public prospect generators. The truth is that my memory is now foggy enough that I can’t tell you how many, but I’ve participated in 22 or 23 economic discoveries and 20 takeovers, which means that I have been successful on, shall we say, 20 of 65 starts, versus the expected statistical average in junior mining of 1 in 3,000. We had a young intern here years ago who told me that my experience was three standard deviations better than the industry experience as a whole.
Now, that’s the type of arithmetic that somebody like me can’t help but pay attention to.
If you want a dramatic example, probably the most dramatic example for me [is] Arequipa Resources, where there was a superb geological team generating prospects in Peru right after the Shining Path had been kicked out—in other words, after the flak jackets came on, but long before the currency was convertible. That company participated, if my memory serves me correctly, in 36 exploration campaigns, all of which were funded by other people’s money. Had the company diluted itself over 36 exploration campaigns, they wouldn’t have existed by the time that they made their final discovery, which was the Pierina discovery.
The upshot of that is that in the company’s sort of three years of existence, they went from a $0.35 per share initial public offering to a $30 per share takeout by Barrick Gold Corp. (ABX:TSX; GOLD:NYSE). [There was] very limited dilution along the way, because the heavy lifting of their exploration—at least the financial heavy lifting of their exploration—was done with other people’s money.
Before I relinquish to my colleague, Dr. John-Mark Staude, I’d like to say one other thing that makes me feel comfortable about prospect generators. The truth is that I’ve spent hundreds of thousands—in fact, millions—of dollars on research over the last 35 years—geological research, engineering research, financial research—and I’ve paid consultants hundreds of thousands of dollars. In prospect generation the due diligence isn’t done by me, it’s done by major mining companies, by peers. And the people who are doing the due diligence don’t send me a bill. They send John-Mark a check.
Now, whether they’re right or not, the fact that they invest in the outcome of their due diligence gives me extraordinary comfort. The fact that BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK) or Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) or Teck Resources Ltd. (TCK:TSX; TCK:NYSE) or Barrick is doing not just the heavy lifting of the check-writing, but also the heavy lifting of the due diligence, for me gives me special comfort.
Maurice Jackson: Quite a compelling value preposition. John-Mark, you’re the CEO of a successful prospect generator. Please introduce us to Riverside Resources (TSX.V: RRI | OTCQB: RVSDF) and the opportunity your company presents to the market.
John-Mark Staude: Riverside is a well-funded, value-driven prospect generator advancing a strong portfolio of gold, silver and copper properties in North America. We leverage the company’s 75,000+ location database and experienced technical team to discover and acquire new exploration assets. A great example is our exploration funding agreement, announced last year, with world’s largest market-cap public mining company, BHP. In this program, BHP is fully funding the exploration work and Riverside is the boots on the ground, doing the technical work.
Our market is niche is that we generate projects. Recently we spun out one of our USA copper-gold projects, which is now moved ahead very successfully, and we profit near and long term from this. We carry a royalty in the Arizona asset and we get paid in over $3 million worth of shares. Therefore, we don’t dilute our shareholder base. And we very proud of the fact that we keep a very tight share structure.
Maurice Jackson: And what type of resources is Riverside exploring for and where?
John-Mark Staude: We’ve largely focused in Mexico, as well as in Canada. We focus a lot on gold, but we also have silver and copper. Riverside really likes shallow, open-pit deposits. Theses deposits don’t take much capital to find, and when you find one, and show that it’s large, it creates the urgency for majors to look to acquire it.
Maurice Jackson: Does the Riverside property bank consists of greenfields or brownfields exploration plays or a combination of both?
John-Mark Staude: It’s interesting. We started off mainly with greenfields, but recently, as companies have left Mexico and we’ve been able to focus during the downturn, [we] have been aggressively upgrading our property bank to having brownfields exploration play around existing mines and neighboring some of the large discoveries, such as SilverCrest Metals Inc. (SIL:TSX.V) and Premier Gold Mines Ltd. (PG:TSX) in Mexico.
We are also in another high value region, as we’re next to Geraldton, Ontario, one of the large developing gold districts with excellent infrastructure and at feasibility stage for potential restart and expansion of the operations. Riverside went from greenfields to brownfields [around existing operations], where we know. . .we have good things that are of value.
Maurice Jackson: Rick, provide us with some background on your relationship with John-Mark and how long have you been an investor in Riverside?
