USA, Mongolia, Africa
Golden opportunities in the USA
The USA’s impact on the gold industry goes far beyond its production, as the unprecedented fiscal stimulus announced by the federal reserve in response to the pandemic propelled gold to its all-time high in August 2020. In the midst of all the noise from Washington, it should not be forgotten that the US is home to world-class mining jurisdictions such as Nevada, ranked number one in the Fraser Institute’s “investment attractiveness” index for 2020.
The tier-one Nevada Gold Mines joint venture between the world’s two leading gold producers, Newmont and Barrick, contributed significantly to each company achieving record FCF in 2020. “Nevada has worked so well that people have taken it for granted, but to take a 3.5 million oz producer, with 7,100 employees and 4,000 contractors in the US, with two completely disparate cultures, and stick them together, throw in the uncertainties of the US election year, plus Covid – the team did a spectacular job,” reflected Barrick chief Mark Bristow.
When quizzed on where he sees most potential for new discoveries, Bristow suggested: “The best place to find another mega deposit is Nevada,” revealing that Barrick has a 10-year plan focusing on the models that drove the discoveries of the late 80s and 90s.
About 35 km south of Barrick’s Cortez Gold mine, lies Millennial Precious Metals’ Red Canyon asset, one of five properties that the early-stage exploration and development company intends on advancing in Nevada. “Each of these assets has a historical or existing resource base that Millennial can add ounces to quickly and cheaply, and we have been open to looking at things that were missed by other groups. For example, at Wildcat and Mountain View, located in Nevada's Hycroft district, no one really understood the plumbing system or the hybrid nature of it,” outlined president and CEO, Jason Kosec.
Out of the gate, Millennial has close to 1.2 million oz of oxide on the books, and that has attracted a strong base of well-respected institutional investors seeking to back the company. Among them, Eric Sprott is set to own 9.9% of Millennial, as it plans to make its initial public offering in Q1 2021, with US$16 million in the bank.
The vision for the next 18 months, according to the company, is to drill a minimum of 20,000 m on Wildcat, Mountain View and Red Canyon. Millennial also intends to undertake an updated resource on these assets, as well as a PEA. “We have a very aggressive strategy, because I think most people do not understand that one of the biggest killers of junior companies is a lack of news flow,” said Kosec, later adding: “Not being aggressive enough is a big pitfall, and Millennial is lucky that its three assets that are going to be drilled this year are very low hanging fruit, and we can add ounces, very quickly and cheaply.”
Also in the top 10 of the Fraser Institute’s top global mining jurisdictions list for 2020 is the state of Idaho, where Revival Gold (TSXV: RVG) is focused on its Beartrack-Arnett project, the largest former producing gold mine in the state. Over the last three and a half years, Revival has built up a resource of 3 million oz and released results in fall of 2020 of a PEA on the first phase to restart the operation. It is an open pit heap leach mine, estimated to produce 72,000 oz/y of gold. According to Hugh Agro, president and CEO: “The bigger opportunity at Beartrack-Arnett is to construct a mill and process the mill resource, which is contemplated at 20,000 tonnes per day.” Revival is now working on exploration to continue to build out the resource and technical information for the larger mill project in a second phase of the operation.
One of the big advantages of mining in Idaho is that communities have proven to offer skilled labor in abundance and are supportive of the industry. “We have a supportive state government and supportive communities. The community of Salmon, Idaho, in which Revival is located, understands the benefits and rewards that come from having a responsibly operated mine in their backyard. The community remembers the successful days when Beartrack-Arnett was in operation in the late 90s and early 2000s,” Agro declared.
“The community of Salmon, Idaho, in which Revival is located, understands the benefits and rewards that come from having a responsibly operated mine in their backyard. The community remembers the successful days when Beartrack-Arnett was in operation in the late 90s and early 2000.”
Hugh Agro, President & CEO, Revival Gold
Even further north, in “America’s Last Frontier,” sits HighGold Mining’s (TSXV: HIGH) Johnson Tract project, which is held by an Alaskan native land interest and has a resource estimate of 900,000 oz of gold equivalent (AuEq) at about 10 g/t AuEq. Despite the challenges presented by the pandemic, HighGold proceeded to complete 16,500 m of drilling between July and the end of October, expanding the zone of mineralization. “What makes the project special is that it has incredibly long intervals of high-grade gold and a unique combination of very high-grade mineralization over very wide widths,” said HighGold president and CEO, Darwin Green.
According to the company, which is also working to progress its Munro-Croesus project in Timmins, one of the drawbacks of operating in Alaska is that drilling costs are around double what they are in Timmins. However, the payoff stands to be far greater in Alaska if successful. In Green’s words: “The threshold for a deposit to go the distance is lower in a place like Ontario than it is in Alaska. However, Alaska is elephant country. There are some monster deposits there and it has got tremendous potential. That is the offset.”
Another of the US states seen as favorable for mining investment, Alaska moved from 9th spot in the Fraser Institute’s ranking in 2019, up to 2nd in 2020.
