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.
Liberty Gold Corp. (LGD:TSX) started off the new year with a bang and has continued to focus on its three gold exploration projects: Goldstrike, Black Pine and Kinsley, all located in the sweet spot known as the U.S. Great Basin. The company announced additional drilling results from the western and dip slopes zone of the Goldstrike project in western Utah, which were followed by results of an initial round of drilling at the Black Pine project in southeastern Idaho. Black Pine is host to a past-producing heap-leach oxide gold mine that contains a large, shallow, district-scale, Carlin-style gold system, similar in nature and scale to Liberty’s Goldstrike Project. The Liberty Gold team has the experience to develop heap-leach gold mines, as two of the last seven heap-leach gold mines in the world have been explored or developed by the same team.
The company attracted the attention of RCF Opportunities Fund L.P., which took an 8.4% stake in Liberty Gold via a private placement in January. The company raised C$10.5 million at $0.42/share and is now in a position to move forward with its aggressive exploration programs.
Over the next few months, Liberty continued to update its shareholders with second tranche results from Black Pine, two new discoveries at Goldstrike, and a maiden independent resource estimate of 865,000 ounces of gold at an average grade of 0.54 g/t Au (49,553,000 tonnes) and an inferred resource of 274,000 ounces of gold at an average grade of 0.52 g/t Au.
“We are thrilled to release the first resource estimate for our flagship Goldstrike Property, the result of three years of hard work by our brilliant geological team. We have exceeded our initial resource target expectation and will continue to drill and expand the Goldstrike Deposit as well as the new discoveries that surround it. This is an important first step in turning a 24 year-old, past-producing mine into a modern, multi-million ounce mining project,” said Cal Everett, president and CEO of Liberty Gold.
Liberty Gold recently conducted its annual meeting, which consisted of voting on everything from management to accountants and auditors. The executive team of Dr. Mark O’Dea, Cal Everett, Donald McInnes, Robert Pease and Sean Tetzlaff will direct the company for another term.
The executive staff’s resume boasts C-level positions where they either founded or managed former mining companies such as True Gold Mining, Fronteer Gold & Aurora Energy, Sabina Gold & Silver, Terrane Metals, Alterra Power and Pure Gold.
One of the team’s biggest accolade is its development of heap-leach gold mines, as two of the seven largest in the world have been developed by members of this team. Long Canyon in Nevada, controlled by Fronteer, was sold to mining giant Newmont for $2.3 billion in 2011, while the second mine, Karma in Burkina Faso, operated by True Gold, sold to Endeavor for C$240M in 2016.
Last, the company’s strategic shareholder base (including Van Eck, Resource Capital Funds, Newmont and Teck) has allowed them to generate a strong working capital position of $7.28 million as of March 31, 2018.
There are 150 million reasons why it’s called the Great Basin as more than 150 million ounces of gold has been produced since 1835. The basin is characterized by its large-scale deposits, which are ideal for open-pit mining. It also has excellent metallurgy for oxide deposits, which allows for low-cost extraction, high recovery rates and positive economics. This area stretches across Nevada and into Idaho and Utah.
• Goldstrike
There is also a reason this area is called Goldstrike; the area has a strong history of mining. From 1988 to 1995 it was an oxide heap-leach mine producing 209,000 ounces of gold and 197,000 ounces of silver. When the mine closed, a wealth of data and drill holes demonstrating gold in the ground were left behind.
Liberty controls a district the size of the northern Carlin trend, where much like the early days at Carlin, historic mining of oxide and simple recovery processes generated profits even at low gold prices. The company has inherited invaluable data consisting of 1,519 drill holes and have drilled 450 of its own.
• Black Pine
Black Pine (previously called Mineral Gulch) is located in southeastern Idaho and hosts a large, Carlin-style sediment-hosted gold system, the surface footprint of which extends over an approximately 12 km2 area. Black Pine is an historical heap-leach gold mine, which produced approximately 435,000 ounces of gold from 1992 to 1997.
• Kinsley
Kinsley Mountain hosts near-surface mineralization similar to other Carlin-style, sediment-hosted gold systems. The property consists of 513 unpatented lode claims on U.S. Bureau of Land Management land plus six leased patents totaling 4213 hectares, and hosts a past-producing mine with an extensive exploration database and numerous, untested gold targets.
• TV Tower
TV Tower contains a large number of targets ranging from high- and low-sulphidation epithermal gold-silver to porphyry gold-copper in the Biga District of Turkey. Liberty Gold has advanced five significant gold, silver and copper-gold discoveries on the project over the past four years. The property hosts numerous additional untested gold and copper targets. The project is road-accessible and is located in a region featuring advanced stage gold and copper-gold projects, numerous open pit coal, quartz and clay mines, ceramics factories and a major power plant.
• Halilağa
Halilağa is a development stage copper-gold porphyry asset located in Turkey. A Preliminary Economic Assessment was completed in 2015 for a conventional open pit, milling operation producing copper-gold concentrate and gold doré. The simplified economic model suggests an after-tax NPV (7%) of $474M and an IRR of 43.1% ($1,200/oz gold and $2.90/lb copper). With total projected capital costs of $558.5M (including contingency of $107.7M), after-tax payback is projected at 1.3 years.
Upcoming Milestones
In May, analyst Mick Carew of Haywood Securities reported on a site visit to the Goldstrike and Black Pine projects. He noted the potential for expansion at both projects. At Goldstrike, he wrote that the visit “reiterated the potential to delineate shallow, oxide gold mineralization amenable to run-of-mine heap leaching, highlighted by the several occurrences of outcropping oxidized rock up well beyond the current resource pit outlines.”
“While Goldstrike has been the primary focus for Liberty, the Black Pine project, acquired by Liberty last year, represents another past-producing heap-leach gold mine with expansion potential not identified by previous operators,” Carew noted.
“Liberty awaits the receipt of an updated Plan of Operations (PoO) at Black Pine and Goldstrike that will enable it to advance both projects significantly,” Carew explained.
Haywood has a Buy rating on Liberty and a target price of $1.00. The stock currently trades at around $0.44.
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Disclosure:
1) Dana Salzarulo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
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Disclosures from Haywood Securities, Liberty Gold Corp., Research Report, May 8, 2018
Haywood Securities, or certain of its affiliated companies, may from time to time receive a portion of commissions or other fees derived from the trading or financings conducted by other affiliated companies in the covered security. Haywood analysts are salaried employees who may receive a performance bonus that may be derived, in part, from corporate finance income.
Haywood Securities, Inc., and Haywood Securities (USA) Inc. do have officers in common however, none of those common officers affect or control the ratings given a specific issuer or which issuer will be the subject of Research coverage. In addition, the firm does maintain and enforce written policies and procedures reasonably designed to prevent influence on the activities of affiliated analysts.
Analyst Certification: I, Mick Carew, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Important Disclosures
Of the companies included in the report the following Important Disclosures apply:
▪ At the end of the month immediately preceding this publication either Haywood Securities, Inc., one of its subsidiaries, its officers or directors beneficially owned 1% or more of Midas Gold Corp. (MAX-T).
▪ Haywood Securities, Inc. has reviewed lead projects of Midas Gold Corp. (MAX-T) and Liberty Gold Corp. (LGD-T) and a portion of the expenses for this travel may have been reimbursed by the issuer.
▪ Haywood Securities Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Liberty Gold Corp. (LGD-T) in the past 12 months.
Other material conflict of interest of the research analyst of which the research analyst or Haywood Securities Inc. knows or has reason to know at the time of publication or at the time of public appearance: n/a.