Rick Rule: My first memory of meeting John-Mark was in an investment conference in Vancouver many, many years ago, when I was talking about prospect generation. And John-Mark came up afterward and introduced himself as business development for BHP. So, I immediately understood that he was ultimately a customer of mine and, of course, did my best to impress him. He moved on, if my memory serves me correctly, from BHP to Teck. At some point in time I tried to hire John-Mark.
He had the very good sense to refuse me, but the consequence of that is that when he was starting his own company, Riverside. I was privileged to be one of the early investors and we’ve been shareholders and backers of Riverside, among others, ever since.
Maurice Jackson: Rick, you referenced these success ratios of prospect generators (PGs) versus traditional exploration companies and you’re one of the biggest advocates for PGs and, in particular, Riverside. Why has your level of commitment been so strong over the years and what gives you confidence in the future of Riverside?
Rick Rule: Well, the truth is that success in prospect generation has to do with the technical acumen of the management team and their commercial acumen. I was particularly attracted to the fact that John-Mark’s pedigree and the pedigrees of his team were particularly well suited to the task at hand.
I’ve always been interested in Mexican exploration in particular and large copper gold systems. John-Mark, if my memory serves me well, went to the University of Arizona, which pioneered most of the modern exploration technology for those types of deposits.
And John-Mark, as a consequence of his Rolodex, has been able to assemble around him a very highly skilled team.
His particular advantage, though, was that he looks at deal structure from the customer’s point of view because John-Mark used to represent BHP in these negotiations and after that represented Teck’s interest in those negotiations. He understands something about, first of all, what the majors require in a joint venture and how to intelligently structure and price a joint venture so that it will be fair to the Riverside shareholders, but also in the interest of the customer.
I think that commercial skill set is something that’s lacking in some of the prospect generators that solely have great technical skills.
Maurice Jackson: John-Mark, last year Riverside announced a new strategic partner in billion-dollar market-cap BHP. Why did BHP partner with Riverside and share some of the details of the partnership?
John-Mark Staude: Yeah, we were really lucky. It turns out BHP wanted to grow into Mexico and they knew that we had done these different types of partnerships for technical programs.
There were 12 companies reviewed that were operating in Mexico, and Riverside passed all of those and was selected as the operating group. BHP is 22,000 times bigger than us in market cap. So we’re really two different-size companies [with different] goals, and we showed them that we operate safely, efficiently, and can for them too.
We’ve done strategic exploration alliances with Kinross Gold Corp. (K:TSX; KGC:NYSE), Cliffs Natural Resources Inc. (CLF:NYSE), Antofagasta Plc (ANTO:LSE), Hochschild Mining Plc (HOC:LSE), continually being able to develop portfolios for the major companies. We can do it safely and effectively, and that’s why BHP came in, and we’re really enjoying working with them.
This program is a million dollars and we’ve already been able to have another 50% as a new additional budget into the program each year for just the greenfield starting in the programs.
It’s a $5 million spend for them to earn into the project. We like those types of situations where they put up all the money. We put up all the science and work, [and] we progress together to develop projects, as Rick says. This really can work for the discovery. Sometimes the discoveries are too small for the major, but they can still be big enough for us, and we can put together those portfolios and then spin them out or do other deals in the future. So we really like working with these major companies.
Maurice Jackson: Rick, what does that convey to the person listening, when two companies, Sprott USA and BHP, are committing capital into Riverside?
Rick Rule: Maurice, anytime that you want to mention Sprott in conjunction with BHP and expertise, you certainly have my permission to do that.
Our interests are different. I think in fairness, one of the things it says is the two different groups who benefit from prospect generation—that is to say, Sprott as a shareholder and BHP as somebody looking for exploration services—have narrowed the field to Riverside. One of the benefits that I think might be lost potentially on Riverside shareholders is the fact that BHP brings more than money.
What BHP might bring to me is due diligence, where they write a check as opposed to send me a bill. But after that, if you assume that John-Mark comes up with an interesting piece of terrain and an interesting exploration idea, BHP has literally hundreds of earth scientists in place. It’s almost impossible that there’s an assemblage of minerals somewhere in the world that somebody at BHP doesn’t have familiarity with. And the fact that they pay the costs and add intellectual capital after the fact is a wonderful benefit that shareholders like myself enjoy from a company like Riverside, [which is] able to joint venture with the largest and smartest mining companies in the world.
Maurice Jackson: Switching gears, John-Mark, what is the next unanswered question for Riverside? When can we expect an answer and what will determine success?
John-Mark Staude: One of them is with the spinning out of Capitan Mining. Riverside actually is able to progress for the shareholders, giving a share of this other company to our shareholders directly.
