RGN Vol 7 Iss 4 by Anderson Murray Media

RESOURCE Volume 7, Issue 4

GLOBAL NETWORK

Mining, renewable energy and oil & gas worldwide

WHEN IT RAINS GOLD POURS HOW UNPRECEDENTED GLOBAL ECONOMIC

UNCERTAINTY HAS BOOSTED GOLD INVESTMENT IN 2020

FEATURED GOLD COMPANIES:

AMARILLO GOLD ARGONAUT GOLD BARTON GOLD HUMMINGBIRD RESOURCES VANGO MINING

REPORTS LIVE FROM

interviews in lockdown: John Reade, World Gold Council chief market strategist

EDITORIAL

2020: The year of the accelerated gold bull market?

hen RGN spoke to the World Gold Council’s director of investment research Juan Carlos Artigas at the beginning of the year, he flagged the Council’s belief that the enduring market uncertainty of 2019 (which contributed to gold’s best year in a decade, in US dollar terms) would continue into 2020, albeit taking different forms.

Jacob Ambrose Willson Editor

Executive Team Editor Jacob Ambrose Willson Content Director (APAC and Americas) David Hunter Creative Director Hugo Currie ICT Director Stuart Clark Managing Director Simon Curran Contributors Jeff Swinoga (Ernst and Young) Matt Geiger (MJG Capital) Evan Metanomski (Baker Young) RGN is published by Anderson Murray Media: a diverse media and information services company focused on creating and distributing engaging content to business leaders across the globe. Disclaimer: The opinions expressed in this publication are not necessarily those of the publishers. Whilst every effort is made to ensure accuracy the publisher and editor cannot be held responsible for any inaccurate information supplied and/or published. Copyright: The copyright for all material published in this magazine is strictly reserved.

How right that prediction was. The deadly COVID-19 pandemic has delivered the biggest shock to the global economy in living memory and we are staring into the abyss of a brutal worldwide recession, following a threemonth hiatus in economic activity and the hasty creation of massive stimulus packages by governments to stave off total economic ruin. In a time of recession, gold bulls will tell you there is only one place to be. Already this year we have seen gold prices soar to record highs in multiple currencies, driven predominantly by safe haven investment. With public debt spiralling and the global GDP now on the long and rocky path to recovery, many investment analysts see the current gold price of around US$1,780 per ounce as just the beginning of a long run in the market, with Bank of America even predicting $3,000 gold by 2021. The World Gold Council is the first place to go when taking stock of developments across the broad spectrum of the gold market. In May, I sat down (virtually) with the Council’s chief market strategist John Reade to discuss how all components of the market have reacted to the unprecedented global events of 2020.

The Q&A piece also includes a short video excerpt from my discussion with John, as part of RGN’s new ‘interviews in lockdown’ series. You can watch more video snippets in some of this issue’s featured companies and on RGN’s YouTube page. RGN’s bumper gold issue features five companies at varying stages of the mine development cycle - from exploration outfits to gold pouring mid-tiers – located in some of the world’s key gold jurisdictions, including the Americas, Australia and West Africa. All of them stand to make material gains from the elevated gold price. There is also a base metals focus to sink your teeth into in this issue, with spotlights on Sama Resources in Côte d’Ivoire, Mongolia-based Xanadu Mines and Argentina-focused Lundin Group company Josemaria Resources. It would be remiss of me not to mention our brilliant contributors this month. Each writer has provided further nuance to different elements of the gold market in these volatile times. And finally, thanks to Mines and Money for putting on the excellent Online Connect digital conferences at the end of June/start of July. You can read a round-up of the twopart series in this issue.

Jacob Ambrose Willson jacob@resourceglobalnetwork.com

Anderson Murray Media Fulham Green, 69-79 Fulham High Street, Main Reception, Bedford House, London SW6 3JW | Tel. +44 (0)207 148 5630

a r

CONTENTS NEWS 6 Global resources news Our selection of mining, oil & gas and renewable energy stories from the last month 10 News in depth A timeline of the biggest M&A deals in the gold sector over the last 18 months

ARGONAUT GOLD

Q&A 14 John Reade (World Gold Council) How the gold market has reacted to the COVID-19 crisis in 2020

COLUMNS 26 Jeff Swinoga (Ernst and Young) Now is the time for gold firms to seize on the opportunities provided by the COVID-19 pandemic 32 Matt Geiger (MJG Capital) Natural resources investment advisor considers recent changes in the copper-gold ratio

BARTON GOLD

38 Evan Metanomski (Baker Young) Australia-based gold bull identifies the factors driving record gold prices in 2020

MINING 48 Argonaut Gold North America’s next mid-tier gold producer

VA N G O MINING

60 Barton Gold Taking advantage of a trio of undervalued gold assets in South Australia

74 Vango Mining +1 million ounces in mineral resource at one of Australia’s largest undeveloped gold assets 84 Amarillo Gold Highly leveraged to the gold price with a low cost base in Brazil 98 Hummingbird Resources More significant news flow from one of West Africa’s most exciting gold firms 116 Xanadu Mines Tier 1 porphyry copper-gold projects in Mongolia

AMARILLO GOLD

130 Sama Resources A decade after discovering a new base metals complex in Côte d’Ivoire, Sama continues exploring 142 CVMR Cutting-edge metals refining technologies for high-tech industries 148 Josemaria Resources The latest large scale resource project to be delivered by the Lundin Group

EVENTS

HUMMINGBIRD RESOURCES

162 Mines and Money Online Connect RGN reports live from a hugely successful online conference series 174 Events Our pick of the top mining, oil & gas and renewable energy events happening around the world in the months to come

MINES AND MONEY ONLINE CONNECT

162

NEWS

SOLGOLD STRIKES $150 MILLION STREAMING DEAL WITH FRANCO-NEVADA SolGold has reached a US$150 million net smelter return (NSR) agreement with FrancoNevada for its Alpala copper-gold deposit, the main target in its Cascabel project in Ecuador. The deal will see Franco-Nevada – which offers natural resource companies upfront cash in exchange for future production – provide an initial $100 million to the development of Alpala, in return for a perpetual 1% NSR. The terms could then be extended by an additional $50 million at SolGold’s discretion, which would subsequently increase FrancoNevada’s NSR up to 1.5%. Franco-Nevada joins other majors with exposure to the Alpala project, including

Australian giants BHP and Newcrest. Last year, BHP increased its ownership in SolGold to 15.31% – making it the largest sole shareholder in the company. London and Toronto-listed SolGold said it will work on a feasibility study for Alpala in the coming months. The company believes it is part of one of the largest copper-gold porphyry systems ever discovered and expects to start production in 2025. “SolGold is immensely excited to further progress Alpala in the run-up to final feasibility and a development decision, and for FrancoNevada’s endorsement of the Alpala project,” said CEO Nicholas Mather. 6

NEWS

Mining, oil & gas and renewable energy news from around the world GOLD SUPPLY CHAIN SHOWS RESILIENCE AMID COVID-19 DISRUPTION The COVID-19 pandemic has disrupted the global gold supply chain, but it has shown resilience in the face of a challenge unlike any other event in modern history, according to the World Gold Council. In a market update published in late May, the global authority on gold highlighted the sector’s resilience in the face of lockdown restrictions affecting each stage of the gold supply chain. “Both gold mining and recycling activities were curtailed due to lockdown restrictions in Q1. But the declines were modest in comparison to the scale of the disruption to other industries globally,” the Council said.

Total gold production fell 3% year-on-year (y-o-y) in Q1 following the curtailment of operations in key producing countries including China, South Africa and Peru. While this represented the largest y-o-y fall since Q1 2017, the Council described the decline as modest given the scale of the pandemic. “In addition, we also saw downstream capacity reduced with a small number of refiners halting operations, as well as challenges in transporting physical gold due to the reduction OFflights.” THE WORLD’S LARGEST inOWNER commercial

UNCOMMITTED HARD ROCK LITHIUM However, the report also underlined surging RESERVE gold investment during Q1 as the COVID-19 outbreak took investor uncertainty to new highs against an existing global backdrop of low and negative interest rates.

NEWS

OPEC AND ALLIES AGREE TO EXTENSION OF RECORD SUPPLY CUTS TO JULY The global oil cartel known as OPEC+ has agreed to extend record oil production cuts until the end of July, in a move which should further support the recovery of oil prices after the COVID-19 crash. The group, comprised of OPEC members, Russia and other key oil producing nations, had initially agreed to cut supply by 9.7 million barrels per day (bpd) during May and June after a collapse in demand due to worldwide lockdowns had reduced the price of Brent crude to below $20 a barrel in April. “Demand is returning as big oil-consuming economies emerge from pandemic lockdown. But we are not out of the woods yet and

challenges ahead remain,” said Saudi Energy Minister Prince Abdulaziz bin Salman in a video conference of OPEC+ ministers. As global lockdowns ease, oil demand is expected to exceed supply sometime in July although OPEC has yet to clear 1 billion barrels of excess oil inventories accumulated since March. The successful outcome of the latest OPEC+ meeting represents a further return to normality in relations between its members, after a row in March between the world’s two largest producers – Saudi Arabia and Russia – destroyed a previous supply cuts deal.

NEWS

Mining, oil & gas and renewable energy news from around the world OFFSHORE WIND OFFERS 1.4TW BY 2050, SAYS INDUSTRY COALITION The offshore wind industry could provide up to 1.4TW of renewable energy capacity by 2050, according to the Ocean Renewable Energy Action Coalition (OREAC). OREAC, which includes major players in the offshore wind sector, said the figure is possible given the resource potential and technological innovation taking place in the space, and as governments look to position offshore wind at the centre of the global energy transition. “In a short period of time, offshore wind has become an incredibly competitive solution for clean power generation across the world, with impressive cost reduction driving the industry’s growth by over 30% in the past decade and now outcompeting alternative fuels such as

coal,” said Ørsted head of market development, consenting and external Affairs Benj Sykes. OREAC was created in response to the 2019 call for ocean-based climate action by the High Level Panel for a Sustainable Ocean Economy, and represents ocean energy in the global dialogue on a sustainable ocean economy. Other companies involved include CWind, MHI Vestas, MingYang Smart Energy, Shell, Siemens Gamesa, TenneT, and GE Renewable Energy, while additional partner organisations include Global Wind Energy Council, World Resources Institute and UN Global Compact.

NEWS

In Depth

On September 24th 2018, Canadian mining giant Barrick Gold announced it agreed to the terms of a share-for-share merger with London-listed Randgold Resources, in a deal worth US$18.3 billion. At the time, it resembled one of the largest gold sector M&A deals in recent memory, and not long after the merged entity began trading in New York and Toronto on January 2nd 2019, another mega-deal had been confirmed when Newmont Mining and Goldcorp joined forces to create the world’s largest gold producing outfit. These blockbuster transactions drastically altered the upper echelons of the global gold mining sector and served to open the floodgates for a flurry of M&A deals over the course of 2019, as gold miners rushed to consolidate their assets. In fact, the total value of gold M&A deals reached $30.5 billion in 2019 - its best performance in nearly a decade - against a wider backdrop of bubbling geopolitical uncertainty and a sharply rising gold price. The start of 2020 brought a second wave of large-scale M&A deals in the gold sector, which continued at pace even in the throes of a global pandemic. While transactions in other sectors have grinded to a halt following the COVID-19 outbreak, companies in the thriving gold space have continued to obtain value through consolidation. Displayed here is a timeline of the biggest deals in the gold space since the landmark BarrickRandgold and Newmont-Goldcorp mergers.

JANUARY 2019

JULY 2019

Barrick completes $18 billion merger with Randgold Resources Barrick Gold has begun trading as a combined entity with Africafocused Randgold Resources after the mega-merger was approved by regulators. Barrick now owns five of the industry’s top 10 Tier 1 gold assets, with former Randgold CEO Mark Bristow at the helm of the new company.

St Barbara acquires Atlantic Gold in $536 million deal ASX-listed gold producer St Barbara has completed the acquisition of Canadian miner Atlantic Gold Corp, after offering a 39% premium on Atlantic’s May share price. The deal gives Melbourne-based St Barbara access to Atlantic’s Moose River Complex in Nova Scotia.

JANUARY 2019

JULY 2019

Newmont-Goldcorp merger creates world’s biggest gold producer Newmont Mining will acquire Canadian rival Goldcorp, subject to shareholder approval, in a $10 billion deal which will create the world’s biggest gold producer by output. Newmont Goldcorp will tap into the world’s largest gold reserves across the Americas, Australia and Ghana.

Resolute Mining grows West African gold portfolio with Toro Gold acquisition Resolute Mining has announced the acquisition of fellow West African miner Toro Gold for a fee of $274 million, expanding its West African portfolio. Dual listed Resolute will take immediate control of the 160,000 ounces per annum Mako Gold Mine in Senegal.

NEWS

A timeline of the biggest M&A deals in the gold sector over the last 18 months

JANUARY 2020

MARCH 2020

MAY 2020

Equinox-Leagold merger creates $1.75 billion company Shareholders of Canadian miners Equinox Gold and Leagold Mining have approved a large-scale merger deal, creating an Americas-focused gold giant. The company will retain the name Equinox and draw on production from mines in Brazil, Mexico and the US.

China’s Zijin Mining completes $1 billion takeover of Continental Gold China’s largest gold producer Zijin Mining has completed the acquisition of Canadian miner Continental Gold, giving it access to the Buriticá gold development project in Colombia. Zijin said the deal will boost its gold output by nearly 20%.

SSR Mining to buy Alacer Gold in all-stock deal Canada’s SSR Mining has confirmed it will buy Alacer Gold in a deal valued at $1.72 billion, against the backdrop of a rising gold price in response to the COVID-19 pandemic. The new company will operate mines in the US, Canada, Argentina and Turkey.

JANUARY 2020

MARCH 2020

Kirkland Lake Gold completes purchase of Canada’s Detour Gold Mid-tier gold producer Kirkland Lake Gold has completed the acquisition of Detour Gold for a sum of $3.7 billion. Canada and Australia-focused Kirkland Lake first lodged the all-stock bid in November 2019. Detour owns the Detour Lake open pit gold mine in Ontario.

West African gold firm Endeavour Mining to acquire Semafo for $691 million Endeavour Mining’s deal for Canadian firm Semafo will create the biggest gold producing outfit in Burkina Faso. The combined group will produce one million ounces of gold a year, according to Endeavour’s chief executive Sebastien de Montessus.

“THE BOARDS OF BARRICK AND RANDGOLD BELIEVE T H AT T H E M E R G E R W I L L C R E AT E A N I N D U S T R YL E A D I N G G O L D CO M PA N Y W I T H T H E G R E AT E S T C O N C E N T R AT I O N O F T I E R 1 GOLD ASSETS IN THE INDUSTRY, AND THE LOWEST TOTA L C A S H C O S T P O S I T I O N AMONG SENIOR GOLD PEERS” BARRICK GOLD AND RANDGOLD RESOURCES JOINT S TAT E M E N T , S E P T E M B E R 2 0 1 8

Building a Multi-Asset Mid-Tier West African Gold Producer

TSX: TGZ OTCQX: TGCDF

JOHN R

RGN interviews the World Gold

GOLD | JOHN READE (WORLD GOLD COUNCIL)

READE

d Councilâ&#x20AC;&#x2122;s chief market strategist

After gold enjoyed its best year in a decade in 2019, closing 18.4% higher in US dollar terms, the safe haven commodity entered 2020 in buoyant shape and continued gaining in the first month of the year. What was to happen next nobody expected, not least from the global investment community. Cases of a novel coronavirus were first reported out of China in early January and by the end of the month the virus had spread to several locations around the world. In March, the World Health Organization officially characterised COVID-19 as a pandemic after the global death toll had spiralled to 4,291 from 118,000 reported cases across 114 countries. Governments soon imposed lockdowns of varying severity in response to the health crisis, effectively bringing the global economy to a standstill. The COVID-19 pandemic fuelled safe haven investment demand for gold in the first quarter of the year, according to the World Gold Council’s latest Demand Trends report. During lockdown, RGN’s editor spoke to the Council’s chief market strategist John Reade, covering how all components of the gold market have reacted to this unprecedented global situation.

Jacob Ambrose Willson: What seems like the mother of all economic uncertainty – the outbreak of the COVID-19 pandemic – has led to sharp investment inflows into gold. This has led to US$ gold prices increasing by around 12% this year. Are you surprised the price hasn’t gone up by more given the scale of economic shutdown in Q1/Q2? John Reade: I am not surprised that gold has performed in the way that it has done. First of all, gold was already trending higher in January before most of us even knew what COVID-19 was. It then started to move more quickly higher as the world became concerned about COVID-19, and then that concern soon turned to panic across markets. We saw all asset classes being sold – equities, credit, commodities, even government bonds. Investors were liquidating and reducing risk across the board, in effect taking down leverage. Gold then fell and then we saw investment-led recovery in the price.

GOLD | JOHN READE (WORLD GOLD COUNCIL)

John Reade

John Reade joined the World Gold Council in February 2017 as chief market strategist. John is responsible for producing strategy and developing insights on the gold market, leading global dialogue by engaging with leading economists, academics, policy makers, fund managers and investors on gold and leading the Councilâ&#x20AC;&#x2122;s research team. John has over 30 yearsâ&#x20AC;&#x2122; experience in the gold industry and related fields, most recently as a partner and gold strategist with Paulson & Co for the past seven years. Prior to that, John worked as a precious metals strategist at UBS for 10 years, a gold equity analyst in South Africa for five years and over eight years held various positions in production and project evaluation in the gold division of Gencor, then a leading South African mining house. John has a degree in Mining Engineering from the Royal School of Mines, a constituent of Imperial College, London.

