Gold Seeker Issue #88 ~ This Week in Mining: Earnings Season Begins

Gold and the mining stocks look poised for a breakout to the upside in the near future. Gold has tested the $1,800/oz level several times, and soon it will breach that level such that $1,800 will become support. For several weeks now, the mining stocks have been leading, moving higher in a flat-to-marginally higher gold price environment. Every time the commercial banks have tried to slam both gold and silver, it is met by strong buying, which has been in the form of gold getting smashed in early trading only to recover through the rest of the day.  Thursday marked the beginning of earnings season, which kicks into high gear over the next two weeks.

$AEM, $AGI, $BTG, $CXB, $CDE, $EGO, $EQX, $GBR, $MAG, $NFGC, $NAK, $ODV, $PGM, $SILV

Agnico-Eagle Mines: Reported Q3 2021 operating and financial results. As far as earnings go, the business will change considerably in 2022 with the addition of three sizeable key assets from Kirkland Lake Gold. In Q3, Payable gold production was 523.7k oz (excluding 17.96k oz of gold production at Hope Bay and including pre-commercial gold production of 6,881 ounces at the Tiriganiaq open pit at Meliadine) at production costs per ounce of $832, total cash costs per ounce4 of $765 and all-in sustaining costs of $1,011/oz. Including Hope Bay, payable gold production in the third quarter of 2021 was a new record of 541.66k oz at production costs per ounce of $845, total cash costs per ounce of $784, and AISC per ounce of $1,059. The addition of Detour Lake, Maccassa, and Fosterville will drive down AISC in 2022. Projected 2021 production remains unchanged at 2.047m oz Au at AISC of $950-$1,000/oz. Agnico generated $413m in operating cash flow, bringing the YTD 9-month total to 1.26B. Agnico reported positive drill results across several projects in Q3, including:

• LaRonde: 2.8m @ 0.50 g/t Au, 41 g/t Ag, 11.90% Zn and 4.6m @ 9.3 g/t Au, 114 g/t Ag, 0.90% Cu and 2.6% Zn in the recently discovered 20N Zinc South Zone.
• Meliadine: 27.4m @ 20.30 g/t Au [delineation drilling in the Tiriganiaq deposit.
• Amaruq: 18.8m @ 4.7 g/t Au and 4.7m @ 5.10 g/t Au.
• Odyssey Project: Infill drilling continues to return wide, high-grade intercepts in the core of the East Gouldie deposit [higher grade deposit at Canadian Malartic], including 41.4m @ 6.80 g/t Au and 4.8m @ 6.30 g/t Au.
• Upper Beaver Project: Conversion and expansionary drilling continues to intercept high-grade mineralization, including 18.2m @ 8.70 g/t Au and 0.81% Cu.

Alamos Gold: Reported Q3 operating and financial results. Alamos produced 104.7k oz Au in Q3, an 11% decrease relative to Q3 2020. This was largely a result of gold production at Mulatos, which was well below guidance at 26.7k oz. With Cerro Pelon nearing depletion at Mulatos, stockpiled ore will represent a larger portion of stacked ore at Mulatos until production from La Yaqui Grande ramp-up in the 2H 2022. As a result, Alamos reduced full-year guidance at Mulatos by 15k oz. Alamos revised its 2021 AISC forecast higher, primarily due to a stronger Canadian dollar and higher costs at Mulatos at $1,120-$1,140/oz. When La Yaqui Grande comes online and achieves commercial production, it will put significant downward pressure on AISC. In Q3, Alamos generated $102.3m in operating cash flow. However, free cash flow was negative due to higher capital spending related to La Yaqui Grande and the Phase III expansion at Island Gold.