So the next unanswered question for Riverside? Is there a potential for a giant porphyry copper discovery there? We’ll be putting out news before the PDAC, which is in the beginning of March, about our exploration programs in Canada and Mexico.
Maurice Jackson: Please provide us with an update on the capital structure for Riverside.
John-Mark Staude: Riverside continues to have a tight share structure with 63 million shares, no debt, and we have over $3 million cash in the bank.
Maurice Jackson: Before we close, Dr. Staude, what did I forget to ask?
John-Mark Staude: I think one of the key things for Riverside is, when are we going to make those discoveries? That’s often asked and I think right now we have four different programs going in 2020 with partner funding, and work going on with them. We’re particularly, I think, interested in what can we do here in the first quarter so we’ll have news flow, and that’ll be a really great way for us to be able to put out those new discoveries that we’re making.
Maurice Jackson: Mr. Rule, what did I forget to as, sir?
Rick Rule: Well, I don’t think you forgot to ask much, Maurice. One thing that I would point out is that over the last 10 years, which have been very, very difficult years for companies in the minerals business—in the minerals exploration business—one of the beauties of the prospect generator model in general, and of Riverside in particular, is that they haven’t had to dilute existing shareholders out of existence.
When John-Mark talks about his very narrow share count, one thing he might mention is that the shares are fairly closely held by people who aren’t in the stock for a nickel gain. When I remember back to the last exploration bull market, which we enjoyed, which sadly was 2001–2002, one of the things that I noticed is that the prospect generators, when money came back into the sectors, literally had a melt-up because as buyers came into the market, there were no sellers to match them.
Now, I’m not suggesting the past is prologue. What I am suggesting is that the tight share floats—closely held companies—do better in nascent bull markets than companies that have had to be very profligate, issuing shares to keep themselves alive during tough times. Another of the unstated perhaps advantages of prospect generators in general, and Riverside in particular.
Glasgow-based start-upHypervine, announced Monday the start of a project, co-funded by the European Space Agency (ESA), to develop services using space-based data to improve efficiencies for extractive industries.
Hypervine, through its blockchain ledger, enables
satellite-sourced information to guarantee accuracy, so quarry companies gain
better oversight of their operations through the adoption of space assets, such
as readings for topography, liquid, mineral and density readings.
Hypervine has worked with Edinburgh’s Napier University and is currently involved in the Scottish Centre of Excellence in Satellite Applications (SoXSA) and its partnered Tontine incubator.
Mining companies have to constantly adapt to
ever-changing economic, environmental and governmental policies making easily
accessible, high quality and up-to-date data vital.
Through the implementation of Hypervine’s
technology, data for mining teams and their subsidiaries is clearly recorded on
an unalterable ledger, removing the risk of small changes being magnified down
a chain, which could result in potentially catastrophic yet avoidable dangers
As well as increasing accuracy when surveying and
planning works on a new site, reducing costs, margins for error and potential
risks for teams on the ground, implementation of Hypervine’s systems also
allows for wider environmental savings through operational efficiencies and
“The use of
satellite-based data for mining work is already a sector experiencing huge
investment and funding across private and nationalised space programs, said Beatrice Barresi,
technical officer, ESA Space Solutions said. “It is a core goal of ours to make industries such
as quarrying safer, cleaner and more accountable.”
There are currently a number of projects in planning to develop digital tools using satellite applications, including a proposed follow-on mining project to further increase the use of cutting edge digital processes in the mining sector, Hypervine said. Whilst already working with firms in Germany, the UK and the US including Galliford Try Plc., Hypervine was recently announced as part of the latest cohort to join the Scottish Centre of Excellence in Satellite Applications (SoXSA) / Tontine incubator in Glasgow.
BHP (NYSE, ASX, LON: BHP) the world’s biggest miner, released results for the second half of 2019 on Monday, announcing an interim dividend for shareholders of 65 cents per share – its second-highest on record.
Attributable profit was $4.9 billion and underlying
attributable profit was $5.2 billion – up 39% from the prior period.
Profit from operations of $8.3 billion and underlying EBITDA of $12.1 billion at a margin of 56%, with production and unit costs at all its major assets on track to achieve full-year guidance, BHP said in the media release.
Net operating cash flow of $7.4 billion and free cash flow
of $3.7 billion reflects higher iron ore prices and a solid operating
performance, it said.
BHP said social value is an essential precondition to shareholder value – and new agreements for Escondida and Spence to transition towards 100% renewable energy sources will reduce costs and CO2 emissions.