John Reade, chief market strategist, World Gold Council

Am I surprised it hasn’t gone

We are going to see a strong

gold has been gold-backed

further? Well, we are only in

year for investment demand

exchange traded funds

May and the narrative coming

driven by that increase in

(ETFs). Why has this type of

from the equity markets has

risk and uncertainty and the

investment seen a seven-fold

been that everything seems

concerns about what the

year-on-year rise in the wake

to pricing towards a V-shape

economic impacts will be

of the pandemic?

recovery. In other words, if

from COVID-19. But on the

you look at the recovery seen

other side of it, the jewellery

JR: First of all, ETFs are easiest

in US equity markets, the

market – traditionally a larger

to track. Because of the way

overwhelming sense is that

component of the market – has almost all of them disclose

this will prove to be short-lived

not quite fallen off a cliff, but

their gold holdings on a daily

and we can just go back to

it’s pretty close to the edge.

basis, we can see when there

buying the deck in equities. So that may be one thing that is

JAW: A large part of this

on a very regular basis. From

limiting gold’s performance so

elevated investment into

there, it’s easy to assume that

far.

have been inflows into ETFs

GOLD | JOHN READE (WORLD GOLD COUNCIL)

that is where most of the

back as a consequence. There

trends throughout the rest of

buying is taking place. But

is a possibility that people

the year as economies slowly

just because you can see big

who would traditionally abuse

emerge from lockdown but

inflows into ETFs does not

the COMEX market to get

uncertainty lingers?

mean it’s the only source of

directional exposure to gold

investment demand taking

have been coming into the US-

JR: We are seeing the first signs

place.

based ETFs more so in the last

of what may happen already

couple of months than they

in China – the world’s largest

The second point is that the

normally would. That’s one of

gold jewellery consumer -

way that gold-backed ETFs

the things that is inflating the

as the country emerges out

have spread around the world

ETF buying.

of lockdown and jewellery

and become widely accepted

shops begin to reopen. We are

over the last 15 years means

We’ve also seen a strong pick-

seeing purchases take place

that they are very accessible.

up in bar and coin investment

but anecdotally speaking to

The other thing I’d add is that

in the West. If you look at

our colleagues in Beijing and

there’s been a lot of distortions

volumes of what the US mint

Shanghai, the jewellery market

and dislocations that have

has sold for example, those

is not the leading component

taken place in the linkages

are up substantially compared

of the recovery, and if anything

between the OTC market and

to the last couple of years.

jewellery buying seems to be

the COMEX futures market.

It’s not just ETFs that are

lagging the broader recovery

COMEX – which is perhaps

seeing the buying, but they

in the overall economy, which

the more traditional route for

are the most obvious and I

makes sense. I can understand

US-based speculators (and

will estimate that they are the

why car sales are up strongly

some investors) in gold – may

biggest component of Western

in China because people want

be currently perceived as

investment demand by far, but

to avoid public transport. You

less attractive than what it

they are not the only form.

can’t make the argument that

normally would be.

people have an imminent need JAW: As you mention, the

to buy gold as a consequence

COMEX volumes have fallen

consumer market has been

of COVID-19.

by about 60% since this

hit hard by COVID-19, with

dislocation in the market took

jewellery suffering a 39%

I’m expecting sequential

place in late March, and even

drop in demand in Q1. What

improvements in jewellery

the OTC volumes have come

is your outlook for demand

demand through the year in

most countries. I think China

JAW: And turning to the

in remote locations where

is a reasonably good model of

supply side, do you expect to

people live and work quite

what we can expect in other

see normality return in terms

close together. The chances of

markets exiting lockdown but

of gold production, following

getting a positive case in one

I donâ&#x20AC;&#x2122;t think itâ&#x20AC;&#x2122;s going to be

the gradual restarting of mine

of these mining camps or in

a strong year for consumer

operations around the world?

a mining town is quite high. I

demand, even if the virus were

think in these circumstances,

to suddenly burn out in the

JR: Yes. I think we will,

mines will react very quickly

summer and disappear, and

although I would expect to

to isolate and shutdown parts

we all start work again in late

see sporadic interruptions

or the entire operation until

summer.

to production going forward

they have the situation under

as well. Mines are often

control again.

GOLD | JOHN READE (WORLD GOLD COUNCIL)

I don’t think the impact on

quarter of the year, unless we

is going to be any shortages

overall production will be

get a severe second wave of

of gold in the market as well,

catastrophic. We were down

coronavirus coming through,

simply because one thing

3% in mine supply terms in the

perhaps in the Northern

that we should see in many

first quarter by our provisional

hemisphere.

markets is an increase in

estimates. That probably will

secondary supply. As markets

be adjusted somewhat, but I

I would guess we’re going

come out of lockdown I

don’t think we will see more

to see single digit losses in

expect some people who

than 10% production lost in

production this year and

have lost income, wealth

the second quarter based on

hopefully getting back to

or employment may partly

the mines we’ve been tracking.

normal towards the end of the

meet that loss by selling gold,

I expect that will be the worst

year. But I don’t think there

particularly in Asian countries

where gold consumption has

gold demand, and we’ve seen

been very high in the last few

this on a number of occasions.

decades, but also where gold

All we must do is go back and

makes up a decent proportion

look at what happened during

of domestic savings. What we

the global financial crisis.

lose from COVID-related mine

Under those circumstances,

interruptions, we will gain

investment demand

from secondary supply.

dominates, jewellery demand steps back and secondary

JAW: Finally, what is your

supply picks up a lot. That’s

long-term outlook on gold

probably a reasonable model

investment given that the

to follow for this year.

world may have to live with COVID-19 for an unknown

What then tends to happen

period of time until a vaccine

is as economies recover,

is produced and distributed?

you’ll see investment demand slowing and consumer

JR: When you are at the depths

demand picking up. I expect

of a financially associated

this year to be characterised

crisis, investment demand is

by very high proportions of

the dominant component of

investment demand in relation

“We are going to see a strong year for gold investment demand driven by that increase in risk and uncertainty and the concerns about what the economic impacts will be from COVID-19” - John Reade, chief market strategist, World Gold Council

to the whole market. And

the only game in town for

that might continue into

the foreseeable future. It will

2021, but it won’t stay there

be the most important game

forever. I think investment

in town this year and maybe

demand did see a step

next year, but after that I

change after the GFC, so I

expect the market to rebalance

don’t think we’ll go back to

somewhat.

the very low levels of net investment demand that

JAW: And Bank of America

we saw in the 1990s or the

predicted $3,000 per ounce

2000s, but nor do I expect

gold by 2021, is this fanciful?

investment demand to be

GOLD | JOHN READE (WORLD GOLD COUNCIL)

those scenarios will indicate that the Bank of America prediction of $3,000 per ounce gold in 18 months or so is entirely credible and possible. I’d encourage readers to go on our website and play around with the Qaurum evaluation tool and see what you get. The only thing I would say is that we’ve developed this tool on the basis of the performance of gold over economic circumstances that we’ve experienced over the last 20-30 years. What we are going through now in terms of coronavirus and its impact on the global economy is unlike anything we have seen JR: I don’t think its fanciful.

outsource the base scenarios

during that period. While I am

I think it’s certainly possible.

from a group called Oxford

comfortable with the general

We have a tool on our website

Economics who provide us

direction that is predicted for

which we developed over the

with internally consistent

gold, the absolute returns that

last few years and launched

forecasts of what might

the Qaurum tool is generating

at the beginning of this year

happen.

are likely to be less precise

called Qaurum. This economic

than normal, simply because

model allows people to

We released four scenarios in

input their expectations for

the middle of April that come

macroeconomic variables and

from Oxford Economics. All

then it shows you what returns

of them show strong gains

you are likely to get in gold. We

in gold for 2020. Some of

it really is different this time.

Itâ&#x20AC;&#x2122;s time for gold companie

Now is the time for gold firms to seize on the opportunities provided by t 26

COMMENT | JEFF SWINOGA (ERNST AND YOUNG)

es to shine even brighter

the COVID-19 pandemic, by Jeff Swinoga (Ernst and Young) 27

The surge in gold prices continues on the back of economic uncertainty and near-term positive fundamentals, which are proving to be a long awaited and welcomed boost for gold mining companies. Increased margins on higher prices and lower costs due to falling oil prices mean that gold operators are expecting a dramatic improvement in free cash flow over the next few quarters — at a minimum. This is a real opportunity for companies to invest in productivity, improve shareholder return programmes and strategically address the challenge of replacing their diminishing resources and project pipelines. However, to benefit from this landscape companies will need to maintain production volumes while ensuring workforce and community health and safety and compliance with various government restrictions.

Rising prices on market uncertainty and increasing investment demand Gold prices were already increasing as a result of trade tensions in 2019, up 18% year over year (y-o-y). Now, with the impacts of the COVID-19 pandemic being felt on global markets, gold has reclaimed its safe haven position in light of the severe

SOURCE: S&P GLOBAL MARKET INTELL

economic uncertainty —

expected period of economic

pushing prices even higher.

recovery.

Gold prices have seen an

Demand, on the other hand,

uptick of 14% since the start

has seen a complete overhaul

of 2020 to reach a seven-year

from the end user. Consumer

high of US$1,731/oz in April,

demand — which is usually

driven by mounting fear of a

the largest source — fell

deepening global economic

by 39%, while investment

downturn and further liquidity

demand from ETFs and similar

measures implemented by

products increased by 594%.

global central banks. But

Overall, Q1 2020 saw y-o-y

even when the anticipated

improvements despite the

impact of COVID-19 subsides,

shifts and sluggish consumer

the forecast for gold prices

appetite in China and India.

remains strong given that trade tensions are likely to

Terry Heymann, chief

carry on coupled with a long-

financial officer of the World

COMMENT | JEFF SWINOGA (ERNST AND YOUNG)

Jeff Swinoga As the national mining and metals co-leader at EY Canada, Jeff leads a team of professionals across the country supporting mining and metals companies as they pursue their growth ambitions in the wake of a transformed competitive and operating landscape.

LIGENCE

Gold Council, said: “Gold’s

as capital expenditures are

response to COVID-19

focused on existing discoveries

demonstrates why it’s an

and late-stage assets rather

enduring asset. A primary

than greenfield exploration.

reason that central banks hold

In fact, global gold production

gold is to protect their national

declined in 2019 for the first

economies at times of stress.

time after a decade of growth.

The same holds true for all

The lack of new deposits

investors.”

means that the project

Lack of new discoveries puts pressure on project pipelines

pipeline for top companies will continue to diminish as they struggle to replace their aging gold mines. To put things in perspective, the current

Price and demand may have

average mine life of 14.9 years,

gone up, but production has

in most cases, is less than the

gone down. The industry faces

estimated time it would take

a lack of new gold discoveries

to discover and develop a

Jeff leverages years of business strategy, structuring, change management, M&A and relationship building experience in CEO/CFO positions for intermediate to large public companies and over 25 years of experience in the sector and finance. Jeff has successfully built and led finance teams through the different stages of financing, construction and production. He also brings international experience in the mining and finance industries with an extensive network, operating and undergoing development in North and South America, as well as Africa. Jeff has served on boards of publiclytraded companies, such as First Cobalt and Tonbridge Power. He holds an MBA degree from the University of Toronto and a four-year Honours Economics degree from the University of Western Ontario. He’s also a chartered professional accountant.

new large and significant gold asset.

Opportunities for growth

or increase spending on

Unlike most other

themselves.

Whatâ&#x20AC;&#x2122;s more, exploration

commodities, gold mining

budgets for gold companies

companies are in a unique

2. Possibility of further

also declined in 2019 after an

position to address current

mergers and acquisitions:

increase in the two previous

challenges and shape their

Gold M&A deal values declined

years. And the budgets of

long-term business strategies

by 20% to $7.7 billion in Q1

junior explorers also fell

despite market volatility. By

2020 y-o-y â&#x20AC;&#x201D; largely due to the

by $234 million. With the

exercising capital discipline,

two mega deals in 2019. The

lack of new development

they can consider:

industry still has appetite for

projects, large gold producers

finding grassroot discoveries

M&A in this year, as evidenced

are expected to stick to

1. Grassroots exploration to

by the announcement of

acquisitions to maintain their

identify new discoveries: Gold

the recent Alacer Gold and

resources.

companies could collaborate

SSR Mining transaction.

with small exploration

The growing preference of

companies to build resources

companies to operate in safe

COMMENT | JEFF SWINOGA (ERNST AND YOUNG)

mining jurisdictions in order

consistent in distributing

to mitigate political risk and

dividends over the last

maintain licence to operate

two years on the back of

means that we’re likely to see

high performance and

more transactions in Australia,

financial discipline. As

Canada and the US.

the industry expects cash flow to grow due to strong

3. Focus on automation and

fundamentals, companies

digital: Gold companies

can adopt shareholder return

should follow the example of

programmes by increasing

diversified miners that have

dividends or look to share

long-term digital roadmaps in

buybacks to attract additional

place to improve productivity.

capital.

But they should be cautious of

Continued focus on making the appropriate long-term capital allocation decisions will help guide gold mining companies through transformation and provide benefit to all stakeholders. There are few sectors that are fortunate to witness growth in a pandemic. Now is the time for gold companies to seize the opportunities and make the right investments to see continued success for years to come.

faults made in the past. During elevated prices in 2011, gold companies funded long-term capital projects primarily with debt — and then when prices slumped, balance sheets quickly became burdened with leverage. This time, rather than expanding and committing significant capital expenditures to long-term projects, companies should consider reinvesting in the

“There are few sectors that are fortunate to witness growth in a pandemic. Now is the time for gold companies to seize the opportunities and make the right investments to see continued success for years to come” Jeff Swinoga, EY Canada Mining and Metals Co-Leader

digitisation and automation of existing mines to reduce their costs and improve resiliency. 4. Shareholder returns: Some of the largest gold mining companies have been

Jeff Swinoga is the EY Canada Mining and Metals Co-Leader and is based in Toronto. For more information, visit www.ey.com/en_gl/mining-metals. The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.

Copper, gold an

Natural resources investment advisor Matt Geiger 32

COMMENT | MATT GEIGER (MJG CAPITAL)

nd a false choice

considers recent changes in the copper-gold ratio 33

It’s safe to say that copper and gold are the two most widely followed metals by today’s investor. It’s probably not a coincidence that these were also the first two metals to be discovered by humans some 6,000 years ago – helped by the fact that copper and gold are two of only a handful of metallic elements that can be found in nature in their native form. Each metal has been used both industrially and monetarily through human history, however nowadays Dr. Copper is indisputably the highest profile industrial metal while the barbaric relic remains firmly a store of value (and to some its own currency).

While the prices of gold and copper have been inversely correlated since the TrumpChina trade battle began in spring 2018, a look at the longer term trajectory of the their prices suggests that (a) they are positively correlated more often than not and (b) copper generally displays more volatility than gold due to its unique sensitivity to the economic cycle. This has certainly been true over much of the past three decades as seen in the chart to the right. The copper-to-gold ratio has gained prominence in recent years and is followed closely by investors. This is thanks in large part to investor Jeffrey Gundlach of DoubleLine Capital, who considers the ratio to be a ‘remarkable’ short-term predictor of interest rates. Based on recent history Gundlach does seem

SOURCE: COPPER TO GOLD RATIO. LO HTTPS: // WWW.LONGTERMTRENDS.NE

to be onto something - but I will admit that as a bottom up investor with a long-term

But the ratio does intrigue

time horizon, short term T-bill

me for a more fundamental

fluctuations are not usually top

reason. As seen in the above

of mind.

COMMENT | MATT GEIGER (MJG CAPITAL)

Q4 1980 and Q3 1986. In other words, gold is more expensive relative to copper than at any time in the last 40 years. This seems counterintuitive as we power forward into the 21st century. We’re in the early stages of what some describe as the Fourth Industrial

Matt Geiger

Revolution – the digitisation,

Mr. Geiger is managing partner at MJG Capital, a limited partnership specialising in natural resource investments. The partnership is long-only and holds a concentrated portfolio of resource equities. Investments include explorers, developers, producers and royalty companies focused on precious metals, energy metals, industrial metals and ag minerals. Matt is a graduate of the Wharton School at the University of Pennsylvania and previously founded a venture-backed technology company most recently valued at US$150 million.

automation, and electrification of anything and everything. Copper serves an irreplaceable role in this multi-decade transformation, which will likely be the most important commodity trend of our lifetime. It is estimated that electricity’s share of final energy consumption will double from 19% today to 40% by 2050 – with 80% of this electricity generated by renewables. To meet this demand, NGTERMTRENDS. T/COPPER-GOLD-RATIO/

Richard Schodde from MinEx Consulting estimates that “over the next 26 years, the world

chart, the copper-to-gold ratio

is going to mine more copper

has only dropped this low two

than what has been mined in

times in the past 40 years – in

all of history.”

