It was a quiet, holiday-shortened week with little news flow. The metals got hammered early in the week, with gold and silver looking like they were going to break down. Gold opened the week above $1,720/oz., falling below $1,708/oz. on the PM Fix on Monday. Gold opened lower on Tuesday, below $1,700/oz. and closed just above $1,680/oz. On Wednesday, there was a relatively week rally, finishing over $1,690/oz. But overnight, there was a far more robust rally on good volume as gold opened at $1,716/oz., closing the week at $1,730/oz. in the spot market. Silver, on the other hand, closed just above $25/oz. last week, only to get hammered below $24.50/oz. on Monday, falling to the $24/oz. support level. Thursday and Friday were strong, with silver closing over $24.90/oz. in the spot market. We hope a bottom has been put in for if gold tests the $1,770-$1,780/oz. level again, it may not hold. The same goes for silver, although it could test 24/oz. one or two more times and hold. Beyond that, it likely to fall somewhere between $22-$22.50/oz.
$CXB, $EQX, $GATO, $GXS, $KL, $SSRM
Calibre Mining: Announced reserves increased by over 200% to 864k oz. Au, which is the largest mineral reserve since 2010 and at the highest grade on record of 4.50 g/t Au. Total M&I and Inferred Resources stand at 1.53m and 1.31m oz. Au. The company uses a hub-and-spoke strategy and has been very successful. The company is just getting started as it has made a number of discoveries and a large number of targets.
Further, a couple of assets have the potential to be significant. 2021 production is targeted at 170k oz. Au (160-180k). We fully expect this to be 190-230k oz. Au in 2022/23 and 240-300k oz. by 2025-2026. There remains ample excess capacity at the Libertad mill, so by developing new spokes, the mill can be fed an additional 1.1-1.4ktpd, which is significant when the average reserve grade is more than 3 g/t Au let alone close to 4.5 g/t.
Limon, Calibre's second and considerably smaller mill, has enough nearby resources to produce 50-70k oz. Au p.a. for the next-10yrs @ AISC of $900-$1,100/oz. It's a good starting point, with 60k oz. Au of production. The Jabali underground, Eastern Borosi, and many discoveries and identified targets will feed the Libertad mill and excess material mined around Limon. At 5 g/t Au, Libertad has the potential to produce 330k oz. Au annually. It will take time to feed the mill at capacity, but it isn't necessary to achieve significant organic growth in the near and medium term.
In 2022, we believe the company can achieve 50% mill utilization, increasing output to 145k oz. Au and 60k oz. Au from Limon for total production between 195-215k oz. Au, approx. 15-25% growth vs. 2021 (which will see a 30% increase in production). By 2023-25, we believe achieving 75%-85% of mill utilization is realistic. This is based on the assumption mill feed from Eastern Borosi will commence. In turn, we believe there is a realistic probability, Libertad can produce 225-280k oz. Au. Eastern Borosi has a current resource of 700k oz. Au (with material exploration upside remaining) at 4.9 g/t Au and 80 g/t Au of 6 g/t AuEq. Further, there is 100k oz. at 12.7 g/t Au and 12 g/t Ag. There has been exciting albeit limited exploration results outside the current resources such as 2.6m @ 8.93 g/t Au and 57 g/t Ag, 5.7m @ 10.92 g/t Au and 859 g/t Ag, 5.4m @ 10.1 g/t Au, and 12.7m @ 5.75 g/t Au and 34.3 g/t Ag. Please read our full company report and valuation by signing up for our free 30-day trial at Goldseeker.com
Equinox Gold: Critics of the company believe Equinox was over-leveraged, notably since the start of the year but only because they either don't know how to read balance sheets or simply didn't take the time to understand it though it is likely the former. Equinox has a material cash balance; most of its debt is via convertible notes, which are in the money, and has investments worth between C$180-C$250m. Equinox announced it has agreed to sell a portion of its interest in Solaris Copper (which was spun out from Equinox Gold) to Augusta Investments and a strategic shareholder for gross proceeds of approx. C$82.5m. Equinox will grant the buyers warrants to purchase an additional 5m shares in Solaris from the company for 12 months at C$10/share. Should this option be exercised, it will generate C$132.5m of proceeds to Equinox. After the share sale, Equinox will own 17.826m shares, or 16.90% of Solaris. If the warrants are exercised, Equinox Gold's Solaris interest would be reduced to 12.826m shares or 12.2% of the company. At current prices, the value of the remaining interest (net of warrants) is US$96m. In other words, should the warrants get exercised, and Equinox sell the remaining interest at the same price, it could bring in a total of US$200m. Beyond that, I-80 will be spun-off from Premier, and the value of Equinox's position (based on initial pricing) is expected to be US$110m. So no, Equinox is not over-leveraged. Lastly, regarding cash flow generation, due to significant stripping at all of its open-pit operations, companywide AISC is expected to be $1,150-$1,175/oz. Beginning the following year, Equinox will see a sustained period [5-6yrs of decreasing AISC]. AISC in 2022 is expected to fall to $955-$985/oz., $870-$910/oz. in 2023, $850-$890/oz in 2024, $835-$855/oz. in 2025 and $825-$850/oz. in 2026.
