Although still under the radar, Omai Gold Mines (TSXV:OMG) is looking to change this soon, as they are in the midst of an ongoing trenching and drill program at their Omai Gold project in Guyana, and are raising money at the moment. A large institutional investor came knocking at their door so they recently closed a C$2M financing and are looking to reel in another C$0.5M with a second tranche, which will provide management with sufficient cash to explore for the remainder of this year. With the current gold price hovering around C$1,950/oz Au, predominantly caused by record inflation levels, supported by the fall-out of the Russia-Ukraine conflict, the company seems to be in the right place to revitalize the historic Omai Gold Mine, which closed due to low gold prices in 2005. As a reminder, Omai Gold Mines already has delineated the Wenot deposit with a 2022 NI43-101 resource estimate outlining 1.6Moz Au, another adjacent mineralized envelope has a historic resource estimate of at least 1.4Moz Au, and there appears to be much more gold to be found.
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Please note: the views, opinions, estimates, forecasts or predictions regarding Omai Gold Mines’ resource potential are those of the author alone and do not represent views, opinions, estimates, forecasts or predictions of Omai or Omai’s management. Omai Gold Mines has not in any way endorsed the views, opinions, estimates, forecasts or predictions provided by the author.
On April 14, 2022, Omai Gold Mines was happy to announce the closing of the first tranche of a non-brokered private placement, to the tune of C$2M, by issuing 16.66M shares for C$0.12 each. Along with the share came a half 2-year warrant, with an exercise price of C$0.17. The second tranche of about C$0.5M is expected to close later this week. A lead order of C$1.5M came from a UK gold-focused institutional investor.
CEO Elaine Ellingham, who just recovered from COVID-19, as did yours truly, was pleased with the insto coming in:
"This financing further supports our accelerated exploration currently underway at our 100%-owned Omai Gold Project in Guyana. We have one drill testing the west extension of the Wenot deposit, while the other drill continues to explore the additional nearby targets identified by our exploration team. With this financing, we are further expanding our institutional ownership."
I wondered if management wanted to further expand the number of drill rigs, since they added another rig on April 4, 2022, or outline another drill program after the current one at Wenot will be completed. CEO Ellingham stated: “Two drills allows us to step out on the Wenot extensions with one drill while the second drill works on exploration targets. For the exploration targets, each hole provides significant new geological and structural information, and we would typically want to await assay results before continuing on a particular new target. It also allows to continue some focused trenching as we gather more insight into the potential new zones.”
More drilling ultimately provides more drill results, which could be helpful if successful, as the market seems to be waiting for results, as the share price has been range-bound between C$0.09 and C$0.125 for quite some time now:
Share price 1 year timeframe (Source: tmxmoney.com)
CEO Ellingham told me that they are compiling assays coming back from the labs , and news about trenching and drill results will come out somewhere in the upcoming two weeks. With a NI 43-101 compliant resource on Wenot and the Fennell historic resource as a base, Omai management has set a goal of finding and proving up 4 to 5 Moz Au.
Management and BoD hold 3.0%, Sandstorm holds 6.8%, Silvercorp Metals holds 11.6%, HNW’s a combined 8.3%, institutionals like Mackenzie combined own 13.1%, and retail holds the balance. After the closing of the two tranches, the cash position will be estimated at C$4.5M, with no debt.
As a reminder, current exploration strategies for Wenot focus on filling in some of the gaps in the drilling of the resource below the existing pit (the independent QP was comfortable estimating an upside target there of 170-290koz Au), and management anticipates extending the deposit along strike to east and west of the Wenot pit. This West Wenot potential wasn’t drilled and pursued at the time of production due to constraints of mine infrastructure at the time, such as the ramp and haulage road which are now gone. A new pit in this area would have a lower strip ratio, which of course translates into higher profitability.
For the East Wenot target, historic drilling already delineated near-surface mineralization, as shallow drilling from the past only went 50-75m deep. Management is looking to verify this drilling, and extending mineralization to 200-300m depth whenever possible, depending on drill results. The ongoing program was initially set at 3,000 meters and consists of 15 to 20 holes. Trenching of additional exploration targets will proceed concurrently in order to prioritize some of the additional potential.
Another very important target for management is the Fennell deposit. This deposit sports a non NI 43-101 compliant historic resource estimate completed on it in 2007, containing about 1.4Moz Au @ 2.5g/t Au, conservatively capped at 15g/t Au to reign in high grade intercepts. Interestingly, when uncapped, this historic resource number rises to about 2.5Moz Au @ 3.95g/t Au.
At the moment the company geologists are optimizing the 3D model, in order to finetune targets for verification drilling, in order to upgrade the historic resource into a NI43-101 compliant one. The drill program for Fennell is scheduled for later in 2022, and consists of 4-5 holes and 6,000m in total. Management believes that there is more leverage and potential value creation in drilling near surface targets that could lead to the discovery of high-profit starter pits. A NI43-101 resource for Fennell would follow after the verification drilling is completed.
Wenot and Fennell aren’t the only exploration targets management is focusing on. Omai just completed a small drill program and trenching on Broccoli Hill, has been busy recently with trenching programs at a number of interesting targets west of Fennell, including Blueberry Hill and Snake Pond, with 29 out of 60 samples returned gold values greater than 1g/t Au, with trenching at Gilt Creek (all 15 samples returned > 1.5g/t Au), and is currently also drilling an initial 2-3 holes at Blueberry Hill, with the first results expected to return from the labs later this week. It appears Omai Gold Mines is non-stop exploring their historic assets, and I’m curious what they will find here. According to CEO Ellingham, while trenching west of Fennell, they encountered a small mine adit or entrance several metres below surface. This indicates that at some time in the past some small scale miners found enough gold to dig in and extract material; old adits are always a good pathfinder to finding a new deposit.
Omai Gold Mines was busy trenching/drilling since the end of February, but with the recently closed first PP tranche of C$2M, they immediately added the second rig, as it enabled management to speed up things. As inflation is running rampant, the gold price seems to follow suit albeit more slowly, and Omai Gold Mines seems to be in an excellent and undervalued situation to make the most of this. Drill results are coming soon according to CEO Ellingham, with some delay due to the inevitable COVID-19 pandemic, let’s see what’s in store for investors. In my view the current valuation doesn’t make much sense, considering the quality of their new Wenot resource and the historic Fennell resource work from the past, and the amount of new targets nearby, each of them being capable of generating another satellite deposit.
I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter at www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.
The author is not a registered investment advisor, and currently has a long position in this stock. Omai Gold Mines is a sponsoring company. All facts are to be checked by the reader. For more information go to www.omaigoldmines.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.
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