Meanwhile goldâ&#x20AC;&#x2122;s role has

the global financial system

diminished in terms of its

whenever the US dollar cedes

importance to society. To be

its enviable role as global

clear - from an investment

reserve currency (it may not

perspective, I remain bullish

be in this lifetime but nothing

on the near-term future of gold

lasts forever); however the rise

and gold equities. After all,

of cryptocurrencies in recent

65% of our weighted portfolio

years further diminishes the

is exposed to precious metal

chance that gold will back any

equities which should serve

of our currencies any time

us well over the coming few

soon.

years. Clearly over the longer term However, the point remains

(decades not years), I do favour

that gold is simply less

copper over gold. Some will

consequential within the

agree, others will dissent

global financial system and

vehemently. But the key

in most of our lives than it

takeaway is that in whichever

was in 1971 when Nixon de-

camp you belong, why not

linked the US dollar from gold

position yourself intelligently

or in 1933 when FDR ordered

as investor in both metals by

the confiscation of physical

backing competent, ethical

gold from US citizens. And it

management teams working

certainly does not hold the

on quality assets?

same societal significance as it did during the first 85 years

Because those bullish on

of American history when

gold should rationally also

gold and silver coins were the

be bullish on copper, at least

only recognised form of legal

over the medium term. Going

tender.

back to the aforementioned copper-gold ratio, the mean

It is possible that gold regains

price relationship between the

a more prominent role within

two metals was approximately

COMMENT | MATT GEIGER (MJG CAPITAL)

0.000160 over the past 40 years.

spending and money printing.

This compares to today’s ratio

This would be the sweet spot,

of 0.000094.

at least from an investment perspective.

Put simply, this means that if gold stood still at US$1,800

I’ll conclude with a caveat

an ounce for the next five

because no thesis would be

years while the copper-to-

complete without one. It’s of

gold ratio reverts to its 40-

course unrealistic to expect the

year mean, we are looking

copper-to-gold ratio to revert

at roughly $4.50 copper

to its mean overnight. The

once the process has run its

process will take conviction

course. This doesn’t take into

and years of patience. And

account the possibility that

there’s also the very real

the mean reversion pendulum

possibility that we see the

overshoots as is often the

ratio take a final plunge in the

case, nor does it consider the

coming six to nine months

possibility that gold prices also

before the mean reversion

rise as the copper-to-gold ratio

process begins in earnest.

normalises. If the irrational exuberance We’ve seen the copper and

evident in the broader market

gold prices diverge noticeably

right now results in another

over the past two years but

March 2020-like panic, copper

that doesn’t have to continue.

and copper equities will

In fact, historically it doesn’t.

certainly not be spared. If this

And you can easily see a world

does occur, don’t get shaken

where a positive correlation

out – you will regret it.

between the two metals returns – think a few years of anemic private sector growth coupled with massive government infrastructure programmes funded by deficit

What is driving go it mean for Austr

Baker Youngâ&#x20AC;&#x2122;s Evan Metanomski identifies th 38

COMMENT | EVAN METANOMSKI (BAKER YOUNG)

old and what does ralian equities?

he factors driving record gold prices in 2020 39

Itâ&#x20AC;&#x2122;s difficult to pinpoint any one factor responsible for the appreciation in the price of gold. Expanding central bank balance sheets, inflation concerns, geopolitical tension and finite supply are a few of the many logical and valid explanations that assist in supporting the case for gold and its relevance. Gold has been the major leading asset class in the 21st century having outperformed US treasuries, US equities, developed market equities and emerging markets (after accounting for dividends). US$100 invested at the turn of the century has grown to $591.

Falling real rates A large contributor has been falling real rates, the US Treasury yield, less the expected rate of inflation. This was over 4% in 2000, and has recently turned negative. It comes with no surprise why gold is deemed more attractive when cash on deposit receives a negative real return. This is in comparison to the days when cash returned a 4% risk free real rate. Itâ&#x20AC;&#x2122;s possible gold is anticipating an uptick in inflation for 2021. It would make sense given central bank balance sheets are bloated with liquidity. QE historically has been mildly inflationary from a PCE perceptive as capital was mostly tied within the banking system. Hence why we have seen tier 1 assets shoot to the moon, whilst nondiscretionary consumption goods have remained relatively stable. What we are seeing today is a surge in money supply, which is being distributed to the real economy. Prices have fallen due to a shock in demand. The combination of closed businesses and

COMMENT | EVAN METANOMSKI (BAKER YOUNG)

high unemployment, much of which is hopefully temporary, has seen prices fall. However, as the world economy reemerges, we could find ourselves facing a supply shock, with large amounts of capital chasing a diminished pool of goods. Itâ&#x20AC;&#x2122;s fair to assume that gold has factored this in, to an extent.

Blowing up the balance sheet Due to current economic conditions, the US federal deficit is reaching unprecedented levels. Preliminary data suggests the federal deficit will be $4 trillion this year, which is greater than 15% of GDP. Although, as the crisis unravels, it is likely these numbers will worsen. Throughout history, only in the First and Second World War have deficits of this magnitude occurred. As GDP declines and the federal deficit widens, the public debt to GDP ratio continues to escalate rapidly. US public debt to GDP is 130% at the time of writing. A few months ago, this ratio printed 110%.

Evan Metanomski Evan Metanomski is an analyst specialising in micro caps with a passion for the relic gold. Having spent considerable time on both buy and sell side in Sydney, he has recently returned to Adelaide heading up research for the boutique financial services firm Baker Young. Whilst Evan loves gold, he finds great satisfaction in uncovering gems of all sorts, covering all sectors searching for value and opportunity. Whilst gold is in the spotlight for a myriad of reasons, he prides his work on deep diving into unloved territories where the majority of the investment community is reluctant to look.

Deteriorating faith in central banks Gold collapsed from $850 to $250 under Greenspan’s ‘Great Moderation’. Greenspan was viewed as the ‘Maestro’ until the dot-com bubble collapsed. Gold went on a tear during the housing bubble, only to top when the ECB president Mario Draghi gave his famous speech: “We will do whatever it takes to save the Euro, and believe me it will be enough.” The future of the world is now in the hands of six central banks, Fed, ECB, BoE (England), PBOC (China), BoJ (Japan), SNB (Switzerland). This bodes unfavourably for the global financial system. For decades these central banks have abused their power and taken control of the monetary system for the benefit of their banker associates, and in some cases their private shareholders. The central banks have corrupted and destroyed the financial system, by printing money and extending credit that doesn’t exist. It is known that creating liquidity out of thin air eventually devalues

currencies to the point where they become worthless. The balance sheets of the six banks have increased by $3 trillion, from $21 trillion at the end of February 2020, to $24 trillion today.

The debasement of FIAT currency Gold (and silver) will be the obvious winner as currency debasement accelerates. Hyperinflation will of course add many zeros to the gold price. However, this price would be meaningless since it would only reflect the debasement of currencies. Although, not meaningless to people who hold worthless dollars or euros. At this point gold will once again prove its utility as a medium of exchange. Physical gold must not be seen as a speculative investment, but as the only store of wealth that has survived throughout history and maintained its purchasing power. Gold is insurance, and gold is wealth protection.

COMMENT | EVAN METANOMSKI (BAKER YOUNG)

Hedging their bets According to the World Gold Council (WGC), the lower rate of purchases of gold by central banks was expected given the strength of purchases both in 2018 and 2019. On the year, central banks have added a net 142 tonnes of gold to their reserves. This is off the nearrecord pace of purchases last year. Central bank total purchases totalled 650.3 tonnes in 2019. This was the second highest level of annual purchases for 50 years, slightly below the 2018 net purchases of 656.2 tonnes. According to the WGC, 2018 marked the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. The case for central banks holding gold remains strong. Especially considering the economic uncertainty caused by COVID-19. The WGC 2020 Central Bank Survey found that 20% of central banks globally plan to expand their gold holdings in the next 12 months. Factors related to the

economic environment, such as negative interest rates, were overwhelming drivers of these planned purchases. This was supported by gold’s role as a safe haven in times of crisis, as well as its lack of default risk. Paul Singer, founder and president of Elliott Management Corp says it best in a recent comment: ‘’This is a perfect environment for gold to take centre stage. Fanatical debasement of money by all of the world’s central banks, super-low interest rates and gold mine operation and extraction issues (to a large extent related to the pandemic) should create a fertile ground for this most basic of all money and stores of value to reach its fair value, which we believe is literally multiples of its current price. In recent months, gold has gone up in price to some degree, but we think that it is one of the most undervalued investable assets existing today.”

Where is gold headed… The current gold premium is telling us that higher inflation is coming. The implications

â&#x20AC;&#x153;Physical gold must not be seen as a speculative investment, but as the only store of wealth that has survived throughout history and maintained its purchasing power. Gold is insurance, and gold is wealth protectionâ&#x20AC;?

for asset classes are immense. Higher inflation implies a weaker dollar, which implies higher commodity prices and a surge in emerging market equities. It will make bonds unattractive and potentially drive down equity valuations in the developed world. The last time we saw this was in the 1970s. Whilst past performance is not indicative of future performance, those that thrived owned gold.

What does this mean for Australian gold equities... Australian dollar spot gold has performed remarkably well over the last few years, primarily due to points raised as well as a weakening local currency. This in turn has resulted in a remarkable opportunity for the gold bugs. The vast majority of gold stocks have been caught in the updraft and has paved the way

COMMENT | EVAN METANOMSKI (BAKER YOUNG)

for outsized gains compared to all other major asset classes. Fortunately, there are several ways in which to leverage this opportunity. Given our nation’s rich history not only in gold but in most major resource categories, we are well placed to continue to capitalise on what has been a spectacular few years. Given the cost of capital and the Australian ‘go get em’ attitude, every man and his dog have been crawling out of the woodwork - pick in hand -

to join what is fast becoming the new ‘gold rush’. Explorers and producers large and small have enjoyed favourable capital markets with abundant access to all forms of liquidity whether it be lines of credit or private money through placements. Given the domestic landscape from all indications the status quo will remain, so it is expected that the industry will continue to experience increased exploration and consolidation. The future

looks bright for gold and we continue to search for opportunities not only in producers but in micro-cap explorers where we have been very successful over recent years. It is our belief that, providing Australia maintains its advantage from a currency perceptive and US spot gold remains steady, the path is indeed paved with gold.

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ARGO GO 48

North Americaâ&#x20AC;&#x2122;s next m

MINING | ARGONAUT GOLD

ONAUT OLD

mid-tier gold producer

Over the last decade, Canadian gold explorer and producer Argonaut Gold has built a reputation for operating a cluster of simple, low risk gold assets across North America. The recent acquisition of NYSElisted Alio Gold at the end of March has been a long time in the offing and adds a couple more attractive pearls to Argonaut’s ‘necklace’ of assets, to borrow a metaphor used by president and CEO Peter Dougherty.

“Consolidation is healthy for

natural synergies. Firstly,

the sector because we’ll get

Florida Canyon is an open pit

better capitalisation, we’ll

heap leach mine – the type

be able to coalesce the best

of operation that Argonaut

talent in the industry and

has excelled in previously,

hopefully produce more vibrant

particularly at low grades.

Talking to RGN, Argonaut’s chief describes the deal as typical of the current gold space, with momentum released from M&A activity among the majors gradually trickling down to the mid-tier and below during the last 18 months. Consolidation has been the name of the game in the gold sector and this is only likely to continue as the global economy prepares for a brutal downturn in the midst of the ongoing COVID-19 crisis.

companies that can survive challenging conditions,” says

Dougherty describes Florida

Dougherty.

Canyon as a low grade, 0.4 g/t operation, but notes that

“For Argonaut in particular,

Argonaut has run 0.3 g/t

the Alio deal allows us to

orebodies and made money on

have another producing asset

them. “There are similarities

in a great jurisdiction,” he

between the two companies in

continues.

the processes that we deploy

Natural synergies

and the way that we execute those, and we think we can add

Alio’s only current producing

to and enhance those things at

gold asset is the Florida Canyon

Florida Canyon.”

Mine in Nevada, which is located 200 km from Argonaut’s

Secondly, Argonaut will use

corporate office in Reno – a 1.5

the acquisition to restructure

hours’ drive on a good day. In

its corporate departments.

comparison to the company’s

There will be a natural

other producing mines in

reduction in overall general

Mexico, La Colorada is half a

and administrative (G&A)

day of travel from Reno and the

costs following the closure

operations in Durango are four

of the company’s Vancouver

hours on top of La Colorada.

office. Instead Argonaut will pool its key talent in Reno,

Besides Florida Canyon being

with the existing team in

right in Argonaut’s backyard,

Mexico remaining in place and

the deal was also attractive to

overseeing the integration of

both parties based on several

the Ana Paula development

MINING | ARGONAUT GOLD

project in Guerrero from Alio’s

things all bode well and really

Turning Florida Canyon from

portfolio.

set this project up to bloom

a cash consumer to a cash

from where it is now.”

producer will be a significant

From an operational adds immediate long-life

Distinctly North American

growth to the portfolio and

Argonaut’s portfolio is now

memory, as the world slowly

will effectively replace the El

comprised of four producing

emerges out of lockdown

Castillo mine in Durango when

assets in Mexico and the

to contain the spread of

it reaches maturity in 2022.

US and three development

coronavirus.

However, the asset will require

projects in Canada and

some TLC from Argonaut in

Mexico. Dougherty describes

Indeed, having diversified

the short to mid-term.

the company’s model as

sources of gold production

North American-centric and

could provide unyielding

“Florida Canyon has been

is resolute in his belief of the

value during a period of

starved of the proper cash

world class nature of all three

unprecedented government

investment and we think that

jurisdictions.

stimulus packages aimed

perspective, Florida Canyon

because of the strength of the

of perhaps the steepest decline to the global economy in living

at propping up groaning

balance sheet we have, we can

“We like to play in playgrounds

economies. The addition of

really bring to the forefront

where we think we can

more debt load will only have

that ability. The first thing we

win. We think Mexico has

a positive impact on the gold

will do is unlock the Sprott

an attractive profile for

market in the longer term,

debt and replace it with our

investors, but we were looking

according to Dougherty.

revolving credit facility which

for diversification. The US

is carrying a 2.25% rate.

happens to be one of the best

“I expect to see gold rise over

jurisdictions in the world after

the next several years and

“Secondly, we will look to

you get your permits in and it’s

also bring along with it the

make a further investment in

the same in Canada. Once you

gold equities. It’s a matter of

the crushing circuits of less

overcome the infrastructure

economics. If we continue to

than $10 million, something

hurdle you have access to one

turn on the debt and printing

we can do out of the cash flows

of the best jurisdictions in the

presses as we have, at some

that we are generating as a

world.”

point in time we are going to

strong company today. Those

result for the company ahead

need that back-end commodity

MINING | ARGONAUT GOLD

Peter Dougherty, Argonaut Gold president and CEO to shore up that currency we

Argonaut quickly complied

are printing. As we look over

with the mandate and ceased

the long term, I am quite

mining, crushing and stacking

bullish about what this is going

activities at its operations, but

to do for gold.â&#x20AC;?

given that it operates heap

Coping with COVID-19

ARGONAUT GOL D AT A G L A N C E

leach mines, the company has been able to continue metal production and metal

Following the outbreak of

sales during the temporary

COVID-19 in Mexico earlier

suspension of mining

this year, mining was deemed

activities.

a non-essential business by the Mexican federal government

In fact, the impact on actual

on March 31st and all

metal production during the

operations were suspended

first 30 days of the suspension

at the beginning of April to

order was non-consequential,

STOCK TICKER TSX:AR

MARKET CAPITALISATION

US$233 million (as of May 11, 2020)

ajbr

prevent the spread of the virus.

says Dougherty. “When we

Colorada and El Castillo on

The company has gone above

think about it over the next

May 18th.

and beyond in its efforts to

30-60 days, I would expect us to recover 80% of what we

At the time of writing, the

community surrounding La

normally would’ve seen.”

region that hosts La Colorada

Colorada, offering sanitation

has had 0 cases recorded in

services to 253 local homes

Fortunately, the areas in which

that small community, and in

and providing face masks and

Argonaut operates in Mexico

the state of Durango – where

personal sanitiser to grateful

have received only very small

the El Castillo Complex is

residents.

outbreaks of COVID-19 and

found - there have been

on May 12th the government

two cases identified in the

“We also took it one step

reclassified mining as an

municipality of San Juan del

further and have acquired

essential business, paving

Rio.

COVID-19 test kits for

the way for Argonaut to recommence operations at La

tackle coronavirus in the

our people. We’ve done

MINING | ARGONAUT GOLD

this because we think it’s

The Magino project in Ontario,

now deploy the assets of the

important. If it turns out

Canada is envisioned to be

company in two different

that we didn’t need the tests,

built by an EPC contractor

functions.”

then so be it. We decided to

at a fixed construction cost

get out in front of this in our

expected to be close to the

Following the acquisition of

communities and whilst this

$320 million outlined in the

Alio, Argonaut’s total gold

doesn’t preclude you from

Magino feasibility study, with

production rate would be

having a case show up, we are

the financing strategy set

around 235-250,000 ounces

now more prepared for when

to be put in place by Q3 this

(oz) per year at full capacity.

it does.”

year. Meanwhile, Argonaut

While achieving this rate in

is progressing through the

2020 may be difficult following

final stages of securing an

the COVID-19 outbreak, clearly

operating permit for Magino,

this is no longer a small fry

Despite the incredibly difficult

having already received

gold firm.

conditions that Argonaut

environmental permits.