A report by Fitch Ratings states that, in the current context of geopolitical tensions, natural disasters and epidemics like that of the novel coronavirus, mining companies that have competitive cost structures and ample leverage headroom should be able to withstand commodity price risk.
On the other side of the spectrum, miners whose credit profiles are less efficient and who have limited financial flexibility are expected to be walking on the tightrope given the possibility of such exogenous events disrupting supply/demand conditions.
“Prices for copper, aluminium, iron ore and zinc meaningfully declined after the COVID-19 outbreak due to the possible effect on Chinese demand,” the market analyst reports. “In some cases, prices fell below Fitch’s 2020 rating case assumption of $5,900/tonne for copper, $1,750/tonne for aluminium, $75/tonne for iron ore and $2,300/tonne for zinc. Fitch expects the coronavirus outbreak to dampen China’s GDP growth this year but the scale of the impact remains uncertain.”
In the view of the New York-based firm, giants BHP (NYSE: BHP), Rio Tinto (ASX, LON, NYSE: RIO) and Anglo American (LON: AAL) have low-cost assets and ample leverage headroom at current rating levels which should make them less vulnerable to longer than expected price weakness.
Similarly, Brazil’s Vale (NYSE: VALE) and Nexa Resources (TSX, NYSE: NEXA), as well as Mexico’s Southern Copper (NYSE: SCCO), are well-positioned to manage through a period of price weakness due to their strong balance sheets and low-cost structures.
On a completely different boat are Peru’s Volcan (BME: XVOLB) and Chile’s Codelco – the world’s no.1 copper producer – considered to be vulnerable due to a failure to reduce debt and/or the effect of lower prices on cash flow and the ability to internally fund Capex.
According to Fitch, Canada’s First Quantum (TSX: FM) is also significantly exposed to copper price risk, given its concentrated price mix and limited leverage headroom. “However, increased production from the ramp-up of its Cobre Panama greenfield project, the ability to reduce Capex and limited near-term maturities will support cash flow generation and limit pressure on liquidity during a challenged operating environment,” the report states.
Phoenix-based Freeport-McMoRan (NYSE: FCX), which partially owns the massive Grasberg copper and gold mines in Indonesia, is not so badly positioned either due to its exposure to gold, which is a natural hedge. In addition to this, the company’s Latin American assets are average cost but its US assets are higher cost.
“Freeport-McMoRan significantly reduced debt over the past several years, has sufficient liquidity and has proven its willingness to curtail loss-making operations and cut dividends, if necessary,” Fitch highlights.
More unstable is the forecast for Russia’s Rusal, the world’s second-largest aluminium company by primary production output, because even though the company has a low-cost position in aluminium, its operating and financial profile weakened in 2019 due to prolonged low commodity prices, cost inflation and slower-than-targeted debt reduction.
The US is host to a number of enviable mining jurisdictions, both in terms of geological endowment and investment attractiveness. Nevada is perhaps most well-known, with Alaska a close runner-up. Idaho is also emerging as a desirable destination for developers. We present eight companies exploring, developing and operating within the US.
Americas Gold and Silver
Americas Gold and Silver (TSX: USA; NYSE: USAS) is a precious metals producer operating in the Americas. The company’s producing mines include the Cosala operations in Sinaloa, Mexico as well as the Galena complex in Idaho. Other assets include the Relief Canyon development project in Nevada as well as the San Felipe property in Mexico. Americas Gold and Silver is working to substantially grow its metals production by next year.
Last year, company-wide production guidance was for 6.6 million oz. to 7 million oz. of silver-equivalent at all-in sustaining costs of $10 to $12 per oz. silver.
The Cosala complex is the main source of the company’s silver production. The 194-sq.-km property features a central processing facility, the San Rafael underground mine, El Cajon project as well as past-producing mines and mineralized showings. In the third quarter, the San Rafael mine produced 3.6 million silver-equivalent oz. In January, the company reported an illegal blockade by a minority of its unionized workers at Cosala. The company has filed legal motions with the Mexican government and temporarily stopped mining and processing operations at the site.
As of December, the 117-sq.-km Relief Canyon project was in the final stages of construction with initial crushed ore stacked on the heap leach pads and commercial production expected in the first half of the year. A 2018 feasibility study for the project outlined an open pit producing 91,000 oz. of gold annually over a six-year mine life at all-in sustaining costs of $801 per ounce. Proven and probable reserves for this asset stand at 27.2 million tonnes grading 0.75 gram gold per tonne for a total of 653,000 ounces.
Americas Gold and Silver acquired the Relief Canyon and Galena assets as part of its Pershing Gold acquisition announced in September 2018.
