- First gold already poured; ramping up to steady-state output
- Probable mineral reserves of 1 million ounces of gold
- Strong set of strategic investors including AngloGold Ashanti and Eric Sprott
What Pure Gold Mining does:
The project sits in the 7 kilometer (km) Madsen Red Lake gold system and there is huge exploration upside here.
The area already has significant infrastructure in place. The Red Lake mining camp in northwestern Ontario has produced nearly 30 million ounces of gold over the past 85 years, making it one of the largest and highest-grade gold-producing districts in Canada.
The PureGold mine is poised to be the fourth highest-grade gold mine in Canada at 9 grams per ton (g/t) and the 16th highest grade gold mine globally, making it higher grade than 95% of gold mines anywhere in the world. The company is developing the mine with scalable, phased approach, and the first phase is set to produce 1 million ounces.
This first one million announces will generate over C$2.3 billion in revenue over the next decade, says the company, and over C$1.2 billion in pre-tax free cash flow. .
PureGold has defined a 2.1 million ounce indicated resource (7.2Mt at 8.9 g/t gold) and a 0.5 million ounce inferred resource (1.9Mt at 7.7 g/t gold) at the PureGold mine.
In 2019, a feasibility study for Phase 1 pegged the pre-tax net present value (NPV) at C$353 million, with a pre-tax IRR (internal rate of return) of 43%, based on a gold price of US$1,275. That NPV moves to US$390 million and IRR at 51% based on a gold price of US$1,500 per ounce.
The first phase project is fully funded and in August 2019, the firm announced a US$90 million project finance package. The aim of the second phase is to extract high-grade ounces of gold already drilled off in the immediate area of the Phase One mine.
Pure Gold is supported by some key strategic investors experienced in building multi-billion dollar gold mining companies. Its largest shareholder is mining titan AngloGold Ashanti, while its second and third-largest shareholders are Eric Sprott and Van Eck Associates Corporation.
Chief executive Darin Labrenz is a Red Lake camp veteran who now leads a multifaceted team of experienced geologists, mine builders, and mine operators, supported by a board with proven capital markets expertise and rich history of building and operating mines.
The firm, last year, put out a corporate video which vividly highlighted the excitement surrounding its PureGold Mine in Ontario. See below:
How is it doing:
In April 2021, Pure Gold announced high-grade results from underground drilling at its mine in Red Lake, Ontario, which shows the potential to improve on the near-term mine plan.
Drill results included 56.6 grams per tonne (g/t) gold over 1 metre (m) from one hole, and 8.7 g/t gold over 7.9m in another. Another hole intersected 30.5 g/t gold over 0.6m. The assays come from work completed in the first quarter this year close to new mine development and next to planned stoping areas.
These results are now being integrated into near-term mine planning, said PureGold, while development completed to date from the main ramp will allow production from some of these areas in 2021.
As reported earlier in April, the company continues to ramp-up the gold mine towards declaring ‘commercial production’ and the processing mill is now running at full pelt.
A major milestone was reported on December 30, 2020, when the firm told investors that first gold was poured at the mine on December 29, 2020, following the introduction of ore to the mill on December 15. That fired the starting pistol on the process of ramping up and optimizing the operation at the mill.
The company noted it would continue to pursue its aggressive growth strategy in 2021, with ongoing exploration drilling from both surface and underground, an update of mineral resources to include drilling completed over the last two years, and incorporation of significant improvements in mine design and mine plan.
And, in March 2021, the group revealed it expects to declare commercial production in the second quarter of 2021.
Updating on the ramp-up at the end of March this year, covering the progress of the first quarter of 2021, Pure Gold revealed that recoveries had been “exceptional” since the first gold pour in December. It added that ramp-up of then processing mill was now complete, operating, as it is, at more than 75% of nameplate capacity.
The company’s focus is now shifting to aligning mill throughput with the rate of underground mining as the project moves to access higher grade ore and progress toward steady-state production, it added.
Notably, realized head grades for the first quarter (to end-March) were lower than anticipated due to ramp-up related issues but these are being addressed and seen as symptomatic of ramp-up, and were not expected to persist in the future, the firm added.
That said, the company did announce that it had struck a deal to amend and increase its 2019 debt financing with Sprott to up to US$20 million, with US$12.5 million to be available immediately on closing.
In terms of output, Pure Gold said that in the fourth quarter to December 31, 2020, it processed 3,535 tonnes of ore at a grade of 7.8 grams per tonne (g/t) to produce 860 ounces of gold at a 96.6% recovery rate. From January 1 to March 29 this year, 47,182 tonnes of ore were processed at a grade of 2.8 g/t gold to produce 4,011 ounces at a 95% recovery rate.
Pure Gold said it would continue to assess both ore throughput and gold production throughout 2Q in respect of any decision to declare commercial production for the PureGold Mine. Inaugural production and cost guidance for the rest of 2021 will follow shortly thereafter.
In exploration news in March 2021, the company reported it had hit high-grade gold mineralization outside the current resource area at the project, namely at the Wedge, Treasure Box and No 1 Vein targets.
The results supported Pure Gold’s objective to add ounces beyond the Phase 1 mine by discovering new zones of high-grade gold on the 47-square-kilometre property, it said.
An updated mineral resource estimate is in progress and is anticipated to be published in the second quarter 2021, the company added.
- Declaration of commercial production
- Financial and operational results and output/costs guidance
- Exploration updates
What the broker says:
In an April 6 update, Stifel GMP analysts said they expect 2021 to be an active year for Pure Gold Mining.
“Pure Gold has commenced production at an exceptional time for a new producer, with high gold prices and forecast low all-in-sustaining costs (AISC) expected to generate strong cash flow, capable of funding its exploration program aimed at supporting a larger and longer-life operation, as well as maintaining a strong balance sheet,” the analysts wrote.
After the company announced high-grade drill intercepts from the underground drilling program completed during its first quarter, Stifel GMP analysts noted that their main focus over the coming months is to see proof of execution on the mining front, with modified blasting and mining practices expected by the company to deliver higher grades going forward.
Pure Gold has said it is now focusing on extracting higher grades from both its Main and East ramps, with the expected delivery of sequentially higher grades over the course of 2021. The company, however, revealed on April 1 that excess overbreak from the initial long-hole stopes introduced more dilution than planned, resulting in materially lower than expected grades to the mill.
“While Pure Gold noted that measures are being put in place to reduce dilution, we view successful implementation of these measures as key to regaining the premium valuation that the company previously traded at,” the analysts added.
Stifel GMP analysts maintained their ‘Buy’ rating and C$2.40 per share price target on Pure Gold Mining stock.
What the boss says:
In the update on mine ramp-up on March 31, 2021, Darin Labrenz, CEO of PureGold, said: “We are pleased by the progress of the ramp-up of the PureGold Mine to date, highlighted by the milling facilities achieving design capacity prior to quarter-end. With the mill ramp-up effectively complete, we can now focus our attention solely on ramping up the mine and accessing high grade ore from multiple declines where we are making great progress.
“The additional US$12.5 million will ensure the PureGold Mine continues its ramp-up phase with maximum financial flexibility, whilst the remaining US$7.5 million can be accessed if needed to provide additional liquidity.”
Contact Sean at [email protected]