A packed pipeline (and the world) is navigating

In fact, Argonaut has the

through, Dougherty remains

“I think the unique thing

makings of a dynamic mid-tier

content with the position the

about the EPC approach is that

North American producer and

company currently finds itself

somebody else is building the

has set itself a transformation

in, chiefly due to the presence

car for you. They’re carrying

strategy with the goal of 300-

of three exploration projects in

out all those activities so we

500,000 oz per year, which

the portfolio.

can leverage our team to work on more than one project. We

“As a matter of fact, now is an

are not overburdening our

amazing time for the company

team and we’ve transferred

given we are still a relatively

the risk for overruns to the

small junior with three

contractor.

development assets that are all poised by the end of the year

“While overseeing the EPC

to be in a decision-making

contract at Magino in Canada,

process as to how we advance

our team can also be working

them,” he proclaims.

on Cerro del Gallo or Ana Paula in Mexico. We can

We like to play in playgrounds where we think we can win. Mexico has an attractive profile for investors, but we were looking for diversification and The US happens to be one of the best jurisdictions in the world” Peter Dougherty, Argonaut Gold president and CEO

MINING | ARGONAUT GOLD

“We add to it Florida Canyon. Here’s another mine that is going to be operating for at least the next eight to 10 years, one of our longest life operating mines. Then the big pendant in the Argonaut scenario is Magino. We’ve already identified 5 million oz and started underground exploration last year to expand the resource. “Magino currently has a 17year mine life based on the first two million oz, but it’s probably going to have a 30year life. Then at Cerro del Gallo we have also identified a 14-year life that likely will PETER DOUGHERTY, ARGONAUT GOLD PRESIDENT AND CEO

extend to 20 years with further exploration. These longer life assets also have significantly

will involve upgrades to both

individual pearls (the smaller

lower operating costs and

the production rate and cost

operations in Mexico) that are

they are the pendants we are

profile.

unique and unto themselves

transitioning towards.”

Polishing the Argonaut necklace “When I formed the company

able generate some cash. “But they’re relatively short life, with smaller production profiles and relatively high cost profiles.

back in 2010, I had a simple concept in mind. Take these

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Post the completion of the Vanchem acquisition Bushveld Minerals will own 2 of the 4 operating primary vanadium production

•

Bushveld Minerals will offer a diversfied product offering for the steel, chemical industry and energy storage market

•

Bushveld Minerals vertical integration strategy into energy storage provides a natural hedge to vanadium price volatility as well as a

processing facilities, with capacity to scale up production significantly

diversified revenue stream

5 Harries Road, Illovo Edge Office Park 2nd Floor, Johannesburg, Gauteng 2196 | info@bushveldminerals.com | www.bushveldminerals.com @BushveldMin_Ltd

Bushveld Minerals

BARTO

Taking ad

MINING | BARTON GOLD

ON GOLD

dvantage of a trio of undervalued gold assets in South Australia

Privately held Australian gold developer Barton Gold has been powering past the COVID-19 dilemma of late according to managing director Alexander Scanlon, having received its Resource Exploration and Production Permits from the Woomera Prohibited Area Coordination Office (WPACO) in mid-May. Approval of the permits will allow the company to advance its gold assets in South Australia, which include the Tarcoola open pit mine, the Tunkilla project and a mill and processing plant. Barton is majority owned by boutique investment group PARQ Capital, who facilitated the 2019 acquisition of the assets from WPG Resources, a group that fell into administration in July 2018. The acquisition, in May 2019, was exceptionally timed and followed PARQ’s global macro investment strategy and 2018 ‘conviction’ call on gold as undervalued based upon an increasingly unstable geopolitical climate, global credit quality deterioration and expectations of a new economic crisis. Since taking control of the assets, Barton has vowed to extend the mineralisation and mine plan for a restart of the Tarcoola mine, and reevaluate development options at the Tunkilla project in view of the economic options provided by ownership of the only processing facilities in the immediate region. The company is also planning an IPO on the ASX in 2021.

“Barton Gold is effectively a new entity and structure set up by PARQ – the group I represent,” says Scanlon. The purpose of that strategy, explains Scanlon, was twofold: 1) Having an optimised ownership structure to simplify government approvals and reduce ongoing compliance work and costs – a distraction from otherwise value-adding work for shareholders, and 2) A clean start, as these assets were all historically owned in a series of entities that went into administration. Rather than assume the burdens associated with a complex web of entities, contractual agreements and creditors, it was simply decided to instead form Barton as a new, forward-focused entity. “That decision helped us to expedite a transaction, reduce the cost of that transaction and reduce the cost and time wasted having to deal with the ghosts of the former structure.”

MINING | BARTON GOLD

Setting up in South Australia The transaction provided a unique opportunity to gain control of 4,735 km² tenements and rights in the low risk, Tier 1 jurisdiction of South Australia, which is heavily mineralised but flies under the radar as a gold exploration region compared to the heavily contested Western Australian market. “South Australia definitely suffers from a lack of attention compared to Western Australia. That is probably a function of the frameworks, policies and procedures for exploration and development [in WA] being a bit more systematically streamlined. It’s an exciting area but perhaps a little harder to get traction in this state,” Scanlon observes. However, this does not appear to have hindered the Barton team. Scanlon and his team have set out to change this impression, and to lead the reemergence of a large portion

Despite the existence of gold

known for previously yielding

Turning away from Challenger

globally relevant assets. The

Barton’s acquisition of WPG’s

situation deteriorated into

opportunity for success is

assets also included the

a costly downward spiral of

attested to by the existence

Challenger underground

‘exploration by development’

of BHP’s Olympic Dam – one

mine, which has historically

at Challenger, which dragged

of the largest polymetallic

produced around 1.2 million

down the former business

mines in the world – and OZ

ounces (Moz) of gold, but is

and, perhaps most ironically,

Minerals’ copper-silver-gold

not without its own difficulties

publicly obscured the high

Prominent Hill facility.

as its name coincidentally

quality nature of Tarcoola.

of a region in South Australia

mineralisation at 4 g/t, the

suggests. Asked exactly how Barton

Scanlon likens the acquisition

were able to gain traction so

The asset has complex

strategy to a conventional

quickly, Scanlon says it was a

geology and orientation

restructuring play; acquire a

matter of providing confidence that has caused headaches

suite of misunderstood but

and building trust with

for developers in the past,

quality businesses tarnished

regional stakeholders.

according to Scanlon.

by the publicly poor results of

“It requires a great deal

one specific division, close the

“We have been able to enter

of forward development

failing division, and optimise

South Australia off the back of

investment and structural

and grow those that remain.

the reputation of our technical

analysis before you go mining.

partners Mining Plus and

PARQ’s analysis indicated

the Byrnecut Group, as well

“Unfortunately when the

that the potential of the

as Primero Group, but also

former owners got started

assets were far greater than

our own private reputation

they did not have that

the ‘Challenger discount’

for taking mining assets in

forward development work

applied to all assets, and that

difficult situations and creating done and didn’t have enough

the market likely valued the

value. I think that helped build

development capital…so it

package on the assumption of

an initial relationship and

became a vicious cycle of

executing the same strategy.

trust with the South Australia

taking material out of the

Government.”

ground for the mill without

Barton will therefore

adequate information.”

defer further review of the Challenger asset, in favour

MINING | BARTON GOLD

BA RTO N G OLD

AT A G L A N C E

of focusing on restarting

extensions of the open pit

the Tarcoola open pit and

and immediate proximate

advancing the Tunkillia

mineralisation.

Project, only 80 km from Tarcoola.

A walk-up restart

PRO FORMA MARKET CAPITALISATION A$48.7 million (as of 29 May 2020)

The Tarcoola asset was originally modelled on a ~2.7 g/t LoM average grade

Scanlon notes that the restart

for a relatively short-term

of the Tarcoola mine â&#x20AC;&#x201C; which

operation, however when

opened in December 2016

the former owners got into

but was placed on care and

the main ore zone in the

maintenance in August

body of mineralisation, they

2018 â&#x20AC;&#x201C; will be a relatively

found multiple mineralised

simple process which will be

structures converging in the

determined by the structural

base of the pit and the ore

MINING | BARTON GOLD

grades jumped well over 3 g/t.

a walk-up restart,” explains

to restart the mine with a

Barton’s boss. “We’ll bring in

greater understanding of

“Actually, for the last seven

a contractor to run the open

the mineralisation and bank

to eight months of operation

pit. The pit itself is competent,

additional mine inventory.

in 2018 the pit averaged over

stable and in fact still only part

4 g/t. So, you’re looking at

way through its current mine

a relatively tidy operation

plan.”

producing 3-4 g/t of material

Tier 1 technical partners Barton’s primary technical

that is then trucked 160 km

Upcoming infill drilling

partner is Mining Plus,

and put through the existing

programmes will also target

Australia’s largest specialist

Challenger mill.

high-grade extensions of

mine geology and engineering

mineralisation to depth and

consultancy. Mining Plus

“It’s is a fairly simple logistical

along strike of the open pit,

have worked extensively with

feat to run that operation

as part of a precise mining

PARQ for the past six years

and start it up. It’s effectively

plan that will enable Barton

as an exclusive technical

service provider, and so the arrangement with Barton is a continuation of this relationship. “We have put together with them a working model where we are able to keep our corporate overheads structure and our costs quite lean by utilising their personnel as and when we need them,” explains Scanlon. The company’s strategy of employing individuals from Mining Plus on an ad-hoc basis is an efficient and costeffective one that allows Barton to leverage its partner’s broad capabilities, including geology, geosciences, geotechnical and mine engineering and operations management. “That brings these two businesses into very strong alignment and it also means that from our standpoint, when you have a group like Mining Plus with that full suite

MINING | BARTON GOLD

of capability and the ability to carry the whole workload, that is very valuable. “We’ve found it to lead to more informed decision making, both in terms of the quality of the work but also thinking about your geological objectives as informed by practical operating requirements. To have that fluidity of awareness and knowledge of back-tofront and front-to-back is surprisingly rare.”

SA’s largest undeveloped gold-only resource Barton’s second priority behind the Tarcoola restart is the extension of the resource at Tunkilla, which happens to be South Australia’s largest undeveloped gold-only resource and an asset that, like Tarcoola, was overlooked by the former owners due to working capital restrictions.

“In the case of Tunkilla,

JORC Resource in the so-

can reduce trucking distance

we think there are a few

called ‘223 Deposit’ with

by diverting Tarcoola ore

interesting optimisation

potential for extensions and

towards Tunkilla instead of

capabilities with that

regional scale confirmation

towards the current plant.

project. Certainly, the recent

of lookalike deposits on the

That might save $10 million a

innovation in the gold price

highly prospective Yerda and

year and is a valuable option to

adds a whole new level of

Yarlbrinda Shear Zones.

have.”

“If you do that, you open up a

In addition, having access

wide range of opportunities

to a 650,000 tonnes per

In particular, Barton is

because you can for one

annum plant in a region

evaluating opportunities to

downscale your processing

where several explorers are

target higher grade zones in an

plant, which offers

operating without their own

early stage open pit operation,

considerable savings and gives

processing infrastructure is a

but also the possibility for a

you more opportunities on

clear boon for Barton. In fact,

high-grade underground mine

logistics.”

the mill is the only one in the

potential attractiveness to the assets.”

using a simple box cut and decline method.

surrounding area and if Barton The logistical synergies

were to build another plant

between the assets were a

at Tunkilla, it would have the

The asset already has an

key driving factor behind the

only two plants inside a bubble

existing 558,000 ounces

company’s decision to invest

with a 600 km diameter.

in them. While Tarcoola

“We have been able to enter South Australia off the back of the reputation of our technical partners Mining Plus, but also our own private reputation taking mining assets in difficult situations and creating value.” Alexander Scanlon

distance from the mill and

A realistic plan and timeline

plant owned by Barton, the

Unsurprisingly, the COVID-19

distance between Tarcoola

pandemic has had an

and Tunkilla is only 80 km.

impact on Barton’s forward

is around 160 km trucking

development plans. However, “If you could unite high

with a focus on risk mitigation

grade ore from Tarcoola

the company had already given

with a higher grade selection itself a flexible and realistic of ore from Tunkilla at a

timeline with the ability to

single processing plant, you

absorb this type of unforeseen circumstance.

MINING | BARTON GOLD

ALEXANDER SCANLON, BARTON GOLD MANAGING DIRECTOR

Therefore, while extension

2021, which would transition

Finally, Barton has recently

drilling at Tarcoola has been

the company from private to

completed a multi-million

delayed from June to July or

public hands and expedite the

dollar capital raise and is now

August because of restrictions

development of its attractive

fully funded for upcoming

on movement, Barton is using

assets in South Australia. In

works as it continues

this time to further optimise

May, the company appointed

discussions with institutional

critical pathway items like

top-tier legal firm Ashurst as

investors for future growth

WPACO permits and for the

IPO counsel and is understood

capital.

restart of the pit during the

to be evaluating a wide range

second half of next year.

of additional corporate development opportunities.

Barton plans to begin the IPO process with the ASX in early

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VAN MIN

+1 million ounce mineral res Australiaâ&#x20AC;&#x2122;s largest und

MINING | VANGO MINING

NGO NING

source and counting at one of developed gold assets

The old adage says that it takes a long time to become an overnight success. Australian gold exploration and development company Vango Mining is a classic case in point. Vango floated in 2004 (under the name Ord River Resources) with one gold asset in regional New South Wales, Australia. Over time it acquired copper tenements in Western Australia and also became involved in bauxite tenements in Laos. After a decade of juggling these disparate projects, the board of the company decided to set a more focused strategy on the gold sector, following the beginning of a resurgence in the gold price in 2013. At this time, Bruce McInnes was appointed to the company’s board, soon after becoming executive deputy chairman and finally executive chairman. An accountant by profession, McInnes tells RGN: “The idea was to try to locate a near-term gold production asset with a good resource base and then look to do a deal with the owner to combine the two companies and move forward as one entity.” When the company came across a major package of quality exploration leases in the Mid West region of Western Australia, it executed on the plan and entered into a farm-in agreement with the then owner.

Over the ensuing years

Vango’s targeted drill

the company expended

campaigns have culminated

considerable capital to earn

in the announcement of a +1

a 100% interest in the project

Moz resource at Marymia in

area – the Marymia Gold

May this year, which McInnes

Project. Vango is now the sole,

declares as the company’s

100% owner of the Marymia

biggest and most important

Project, which covers an

milestone to date.

extensive 40 km of strike in a major brownfields gold belt

“That was a critical milestone

that sits immediately Northeast

in terms of proving to the

of the 5.5 million ounce (Moz)

shareholders that we have

operating Plutonic Gold Mine.

invested their funds wisely in line with our exploration

“Once we started drilling in

model, and that our exploration

early 2017, we quickly found

has been validated. There was

that there was potentially six

a previous JORC 2004 resource

gold corridors similar to the

with a considerable amount

Plutonic Mine. When you look

of gold ounces, but part of

to the overall size of area,

our drilling programmes have

Plutonic covers about 20% of

been focused on bringing the

the brownstone belt and we

old resource into current, 2012

own the remaining 80%.”

JORC compliant status, as well as substantially expanding

The exploration programmes

the size of the resource, all of

to date have identified three of

which has been achieved.

the six mineralised corridors – PHB, Trident and Triple P - as

“Secondly, there has been

being near-term opportunities

recognition from the

to develop high-grade gold

marketplace that we have

mines, with the Trident

achieved that magical 1 Moz

Corridor the most defined by

milestone. Thirdly, it was a

drilling.

building block that we needed in order to complete a mine

MINING | VANGO MINING

application and mine planning

drilling programmes over the

Building blocks

to the WA Department of

past three years. These efforts

The building blocks of this

Mines and Petroleum [DMP],

have been rewarded with a

exploration success were put

to demonstrate the viability

1,002,000 oz mineral resource

in place by McInnes and co

and sustainability of what we

at 3.0 g/t gold, including

around four years ago upon

plan to be a significant long-

open pit and underground

the formation of a turnaround

term gold mining operation at

resources, which goes a

strategy focusing first and

Marymia.”

long way to establishing the

foremost on economic

project’s viability.

prudence.

formal mining approval

But, achieving the magical

“We are very careful about

process is extensive –

1 Moz mark is just a starting

how we spend shareholders’

significantly more so than

point, and Vango’s next drill

money. We want to know that

most people might appreciate

programmes will be designed

any project we get involved

- and so the company has

to further expand the resource

in has the potential to be

applied a highly rigorous

to 1.5 Moz and then to 2 Moz.

profitable and to deliver a

McInnes explains that the

and stringent approach to its

sustained life to the asset that

VA NG O M IN I N G

AT A G L A N C E

Vision for the future

STOCK TICKER ASX:VAN

MARKET CAPITALISATION

A$81.46 million (as of June 22, 2020)

you are pouring millions of

McInnes describes himself

dollars into.

as a ‘builder’ and has infused this spirit into the company’s

“Some companies prefer

thesis for the Marymia Gold

to drill out assets and hope

project. Part of this has been

that a major takes them out.

the building - or evolution - of

We’ve taken a different view

Vango’s board. Over time the

and want to unlock the full

company’s board has evolved

scope and size of the project

and now has a balanced mix

area, and to be in a position to

of skillsets, from commercial

potentially mine the area for

and corporate to mining and

20-30 years, not just for two or

technical expertise.

three.” says the chairman.