In September 2019, the company announced a strategic 60-40 joint venture agreement with Eric Sprott for the Galena complex to recapitalize the operation through increasing production and lowering costs. Starting in October, Sprott invested $15 million for capital improvements with a further $5 million committed to fund the first year of operations to earn a 40% interest in the complex.
Americas Gold and Silver has a $308-million market capitalization.
Avidian Gold (TSXV: AVG) is an exploration company focused on its 106-sq.-km Golden Zone and 15-sq.-km Amanita properties in Alaska, a top-ranked mining jurisdiction.
The Amanita property is located 15 km northeast of Fairbanks and is contiguous with Kinross Gold’s (TSX: K, NYSE: KGC) Fort Knox mine. The company says the Tonsina structural corridor found at Fort Knox continues onto Amanita; historical drilling along this trend intercepted oxide gold mineralization from surface to a depth of over 150 metres.
Trenching within the 4-km long Tonsina corridor last year returned 94.5 metres of 3.04 grams gold per tonne as well as 27 metres of 4.22 grams gold per tonne.
The Golden Zone property is located 320 km north of Anchorage and features high-grade gold and base metal mineralization spatially related to shallow intrusions which extends over 15 km of strike. The property sits within the prolific Tintina gold belt with gold-dominated showings contained within three corridors. Avidian has identified a number of gold-copper exploration targets at the site.
The Breccia pipe deposit at Golden Zone features indicated resources of 4.2 million tonnes grading 1.99 grams gold per tonne for a total of 267,400 oz. with additional inferred resources of 1.4 million tonnes at 0.83 gram gold for a total of 35,900 ounces.
Last year’s exploration work at Golden Zone also extended the strike length of the JJ-J4 zone discovery to in excess of 750 metres while mapping and compilation work at the Copper King area increased its mineralized strike to over 1.5 km.
This year, Avidian plans to complete additional trenching at Amanita to continue extending the surface footprint of the mineralization, to be followed by drilling of these targets. At Golden zone, additional field work is planned to define future drill sites.
In addition, the company holds the Jungo project within Nevada’s Humboldt district as well as a 59% interest in High Tide Resources. High Tide Resources is a private company that has the option to earn a 100% interest in the Labrador West iron ore project, located 17 km west of Iron Ore Company of Canada’s Carol Lake mine and in the Black Raven gold asset in Newfoundland. High Tide also wholly owns the Strickland base metal property in Newfoundland and Labrador.
Avidian became a publicly listed company in December 2017. It was founded as a private entity in 2011.
Avidian Gold has a $13-million market capitalization.
NovaGold Resources (TSX, NYSE: NG) is focused on developing the Donlin gold project in Alaska. Donlin, a 50-50 partnership between Barrick Gold (TSX: ABX; NYSE: GOLD) and NovaGold, features total reserves of 504.8 million tonnes grading 2.09 grams gold per tonne for a total of 33.8 million ounces. The federally-permitted project is undergoing technical studies in advance of a construction decision.
In February, the company announced that it received final state approvals for a buried natural gas pipeline and transportation facilities at Donlin.
A 2011 feasibility study for the project suggested a 440,000 tonne per day open pit mine with a 53,500 tonne per day crusher, producing a refractory sulphur concentrate that would be treated in a pressure oxidation circuit before cyanidation. The resulting mine would produce an average of 1.1 million oz. of gold annually over a 27-year life with life of mine operating costs of $581 per ounce. The total estimated capital cost for the project was pegged at $6.7 billion, including contingency. Using a gold price of $1,200 per oz., the project’s net present value came in at $547 million, using a 5% discount rate.
Current reserves and resources at Donlin are contained within 3 km of an 8-km long mineralized trend; the company has identified additional targets within this trend.
As of the end of 2019, NovaGold had $149 million in cash with additional receivables pending. The company expects to receive $100 million over the next three years in deferred proceeds from the sale of the Galore Creek project with a further $75 million expected upon construction approval of this project, jointly owned between Newmont (TSX: NGT; NYSE: NEM) and Teck (TSX: TECK.B; NYSE: TECK).
This year, $20 million is planned for the Donlin project with 22,000 metres of drilling scheduled to test the extensions of high-grade gold zones. Additional work is ongoing to collect geotechnical data for engineering work on the proposed tailings facility and water diversion and retention structures, as required for the dam safety certification application to the state.
NovaGold has a $3-billion market capitalization.
A drill rig at NuLegacy Gold’s Red Hill gold project in Nevada. Credit: NuLegacy Gold.