B2Gold: The Company agreed to sell various Burkina Faso Projects to West African Resources [WAF] an 81% interest in the Kiaka Project for $45m payable on closing of the transaction, comprised of 50% cash and 50% WAF common stock, $45m payable on the earlier of (i) commencement of construction at the Kiaka Project (provided such date will be a minimum of 6 months from the date of the Kiaka Agreement), (ii) completion of a positive feasibility study at the Kiaka Project, and (iii) October 25, 2022, in cash or WAF ordinary shares, at B2Gold's option but subject to any required WAF shareholder approval to issue WAF ordinary shares; and a 2.70% NSR royalty on the first 2.5m oz Au produced at Kiaka. Furthermore, B2Gold will sell its 90% interest in the Toega Project to WAF in exchange for $18m and a 2.70% NSR royalty on the first 1.5m oz produced until royalty payments total $22.5m, falling to 0.45% thereafter.

Calibre: One of our favorite junior gold producers announced it would acquire a small junior gold producer, Fiore Gold. Fiore has a mine in production and an advanced stage development asset [roughly two years away from construction] in Nevada, not to mention an extensive land package covering 222 square kilometers. When the deal closes, Calibre will see production increase 50k oz Au from the Pan Mine in addition to near-medium term [2-4yrs] organic growth, driven by Eastern Borosi [its next major “spoke” in its hub-and-spoke strategy] along with increased mining rates elsewhere in Nicaragua, and development of the Goldrock Project. Calibre shareholders will own 78% of the Company post-acquisition, with Fiore shareholders holding 22%. In short, Calibre now has several assets that will drive growth in the years ahead, including the significant excess capacity at the Libertad Mill, Eastern Borosi, Pan, and Goldrock. It would be great to see Calibre make another relatively small acquisition such that its production potential would be 375-400k oz Au p.a. This acquisition is accretive on all key operating and valuation metrics. In 2022, we should see production increase from approx. 160-170k oz Au to 230-245k oz. Au.

Coeur Mining: Reported Q3 2021 results. In Q3, Coeur produced 87k oz Au and 2.5m oz Ag, with production levels expected to increase in Q4 and finish the year within the Company's guidance range of 322-367k oz Au and 9.7-12.2m oz Ag. The Company's Rochester expansion is 42% complete, and the Company is working to mitigate inflationary pressures on the remaining unawarded work packages. Coeur is also looking to develop the Silvertip project into a larger-scale operation. A large-scale expansion and restart will follow the completion of the ongoing Rochester expansion project. Coeur generated $34.8m in operating cash flow [before changes in working capital].

Eldorado Gold: Reported Q3, 2021 operating and financial results. Gold production totaled 125.46k oz in Q3 2021, a decrease of 8% from Q3 2020 production of 136.92k oz driven by a planned shift to lower-grade ore at Kisladag. Gold production in the quarter increased 8% over Q2 2021. As a result of strong production in the first nine months of 2021, primarily due to operational improvements at Kisladag, Eldorado is increasing its 2021 annual production guidance by approximately 6% to 460,000-480,000 ounces of gold. In Q3, AISC was $1,133/oz due to lower production, higher operating costs, and higher sustaining capital investment. The Company generated $101m in operating cash flow and $29.7m of free cash flow.

Equinox Gold: The Company announced that full-scale construction activities at the Greenstone Project in Ontario, Canada, have commenced. This is one of Equinox's four flagship assets and will provide significant low-cost production [avg 240k oz Au p.a.]. There are numerous moving parts for Equinox, including the mine build at Santa Luz [which will reach first production in Q1 2022], the ongoing expansion at Los Filos, finalizing the study for a new CIL plant to more efficiently process higher-grade ore [which is the second part of the Los Filos expansion]. Equinox also has advanced studies to develop an underground component at Aurizona to complement open-pit mining operations.