Mongolia's bright future
Since opening its markets to foreign investors in the 90’s after nearly seven decades as a Soviet satellite with a centrally planned economy, Mongolia has become well known for its prospectivity. In the South Gobi region, towards the border with China, lies one of the world’s richest sources of metal. The giant Oyu Tolgoi copper mine is held 34% by the Mongolian government and Turquoise Hill, with majority-owner Rio Tinto holding the rest. It started producing above ground in 2011, and expansion underground should see total output of copper climb to 500,000 mt/y—placing Oyu Tolgoi as the third largest copper producing mine in the world.
The mine has become a symbol of the new, open for business, Mongolia. It is a crucial part of Mongolia’s economy, as it is not only the country’s biggest source of foreign direct investment, but it also provides thousands of well-paid jobs. Developing the mine has not been entirely smooth sailing, as Rio Tinto has come under pressure in Mongolia, where the government is seeking an independent review into delays and huge cost blowouts in the underground expansion of Oyu Tolgoi. However, few are questioning the country’s commitment to creating an auspicious environment for foreign mining companies.
Steppe Gold (TSX: STGO) has made immense progress since entering Mongolia in 2016. STGO began producing gold at its flagship Altan Tsaagan Ovoo (ATO) mine in March 2020, which was built in just 14 months with under US$20 million of capex and is now ramping up output. Steppe also owns the Uudam Khundii (UK) gold project (an 80:20 joint venture between Steppe and the Bayankhongor provincial government) and the Mungu gold and silver discovery, located immediately northeast of its current resource at ATO.
Aneel Waraich, Steppe’s executive vice president pointed out: “We are very proud to be able to bring production online during a global pandemic. Steppe Gold (STGO) has now completed two quarters of production and produced over 25,000 oz of gold, while selling an equivalent amount to the Mongolian Central Bank. We generated over US$24 million of operating profit in our first six months, and overall, it has gone well given restricted travel.”
Steppe’s operating team is 100% local, and this turned out to be an advantage when the effects of Covid began to play out around the world. “Steppe has shown that a local skilled labor force exists in Mongolia. Importantly, by having a local team in place, we do not need to rely on expats to run our business. This means we have not had to curtail or delay production,” Waraich underlined.
2021 is set to be another year full of catalysts, with a maiden resource update on Mungu, as well as the other three ATO deposits coming in early 2021. On the back of that, STGO intends releasing a revised feasibility study on the phase 2 expansion, followed by new drill and exploration programs continuing on both projects and first time drilling on the UK project.
“I think the market is viewing us as a silver company. However, when we put together Trigon, it was on the thesis of a growing demand for copper and the potential for Africa to supply that demand.”
Jed Richardson, President & CEO, Trigon Metals
African projects in the spotlight
From an M&A standpoint, one of 2020’s biggest transaction involved a merger of near-equals in Africa, as Endeavour Mining acquired Toronto-based Teranga Gold for a US$2 billion all-share deal in November to create a top 10 gold producer which will list in London. The transaction came on the back of Teranga’s acquisition of Barrick’s Massawa gold project in Senegal, which combined with its Sabodala mine to form the Sabodala-Massawa complex. “The pre-feasibility study points to a 5-year production profile of 384,000 ounces per year at all-in sustaining costs of less than US$700 per ounce,” said Richard Young, TGZ’s president and CEO, demonstrating the potential for value-accreditive M&A that creates assets stronger than the sum of their parts.
The uranium market reignited in 2020, appreciating 21.14% as strained supply due to Covid shutdowns combined with solid demand on the horizon improved market sentiment. Global Atomic Corp (TSX: GLO) is a unique story for a uranium junior due to its Turkish zinc smelting operation which has been profitable since 2009, negating the need for frequent dilution as the company works to develop its flagship Dasa uranium project in Niger.
In May 2020, GLO released a PEA for Dasa at a conservative base case price of US$35/lb, resulting in an AISC of less than US$19/lb, which would put the company in at the lowest cost quartile of companies producing uranium. “Not many junior developers can claim to have operating costs similar to that of Cameco and Kazatomprom,” stated Stephen Roman, GLO’s president and CEO, adding that drilling in the area delineated as the Flank Zone resulted in a close-to-surface high grade uranium discovery. The PEA outlined a low-capex, high grade asset, with an after-tax NPV of US$211 million and an after-tax IRR of 26.6%, based only on the Phase 1 Mine Plan. With GLO receiving its mine permit in Q1 2021, its aim of commencing production in 2024 is viable even at current uranium prices, according to Roman.
Although West Africa represents the continent’s current mining hotspot, a number of upcoming countries are looking to take advantage of rising metals prices and to attract foreign investment with mining-friendly regulations. Trigon Minerals (TSXV: TM) is looking to restart the Kombat copper mine in Namibia, as well as exploring the Silver Hill project in Morocco, which it acquired in August 2020. “These are some of the best mining jurisdictions in Africa,” claimed Jed Richardson, TM’s president and CEO, who has the backing of Eric Sprott as a major investor.
While Sprott and SIlvercorp were attracted to Trigon’s greenfield silver opportunity in Morocco, the rising copper price and the September 2020 resource update from Kombat that expanded the asset from 7 million to 39 million tonnes, offers two-pronged optionality to the Toronto-based junior. “When we put together Trigon, it was on the thesis of a growing demand for copper and the potential for Africa to supply that demand,” revealed Richardson, who expects a bankable feasibility study for Kombat in 2021, as well as a maiden resource for Silver Hill.
Image courtesy of HighGold Mining