Analysis - Gold

Gold

5 Year Gold Prices - Gold Price Chart
Gold Ore

Gold (chemical symbol: Au) is a precious metal, just like silver, platinum and palladium, and one of the most valuable and highly sought after on the planet. Its main purpose is for investing or preservation of wealth, or a hedge against inflation. As small deposits with likewise small operations can already be profitable, gold juniors are the most abundant among junior miners on the various exchanges, but certainly the Canadian TSX Venture and TSX.

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Summaries:

 

Executive Summary:

  • After Neil Woodyer left Endeavour Mining as a CEO in 2016, he teamed up with mining titan Frank Giustra, to set up Leagold
  • They managed to buy the Los Filos gold mine from Goldcorp in Mexico for US$350M
  • After giving this a closer look, it seems a profitable acquisition for Leagold
  • Development potential provides significant upside in a few years
  • Management is aiming at aggressive growth in order to build the next mid tier producer

Touquoy project; Steel structure for grinding building

1. Introduction

Terraco Gold (TEN.V) made headlines with their Spring Valley royalties transaction in May 2016. Spring Valley is a multi –million ounce gold project in Nevada owned by Waterton Global, advanced by Barrick to a PFS level by spending over US$70M before Waterton bought it for appr US$83M. Unfortunately for Terraco, but typical of private equity firms, the Spring Valley news flow slowed down after this (though industry sources believe they are improving the Spring Valley project behind the scenes as they did in the below example).

Executive Summary:

  • Balmoral Resources is advancing two interesting discoveries, the Martiniere gold project and the Grasset nickel/copper/PGE deposit
  • Grasset is one of very few nickel deposits available in safe jurisdictions, decent grade but small
  • Martiniere is the flagship project, and continuing high grade drill results seem to define a collection of several interesting mineralized envelopes, all starting near surface
  • The company was too optimistic in the recent past about timelines of the maiden resource estimate, but I believe Q3 2017 to be my own realistic estimate for Martiniere this time
  • Martiniere could very well top 2M ounces of high grade gold, partly open pittable which could generate very interesting economics, making it one of the premier exploration plays in the Abitibi Greenstone Belt

Executive summary

  • Moneta Porcupine Mines is a gold developer, and owns the 100% owned 4.3Moz Au Golden Highway deposit in the mining friendly province of Ontario, Canada
  • The project has solid Dec 2012 PEA economics with an after tax NPV5 of $420M and IRR of 24.7% at a gold price of $1350/oz, and a market cap of just C$60.3M
  • Management likes to picture the company as an exploration play, looking for more high grade zones to improve economics
  • With already established, positive PEA economics it is also very much a development play in my view, probably of interest for mid tiers or majors looking for profitable, sizable assets in excellent jurisdictions
  • Moneta recently announced a long awaited C$7M private placement which is scheduled to close around September 7, 2016, which would finally enable them to advance Golden Highway after a long bear market
  • Terraco Gold recently closed a $19M deal with Waterton, involving the Spring Valley royalties
  • As Waterton plans to advance the excellent Spring Valley project quickly and controls $2B in assets, Terraco can probably expect significant royalty payments in 3-4 years time
  • The company also aims at completing a PEA on the prospective Almaden/Nutmeg project in Q4 2016, which will be a big near term catalyst and significantly increase and indicate asset value
  • Terraco strives to become an established royalty player, and is looking to expand its portfolio rapidly

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