Great Bear Resources: Great Bear's stock price has been on a tear since mid-September, which it was trading between $10.40-$10.65/oz, breaching $14/share several times, and is currently trading at that level. This is likely in anticipation of the coming maiden MRE at the LP Fault at its Dixie project [expected in Q1, 2022], estimated at 6-10m+ oz Au. However, later in 2022, the Company will provide an MRE for the higher-grade but considerably smaller Dixie Limb and Hinge Zones before year-end 2022. Furthermore, a PEA will be undertaken sometime in the 2H 2022, which we expected will return phenomenal economics. But this could mean little in the bigger scheme of things. Many have compared the LP Fault to the Hemlo Gold Mine [once a Tier-I asset, producing 350-450k+ oz Au at attractive costs during its prime]. Production has fallen off considerably, below 200k oz Au p.a. The LP Fault shares many geological similarities with Hemlo. Most mineralization at Hemlo was found via deeper drilling. Great Bear has yet to test levels anywhere near as deep, but that will change soon.

Great Bear also reported gold recovery test results from its Dixie Project. Great Bear selected the most challenging domains to extract gold from at the LP Fault. The Company is pleased with the result as recovery rates were high at all grades [the LP Fault contains high-grade mineralization as well as lower-grade bulk tonnage mineralization]. The results are similar to the high recovery rates from Dixie Limb and Hinge zones using comparable grinding and cyanidation protocols indicates mineralized material from all gold zones is likely amenable to processing through the same extraction circuits.  Initial LP Fault cyanidation gold recovery tests confirm that non-refractory, free gold dominates all low to high-grade domains tested to date. All Dixie gold zones have excellent potential for significant gravity circuit gold recoveries, which will be investigated in the next phase of metallurgical testing. The 48-hour recovery rates range between 95.2-99.2%, which is incredibly robust.

MAG Silver: Total Juanicipio production for Q3 based on provisional estimates before offtake agreement adjustments totaled 667.5k oz Ag and 1.1k oz Au (293.7k oz Ag and 487 oz Au attributable to MAG). While the JV group is only processing material at the Fresnillo Mill two to three days a month, it is important to allow for a smooth ramp-up of the Juancipio mill. As a result, the JV group has optimized processing to a degree. Construction of the Juanicipio processing plant continues to make good progress, focusing on transitioning from construction to commissioning activities. Pre-commissioning testing has already begun for key process plant systems as the plant approaches mechanical completion. According to operator Fresnillo, the plant is expected to be commissioned by year-end, subject to timely connection to the National Electricity Transmission Grid of Mexico. Fresnillo expects to obtain the authorization to connect to the power grid on schedule, which would allow no-load testing of the facility to be started, progressing to water testing during November and full load commissioning by year-end.

New Found Gold: announce an expansion of the exploration program at its 100% owned Queensway Project, Newfoundland. The Company has completed approximately 51% of its current 200,000m diamond drill program at Queensway. About 24,000m of drill core is pending assay results. The Company is doubling the drill program to 400,000m and an increase to 14 drill rigs. Once complete, and assuming drill results are more or less in line with results to date, this could be one of the highest-grade gold deposits globally [with incredible economics], although there is still a lot to prove and in turn, as only 78,000m have been drilled and assayed. This is a lot of drilling, so we will have to wait until 200-250,000m have been drilled to determine an estimated grade and potential size of an initial resource estimate. This expanded drill program is fully funded out of the Company's current working capital balance of approximately $103 million, which is anticipated to increase to roughly $150 million on the closing of the recently announced financing by Eric Sprott.

Northern Dynasty: The Company reported the results of a PEA at its Pebble project, highlighted by robust financial results. This study was meant o evaluate three potential expansion scenarios. Notable results from the PEA include:

• Initial 20-yr open-pit mining, processing 180,000tpd.
• Using base case metal price assumptions, the project will generate an IRR and NPV7% of 15.70% and $2.3B, increasing to 23.7% and $4.7B at current prices [$4.25/lb Cu; $1,800/oz Au; $24/oz Ag, $18/lb Mo; and $1,600/kg Re. In other words, it is highly leveraged to the price of copper and gold, and other metals.
• Life-of-mine ("LOM") metal production for this scenario: 6.4 billion lbs. copper; 7.4m oz Au; 300m lbs. Mo; 37m oz Ag; and 230,000 kg Re.
• Average annual metal production: 320m lbs. Cu; 368k oz Au; 15m lbs Mo; 1.8m oz Ag and 12,000 kg Re.