Gatos Silver: Reported Q4 and 2020 results. There we CV-19 related issues after commissioning the mill and ramping up production. Designed throughput capacity was achieved in April, but then there was a forced shutdown for approx. 2 months. Design capacity was again reached before year-end 2020. The company essentially broke even on a cash flow basis in 2020. 2021 will be a transition year for the company as it will be highlighted by optimizations and a one-time increase in sustaining capital investment. Sustaining capital investment is expected to be between $65-$75m. Towards the back half of the year, Cerro Los Gatos is expected to approach the life of mine averages of 7.5-7.9m oz. Ag, 40-42m lbs. Pb and 49-52m lbs. Zn at AISC of $17-$17.50/oz. Looking ahead to 2022, costs will fall significantly. Normalizing sustaining capital investment will reduce AISC by $7-$8.25/oz. Although we've mentioned this in recent updates, the company increased its ownership in CLG mine and land package from 51.50% to 70%.
Goldsource Mines: The company reported excellent, high-grade, near-surface drill results. In this release, 16-core holes were reported, totaling 1,205m. Highlights include:
- 51m @ 2.02 g/t Au (Ounce Hill)
- 7.5m @ 2.61 g/t Au (Ounce Hill)
- 4.5m @ 2.92 g/t Au (Ounce Hill)
- 18m @ 1.75 g/t Au (Ounce Hill)
- 15m @ 1.51 g/t Au (Ounce Hill)
- 37.5m @ 1.05 g/t Au (Bacchus)
- 21m @ 1.44 g/t Au (Bacchus)
- 3m @ 5.32 g/t Au (Bacchus)
- 19.5m @ 1.26 g/t Au (Bacchus)
Kirkland Lake Gold: The company announced the filing of a technical report of Detour Lake, including a new LOM plan. This plan will change as we will see next year as the company looks to convert Detour into a super-pit. As Kirkland conducts more drilling at depth, it is looking like it could be a large, high-grade deposit, which may or may not supplement production later in the decade, if not the following. The highlights of the new life of mine plan include no drill results since the asset was acquired. Highlights include:
- 2021-2024 production of 680-720k oz. Au, increasing to 800k oz. in 2025 and over 900k oz. in 2032.
- Just a few short years ago, the cost structure at Detour Lake was very elevated. The operation either made a very marginal profit, broke even, and saw operating cash outflows in some quarters. In 2021, AISC is expected to fall to $900/oz.
- The new LOM plan is highlighted by higher production and considerably lower unit cost with cash costs and AISC (2021-2025) of $524/oz. and $775/oz.
- Base case 22-year mine life. Realistically, inclusive of underground, Detour will likely have at least a 3-decade mine life.
- NPV5% of $3.79b @ $1,500/oz. Au
- The company noted that the 2022 LOM plan will supersede that just filed. The goal of the 2020 LOM plan is to study and decide whether or not to move forward with the super-pit scenario. It is believed this will allow the mine to achieved 900k oz. Au p.a. more quickly and at lower costs.
- The new LOM plan will also include all the exploration drilling since the asset was acquired. Using a $1,750/oz. With 5-15% higher production at the same or marginally lower costs over a longer mine-life, this results in the NPV5 of approx. $4.5-$5.5B @ Detour Lake. Given the asset's premium quality, applying a 1.50x NAV multiple should result in a market value between $6.75B-$8.25B, making Kirkland Lake Gold cheap as it has another Tier-I asset (Macassa beginning in 2023) and a high-quality Tie-II asset in Fosterville.
SSR Mining: Reported an updated MRE. Reserve increased 5% to 8m oz. Au and 9m oz. AuEq, driven primarily by additions at Copler. M&I resources increased 14% to 15m oz. Au and 27m oz. AuEq. Reserves at Copler increased 17% to 3.8m oz. and M&I resources increased 20% to 7.2m oz. Au. Reserves at the high-cost Marigold mine increased 9% to 5.4m oz. Au