NuLegacy Gold (TSXV: NUG; OTC: NULGF) is focused on gold exploration within Nevada’s Cortez trend. The company’s 108-sq.-km Red Hill project is located on strike with Barrick Gold’s (TSX: ABX, NYSE: GOLD) Cortez complex and Goldrush project.
Exploration work completed in 2017 and 2018 confirmed structural and stratigraphic connections between Red Hill and Barrick’s Goldrush and Fourmile projects. As a result, the company has identified multiple Carlin targets within a rift zone that is 6 km long and 4.5 km wide. Drilling in 2018 intercepted 22.1 metres of 6.59 grams gold per tonne within this area. There are additional epithermal and Carlin targets within the property.
Targets at Red Hill include the Avocado zone, a 2012 discovery that returned Carlin-style alteration, the Serena zone, host to Carlin-style mineralization, and the North zone, featuring near-surface oxide mineralization that could be linked to Serena.
Following the closing of a $7.5-million private placement in October 2019, NuLegacy re-started drilling at Red Hill later that month. The $4.7 million, 17-hole exploration program is expected to be completed in the spring and is targeting five zones.
Edward Cope, the company’s director of exploration and evaluations, previously led the team that generated substantial resource growth for Barrick’s Nevada division, and Charles Weakly, NuLegacy’s district geologist, contributed to the expansions of the Goldstrike and Goldrush discoveries.
The company’s shareholders include OceanaGold (TSX, ASX: OGC) with a 12.2% stake and Barrick with a 7.9% interest.
NuLegacy has a $20.4-million market capitalization.
Paramount Gold Nevada
Paramount Gold Nevada (NYSE: PZG) is focused on development of the Grassy Mountain project in Oregon. In January, the company announced that it had received the water permit required to operate the mine following the November submission of a consolidated permit application to the Oregon state agencies for the construction and operation of the Grassy Mountain mine.
Current measured and indicated resources at Grassy Mountain stand at 28 million tonnes grading 1.17 grams gold per tonne and 3.67 grams silver per tonne for a total of 1.06 million oz. of gold and 3.2 million oz. of silver. Ausenco is working on a feasibility study for the project and will receive payment in 1.1 million restricted common shares of the company, escrowed until it delivers a final feasibility, expected in mid-2020.
A 2018 pre-feasibility study for the project outlined an underground mine producing an average of 47,000 oz. of gold and 50,000 oz. of silver annually over a seven-year mine life at cash operating costs of US$528 per ounce. The resulting net present value estimate, at a 5% discount rate, came in at $87.8 million with a 27.6% internal rate of return. The total initial capital cost was pegged at $110 million for the 680 tonne per day mining and milling operation.
Paramount also holds the Sleeper project in northern Nevada, a past-producing open pit. A 2017 PEA for this project outlined a 30,000 tonne per day heap leach open pit operation producing an average of 92,400 oz. of gold and 91,800 oz. of silver annually for an after-tax net present value estimate, at a 5% discount rate, of US$126 million. Additional exploration, permitting and metallurgical testwork is ongoing.
On the exploration front, Paramount is planning to complete follow-up drilling of the North Spur, Dennis Folley and Wally/Wood targets, all of which are located within 3.2 km of the Grassy deposit. Additional targets include Crabgrass and Bluegrass: Crabgrass features a historic resource estimate whereas past drilling at Bluegrass intercepted shallow gold mineralization. The company acquired the Grassy Mountain project in 2016.
Paramount Gold has a $28-million market capitalization.
Premier Gold Mines
Premier Gold Mines (TSX: PG) is a gold producer and developer with assets in Nevada, Mexico’s Sonora state and Ontario.
Last year, the company produced 67,427 oz. of gold and 192,829 oz. of silver, primarily from the Mercedes underground mine in Mexico.
In Nevada, Premier holds a 40% interest in the South Arturo project (60% held by Nevada Gold Mines, a joint venture between Barrick Gold (TSX: ABX; NYSE: GOLD) and Newmont (TSX: NGT; NYSE: NEM) in the Carlin trend. This property hosts the El Nino underground mine, which declared commercial production in the third quarter of last year, producing a total of 7,526 oz. gold last year.
The El Nino deposit is down-plunge of a past-producing open pit with ongoing pre-stripping for a second mine; an open pit is expected to start up in the second half of the year. Work is also underway on a potential heap leach facility with an additional open pit planned for the site. South Arturo reserves attributable to Premier stand at 2.8 million tonnes grading 3.01 grams gold per tonne for a total of 275,000 ounces. Underground exploration is ongoing to support long-term production.
