Toronto’s Global Reach
Headquartered in Toronto, mined abroad
The mining industry operates on a global scale, but has a limited number of centers where most publicly traded companies are based. Toronto, like Vancouver and Perth, is a major hub for the mining industry, encompassing both large producers and smaller junior companies, as well as engineering firms. It is a key location for conducting deals and orchestrating projects.
Around 42% of the world's public mining companies are listed on the TSX and TSXV, attracted by the stable and efficient Canadian financial system affording them unparalleled access to capital. This, in addition to the abundance of expertise that resides in Toronto, is why companies with projects in jurisdictions all around the world maintain offices in the city and listings on the TSX and TSXV, often bypassing less liquid regional exchanges.
The Southern Cone
With a depleted foreign currency reserve, three different ministers in over a month, and the second review approval for a US$44 billion extended fund facility program, dollar-strapped Argentina’s economy is battered. However, given political shifts toward leftist governments in Peru, Colombia and Chile, and the ensuing political risks associated with those jurisdictions, mining companies and investors are now taking a more open view toward the nuances of particular districts. Rich in natural resources, Argentina’s San Juan Province is among the top jurisdictions in mineral exports. According to the Government of Argentina, in September 2022, San Juan's mining exports grew 34.2% compared to September 2021, reaching a total value of US$60 million.
Michael Meding, vice president and general manager at McEwen Copper, a spinout of McEwen Mining, compares the jurisdiction to Nevada: "I think San Juan province in Argentina is analogous to Nevada in the US, where there is a good environment to conduct mining business."
McEwen’s flagship project is Los Azules, an advanced-stage porphyry copper exploration project that is reported to be the ninth largest undeveloped copper deposit in the world. According to Rob McEwen, executive chairman and chief owner of McEwen Mining, the impetus for the spin-out came after market interests shifted away from multi-asset models.
McEwen spoke of the advantages of Los Azules compared to similar projects in the province, including the fact that it sits at a lower altitude that is closer to infrastructure. He also noted that the published estimated copper resources and grade are 2-3 times higher than two other copper projects, Filo del Sol and Josemaria, that are also located in San Juan province. The company is waiting to complete an updated PEA in Q1 2023 to establish its market value and intends to go public by mid-2023.
“Los Azules is the ninth largest undeveloped copper deposit in the world, and within McEwen Mining, it represents the largest value and greatest excitement in our portfolio of assets.”
Rob McEwen, Executive Chairman and Chief Owner, McEwen Mining
Another new company created on the heels of an asset spinout is Lavras Gold, which went public in April 2022, shortly after Hochschild Mining acquired its predecessor company, Amarillo Gold. The company’s flagship Lavras Do Sul (LDS) project is located in southern Brazil, and is an intrusive hosted gold deposit measuring approximately 10 km in diameter. "Comparable gold systems to ours in terms of geological model would be Cripple Creek in Colorado, which has around 26 million oz Au, Porgera in Papua New Guinea, and Golden Sunlight in Montana. These gold systems can be very large and very high grade. What we hope to find is a multimillion-ounce type of gold system," Michael Durose, President and CEO of Lavras asserted.
In addition to the flagship asset, Lavras also kept a 2% net smelter return royalty on the Mara Rosa exploration ground, where it drilled 40 holes into the Pastinho discovery to define a gold structure about 1.8 km strike length. "There is a tangible value associated with the Mara Rosa royalty," Durose concluded.
In Brazil’s Bahia State, Largo has its Maracás Menchen mine, which is the world's largest primary producer of vanadium. It is also one of the highest-grade vanadium assets, and its cost of production is comparatively low. The company is now developing a titanium business, which is an optimization of its Maracás Menchen asset. Largo expects to produce titanium from the same ore the vanadium is produced from to provide a new revenue stream so that operational costs will be optimized. Expectations are that the mine will produce about two thirds of Brazilian demand for titanium pigment once the project reaches full capacity. “According to our latest filed NI 43-101 technical report, we have outlined a plan to expand our titanium pigment plant capacity to produce 60,000 t/y, with a subsequent expansion plan to 120,000 t/y TiO2,” Daniel Tellechea, Interim CEO of Largo said.
The other pillar Largo’s business centers around is the emerging vanadium battery business, based in Massachusetts. While Largo is well positioned as the preferred vanadium supplier for the aerospace market, there is potentially a much larger market stemming from the application of vanadium for batteries related to the energy transition. Tellechea highlighted market forecasts that vanadium battery demand should result in consumption of 4,000 t/y V2O5 in 2022, 10,000 t/y in 2023, and 20,000 t/y in 2024. Given the rapid growth in demand, Tellechea is determined to ensure Largo is able to capitalize on the growing market, and consequently acquired a vanadium redox flow battery technology. Tellechea described his reasoning: “We wanted to create more value for our high-grade vanadium, and our theory was that it is perfect to be deployed into batteries for energy storage. We identified VionX as having the best VRFB technology, because the energy density is about five times greater than any of the VRFB alternatives. By having more energy, the number of components per kilowatt hour is lower, and that effectively means one can lower costs with fewer components needed.”