The PEA also examined three potential expansion scenarios, each with a mine life that could reach >100yrs. Note: The results listed above are solely for a future open-pit mine. It is worth noting that the Pebble project has tremendous resources, including the second-largest gold resource of 107m oz Au and 82B lbs. Cu, 515m oz Ag, 5.6B lbs. Mo, and 4.2m kg's RE. This is a very troubled project and is unlikely to get built anytime soon or this decade.

Osisko Development: announce drilling results from the 2021 exploration and category conversion drill program at its Cariboo Gold Project. A total of 152,000m were drilled in 2021, of which 28,000 and 92 holes were drilled at Lowhee Zone. Assay highlights from this release include:

• 9.05m @ 6.77 g/t Au
• 7.75m @ 158.40 g/t
• 0.70m @ 70.40 g/t
• 7.15m @ 16.46 g/t
• 1m @ 103.50 g/t
• 15.20m @ 19.03 g/t

Osisko Development has done nothing but impress with its drill program in 2021. When the resource is updated, it wouldn't be surprising to see an increase in average grade, though that is neither here nor there. Technical studies have illustrated this is a highly economic project. The fact that Sean Roosen left Osisko GR for Osisko Development means there is much more to this project than meets the eye, likely in the form of significantly larger resource [over time].  

PureGold Mining: Announced Q3 2021 production results. Operations are improving, but it should gain stream through year-end, setting up for a much better 2022. Highlights from Q3 include:

• Average daily throughput of 685tpd for the quarter, a 35% increase compared to the second quarter driven by increased stope access and mill upgrades.
• Gold production of 9,260 ounces, a 54% increase compared to the second quarter driven by higher grades and increased tonnage.
• Average mill head grade of 4.8 g/t Au, a 15% increase in the second quarter.
• 94.70% recovery rates.
• Completion of mill upgrades to increase processing capacity 1ktpd achieved for a couple of days during the quarter.
• Continued ramp-up of production from the East Ramp area of the mine, which has become a key production contributor and is expected to grow significantly over the coming quarters.
• Average ramp development rate 7.4m per day, as improving stope access and continuing to accelerate access to deeper, higher-grade zones of the mine, including the 8-Zone, which remains a top priority.

SilverCrest Metals: Provide an update on construction activities at the Company's Las Chispas Project in Sonora, Mexico. At the end of Q3, the overall construction progress at Las Chispas was 54% complete compared to the overall scheduled completion of 48%. Construction continued to progress well in the quarter with the main access road, plant detailed engineering, concrete work complete, bridge construction 88% complete, plant construction 49% complete, powerline 47% complete, and underground infrastructure ongoing. Further, capital spending is tracking well against budget [that in the FS]. This is very impressive as we’ve seen numerous companies announce increases to capital cost estimates due to inflation. Through Q3, 2021, 68% of the $137.7m (FS) capital cost estimate was committed, of which 57% has been incurred across all capital cost scopes, in line with budget. At the end of Q3, 2021, approximately $59m in capital remains to be incurred through commissioning. Underground Development Ahead of Schedule, with underground development ahead of schedule at the end of H1, 2021, development rates continued to progress well in Q3, 2021 for a total of 15.7km completed since underground development began in Q1, 2019.

Unit underground mining costs continue to track slightly under budget, and development meters remain well ahead (1.6 km) of the Feasibility Study budget, year to date. As of the end of Q3, SilverCrest had cash and equivalents of $199m and $60m remaining under a $120m project financing facility. SilverCrest is in line for a re-rating in 2022 as first production will be achieved mid-year, followed by a ramp-up period through year-end. Given the financial flexibility, once SilverCrest reaches steady-state production, it can start considering an expansion from 1.25ktpd to 1.5-2.0ktpd. There are a couple of issues from building a large plant initially, including but not confined to the clay content. Nevertheless, SilverCrest will at some point expand the plant, the question being by how much.