Premier also holds the past-producing McCoy-Cove project in Nevada’s Battle Mountain trend. A carve-out in place with Barrick has the major earning a 60% interest in a portion of this property with Premier retaining a 100% interest in the high-grade Cove deposit. Premier’s share of measured and indicated gold resources stands at 950,000 tonnes grading 11.22 grams gold for 342,000 oz. with additional attributable inferred resources of 3.7 million tonnes grading 11.24 grams gold for a total of 1.3 million ounces. Additional exploration is underway in advance of a feasibility study and development decision.
In Mexico, Premier holds the Mercedes mine, 150 km northeast of Hermosillo, with underground operations targeting extraction of 2,000 tonnes per day. Last year, this mine generated 59,901 oz. of gold and 191,306 oz. of silver. Recent exploration successes include discoveries at the Lupita Extension and San Martin zones, with potential for resource growth along this structural trend. This year, the asset is expected to contribute 65,000 oz. to 75,000 oz. of gold at all-in sustaining costs of $1,125 to $1,275 per ounce.
Premier’s Ontario holdings include a 50% stake in the Greenstone property (50% Centerra Gold (TSX: CG)), 275 km northeast of Thunder Bay. Permitting is underway for this asset with measured and indicated open-pit mineral resources, updated last year, of 137.7 million tonnes at 1.33 grams gold for 5.9 million ounces. A 2016 feasibility study outlined a 27,000 tonne per day open-pit operation producing an average of 288,000 oz. gold annually with initial capex of $1.25 billion. At a gold price of $1,250 per oz., the resulting internal rate of return, on an after-tax basis, came in at 14.4%. In December 2019, the company announced that it had received a statement of claim from its joint venture partner claiming that a project update submitted last year should not be considered a feasibility study, as defined in a partnership agreement from March 2015. Additional engineering and financial modeling work is underway for Greenstone.
Premier Gold Mines has a $337-million market capitalization.
Revival Gold (TSXV: RVG) is developing the 54-sq.-km Beartrack-Arnett project in Idaho. In February, the company released an updated resource for the two deposits with 36.4 million tonnes of indicated resources grading 1.16 grams gold for a total of 1.4 million oz. with additional inferred resources of 47.2 million tonnes at 1.08 grams gold for a total of 1.6 million oz. This resource includes a total heap-leach component of 580,000 oz.; a further 1.9 million oz. across all categories are contained within open-pittable sulphides that would require milling. The resource also features an underground sulphide component at Beartrack.
Work on a preliminary economic assessment for Beartrack is underway to evaluate a re-start of heap leach operations at the site. Revival is targeting a 10,000 tonne per day to 15,000 tonne per day production rate for the preliminary economic assessment and currently envisions a future mill operation with a 20,000 tonne per day run rate.
Beartrack produced over 600,000 oz. of gold from heap leach operations in the 1990s and historic infrastructure remains at the site.
Revival plans to continue exploration efforts at the project to grow its resource inventory; mineralization at both deposits remains open for expansion. Beartrack features five known areas of mineralization within a five-kilometre stretch along the Panther Creek fault with further potential for over 5 km by the Coiner fault. At Arnett, there is a 2 km diameter, shallow magnetic high that underlies the Haidee area, which contains the current pit shell.
Last year, the company completed metallurgical test work on sulphide composites from Beartrack that suggest overall gold recoveries of 94% to 95% through flotation and pressure oxidation. Heap leach gold recoveries for Arnett are estimated at 75% based on bottle roll tests and analysis of historical data.
Revival wholly owns the Arnett project site and, in September 2017, entered into an option agreement with Yamana Gold (TSX: YRI, NYSE: AUY) to earn a 100% interest in Beartrack. Under the terms of the agreement, the company needs to spend $8 million on exploration over four years, $5.8 million of which was spent by the end of last year.
Revival Gold has a $40-million market capitalization.
Titan Mining (TSX: TI) is involved with zinc exploration and development in New York state. The company’s flagship Empire State mine (ESM) complex consists of the ESM #4 mine, which is in production, and six historic mines. Operations at ESM #4 were restarted in January 2018 with the first zinc concentrate produced in March of that year. The 324-sq.-km property includes a 4,536 tonne-per-day mill.
While Titan re-started the Empire State mine in November 2017, the company announced in February 2019 that it would be lowering throughputs at the operation to focus on underground development and exploration in the near-term. The company is working on a revised mine plan, which will incorporate the #2D zone in #2 mine, connected to the #4 shaft, as well as the New Fold zone in #4 mine.