“Our power costs in Idaho are 1/3 of what they would be if we were in a jurisdiction like Chile. Labor rates, thanks to high productivity, are also more competitive. Lastly, policies in other jurisdictions are no longer as advantageous as they once were, and there is no comparison when it comes to the legal certainty North America provides.”
Hugh Agro, President and CEO, Revival Gold Inc.
Mined in USA
Mining is embedded into the history of Idaho, and it is called the Gem State for good reason. Revival Gold’s Beartrack-Arnett currently ranks as one of the highest grade and largest independently owned undeveloped open pit gold projects in the US. Couple that with the fact that Idaho is one of the most mining-friendly states, and Revival is in a strong position to reach production in a relatively quick timeline. The company also benefits because Beartrack-Arnett is on a brownfield site that operated as recently as the early 2000s. Revival Gold has put out an updated resource, increasing from 3 million oz to 4 million oz Au, while also revealing that mineralization extends for 5.6 km along strike, with results averaging a grade of 7.7 g/t Au in a high-grade core. Revival Gold is hoping to get to production quickly with minimal capex expenditure, while at the same time, is devoted to continuing efforts to explore and build out the larger potential for a much bigger project. “We are taking this route because we want to be able to ride through difficult markets by getting to free cash flow sooner, with lower capital expenditure and less shareholder dilution. All of these actions are meant to preserve our long-term upside while we continue to explore,” Revival Gold president and CEO Hugh Agro explained.
Mexico
Mexico is another foreign jurisdiction where Toronto headquartered companies see significant opportunities. Although the leftist Morena party administration of President Andrés Manuel López Obrador (AMLO) has adopted a tougher approach to environmental pretermitting, resulting in a slowdown in the processing of applications, while freezing new mineral concessions and nationalizing lithium, companies continue to press forward and bring assets into production.
One of the companies that remain undeterred is Minera Alamos, which was founded in 2018 on the premise that a quirky Australian bootstrapped mining model was a sound approach to mine building. The idea is to build low capital cost mines and scale them out to cash flow, and in times of high inflation, rising interest rates, and more scarce capital, this model is one that seems uniquely appropriate. “Our results reflect that we are making money each quarter without seeing much inflationary pressure in our operating costs. The past 12 months have been a steady year of demonstrating our business concept, and I think we have executed on that well, despite many things working against a company building a gold mine,” pointed out Minera Alamos president Doug Ramshaw.
Minera Alamos recently announced a PEA on its second mine, Cerro de Oro, that it plans to build in Zacatecas, Mexico, and according to Ramshaw, it will be another mine that fits into the narrative of a low capex build of sub US$30 million. After the company receives all permits, which it anticipates by the end of 2023, it can then build the mine in approximately five to six months. “This 60,000 oz/y production from the proposed US$30 million Cerro de Oro mine bolted onto Santana will set the scene for us achieving our initial goal of being a 100,000 oz/y gold producer while demonstrating remarkably low capital intensity,” Ramshaw added.
Torex Gold also continues to deliver positive news coming out of Mexico. It topped guidance with record production in 2022, and continues to report positive operational results at its 100% owned Morelos property. In 2023 it will be ramping up activity at its Media Luna project after receiving approval from Mexico’s Secretariat of Environmental and Natural Resources (“SEMARNAT”) on the environmental permit, which will allow operations to begin.
Media Luna, a low risk brownfield build with a 10-year plus mine life, significant resource upside and meaningful copper exposure, is projected to more than triple the mine life of Morelos Complex. “Every company is founded on a flagship asset, and the combination of ELG and Media Luna on our Morelos property represents the future from which we will grow,” Torex Gold president and CEO Jody Kuzenko said.
Kuzenko is also open to M&A discussions given a strong balance sheet with C$340 million in cash and a desire to diversify away from single asset risk. She shared: “When valuations are depressed, it is an opportune time to look at other companies that have quality assets, and whose share prices are in similar situations to ours. In these instances, it could be appropriate to do some kind of merger of equals to get to scale and diversify away from single asset risk. This will improve the valuation of our company and deliver value to shareholders.”
Ecuador
Nestled between the rugged peaks of the Peruvian Andes and the lush valleys of Colombia, Ecuador is a land of untapped mining potential. While its neighbors boast well-established mining industries, Ecuador's mining sector is just starting to take shape after years of opposition from indigenous communities and adverse court rulings. With rich mineral deposits waiting to be uncovered and a government accepting of foreign investment, the country is poised to become a more relevant player in the mining world. Ecuador’s mines and energy ministry expects to generate over US$4 billion in annual mining exports by 2025. According to the latest Fraser Institute survey, Ecuador was the only Latin American country that improved its score on the Policy Perception Index.
