Hedge funds slash bullish wagers on gold over Trump election win
The precious metal has fallen about 8% from a record high on Oct. 31, with losses accelerating after Trump’s election victory last week.
The board of Battle North Gold has approved construction of the Bateman gold project in Red Lake. After starting work on critical path construction items in November, the company expects to start processing ore by year-end and achieve commercial production by the end of 2022.
Battle North expects to spend C$59.1 million this year on initial capital development – this includes underground development, tailings management facility (TMF) and mill upgrades and equipment purchases. As of the end of January, Battle North had spent C$4 million on the critical path construction items. An additional C$17.8 million is budgeted for capitalized operating costs this year, such as infill drilling, site maintenance and underground development.
In December, the company signed a commitment letter for a five-year $40 million senior secured credit facility with Macquarie Bank. The release notes that “the credit facility, in concert with our strong cash balance, is expected to fully fund the Bateman gold project to commercial production.” At Nov 5, 2020, the developer’s cash balance was C$65 million.
C$17.8 million is budgeted for capitalized operating costs this year, such as infill drilling, site maintenance and underground development
According to George Ogilvie, Battle North’s president and CEO, there is potential for a first gold-pour by year-end.
“Construction on critical path items has commenced at the Bateman gold project and we are excited that the board has approved the full construction of the project, with the potential to be pouring first gold by the end of the year. In addition, we have commenced drilling of highly-prospective targets on our regional Red Lake properties and we will be providing an overview of our 2021 exploration plans shortly.”
On the underground development front, 100 metres has been completed to date with 3,300 metres planned for 2021. A contractor has completed construction of a surface portal and is now advancing a ramp decline, which will connect with an incline that is also being developed. Once the two development tracks meet, Bateman will have a second point of access (in addition to the existing shaft) to the underground. The October 2020 feasibility calls for 8,600 metres of underground capital development before commercial production, for 9 to 12 months of development flexibility.
Minor mill, underground infrastructure and sewage treatment upgrades are also required before commercial production. The 1,800 t/d mill is permitted for throughputs of up to 1,250 t/d.
As part of its stope planning process, Battle North expects to infill stopes before mining.
Battle North has an in-house engineering, procurement and construction management (EPCM) team to oversee construction of the project.
The October 2020 feasibility defined a seven-year, 1,315 t/d underground operation with a 21-month construction and ramp-up period that includes 14 months of gold production to offset some capital expenditures. During commercial operations, the mine would generate an average of 79,308 gold oz. annually, at all-in sustaining costs of $865 per oz. with an initial capital estimate of C$109.3 million.
Andrew Mikitchook of BMO Capital Markets notes that the 2021 spend guidance of C$59.1 million in capital and C$17.8 million in capitalized operating costs (for a total of C$80.9 million once C$4 million spent last year on construction is added) is “slightly higher than the year-2 estimates in the October 2020 feasibility net capex and operating costs totaling C$68.7 million as it appears construction is slightly accelerated to the original plan.”
He sees Battle North as being fully financed for the restart and expects a re-valuation of the stock as the company delivers construction progress towards a restart. Mikitchook has an ‘outperform’ rating on Battle North with a C$4 target.
Ryan Hanley of Laurentian Bank Securities highlights the compelling valuation of the stock, which is trading at a discount to its peers. Hanley has a ‘buy’ rating for Battle North, also with a C$4 target price.
“We continue to believe that given its strong management team (which continues to meet ongoing project advancement targets on time and on budget), strong balance sheet (with construction now funded upon closing of the credit line in Q1 21), significant amount of existing infrastructure (thereby lowering construction and start-up risk), significant tax pools (thus making the company a takeout target), and very large regional exploration package (most of which has seen limited, if any, exploration work), that BNAU should trade at a premium to its peers.”
(This article first appeared in the Canadian Mining Journal)