MINING | VANGO MINING

A key piece of the puzzle was

“Andrew has really been

Raising the roof

the appointment of highly

an important find and

In mid-June, Vango

skilled mining engineer

compliments the other

successfully raised A$15

Andrew Stocks as managing

members of the board

million on the ASX in an

director of Vango in November

immensely. I’ve learned a lot

oversubscribed capital raising

2019. Stocks stood out from

working with him over the

that will allow the company to

all other applicants due to his

last four to five months and he

aggressively pursue the next

unmatched understanding

has a major task now to bring

phase of drill programmes

of the geology of the

this company to its productive

at Marymia, which include

Marymia region, having been

capability – a task that I have

high-grade resource expansion

instrumental in the build of

utmost confidence in him to

targets and larger scale

the nearby Plutonic mine

deliver.”

Plutonic-style analogue

under the auspices of Barrick

targets.

Gold in the 1990s.

Bruce McInnes, Vango Mining executive chairman

The company was also able to

in parallel, to focus on

previous campaigns, and has

convert $2.4 million of debt

development plans for the two

delivered significant time and

into equity in the raise through

areas which will potentially be

cost savings to the company’s

the issue of 30.3 million

the initial mine targets: PHB

exploration programmes.

new shares. These incoming

and Trident.”

institutional and professional

“We’ve been able to rely on

investors attest to the strength

Vango has been fortunate in

that database to be quite

of the financial building blocks

that it inherited a large amount precise about where we drill.

put in place over the past four

of historical data relating to

The design of our next drilling

years, according to McInnes.

the Marymia Gold project

programme is being finalised

when it took full control of

and these next rounds of

“Now it is with Andrew to

the project. While the data

drilling will be designed to

provide the company with

doesn’t extend to depth, it has

expand the resource toward

a further upscaling of the

allowed Vango to locate and

our next target of 1.5 Moz and

resource base and also,

test specific targets throughout

then to 2 Moz.

MINING | VANGO MINING

“But equally as important is

becoming a shareholder in

viability of Vango’s proposed

the ability then to provide

Vango. The company will

mining operation at

evidence to the DMP that this

continue to use Westdrill for

Maryima, as well as deal

is not a company that will

future campaigns, along with

go to mining then fold for a

other outfits for additional rigs

lack of resources,” McInnes

where required.

highlights. “This programme is extremely important going forward.”

Flying towards feasibilities The company has also

Vango’s primary drilling

commenced work towards

partner has been Westdrill,

feasibility studies for the

who are not only a great

Marymia Gold project.

drilling company but have also

These studies are designed

been immensely supportive

to establish the economic

“Some companies prefer to drill out assets and hope that a major takes them out. We’ve taken a different view and want to mine the area for 20-30 years, not just for two or three” Bruce McInnes, Vango Mining executive chairman

of the Marymia project, even

with other core issues such as the environment and sustainability. “We’ve done a lot of work in terms of the hydrology and environmental studies. Blueprint [Environmental Strategies] has completed the majority of the environmental studies required to be submitted in our mining plan. “The water studies have been completed by specialist consultancy group, Rockwater. Those studies include the flow rate and quality of water in the area. Surprisingly, given the project is located in a very dry BRUCE MCINNES, VANGO MINING EXECUTIVE CHAIRMAN

“The design of our next drilling programme is being finalised and these next rounds of drilling will be designed to expand the resource toward our next target of 1.5 Moz and then to 2 Moz.”

area, it has an abundant supply me what I’ve been saying for of high-quality underground

some time in my chairman’s

water.

letters, and that is that we believe we have one of the

Following the capital raise

largest and best undeveloped

in June, McInnes reflects on

gold assets in Australia.

a well-deserved celebratory drink shared with a mining analyst. “He actually said to

“He went on to say that Vango

MINING | VANGO MINING

“But I will always admit that I know what I don’t know. This has helped us bring in the right people for the right positions and I know that our current team will carry this company through to mining. And within the next three or four months I expect to see quite a massive upgrade in our market capitalisation.” With uncertainty set to reign supreme over capital markets throughout the rest of the year, and the Australian gold price likely to hold steady in the $2,550 per ounce range, Vango is extremely well placed to deliver value for its ANDREW STOCKS, VANGO MINING MANAGING DIRECTOR

shareholders as it undertakes its next round of resource expansion drilling and

having one of the largest

“I came in as a complete

progresses towards feasibility

undeveloped gold assets in the

unknown in the mining

studies at one of Australia’s

country is only complimented

industry, so I think there was a

largest undeveloped gold

by the fact that you are the

lot of doubt in the marketplace

projects.

most undervalued explorer out

that we could actually achieve

there. So, it’s come with a two-

something that even people

edged sword; we’ve got a great

with a long history in the

asset and we are also the most

sector find difficult to do.

undervalued in terms of our peers.

AMARILLO 84

MINING | AMARILLO GOLD

GOLD Brazilâ&#x20AC;&#x2122;s next gold producer

TSXV and OTCQB-listed Amarillo Gold was formed in 2004 specifically to purchase the Mara Rosa Property – a greenstone belt, shear hosted meso-thermal gold mineralised system of Neo-Proterozoic age – located in the Brazilian state of Goiás. Mara Rosa is comprised of 2,600 hectares of mining permits, of which the main accumulation of gold is inside what is known as the Posse Deposit.

“We did a 15,000 metres

Posse was discovered by BHP in the 1980s, mined by Western Mining in the 90s and eventually sold to Amarillo by a troubled Metallica. Torontobased Amarillo soon acquired a second Brazilian project in 2006 before conducting around 40,000 metres of drilling at Mara Rosa over several years up to 2011, when it published a pre-feasibility study (PFS) for the project. Further geotechnical work was conducted and used to update the +1 million ounces (oz) resource and PFS in 2016-17, before some upheaval resulted in several corporate changes.

strong position to finish the

Rowland Uloth joined as executive chairman in mid2017, Hemdat Sawh was appointed CFO later that year and in early January 2018 Mike Mutchler became Amarillo’s new CEO. “Since then we’ve been busy getting Mara Rosa back on track,” says Mutchler.

Finalising the feasibility

drill programme in 2018-19, moved all of our inferred and measured into indicated resources, updated our PFS in late 2018 and started our feasibility study early in 2019. We put it on hold later in the year, but a $15 million capital raise in August put us in a feasibility study in 2020.” Unbeknown to the company was the onset of an unprecedented global pandemic this year, which necessitated a shift in work patterns for Amarillo’s office and field-based staff in Canada and Brazil, as well as for the engineering teams working on the feasibility.

However, the feasibility work was finalised in May with staff working remotely and the findings published at the beginning of June. Before delving into the results, it

MINING | AMARILLO GOLD

would be remis not to discuss

Fortunately, the areas where

There have been few recorded

the impact of COVID-19

Amarilloâ&#x20AC;&#x2122;s sites are located

infections near the Mara

on Amarilloâ&#x20AC;&#x2122;s operations,

have been relatively untouched Rosa project, which can be

particularly given that Brazil

by the virus, which allowed

partially attributed to the

has the second highest

the company to continue

swift reaction of the GoiĂĄs

recorded infections in the

operating throughout the

State authorities, according

world and was closing in on

peak of the pandemic, albeit

to Mutchler. Existing mines

a million cases at the time of

in line with social distancing

in the state were initially

writing.

measures.

shutdown before reopening again, and despite not being in

MINING | AMARILLO GOLD

POSSE GOLD DEPOSIT - CROSS SECTION LOOKING NORTH

operation, Amarillo continued

same time and all staff were

switch from multiple indicator

with around a dozen field

quickly set up to work from

kriging (MIK) to ordinary

technicians on-site throughout

home. “Our engineering

kriging for resource and

the pandemic.

groups Ausenco, SRK and

reserve estimates.

GHT Engenharia also started It is a similar situation at

working from home. There

Amarillo’s Lavras do Sul

may have been a couple of

property in Southern Brazil.

weeks of disruption, but it

There have been few recorded

didn’t slow us down and we

cases near the project, and

were able to continue with our

only six employees have been

feasibility work.”

working on-site shipping core from an earlier exploration programme.

Key recalibrations

AM ARIL LO GOL D

AT A G L A N C E

STOCK TICKER

Two significant changes to

TSXV:AGC, OTCQB:AGCBF

The company’s Toronto team

the project were outlined

was already working from

in the Mara Rosa feasibility

MARKET CAPITALISATION

home, but its Belo Horizonte

study, compared to the 2018

office closed around the

PFS, the first of which being a

US$33.2 million (as of June 18, 2020)

“We’re highly leveraged to the gold price. A 10% change in the gold price changes our NPV by about 30%” Mike Mutchler, Amarillo Gold president and CEO

“Our infill drilling was

well for veiny deposits, but

delivering lower grades than

that the Posse Deposit is more

previous drilling had, based

strata-bound into a shear

on MIK models. So we did a

zone and there are chemical

jack knifing study, which is

alterations within the shear

where you drop a hole out

zone that affect the grade, but

of the database and let the

not quite what you would call

model predict the grade at that

a vein.

point and then compare that to the actual grade. We saw

“While the switch to ordinary

further evidence that MIK was

kriging dropped the grade by

overstating the grade.”

about 20%, from 1.4 g/t in the PFS to 1.2 g/t in the feasibility,

Mutchler points out that MIK

the new model provides

is a reliable tool that works

much greater confidence in

MINING | AMARILLO GOLD

AERIAL VIEW OF THE POSSE DEPOSIT SHOWING POSSE NORTH AND POSSE SOUTH PITS

the resource and we feel we

operations near Brumadinho

deemed it impractical to

have a much higher chance of

in Minas Gerais early last

evacuate the open pit within 30

reconciliation in the mine plan

year. The disaster prompted

minutes of a warning message.

when we do get started with

a deep rethink of health and

In addition, Amarillo foresaw

the operation.”

safety protocols relating to

delays to the permitting

tailings dams and led to new

process if it were to go

The second major change in

regulations, including the

ahead with the original plan

the feasibility study concerned

provision of an exclusion zone

and move the tailings dam

the decision to switch to dry

that is reachable by all staff on

downstream.

stack tailings as opposed to a

foot within 30 minutes of an

downstream construction dam

audible warning.

at the Mara Rosa project.

“I think you’re going to see Brazil leading the world in

In Amarillo’s case, the

switching to dry stack tailings.

Brazil’s mining sector was

permitted location of its

The technology has caught up

rocked by the fatal dam

tailings dam is upstream from

with industry such that you

failure at one of Vale’s iron ore

the open pit, so the company

based on different gold prices. The base case used a gold

Â Â?Â? Â? Â? Â? Â? Â Â Â Â? Â? Â? Â&#x20AC; Â Â&#x20AC; Â Â Â? Â&#x201A; Â&#x192; Â? Â Â Â? Â&#x192; Â&#x201E;Â&#x2026; Â&#x2020;Â&#x2021;

price of $1,400 per oz, which predicted an after-tax NPV5 of $183 million and IRR of 25%. However, when using the gold price at the time the study was published â&#x20AC;&#x201C; around $1,700 per

Â&#x2C6; Â Â Â Â&#x2030; Â&#x160;Â&#x160; Â&#x201E; Â&#x2021; Â&#x160;Â&#x2039;Â&#x2039;Â? Â&#x152; Â&#x17D; Â&#x2018; Â&#x2030; Â&#x160;Â&#x160; Â&#x201E; Â&#x2021; Â&#x2019;Â&#x2019; Â&#x2039;Â?Â&#x201C; Â&#x201D;Â&#x152;

oz â&#x20AC;&#x201C; the NPV increased to $360 million and the IRR reached 50%, which represents a big

can use dry stack tailings now

swing in the value of the

on a large plant. Weâ&#x20AC;&#x2122;re going

project.

to build a 7,000 tonnes per day carbon-in-leach (CIL) plant

â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re highly leveraged to the

and itâ&#x20AC;&#x2122;s entirely feasible to use

gold price,â&#x20AC;? says Mutchler. â&#x20AC;&#x153;A

dry stack tailings.â&#x20AC;?

10% change in the gold price

Leveraging the high gold price

changes our NPV by about 30%. We also showed a middle of the road consensus case

The feasibility study supports

which gave an attractive NPV

an open pit mine and CIL

of $272 million.â&#x20AC;?

operation over a 9.6 year mine

CEO MIKE MUTCHLER (THIRD IN FROM

like with the gold price, the feasibility compares different

life, with gold production of

In addition, 60% of the project

exchange rates and highlights

102,000 oz annually for the

costs are based locally in

the economic advantages

first four years of the operation

Brazilian reais, which has

available to Amarillo with a

and average annual production

fallen in value compared to the

favourable rate.

of 84,500 oz over the full LoM.

US dollar in recent months and

The study offered three cases relating to project economics,

provided an opportunity for a

â&#x20AC;&#x153;Brazil is getting control of

lower project capex figure. Just

their economy and has a business and industry friendly government in place. But in

MINING | AMARILLO GOLD

M THE RIGHT) WITH THE AMARILLO GOLD TEAM

the meantime, I think we

several key individuals

which began in 2016 when

have an opportunity to take

from the local government,

the company was awarded

advantage of that higher

Amarillo received a Protocol of

its preliminary licence (LP)

exchange rate to build the

Intent to build the Mara Rosa

– the first of a three-step

project for a lower overall

project from the governor of

process for all mining projects

capex.”

the State of Goiás in June.

in Brazil – on the back of an environmental baseline

Permitting progress

The Protocol of Intent is

study and a series of fruitful

another key step in the

community meetings.

Following a formal digital

project’s progression through

meeting in May involving

the permitting timeline,

“Mara Rosa is a brownfield site

which is around 10 km from

model. Amarillo completed

and so there used to be mining

the mine. 10,000 people live

this work and applied for the

jobs in the town of Mara Rosa,

here and there is no other

licence back in December

“We think we’ll lock in the construction financing in September or October. That roughly lines up with when we expect to receive the LI.”

major industry, so they want

2019, and expects to receive

to see the mine reopen and

the permit at some point in Q3

jobs come back into the

of this year.

community. We learnt this

The LI will give Amarillo the ability to build and commission the plant, with the final operating licence (LO) awarded after a formal inspection of the plant takes place once it reaches commercial production.

during public meetings in 2016 and have maintained good local support since then.” The next step of the process is the installation licence (LI), which requires basic engineering and a financial

MINING | AMARILLO GOLD

Mike Mutchler, Amarillo Gold president and CEO

The home straight Amarillo is shaping up well for this next crucial phase of development at Mara Rosa. The company is working with Auramet International on project financing and evaluating different debt-equity ratios for the construction period.

in April next year, following

same time, the company will

the end of the rainy season.

drill some of its 22 targets at the Lavras do Sul project,

“From then it will take 15

which Mutchler believes will

months to complete the

eventually become a multi-

plant. So, we’ll be ready to

million oz district. The future

commission the plant in mid-

is bright and golden for

2022, with first commercial

Amarillo in Brazil.

production by the end of the year.”

“We think we’ll lock in the

Alongside this, Amarillo will

construction financing in

also be undertaking regional

September or October. That

exploration at Mara Rosa

roughly lines up with when we

and extensional drilling at

expect to receive the LI. This

the Posse Deposit to further

will allow us to break ground

grow the resource. And at the

HUM R

MINING | HUMMINGBIRD RESOURCES

MMINGBIRD RESOURCES

significant news flow from one of West Africaâ&#x20AC;&#x2122;s most exciting gold firms

Regular readers of RGN will be very familiar with AIM-listed gold explorer and producer Hummingbird Resources by now. This publication has been following the company’s West African story since 2016, when it had only then completed a definitive feasibility study (DFS) for the Yanfolila gold project in Mali, having pivoted away from its original exploration asset in Liberia. Over the last four years, Hummingbird has delivered the Yanfolila mine on-time and on-budget, transforming itself from an explorer to a producer in the process. After reaching nameplate capacity in early 2018, the highly flexible team skilfully navigated operational challenges at the mine in 2019 and boosted throughput through the addition of a second ball mill, all while maintaining a prominent position in the local Sikasso region through a series of generous community development programmes. 2020 has been another year of significant news flow for Hummingbird, despite the worrying emergence of a global pandemic that has posed a challenge not just to the company’s finances but more importantly to its stakeholders.

“There’s no doubt it’s been very challenging,” says managing director Dan Betts. “We operate a remote mine in a remote jurisdiction and Mali’s borders have been closed for some time, which has given us a lot of supply chain and logistics issues. “We’ve had to increase our inventory of spares, fuel and supplies so we can sustain unforeseen events, but when things do go wrong it’s hard to get parts to site and this has a cost implication for the company.” However, Betts believes that by far the biggest challenge posed by COVID-19 has been maintaining morale and managing fatigue on-site at Yanfolila. The pandemic has dictated a stricter focus on employee health and safety, which has meant changing shift patterns from normal with time off to an intense 15-week spell on-site for many staff.

100

MINING | HUMMINGBIRD RESOURCES

101

of the Kouroussa Gold Project

going so well, but it’s been

Going into Guinea

a tough ask for our team.

