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.
GoldMining (TSX: GOLD; NYSE: GLDG) has released a preliminary economic assessment for its La Mina project in Antioquia, Colombia.
The project is expected to produce over 1 million gold-equivalent oz. over a 10.4-year mine life, mining 37.8 million tonnes of mineralized material.
The preliminary economic assessment forecasts the project will produce an average of 102,000 gold-equivalent ounces per year at an all-in sustaining cost of $697.8 per ounce. The project is also expected to produce over 165 million lb. copper and over 600,000 oz. silver, which are included in the gold-equivalent calculations.
At a 5% discount rate, the project would generate a post-tax net present value of $232 million and a post-tax internal rate of return of 14.5% using metal prices of $1,600 per oz. gold, $21 per oz. silver and $3.39 per lb. copper.
The project’s total capital cost is expected to be about $370.87 million.
“We are extremely pleased with the positive economics demonstrated by this PEA on La Mina,” Alastair Still, GoldMining’s CEO stated in a press release.
“We are also highly encouraged by the opportunities to build upon this PEA, including drill-ready targets at the nearby La Garrucha deposit, which, on the last hole drilled by the previous operator yielded 271 metres of 1.03 grams gold per tonne and 0.13% copper.”
The La Mina project has indicated resources of 28.2 million tonnes grading 0.73 gram gold per tonne, 1.76 grams silver per tonne, and 0.24% copper (or 1.09 grams of gold-equivalent per tonne) for contained metal of 662,680 oz. gold, 1.60 million oz. silver, and 150 million lb. copper (989,463 gold-equivalent ounces).
Inferred resources add 13.6 million tonnes grading 0.65 gram gold per tonne, 1.76 grams silver per tonne, and 0.27% copper (or 1.05 grams gold-equivalent per tonne) for contained metal of 287,005 oz. gold, 772,030 oz. silver, and 81.2 million lb. copper (989,463 gold-equivalent ounces).
Barry Allan, a mining analyst at Laurentian Bank Securities, described the PEA as positive and said he believes that it has “economic merit and will be advanced to the next stage of development.”
Colin Healey, an analyst from Haywood Capital Markets, echoed a similar sentiment.
“The PEA on La Mina comes in at a significantly higher implied valuation in its base case than we ascribe for the asset in our formal valuation and is hence positive,” he wrote in a note to clients.
“La Mina’s base case post-tax NPV 5% of $231 million reflects large (>2x) upside valuation potential to our model for La Mina alone and should help propel GOLD [the company’s] shares toward our target.”
GoldMining owns the 3,210-hectare La Mina property through its subsidiary company Bellhaven Copper & Gold, which it acquired in 2017.
In 2022, the company aims to “unlock value” from its assets through the Americas which consist of Measured and Indicated resources worth 16.24 million gold-equivalent oz. and an additional inferred resource totaling 16.17 million gold-equivalent ounces. Aside from its gold and gold-copper sites it also aims to develop its Rea uranium project, located in Canada’s Athabasca region.
“While not a core gold project, we also control 125,000 hectares on our Rea uranium project in a region that is home to some of the highest-grade uranium mines on the planet…where grades can be orders of magnitude above the average global grade of uranium deposits,” Still told The Northern Miner.
(This article first appeared in The Northern Miner)
