Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Lavras Gold (TSXV: LGC), an exploration stock that ran up a blistering 600% last August and September, lost some of its heat today on new results from the LDS project in Brazil.
Despite releasing relatively encouraging exploration results from the Fazenda do Posto (FDP) and Butiá deposits in Rio Grande do Sul state, Lavras shares fell 24% to a session low of C$0.24 on Thursday morning. Lavras, which has a market capitalization of C$40.5 million is still up 93% over the past year.
“People buy on the rumour and sell on the news now in this market – I think it’s just a factor of the market,” Naomi Nemeth, vice-president for investor relations, told The Northern Miner by telephone.
Lavras announced on Thursday that hole 23FP011 at FDP returned an average grade of 1 gram gold per tonne over 173 metres, starting from a depth of 69 metres. This section included 1.4 grams gold over 94.8 metres. Similarly, hole 23FP008 showed 1.1 grams gold over 123 metres, indicating the presence of a large, near-surface, bulk-tonnage gold system, the company said in a release.
The FDP discovery has now been traced over a 200 metres strike and lies 150 metres west of the Butiá deposit, which already hosts a measured and indicated resource of 12.9 million tonnes at 0.97 gram gold per tonne for 376,751 oz. of metal.
The company says the proximity of these two sites raises the potential for a combined open-pit development project.
One explanation for the share price drop is that retail investors might have been seeking more bonanza-grade intercepts, as in the announcement of Aug. 2 last year. Hole 23BT004 returned a 4-metre section from 31 metres depth, where each respective metre assayed returned 52.3 grams gold per tonne, 9.28 grams, 110.5 grams and the last had 2.28 grams gold. The hole essentially started the six-bagger rally through early October.
“What we’re building there at the FDP and Butiá project is several football fields in each direction of mineralization, and the corporates get it. It’s more the retail shareholders who want to see super high grade at that volume,” she said, suggesting it’s the retail investors leaving in droves.
“It’s also possible we’ve got a big seller, but how do we know in Canada? We never know who’s selling our stock; unless they tell us.”
Nemeth suggests the selloff was part of normal market fluctuations and cycles, with no material reason to blame for the negative movement, other than noting that a particularly sharp selloff like today’s, was in her experience, rare.
Nemeth said that as of December 2023, the company had about C$10 million in cash in the bank to see the current exploration through, and follow-up work will be budgeted as needed.
The company enjoys the financial backing of industry notables, including Eric Sprott at 15%, a 30% institutional follow, 20% by insiders and management, and 5% by Kinross Gold (TSX: K; NYSE: KGC). Other notable owners include Lawrence Lepard, with insiders buying a big chunk of shares in the last few months. Eric Sprott, Rob McEwen, and Kinross bought shares at C$1.35.
Lavras says the exploration results from FDP confirm the presence of extensive gold mineralization but also suggest a high-grade core of mineralization that could significantly impact the project’s economics.
Gold is mainly found in hydrothermally altered granitoid rocks, which show characteristics of a disseminated, bulk-tonnage gold system.
Lavras plans to continue its exploration with an additional 10,000 metres of drilling budgeted for the FDP and Butiá sites.