Despite these significant

Cassidy Gold Corp in June,

Another challenge has been

impediments to

moving into a third West

not knowing. You can’t really

Hummingbird’s regular

African jurisdiction in the

plan in this time, so it’s been

operational and corporate

process.

a case of reactive planning

rhythms, the company has

depending on what rules

remained active in the market

governments have thrown at

and announced the acquisition development asset in Guinea’s

“It’s amazing they’ve kept

us.”

10 2

in Guinea from junior explorer

The deal for this near-term prolific Siguiri Basin perfectly

MINING | HUMMINGBIRD RESOURCES

aligns with Hummingbird’s

per year. This bracket sounds

little gem in that respect.”

strategy of building a high

great on a spreadsheet but it’s

grade, high margin gold

actually very hard to find this

Kouroussa has a mineral

producer in West Africa and

type of project which is slightly

resource of 1.18 million oz of

it complements the Yanfolila

sub-scale for the majors and

gold, which Hummingbird has

mine in more ways than one.

the mid-tiers, but big enough

applied significant dilution

to be a substantial employer

to, but is still returning head

“We were aiming for a project

and revenue generator for us.

grades at over 3 g/t gold

with a production profile of

The Kouroussa project was a

according to Betts. “There

around 100-150,000 ounces (oz)

103

HUMMINGBIRD

were some absolutely knock

flowsheets and process plant

RESOURCES

out drill holes there and I

design and even service

think the exploration potential

providers as they are in the

is huge as well,” he says. First

same broad geographic region

gold is expected in under two

in West Africa.

AT A G L A N C E

years, when the mine will

STOCK TICKER AIM:HUM

MARKET CAPITALISATION

£101.5 million (as of June 24, 2020)

produce around 100,000 oz per

“We can take a lot of synergy

annum.

from everything we have done at Yanfolila and transport it

In addition, there exist

across to Kouroussa, which

several similarities between

should help us build the mine

Kouroussa and Yanfolila, in

very effectively. We have kept

terms of the scale of both

the same project team together

projects, the metallurgical

from Yanfolila and after the second ball mill, this is the

1 04

MINING | HUMMINGBIRD RESOURCES

105

1 06

MINING | HUMMINGBIRD RESOURCES

third build that project team

it hosts plenty of major mining

there is no need to cross land

will work on.”

companies as a result.

borders to get on-site.

A mature mining sector

For Hummingbird, Guinea

“In terms of physical security,

represents a new political

Guinea is slightly more stable

While not as mature as Mali’s

environment – which always

than Burkina and Mali at the

gold sector, Guinea is by no

takes time to acclimatise

moment. I think it’s a good

means a fledgling mining

to. However, Betts believes

time to enter, certainly in

jurisdiction. Thanks to its

this adaption comes with

terms of gold exploration

world class bauxite and bulk

no significant risk. In fact,

around the Siguiri gold

commodities industries,

working in Guinea may

belt. There have been some

the country has established

actually be smoother as the

amazing drill holes come out

infrastructure, a strong

country has its own port and

recently from the Australian

understanding of mining and

juniors and I think there is

1 07

DAN BETTS, HUMMINGBIRD RESOURCES MANAGING DIRECTOR

10 8

MINING | HUMMINGBIRD RESOURCES

going to be a lot of activity in this part of Guinea over the next 10 years.” Hummingbird is already busying itself at the Kouroussa project crossing Ts and dotting Is in terms of permitting and government approval for the change of hands. The company is in dialogue with the government and is pleased to have received early support from the authorities. “They [the government] seem very supportive of Hummingbird’s involvement and I don’t foresee any problems, so the team is now working on refining the detail and the scope of the plant.” Throughout the remainder of the year, the company plans to refine the Kouroussa feasibility study and enlarge the scope of the plant, making it more comparable to the Yanfolila operation. “We’re imagining a circa 1-1.2 million tonnes per year plant,

109

Dan Betts, Hummingbird Resources managing director

two-stage crushing, CIL gravity

presented problems due to its

while funding all other costs

circuit producing in the region

vast scale.

during the two-year period,

of 100,000 oz per year,” Betts

earning a 49% interest in the

envisions. “Hopefully we will

“It’s going to be a huge

be ready to start construction

project. Remember the first

at the beginning of next year.”

164 drill holes we did all hit

The agreement should also

mineralisation. There is so

unlock a huge amount of value

much gold there to be found,

for Hummingbird’s investors,

but we felt it needed someone

according to Betts. “When

with a longer-term mindset

ARX lists in Canada it will

Also in June, Hummingbird

to do more exploration and

be a separate entity with a

sealed an earn-in agreement

expand the project. That’s what direct look-through value for

with ARX Resources for the

ARX is doing.”

Sharing the workload in Liberia

Dugbe project (its original

project.

Hummingbird’s shareholders. And then at the end of it all,

West African asset). Liberia

Under the terms of the deal,

Hummingbird converts its

has been a tough nut to crack

ARX will spend US$10 million

51% in the project into 51% of

for the company over the past

on further exploration and

the company and maintains

five years and the project itself

commit to completing a DFS

control of the asset. I think it’s a fantastic deal.”

110

MINING | HUMMINGBIRD RESOURCES

111

In a third major piece of news

to find ways to promote the

community and healthcare. “I

flow in June, Hummingbird

industry and all the good work

think that is something to be

confirmed its membership

it does. That’s the bit of the

immensely proud of and I’m

with the World Gold Council

relationship I am most looking

looking forward to being a part

– a point of real pride for

forward to; looking at how we

of that with the World Gold

the company’s managing

can promote and be proud of

Council.”

director. “I see the Council as

the gold mining industry.” Betts is quick to highlight the

Assisting the COVID-19 effort

admirable work that the gold

In a particularly fraught

“It has many capable and

sector does around the world

time for all of its people,

respected people looking

in terms of R&D, environment,

Hummingbird has gone

the highest body in the gold industry.

11 2

MINING | HUMMINGBIRD RESOURCES

health education, including

resource expansion at

bringing in an additional

Yanfolila as one of its key

site doctor who has provided

annual targets. This has

valuable assistance to our

not changed even after the

medical team in supporting

outbreak of COVID-19 and

Hummingbird’s COVID-19

all of its implications on the

response.

ground.

“In addition, we have made

In early June, the company

donations to the Malian

announced some encouraging

government and local

drill holes from underground

health authorities, offering

drilling at Komana East, and

direct support to our local

there are hopes this could

communities with initiatives

prove up the underground

such as soap manufacturing.

mining concept at Yanfolila

We have been buying

and add long-term oz to the

soap from the community

base load feed for the mine.

soap factories previously

above and beyond in its commitments to the local

established by Hummingbird

“We’re hitting mineralisation

and supplying the local

where we were expecting and

communities to help combat

are also targeting some new

COVID-19 with greater

deposits. Nobody has done any

handwashing and hygiene.

communities in Mali, bringing

greenfields exploration here for seven or eight years, and

in additional public health

“We also continue to supply

we’ve had a couple of good hits

education initiatives while

medical equipment and are

in the early drill holes. It’s a bit

continuing to support existing

in the process of buying some

early to say but I’m optimistic

programmes, including the

testing equipment with the

we will come up with more

hugely successful market

support of the government of

good results,” Betts concludes.

garden and water projects.

Mali.”

“We have put a huge amount of

At the start of the year,

effort into driving community

Hummingbird earmarked

113

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XANA MIN

Tier 1 porphyry copper-g

1 16

MINING | XANADU MINES

ADU NES

gold projects in Mongolia

1 17

During a recent Mines and Money virtual networking event, it was suggested to managing director and CEO of Xanadu Mines Andrew Stewart that there is no better place for an exploration project to be located than Mongolia during a global pandemic. Speaking to RGN shortly after, Stewart reiterates the minimal impact COVID-19 has had on life in Mongolia – the vast and sparsely populated central Asian country where Xanadu is advancing three district scale copper exploration projects in the South Gobi Desert. “I was in Mongolia in January on a site visit with our new chairman [Colin Moorhead] and not long after that we started to see some cases reported out of Wuhan in China. Mongolia quickly closed its borders in response to the outbreak,” says Xanadu’s boss. Mongolia has reported just 140 cases of COVID-19 and 0 deaths at the time of writing in late May, and is one of the only places in the world where society has functioned almost as normal since March, bar the closure of schools.

Getting ahead of the game

its second tier Red Mountain

As a result of Mongolia’s swift

having signed an earn-in

response and subsequent

agreement with the Japan

containment of the virus,

Oil, Gas and Metals National

Xanadu has been able to

Corporation (JOGMEC) for

continue its operations while

the project’s development in

other mining companies

March.

porphyry copper-gold project,

around the world have been forced to step back due to

While on-ground exploration

government-directed lockdown

activities have commenced

orders of varying length and

at the highly prospective Red

severity.

Mountain project, Xanadu has also strived to comply

11 8

In particular, the company

with stringent health and

has been very active of late at

safety procedures to reduce

MINING | XANADU MINES

the potential of the virus

The first half of 2020 included

and definition, Xanadu

spreading on site.

a strategic refresh and

creates liquidity events for

a corporate restructure,

its shareholders and exits

“Our number one priority

providing a laser focus for a

those projects, refreshing its

is health and safety for our

company that has in the past

exploration portfolio to do it

employees and contractors in

been criticised for getting

all over again.

the communities we work in,

distracted from its core

so we have implemented a few

business.

health and safety programmes

Linked to this refresh, nonessential activities in 2020 have

in light of COVID-19. In

Xanadu’s strategy is now

been cancelled or deferred

addition, while ensuring the

clearly that of an exploration

by Xanadu’s leadership

operational integrity of the

company, described as looking

and several cross-control

business, we’ve also been

for globally significant copper-

procedures relating to cash

proactive in making corporate

gold porphyry orebodies in

flow management have also

decisions.”

Mongolia. Following discovery

been implemented. One of the

119

Andrew Stewart, Xanadu Mines managing director and CEO

targets set by the refreshed

globally, so it’s important we

metals’, according to Stewart –

board of directors was a 35%

put that plan into action,”

in delivering long-term carbon

reduction in administration

Stewart stresses.

emission reductions in line

costs in 2020, which would of US$1.3 million on the same

The king of all metals

outlay in 2019.

One unintended effect of

in a range of green energy

the COVID-19 outbreak

applications - from electric

“However, there is still

has been the portrayal of a

vehicles and the lithium-ion

considerable uncertainty in

rapidly decarbonising world

batteries powering them to

the near term environment

following the onset of wide-

wind turbines and solar panels

and we don’t fully understand

scale economic lockdowns in

- has been well documented

what the magnitudes of the

March, and this has further

in recent years, but Stewart is

forward capital investment

highlighted the importance

keen to stress the effectiveness

decisions are going to be

of copper – ‘the king of all

of copper in medical

equate to considerable savings

120

with the Paris Climate goals. The importance of copper

MINING | XANADU MINES

applications, particularly

surgical equipment in my

in preventing the spread of

view.”

deadly bacteria and viruses like COVID-19.

In addition, an early-stage US

X ANADU M INES

AT A G L A N C E

Government-funded study “Another thing the virus has

showed that the virus that

shown us is that we should be

causes COVID-19 remained

moving towards copper in all

viable for up to two to three

medical equipment. Stainless

days on plastic and stainless

steel is often used in medical

steel surfaces, compared to

settings but the material has

just four hours on copper.

many holes that bacteria and superbugs can hide in. Copper

With governments around

just doesn’t have that structure

the world responding to

so it’s a better material for

the economic threat posed

STOCK TICKER ASX:XAM

MARKET CAPITALISATION

US$19.5 million (as of May 22, 2020)

121

1 22

MINING | XANADU MINES

by the COVID-19 pandemic with debt-laden stimulus packages, Xanadu is aiming to position itself strongly for an uptick in the copper market, particularly with its flagship Kharmagtai copper-gold project.

Marching on at Kharmagtai The company delivered a 400% increase in contained copper and a 249% increase in contained gold within the open cut resource at Kharmagtai between 2015 and 2018, with the current mineral resource estimate standing at 598 million tonnes (Mt) containing 1.9 Mt of copper and 4.3 million ounces (Moz) of gold, with a high grade core of 54 Mt at 0.86% copper equivalent. Recent drilling in Q1 further demonstrates the existence of extensive high-grade sections at Kharmagtai, after a pivotal drill intercept at Stockwork Hill revealed that the higher grade zone extends to the East and remains open in that direction.

123

124

MINING | XANADU MINES

is the Tier 1 nature of the

Mongolian drilling excellence

project. We can demonstrate

Since it started exploration

the scale and we have that

drilling in South Gobi,

but continuing to grow the

Xanadu has spent time

high-grade is a focus for

building a local supply chain

us because that’s the early

and the company has been

payback from that material.

vindicated in its decision to

It shows that there’s not only

work with Mongolian drilling

material coming to surface

contractors, not least because

and the open cut pit is going to

it has been able to continue

drive the underground in the

operating during the time that

future.”

Mongolia closed its borders

“One thing we are demonstrating at Kharmagtai

in response to the COVID-19 Mineralisation at Kharmagtai

outbreak.

is hosted by very old terrain that has been dismembered

“We have capacity with a team

by faults, which has meant

in Mongolia and a company

that Xanadu has had to piece

called Litho. They’ve been

the geological puzzle back

able to drill holes down to

together in order to build out

1,500 metres with no issues.

the resource in recent years.

In 25 years of experience I haven’t experienced crews that

However, Stewart says the

are more talented and have

geological team has now built

the skill levels to drill some

up what the business calls

of these holes. They’ve been

‘brownfields knowledge’ at

amazing and provided very

Kharmagtai. “This means the

cost-effective exploration.”

risk of drill holes is reduced, so we can be a lot more predictive

Xanadu completed a scoping

with our drill holes. That then

study for the open pit segment

feeds into very low discovery

of the Kharmagtai project

Spotlight on

Andrew Stewart

Dr Andrew Stewart is an exploration geologist with over 15 years’ experience in mineral exploration, primarily focused on project generation, project evaluation and exploration strategy development throughout Asia and Eastern Europe. Andrew has particular expertise in porphyry copper-gold and epithermal gold deposits, but has worked across a diverse range of commodities. He holds a BSc (Hons) from Macquarie University and a PhD from the Centre of Ore Deposits and Exploration Studies at the University of Tasmania. During his time at Ivanhoe Mines and Vale, Andrew held various technical and management positions in Mongolia and Indonesia and has been involved in several greenfields discoveries. After providing technical and programme management for Vale in Indonesia and Mongolia, Andrew joined Xanadu Mines as chief geologist leading the gold and base metals project generation and evaluation team in Mongolia. Andrew is now managing director and CEO of Xanadu Mines and chairman of the safety, health and environment committee.

costs.”

125

in April 2019, which was an important step in depicting a viable 10-year open cut project with a low strip ratio, along with a healthy NPV and IRR. This undertaking will provide the basis for something special, according to Stewart. â&#x20AC;&#x153;The rationale of the scoping study was purely to show that we already have a project and now can take on a lot more risk as we try to make this into a Tier 1 asset. At the time of the study, the resource was only a quarter drilled, so the scoping study has essentially de-risked our expansion drilling.â&#x20AC;? Throughout the rest of the year, Xanadu will continue to progress and fund exploration drilling at Kharmagtai, which is located approximately 265 km West of the Red Mountain project. In midMay, the company reported that exploration activities had commenced at Red Mountain in conjunction with JOGMEC.

126

MINING | XANADU MINES

127

Teaming up with JOGMEC

expenditure over the next four

situation that requires a

years.

funding solution to help us

The on-ground programme

through and working with a

has been designed to collect

“While Kharmagtai is the

great group like JOGMEC is a

baseline data over the large

engine room for our growth,

way of doing this.”

district to prepare drill targets,

this JV will allow us to

in anticipation of the discovery

progress Red Mountain in the

As an investment destination

of another Tier 1 copper-gold

background at the same time

Mongolia has had a storied

porphyry deposit.

while protecting dilution of the

history down the years,

company,” Stewart says.

but its reputation has been

Meanwhile, the JV itself will

1 28

unequivocally enhanced by

allow JOGMEC to earn up to

“We’re a small company

Rio Tinto’s construction of the

a 51% beneficial interest in

and have our hands on two

world-class Oyu Tolgoi copper-

the project by funding up to

potential Tier 1 assets in the

gold mine in record time.

$7.2 million in exploration

South Gobi. This is a rare

MINING | XANADU MINES

Oyu Tolgoi was a landmark

change as more mining

in a cornerstone investor for

development that helped

projects go through. We are

Kharmagtai within the next 18

Mongolian authorities

happy working with Mongolian months.

grasp the potential of its

stakeholders to develop these

underexplored copper belts in

projects and I personally feel

“However, there is a lot of

generating strong tax revenues

that working here is easy.”

exploration to do in the

through further mining

meantime and our idea is to

projects. “I think mining is

The next stage

now a dominant part of the

Overall, Stewart is very pleased

a Tier 1 asset, and we have a

economy here and Mongolia

with Xanadu’s progress in

clear and concise strategy to

relies on it.

advancing the Kharmagtai

do that. It’s about putting the

and Red Mountain projects

funding in place now.”