Adventus Mining is a Toronto-based company that took a chance on Ecuador's young-mining industry. After raising US$263 million in January 2022, and signing the investment protection agreement with the government of Ecuador, Adventus hopes that its El Domo copper asset is next in line for approval. "This is only the third time ever that a mining company has signed such an agreement with the government of Ecuador. The other two times were with Lundin Gold's Fruta Del Norte, and EcuaCorriente’s Mirador mine, which were each in the order of a billion dollars in foreign direct capital investment," explained Christian Kargl-Simard CEO of Adventus Mining.
The agreement not only grants Adventus tax breaks, but it also protects investments made in the country under strict terms. Kargl-Simard pointed out that they expect to produce 25,000 t/y of copper equivalent. “El Domo is a rare breed, because there are a lack of copper VMS deposits in development, and the ones that are being developed have grades that are half to a third of what Adventus has,” he added.
“El Domo is three years ahead of any other greenfield copper development project globally to get into construction. With copper being the most important industrial metal, particularly for electrification and lower carbon economies, our business creates and unlocks scarcity value.” Christian Kargl-Simard, President and CEO, Adventus Mining Corporation
Bolivia
Along with Ecuador, Bolivia has a checkered history when it comes to mining. Nevertheless, President Luis Arce, the former finance minister for the Morales' government, has made it clear that he wants to attract foreign investment. At the same time, he expects full involvement with Bolivians. Eloro Resources has been operating in-country since acquiring its Iska Iska project in 2020, and the management team senses enormous latent potential in country. Eloro EVP of exploration Bill Pearson’s observed: “If you look at a map of Peru, you see a plethora of mines, but then you come down to Bolivia, and suddenly the number of mines drops off considerably. That certainly has nothing to do with the geology.”
Thus far, Eloro’s experience in country has gone smoothly, instilling even stronger conviction in the jurisdiction from Pearson: “You cannot judge the politics in Latin America based off what happened 10 or 15 years ago,” he said.
Eloro began drilling in September of 2020, and had a big breakthrough when it drilled to the southwest and hit 180 m of mineralized breccia. One of the big achievements of 2022 was the recognition that Iska Iska’s major mineralized zone spans the entire Caldera. After a little over two years, the company has completed 85,000 m and 122 holes. “We have not missed in one hole, and furthermore, we have not defined the limits of the mineralized zone yet,” said Pearson.
The company’s next big benchmark will be its inaugural mineral resource estimate on Santa Barbara, but as the company explained, it is more of a progress report. “We are finding magnificent core, which is remarkably consistent, continuous, and high grade at 90 g/t silver equivalent. Santa Barbara is essentially the cherry on top of what we feel is a giant likely tin porphyry,” Pearson added.
Eloro continues to add to its land package with the acquisition of Mina Casiterita, which is important, because it ties onto the southwest side to Iska Iska. The impetus of the acquisition: “In Casiterita we are down in the valley off the mountain, so we think this is very likely a tin porphyry. All of a sudden, instead of having to drill 1,500 m holes under Iska Iska to see if it is there, we can actually explore this near surface."
Finland
Rupert Resources’ Rupert Lapland project and its Ikkari discovery are located in a part of Finland that had seen limited commercial exploration, despite hosting Agnico Eagle's Kittila gold mine, which is one of Europe’s largest mines. The first drill hole went into Ikkari in March 2020, and months after Agnico Eagle made a strategic investment into Rupert. This catalyzed investor enthusiasm, bolstering Rupert’s balance sheet. “This discovery stands out as being unique in terms of gold discoveries today, and the market caught onto it quickly. They realized that when you have huge intercepts with 137 m of continuous mineralization, at 1.8 g/t, there was little doubt in people's minds that this was going to grow into a significant deposit,” noted James Withall, CEO of Rupert Resources.
The success continued as more exploration was conducted, and at the end of November 2022, the company published its PEA. Since then, Rupert has graduated to the TSX mainboard from the TSXV.
Perhaps the most appealing attribute of the Ikkari is the high margins it is expected to generate. The main driver of the low cost base at Ikkari is the morphology of the deposit. As an analogy: Imagine you are looking at a city block. “A lot of gold deposits occur as a narrow line down the middle of the road - the vein or structure where the gold occurs. Ikkari is like mining the whole city block, because the intercepts are up to 150 m wide. You are not just taking the street, you are taking the buildings on either side, and it is all mineralized,” Withall proclaimed.
This ultimately enables the net present value of every ounce mined at Ikkari to be almost twice the average seen in other projects. Withall added: “Ikkari will produce 200,000-220,000 oz/y, but it produces far more annualized cash flow than many much larger producers.”
Article header image courtesy of Largo Inc.