In January, the company announced drill results from two new zones of near-surface mineralization: the Turnpike and Hoist House zones, within 1.6 km of the ESM mill. Turnpike returned 24.4 metres of 5.8% zinc, 2.8% lead and 28.2 grams silver per tonne, while Hoist House returned 6 metres of 7.3% zinc, 0.9% lead and 11.7 grams silver. According to the company, these zones are potential sources of near-term open-pit feed for the mill, which currently has excess capacity.
Both Hoist House and Turnpike are interpreted as extensions of deeper orebodies mined historically. There are additional exploration targets identified throughout the district-scale property from a re-analysis of historical data.
Current measured and indicated resources at the #4 mine stand at 2 million tonnes grading 13.27% zinc with additional inferred resources of 4.9 million tonnes at 12.5% zinc.
Titan has entered into a long-term zinc concentrate offtake agreement with Glencore (LSE: GLEN). The company acquired the Empire State complex in December 2016, completed its initial public offering in October 2017 and is part of the Augusta group of companies.
Titan Mining has a $32-million market capitalization.
With the release of optimized mine plans for both Rainy River in Ontario and New Afton mine in British Columbia, New Gold (NYSE: NGD) is focusing on cash flow generation. The company also provided full-year financial results and issued guidance for 2020; operating results from 2019 were pre-released in January.
This year, New Gold expects to produce a total of 465,000 oz. to 515,000 gold-equivalent oz. at all-in sustaining costs of $1,260 to $1,340 per oz.; in line with last year’s performance.
At Rainy River, with a reserve reduction of 1.6 million oz., New Gold developed a mine plan to maximize returns with a shorter resulting mine life. The updated plan features average gold production of 289,000 oz. annually at AISCs of $967 per oz. with a resulting net present value estimate, at a 5% discount rate, of $421 million.
The new plan involves a smaller open pit shell and an underground component starting up in 2022.
“Over the past number of months we have evaluated numerous scenarios for the Rainy River mine and are pleased to release an updated life of mine plan that delivers a solid open pit and underground mine plan that positions the operation for profitability and free cash flow generation beginning in Q4 2020 that continues over the balance of the mine life,” Renaud Adams, the company’s CEO, said in a release.
Last year, Rainy River produced 257,051 oz. at AISCs of $1,630 per oz. This year, the mine is expected to produce 240,000 oz. to 260,000 oz. at AISCs of $1,470 to $1,550 per oz.
At New Afton, New Gold has focused on a self-funding development of the C-zone which will see lower production between 2021 and 2024 with the C-zone starting up in 2024 and extending mine life to 2030. The mine is now expected to generate an average of 260,200 oz. of gold-equivalent a year at AISCs of $681 per oz. The associated net present value has been estimated at $735 million, also at a 5% discount rate.
“We have also released an integrated mine plan that optimizes the self-funded development of New Afton’s B3 and C-zone that could deliver significant free cash flow of more than $1 billion over the life of the mine,” Adams added.
This year, New Afton is expected to contribute 220,000 oz. to 250,000 gold-equivalent oz. at AISCs of $940 to $1,020 per oz.
At market close Thursday, New Gold’s stock was down over 10%. The day’s trades were over 12 million, 10 times the daily average. The company has a $509 million market capitalization.
Troilus Gold (TSE: TLG) announced on Thursday an upsized non-brokered private placement with gross proceeds expected at up to C$12.8 million, up from C$10 million previously.
The placement features a common share offering component of up to 11.3 million common shares, at C$0.65 each, for gross proceeds of up to C$7.3 million. The flow-through portion includes the issue of up to 6.45 million flow-through shares, in three tiers, for gross proceeds of up to C$5.5 million.
Closing is expected on February 28.
“This year we will be engaged in ongoing exploration of the property which we believe has the potential to add to the current estimated mineral resources and a shift to engineering activity, based on which we expect to deliver a pre-feasibility study later this year,” Justin Reid, the company’s CEO said in a press release.
Current indicated resources at the Troilus gold project stand at 159.1 million tonnes grading 0.92 g/t gold-equivalent for a total of 4.71 million gold-equivalent oz. with additional inferred resources of 52.7 million tonnes at 1.04 g/t gold-equivalent for a total of 1.76 million oz.
At market close Thursday, Trolius Gold’s shares were up over 4%. Trading volume was over 357,000, more than double the daily average. The company has a C$48.2 million market capitalization.