“There is still a slight

during the last 12 months and

perception issue associated

feels that the next stage for the

with Mongolia but this will

company will involve bringing

really advance Kharmagtai to

129

( SAMA RES

A decade after discovering a new base metals compl

13 0

MINING | SAMA RESOURCES

(SOURCES

lex in Côte d’Ivoire, Sama continues exploring

1 31

132

Consulting geologist Marc-Antoine Audet first arrived in Côte d’Ivoire in 1994 as part of a nickel laterite exploration team for former Canadian natural resources firm Falconbridge. He was to spend four years in the country, serving as senior project geologist and director of operations for Falconbridge, during which time he became aware of significant base metals mineralisation in the Achaean craton just West of the Ivorian segment of the Birimian Greenstone Belt – which is predominantly understood as the prolific gold system underpinning West Africa’s mineral wealth. After continuing his exploration career with Falconbridge and its subsequent acquirer Xstrata, Audet returned to Côte d’Ivoire in 2009 and formed Sama Resources to focus on the nickel-copper sulphide opportunities he identified in the 1990s.

The company’s Samapleu

The surface Samapleu nickel-

Nickel-Copper project is

copper-PGE mineralisation

located approximately 600 km

is composed mainly of

Northwest of Côte d’Ivoire’s

disseminated sulphide

economic capital Abidjan,

mineralisation within a

adjacent to the Ivorian-Guinean

well preserved pyroxenite.

border and immediately South

Numerous high-grade nickel,

to the world class nickel-cobalt

copper and PGE veins and

laterite deposits of Sipilou and

stringers are cross-cutting the

Foungouesso.

mineralised pyroxenite.

The mineralisation at Samapleu

“All the metallurgical tests that

is typical of a layered pipe-like

we have done so far, especially

intrusion or conduit‐hosted

with SGS in Canada and with

nickel deposits, similar to

CVMR, have shown that the

intrusions that host some of the

recovery of the ore is very

world’s largest nickel‐copper

good. If we wanted to produce a

In a tumultuous first decade, the fledgling company encountered myriad external challenges including civil wars in Côte d’Ivoire, the Ebola crisis of 2013-16 and a severe slowdown in the resources sector which slashed funding available to junior explorers. However, Sama not only survived these existential threats, but succeeded in discovering a new geological intrusion called the Yacouba Complex, which shows potential for hosting high-grade nickel-copper-cobalt and palladium mineralisation in pods that are yet to be discovered. TSXV-listed Sama has been chasing these massive sulphide reservoirs over the last 10 years, undertaking a series of geophysical and exploration drilling campaigns to enhance its understanding of the host mineralisation at depth.

sources such as the Norilsk

concentrate, we can produce a

deposits in Russia and the

10-11% nickel concentrate and

Voisey’s Bay Mine in Canada.

20% copper concentrate, but we want to go further than that.”

“The ore at Samapleu is president and CEO of Sama.

Publishing the PEA

“Even though it was formed

In typical fashion, Sama

two billion years ago, the

triumphed in the face of

ore has not suffered any

adversity in publishing

alteration, metamorphism or

a preliminary economic

other deterrent activities that

assessment (PEA) for the

sometimes you see in other

Samapleu project in May, while

deposits around the world.”

the world (and Côte d’Ivoire)

very beautiful,” says Audet,

was in the grip of a global pandemic.

MINING | SAMA RESOURCES

1 33

MA AUDET AND PROFESSOR PICARD FROM UNIVERSITY OF FRANCHE-COMTÃ&#x2030;

1 34

MINING | SAMA RESOURCES

The main purpose of the PEA,

“We saw the opportunities

which was prepared by DRA

available with the technology

Global in Canada through DRA

a couple years ago and worked

Met-Chem, was to underline

hard with CVMR to adapt the

the value of the project by

process to the ore that we have

advertising the company’s

at Samapleu,” Audet explains.

ability to produce nickel and iron powders ready for direct

The PEA indicated that

use in various industrial

Samapleu will have an annual

applications.

production rate of 3,900 tonnes of carbonyl nickel powder,

“The idea was to use a well-

8,400 tonnes of carbonyl iron

known technology that

powder and 14,100 tonnes of

was jointly enhanced by

copper concentrate over a 20-

Falconbridge and CVMR in

year mine life.

the early 2000s to produce an iron and nickel nano-powder.

In addition, the study

Thereafter, Toronto-based

estimated a pre-tax NPV of

CVMR further developed on their own the technology. “Using this technology, we can

SAMA RESOURCES AT A G L A N C E

produce a final product which would be sold at 100% value from the project site. This is exciting because instead of producing an intermediate concentrate that we would

STOCK TICKER

have to sell to smelters around

TSXV:SME, OTC.PK:SAMMF

the world, at let’s say 70% of

MARKET CAPITALISATION

the LME value, now we will produce something that will be sold directly to market.

US$29 million (as of June 11, 2020)

1 35

“Typhoon™ is an extremely powerful tool that has allowed us to identify several good zones for follow up drilling, which we are doing now” Marc-Antoine Audet, Sama Resources director and CEO

1 36

US$616 million and an IRR

and stringers the company has

of 32.5% against an initial

identified at surface.

capex of $282 million and operational costs of $23.96

Throughout the campaign,

per tonne milled, underlining

Sama has utilised an

the economic viability of the

exploration system called

project.

Typhoon™, having partnered

Turning on Typhoon™

with its proprietor HPX TechCo in October 2017. HPX provides solutions to base

Sama’s 2020 exploration

metals explorers and is owned

drilling campaign aims to

by Ivanhoe Mines founder

seek out the massive sulphide

and mining magnate Robert

reservoirs at depth that host

Friedland. Its Typhoon™

the high-grade nickel-copper-

system is an IP and EM tool

PGE massive sulphide veins

providing depth penetration

MINING | SAMA RESOURCES

Marc-Antoine Audet, Sama Resources director and CEO up to five times deeper than

to conduct 6,000 metres of

Samapleu, which is where we

other equipment.

drilling across three targets by

found mineral resources near

the end of the first half of the

surface.

“This extremely powerful

year, using HPX’s Typhoon™

tool has allowed us to

technology. However, the

“We have a very strong EM

identify several good zones

pandemic has necessitated

target 750 metres below the

for follow up drilling, which

a reduced workforce in

Samapleu current resources

we are doing now,” says

line with social distancing

that still needs to be drilled.

Audet. “We are exploring

measures, which has resulted

We are also currently drilling

almost 50 km of strike length

in a slowdown in exploration

the targets that we defined

along the complex and

activity.

at a newly discovered area

every time we drill targets

called Yepleu, 25 km Southwest

defined by Typhoon™, we hit

Nonetheless, at the time of

of the original discovery at

mineralisation.”

writing Sama had completed

Samapleu. At Yepleu we are

around 4,000 metres of drilling

drilling a hole targeting a

Prior to the outbreak of

and was closing in on its H1

very strong EM target at +850

COVID-19, Sama planned

target. “We have drilled below

137

metres from surface and it is

Commenting on

Samapleu project and so

ongoing.”

Sama’s corporate social

when he returned with Sama

responsibilities in the

in the 2000s, he was able to

region, Audet highlights

call on the same individuals

the importance of local

from his Falconbridge days,

Despite owning its own drill

employment in Côte d’Ivoire,

in particular exploration

rigs, which allows Sama to

where one employee can

manager Bakayoko Bouake,

be flexible and efficient with

support about 20 people on

who is Sama’s representative in

its exploration campaigns,

average. “With this in mind,

Côte d’Ivoire.

the company is proud to

we are really careful with

support the Ivorian economy

regards to giving opportunities

“We’ve been working together

and businesses through local

to local people.”

for at least 20 years now,

Investing in Côte d’Ivoire

procurement of goods and services for the camp.

1 38

so there are very strong Back in the 90s, Audet was

bonds between us and the

based just North of the

local community. It’s a big

family and we don’t have any

the geology, the environment,

recognition of the company’s

expatriates. Everything is run

the social side and more.

local work by the Ivorian head

by Ivorians – the accountants,

of state. “It’s important that we have

“We want to continue doing exploration with the aim of locating these accumulations of high-grade nickelcopper sulphides at depth”

a strong presence in Abidjan

In October 2019, Sama

but also on the exploration

received the highest

site, which allows us to be

distinction award from

efficient and close to the

Prime Minister Amadou Gon

people.”

Coulibaly for the quality of its work supporting the

As alluded to by Audet, Sama

local community around

has elicited support from

the Samapleu project.

the Ivorian government

Audet says it was a pleasant

through its conduct over

surprise to receive this

the last decade, and this is

high level government

exemplified by the recent

140

MINING | SAMA RESOURCES

acknowledgement, and reveals

and power supply.

that two more ministers have

“This is where we are and that is one of the goals, to

since visited the site to witness

“We also want to continue

find these accumulations.

first-hand Sama’s exploration

doing exploration with

We believe it is there, the

progress.

the aim of locating these

geology of the system supports

accumulations of high-grade

this and we will continue to

nickel-copper sulphides

chase those massive sulphide

at depth. What we have

reservoirs,” Audet concludes.

Searching for the source Over the next 12 months,

discovered at surface is only

Sama aims to continue fine

a small shoot of massive

tuning its studies for open

sulphides. But we believe they

pit production at Samapleu

have to originate from a source

and plan for additional

at depth because they are cross

metallurgical studies while

cutting surface mineralisation

holding discussions with the

very sharply.

government relating to off-site infrastructure, including roads

1 41

cvm

Cutting-edge metals refining tec

C O R P O R

1 42

MINING SERVICES | CVMR CORPORATION

chnologies for high-tech industries

R A T I O N

1 43

KAMRAN M. KHOZAN, CVMR® CHAIRMAN AND CEO

CVMR Corporation (CVMR®) is a privately held, multinational metal refining technology provider that was established back in 1986 and is based out of Toronto, Canada. Over the last 34 years the company has progressed into a world leader in metal powder production used in rechargeable batteries, automotive manufacturing, 3D printing, super alloys, electronics, medical instruments and many more high-tech applications. CVMR®’s innovative refining processes are based on what is known as vapour metallurgy, with the company’s name and trademark an acronym derived from Chemical Vapour Metal Refining.

144

MINING SERVICES | CVMR CORPORATION

These processes do not melt

methods used by Norilsk or

the metals as is done in the

Vale,” says Kamran M. Khozan,

usual smelting processes.

chairman and CEO of CVMR®.

This technology can be utilised to refine no less

Clean, green metals refining

than 36 metals including

In today’s world, there is an

nickel, iron, lithium, cobalt,

increasing need for metals

magnesium, manganese,

to be processed efficiently

platinum group elements, rare

and in an environmentally

earths, vanadium, copper,

clean manner, and this

tantalum, gold and also in

need reinforces the value

bold applications such as the

of CVMR®’s processes and

manufacturing of graphite and

technologies.

graphene from CO2. The company’s plants create

Vapour metallurgy

The company is perhaps most

no air, water or soil pollution

accomplished in refining

and are hermetically sealed,

nickel laterite from sulfide

with all the gases (reagents)

and laterite ores and can do

used in the vaporising

so at a lower operational cost

processes recycled. CVMR®’s

than other prevailing refining

technologies are not only

methods used to produce high

neutral to the environment,

value products in a variety of

but also considered one of

industrial products.

the safest refining processes by the United States’ EPA and

Three other major

Germany’s TUV.

CVMR®’s patented vapour

corporations use the chemical

metallurgy processes refine a

vapour refining method:

For these reasons amongst

range of metals by chemically

Norilsk in Russia, Vale/Inco in

several others, CVMR® has

vaporising them close to

Wales and BASF in Germany.

gained a leading position

atmospheric pressure and at

“CVMR®’s technologies are

in metal refining and is

relatively low temperatures.

about 30 years ahead of the

recognised as a company

1 45

“The industries that use metals in their manufacturing process will not be operating the same in the next 10 years. Those manufacturers who do not pay attention to this revolution will not be here in 10 years’ time” Kamran M. Khozan, CVMR® Chairman and CEO

146

offering unique and valuable

globally significant scientific

solutions to the mining and

and commercial projects,

metal refining industry.

working closely with leading academics, government

CVMR® builds its refining

institutions and major

and manufacturing plants on

multinational corporations

a modular basis, enabling a

to deliver cutting-edge metal

substantial degree of flexibility

refining results.

which allows a plant to be built and to grow in size gradually.

Tier 1 clients

In May 2018, CVMR® and Interoceanmetal Joint Organization (IOM)

Throughout the last four

signed a Memorandum of

decades, CVMR® has secured

Cooperation that stipulated

lucrative contracts for

the use of CVMR®’s proprietary

MINING SERVICES | CVMR CORPORATION

technologies for the refining

The organisation also

printing of various three-

of polymetallic nodules (PNs)

works closely with several

dimensional metal objects,”

from the Pacific Ocean floor.

international governments,

says Khozan.

including Russia, South Africa IOM was the first international

and China, offering research

“The industries that use metals

organisation to be awarded

and development services as

in their manufacturing process

an exploration contract by the

well as consultation on designs

will not be operating the same

International Seabed Authority

for various metal refining

in the next 10 years. They

in a 75,000 km² section of

plants.

will be much more efficient,

the Northeast Pacific Ocean.

environmentally neutral and

CVMR®’s technology allows

On the commercial mining

allow customers to have their

for the mining and refining

side of the business, CVMR®

own unique ideas incorporated

of the PNs onboard a ship,

has part ownership in Sama

into the objects they buy.

reducing the production

Resources’ Samapleu Nickel-

cost of these minerals which

Copper project in Côte d’Ivoire

“Graphite and graphene

would otherwise need to be

and has licenced its nickel

will take centre stage in the

transported to land.

refining technology to Sama

manufacture of the equipment

for $5 million. The two have

we use. This is truly a radical

CVMR® has previously been

worked closely to adapt

shift in our understanding of

asked to manufacture US

CVMR®’s refining processes

structures, which have up to

dollar money plates by the

to the ore at Samapleu and

now remained static and rigid.

US Department of Treasury

CVMR also helped DRA Global

Those manufacturers who

and US Mint, under the strict

Engineering to complete

do not pay attention to this

supervision of Treasury

Sama’s PEA.

revolution will not be here in

officials. It also counts

including the Canadian

The future of metals manufacturing

Department of Defense

“We are a generation that

and the US Departments of

has observed revolutions

Defense and Energy.

in telecommunication,

several other governmental departments as clients,

10 years’ time.”

information dissemination technologies, robotics and

abj

147

148

MINING | JOSEMARIA RESOURCES

JOSEMARIA RESOURCES The latest large scale resource project to be delivered by the Lundin Group

1 49

The Lundin Group was founded by Swedish oil and mining entrepeneur Adolf H. Lundin over 40 years ago and is today comprised of 13 publicly traded companies dotted around the global resources sector. In the beginning, the Group was driven forward by Adolf’s passion for natural resources and his desire to supply the world with key commodities. In order to do this, he quickly learned that you need to find large, high quality resources and bring them into production wherever they are to be found in the world and no matter how unfavourable the jurisdiction might appear to be.

“The Lundin Group modus

the business, the Lundin Group

operandi is to find tier 1 assets

has production out of Norway,

that benefit local communities.

Canada, Nigeria, France,

We’re not scared to go to any

Malaysia and Iraqi Kurdistan.

jurisdiction, as long as the local country wants to do it

“In Argentina, we’ve had ups

together. This belief has taken

and downs but my father went

us across the world,” says

there in the early 90s and

Adolf’s grandson and current

found success and we never

president and CEO of Josemaria

left. Overall, it’s a Group where

Resources, Adam Lundin.

a lot of people came together

A truly global resources group

who were passionate about making the world a better place and doing that through

The poster child of the

the extraction of natural

Group’s success in the mining

resources.”

sector is Lundin Gold, after it brought into production the

The Lundin Group’s early

multi-million ounce Fruta del

success in Argentina goes back

Norte gold mine in Ecuador

to the discovery of the Veladero

– a jurisdiction that precious

gold deposit in San Juan

few Western companies had

Province. The project was soon

explored in prior to Lundin’s

acquired by Homestake Mining

discovery.

after fighting off a hostile bid by Barrick, who ultimately bought

Elsewhere, the Lundin

Homestake to get their hands

Group has been involved in

on the prized deposit. Veladero

developing one of the largest

has remained one of the largest

copper-cobalt mines in the

gold mines in the world over

Democratic Republic of Congo

the last two decades.

through Lundin Mining, which

ADOLF H. LUNDIN, LUNDIN GROUP FOUNDER

150

currently operates mines in

On the back of this divestment,

Brazil, the US, Portugal, Chile

the same Lundin Group

and Sweden. On the oil side of

exploration team decided to

MINING | JOSEMARIA RESOURCES

151

stake some ground on the Chile-Argentina border, not far from the Veladero deposit, at the turn of the century. The subsequent exploration campaigns yielded three grassroots discoveries – one being the Josemaría coppergold deposit in 2004. The three discoveries are in the same land package and are located within 15 km of each other, but have since been spun into three separate companies within the Lundin Group. “Josemaría is currently the most defined project. We feel we’ve found the boundary of the resource, so the view now is to get something into production and maybe we can later tie in the other two deposits to form a district that will allow us to be mining here for 50+ years,” says Lundin.

Faith in Argentina In years gone by, international mining companies have been wary of investing in

15 2

LUKAS AND ADAM LUNDIN WITH ARGENTINA PRESIDENT ALBERTO

MINING | JOSEMARIA RESOURCES

an emerging market like Argentina, especially while some of its provinces receive low rankings for attractiveness as a mining jurisdiction. However, it has never been the remit of the Lundin Group to be put off by warnings of this nature. As we have already learned, if a project is large and of a high quality, the group will commit to its development. In the case of San Juan Province, where Josemaría is located in the shade of the resplendent Andes mountains snaking through Northern Argentina, mining is entrenched in the political and economic fibres of the region. “San Juan is where we made the Veladero discovery, so it has producing mines and they understand mining and how it can help benefit the local economy. Before Veladero came into production, San Juan was one of the top five FERNÁNDEZ (MIDDLE), JAN 2020

poorest provinces in Argentina

153

and now it’s one of the top five

At the federal level, Lundin

wealthiest, because of those

and his father Lukas managed

royalties and benefits attached

to arrange a meeting with

to the Veladero mine.”

President Alberto Fernández during a visit to Buenos Aires

In addition, Josemaria’s

in mid-January. “To be able

experience working with the

to meet the president at short

different layers of government

notice and get in front of key

in Argentina thus far has been

government officials shows

overwhelmingly positive.

their willingness and their

On the provincial level, the

want to get mining going.

company has been in close contact with the minister of

“This is their resource. We

mines for San Juan Province,

are happy to help put it into

who was recently appointed

production but they will be

federal minister of mines,

biggest benefiters, followed

reporting directly to the

by our shareholders,” Lundin

president.

asserts.

J OS E M A R I A RES O U R C ES

Entering a new era

AT A G L A N C E

Following the publishing of a robust pre-feasibility study (PFS) at the end of 2018, Josemaria made the decision to plough on with the bankable and full feasibility studies. And so, last year became a

STOCK TICKER

TSX:JOSE, OMX:JOSE

MARKET CAPITALISATION

US$87.2 million (as of April 2, 2020)

1 54

transformational year in the development of the company and the project. The company’s name was changed from NGEx Resources

MINING | JOSEMARIA RESOURCES

155

1 56

MINING | JOSEMARIA RESOURCES

(the original entity that made the three discoveries) to Josemaria Resources and Adam was brought in to head up the refreshed organisation, along with several other additions to the board and management team. “We strengthened the board by bringing in Paul Conibear, the previous Lundin Mining CEO. We have Ashley Heppenstall, who is former Lundin Petroleum CEO. We also brought in Ron Hochstein who’s currently running Lundin Gold.” Adam’s father Lukas is also on the board of directors alongside Jack – Adam’s brother and Lukas’ son. Alongside the familial connections, the board retained the services of renowned geoscientist Wojtek Wodzicki - who made the initial Josemaría discovery. “I think it’s important to keep that continuity,” Lundin adds. Christina Batruch rounds off Josemaria’s experienced board

Spotlight on

Adam Lundin

Adam Lundin was appointed president and CEO of Josemaria Resources in September 2019, succeeding Dr. Wojtek Wodzicki, who had been at the helm of the company for over 10 years. Adam is the grandson of Adolf Lundin, the man who founded the Lundin Group over forty years ago. Following in the footsteps of his grandfather and father, Adam chose a career in natural resources and has accumulated several years of experience in capital markets and public company management across the sector. Working across the Lundin Group, Adam is also CEO and a director of Filo Mining Corp and a director of NGEx Minerals and Africa Energy Corp.

157

“We have big camaraderie in the Lundin Group. All the companies are independent from one another, but we learn from each other and we’re always there to support each other”- Adam Lundin, Josemaria Resources president and CEO

1 58

team and is responsible for

Going back to the 2018 PFS,

helping guide the company’s

Lundin was pleased with

sustainability strategy.

the anticipated economic metrics for the Josemaría

On the management side,

project, particularly the capital

Ian Gibbs was brought in as

expenditure (capex) estimate

chief financial officer owing

of US$2.75 billion. This may

to his previous project finance

seem like a large figure in

experience from the oil side

comparison to Josemaria’s

of the Lundin Group and

market cap, but this is a large

with Lundin Gold. With an

scale project that requires

extensive history across global

large scale investment.

engineering companies, Arndt Brettschneider, VP Projects,

Furthermore, Josemaría’s

was also recruited to lead the

production profile is also

feasibility study.

attractive. The operation will

MINING | JOSEMARIA RESOURCES

produce 125,000 tonnes per

Lundin Mining agreed when it

field programme that included

annum of its main commodity

bought the Candelaria mine in

condemnation, geotechnical

copper over a 20-year mine

Chile, as a way of financing the

and water drilling.

life, along with 230,000 ounces

capex for Josemaría.”

of gold and 790,000 ounces of silver per annum over the same period.

Ploughing ahead in 2020

Josemaria is blessed with a supply of groundwater just 1.5 km away from the project – a

The first quarter of 2020

considerable benefit given that

“The gold production is

has been about polishing

just across the border, Chilean

significant and accounts for

elements of the PFS ahead of

authorities insist on miners

around 25% of our revenue

the publish of a full feasibility

building desalination plants

of the mine life. That gives us

study and building towards

for their water supply.

flexibility when it comes to

applying for environmental

project finance. Maybe we will

and social permits. The

After proving its main source

look to the streaming deal that

company conducted a large

of water supply, the company

159

was about to test another basin

times. We’ve collected a lot of

Josemaria has also been

as a future supply source until

our baseline studies, so we’ll

monitoring the local

Argentina was placed in full

be in a good position to apply

environment in tandem with

lockdown to quell the spread

for permits in Q4.”

BGC Engineering over the last

of COVID-19 (coronavirus), so the work was cut short.

1 60

five years, specifically focusing On the social side, Josemaria

on minimising any potential

has engaged with the Lundin

impact on a glacier around

“The original plan before

Foundation and started to run

seven km away in the Andes.

COVID-19 was to finish the

social programmes within

feasibility and publish it in

the community. One aim is

Q3. I think it’s better to start

to eventually assist water

guiding the market towards

treatment facilities in the local

A standout company and project

the second half of the year,

city of San Juan.

The Lundin Group is bullish

just to give us some flexibility

about copper and a believer

as we adapt to these changing

in the forthcoming electrical

MINING | JOSEMARIA RESOURCES

revolution as the world looks

of experience in different

Despite the global

to shift away from fossil fuels,

geographical contexts and

resources sector facing an

and Josemaría is a large scale

economic cycles.

unprecedented squeeze from

mine that is going to stand

the coronavirus pandemic,

out in an environment where

“Lundin Gold was one of

Lundin is quietly confident

not many copper projects of

the first projects we built by

that Josemaria can emerge

an appropriate scale for the

ourselves and we are hoping

stronger. “Downturns is when

projected demand increase are

Josemaria is the next one.

we benefit the most as a

coming to market.

We have big camaraderie in

Group. We can push projects

the Lundin Group. All the

forward and retain key talent

Josemaria the company also

companies are independent

where other companies are

stands out in the junior space,

from one another, but we

sitting idle.”

as its part of a much larger

learn from each other and

family of natural resource

we’re always there to support

companies with decades

each other,” Lundin exclaims.

1 61

16 2

EVENTS | MINES AND MONEY ONLINE CONNECT

reports live from a hugely successful online conference series 1 63

In any given â&#x20AC;&#x2DC;normalâ&#x20AC;&#x2122; year, the international mining community would expect to coalesce on a regular basis at the multitude of conferences and roadshows put on by events teams such as Mines and Money. However, 2020 has been far from normal. The COVID-19 pandemic has wreaked havoc on the mining events calendar, with postponements and cancellations a necessary outcome as the world comes to terms with restrictions on travel and large-scale gatherings. For the past 18 years, Mines and Money has run a busy schedule of successful events around the world that have brought miners and the investment community together, but this year the organisers have been pressed to recalibrate their platform along digital lines to provide the same service. The two-part Online Connect series kicked off in the last week of June and aimed to provide a virtual environment for information sharing and deal making in these turbulent times.

164

Asia-Pacific Mines and Moneyâ&#x20AC;&#x2122;s maiden digital conference event of the lockdown period took place from June 23-25 and brought together investors from Hong Kong, Singapore, Mainland China, Australia, Japan and Korea. The Asia-Pacific (APAC) show welcomed over 1,500 attendees not just from the aforementioned countries but from more than 60 different nations. Those delegates heard from 126 speakers, including project updates from 40 mining and energy companies, who between them requested more than 2,099 meetings across the week. The show was opened by Queensland Government Minister for Natural Resources, Mines and Energy Anthony Lynham, who encouraged investors to continue being active in Queensland and across Australia.

EVENTS | MINES AND MONEY ONLINE CONNECT

1 65

ANTHONY LYNHAM, QLD MINISTER FOR NATURAL RESOURCES, OPENS DAY ONE OF ONLINE CONNECT APAC

“Queensland’s resources

three with a speech from

rich resource base to deliver

sector has fared better than

newly minted Minister for

the products of the future.

many others as economies

Regional Development and

Together we can harness our

worldwide struggle,” he said.

Manufacturing Glenn Butcher.

strengths to build a stronger

“Oil and coal prices have

state economy,” he said.

taken a massive hit during

Butcher reminded the

this pandemic. Despite this,

audience that Queensland

Queensland continues to

remains a safe, trusted and

attract resources investment.”

friendly supplier of key

The Queensland Government

products for the world’s

Europe, the Middle East, Africa and the Americas

economy.

After a hugely successful

and Trade and Investment

166

APAC event, Mines and

Queensland was the show’s

“Poised, ready and waiting

Money delivered another

principal partner, and helped

our manufacturing sector

three-day digital conference

close the conference on day

is eager to capitalise on our

the following week, this time

EVENTS | MINES AND MONEY ONLINE CONNECT

RONALD-PETER STOEFERLE REVIEWS THE IN GOLD WE TRUST REPORT, EMEA DAY ONE

FIVE-STAR DISCUSSION ON THE GOLD BULL MARKET, EMEA DAY TWO

1 67

KITCO EDITOR NEILS CHRISTENSON INTERVIEWS FRANK HOLMES ON EMEA DAY TWO

focusing on investors from

“Gold stabilises your portfolio

Europe, the Middle East, Africa and insures your losses on the

Neils Christenson on day two,

and the Americas (EMEA).

equity side,” he said. “Gold

legendary investor Frank

is now outperforming the

Holmes discussed the impact

Day one of EMEA started

stock market. We can also

of COVID-19 on the mining

with a timely review of the

see strength versus the bond

investment landscape.

recently published In Gold

market and mining stocks are

We Trust Report by its author

now outperforming gold.”

Ronald-Peter Stoeferle. Among

1 68

chat hosted by Kitco editor

He observed an ‘avalanche of new millennial investors’

several reasons for the rising

The arrival of a strong gold

during the pandemic and

gold price over the last 18

bull market was a constant

more speculative investors

months, Stoeferle highlighted

point of discussion throughout

buying gold stocks. However,

an erosion of trust in central

the three-day show, along

the biggest positive for gold

banks and escalating fiscal

with the impact of COVID-19

stock investors has been the

stimuli to support creaking

on the mining sector this

operative word ‘free cash flow’,

economies.

year. In a fireside afternoon

according to Holmes.

EVENTS | MINES AND MONEY ONLINE CONNECT

“After COVID-19, the S&P 500’s

Since lockdowns came into

day during the EMEA show. It

free cash flow went negative,

effect around the world back

was therefore no surprise to

but not gold – it went positive.

in April, Mines and Money

see attendees from the show

Now you are seeing more

has hosted weekly video

migrate over to 5@5 in great

interest in gold stocks,” he

networking sessions called

numbers to round off the day’s

said.

5@5. The basic premise of 5@5

proceedings.

is to keep up the conversation “Barrick and Newmont have

in the resources sector

The final instalment of the

been very loud in saying they

by bringing together five

trilogy of 5@5 sessions was

have free cash flow available

renowned industry figures in

delivered in partnership with

this year [hence the ability to

front of a live audience.

resources investment expert

pay dividends to generalist

team Dundee Goodman

investors] and I think we’ll go

The sessions have proved to

Merchant Partners, and

into a nice run for the next

be incredibly popular over the

featured no less than five

three to five years where gold

last four months, so the Mines

mining companies and two

stocks will outshine the S&P

and Money team decided to

renowned resources stocks

500.”

run a 5@5 at the end of each

investors.

1 69

MINES AND MONEY 5@5

17 0

EVENTS | MINES AND MONEY ONLINE CONNECT

“We have been delighted with how engaged miners and investors have been, both listening to presentations and using the meetings platform. I am delighted to see so many of our customers embracing the online way of doing business” | Andrew Thake, Mines and Money head of content Dundee’s Robert Nixon set the tone for the discussion by stating that the firm hasn’t seen a more bullish time for precious metals investment than now. “To say we are bullish is an understatement. Our aim is to marry our expertise with exciting junior companies.” A standout presentation was delivered by New Place Dome CEO Max Sali, who struck an enthusiastic tone when discussing the current market for precious metals

171

MINES AND MONEY 5@5 SESSION, DAY THREE EMEA

firms and waxed lyrical about “Over the course his company’s prospects in of the three days we have seen 1,100 the premier gold district of Nevada. “At Kinsley Mountain, meetings take we intend to wake up the place between sleeping giant, and not in a miners and nice way,” Sali quipped. investors, with an average of 18 Moving with the investor meetings times per mining Having reported live from company” Mines and Money’s Online Connect APAC and EMEA Mike Hill, mines and Money head of shows, RGN witnessed a smooth transition to mining sales

172

virtual conferencing which has allowed the mining community to continue collaborating and connecting with investors during these unprecedented times. “Over the course of the three days we have seen 1,100 meetings take place between miners and investors, with an average of 18 investor meetings per mining company,” said Mines and Money’s head of mining

EVENTS | MINES AND MONEY ONLINE CONNECT

MINES AND MONEY ONLINE CONNECT - BRINGING THE MINING SECTOR TOGETHER DURING COVID-19

sales Mike Hill following the

“We have been delighted with

investors and more than

conclusion of the EMEA show.

how engaged miners and

1,800 attendees. As a result of

investors have been, both

this palpable success, Mines

While the organisers will

listening to presentations and

and Money is now taking

no doubt miss the feeling

using the meetings platform,”

the Online Connect global,

of bringing the mining

said Mines and Money head

with rolling time zones for its

community together under

of content Andrew Thake. “I

online meeting platform at the

one roof at its conferences

am delighted to see so many of

start of September. Stay close

around the world, by moving

our customers embracing the

to RGN for further information

the events online investors

online way of doing business.”

on this exciting development.

are no longer constrained by geographic bounds, enabling

Over the two-week period,

miners to actually benefit from

the APAC and EMEA

a larger investor base.

shows attracted 79 mining companies, 900 active

arj

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EVENTS International Mining and Resources Conference (IMARC) + EXPO Where global mining leaders connect with technology, finance and the future October 27-29, 2020, Melbourne, Australia IMARC is set to return to Melbourne at the end of October for its seventh year, having quickly grown to become the largest international annual mining event in Australia. Powered

build on a stellar event in 2019 which welcomed 7,000 attendees from more than 100 countries, with a total of 4,600 meetings requested through IMARC Connect. Key themes in 2020 will be collaboration

by Beacon Events, the organisation behind the hugely successful Mines and Money series, IMARC will hope to

and engagement, commodity trends, ethical investment and the clean energy transition.

Africa Oil Week Fuelling the future of African energy 02-06 November, 2020 Cape Town, South Africa Brought to you by the Hyve Group â&#x20AC;&#x201C; the company behind the Investing in African Mining Indaba - Africa Oil Week is still going ahead as planned in November despite the ongoing impact of the COVID-19 pandemic on large scale gatherings and business conferences. The 2020 event will deliver a range of new offerings for attendees,

174

including a central networking hub, OFS technology showcase and a revamped PetroAfricanus gala dinner. In addition, Total chairman of the board and CEO Patrick PouyannĂŠ has been confirmed as a speaker, with further speaker announcements to follow over the coming months.

EVENTS

Mining, oil & gas and renewable energy events from around the world

Mines and Money London The number one global event portfolio for mining investment returns to London December 01-03, London, UK Mines and Money London is one of the most popular events in the mining calendar, and the 2020 event is likely to be even more eagerly anticipated as other international conferences in the Mines and Money series face cancellation due to the COVID-19 outbreak. As it stands, Mines and Money will return to the UK capital for its 18th year and aims to

attract over 2,000 attendees, including 600 investors and 150 mining companies ranging from exploration juniors to established producers and majors. Participating gives you access to the exhibition, the agenda and the Mines and Money Connect meeting planner.

RE-Source 2020 European platform for corporate renewable energy sourcing December 09-11, Amsterdam, Netherlands RE-Source claims to be the worldâ&#x20AC;&#x2122;s largest gathering of renewable energy buyers and suppliers â&#x20AC;&#x201C; and it will return to Amsterdam at the end of the year. In 2019, there were over 900 registered participants, many of which took part in peer-to-peer workshops and business-to-business matchmaking meetings. The event also provided speakers

and support from the highest political levels in the EU. This year, RE-Source has pledged further B2B matchmaking activities, deep dive breakout sessions and extended meetings to include more diverse buyer and supplier groups. The last two RE-Source events sold out in advance, so be sure to have it in your calendar.

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LATIN AMERICA MINING FOCUS

RGN Vol 7 Iss 4

Articles inside

Events

Xanadu Mines

Sama Resources

Amarillo Gold

Mines and Money Online

CVMR

Josemaria Resources

Hummingbird Resources

Vango Mining