Gold Seeker #76 ~ This Week In Mining: Earnings Season in Full Swing, Metals Hammered to Close the Week

Gold, silver, and mining stocks traded sideways for most of the week only to get hammered on Friday. The metals did break or test some resistance levels, and unfortunately, it looks like prices will move lower before moving up again. This isn't uncommon as we are still in the summer doldrums and will remain so for the rest of the month. On the bright side, the mining stocks decline less than the underlying metals, which is a bullish sign. In addition, earnings season was in full swing this week, with most companies reporting earnings this week and over the next two weeks.

$BTG, $CXB, $DEF, $DSV, $EDV, $EQX, $FCO, $FTCO, $AUMN, $HL, $IAG, $MUX, $NVO, $OCG, $PGM, $SAND $SKE, $SVM, $SSRM, $TXG, $WM

B2Gold: Reported strong Q2 earnings with total gold production of 211.6k oz. Au (197.38k oz. excluding attributable production from its interest in Calibre) or 5% above budget. The company remains on track to achieve the upper end of its 2021 guidance in the range of 970k-1.03m oz. Au. Cash costs and AISC were $649/oz. and $1,011/oz. Fekola's mill throughput `was a quarterly record of 2.29 million tons, 16% above budget and 47% higher than the second quarter of 2020, following the successful completion of the Fekola mill expansion in September 2020. B2Gold is in strong financial shape with cash and equivalents of $382m, no debt, and an undrawn $600m revolving credit facility.

Calibre Mining: The Nicaragua-focused company reported strong Q2 and 1H 2021 results. It is also making excellent headway at its next major mining "spoke" (Eastern Borosi), which will fuel continued growth. In Q1, Calibre produced 43.5k oz. Au @ AISC of $1,216/oz., generating operating cash flow of $29.1m. Another good quarter (except for elevated AISC) allowed the company to continue to build up its cash position, which now stands at $66.3m. 550tpd of ore was delivered from the Pavon Norte mine to the Libertad mill, 57% higher relative to Q1, which is expected to increase to 1ktpd by year-end. Further, Q2 saw the first deliveries of Panteon South development ore, reaching commercial production in July 2021. At Eastern Borosi, the company completed 75% of the infill, metallurgical, geotechnical, and hydrological drilling and acquired most of the required surface rights during the quarter.

Calibre also advanced social, technical, and environmental work targeting a permittable product ready for submission by the end of 2021 and updated resource estimates during Q1 2022. The progress at Eastern Borosi has been excellent and will allow the company to conduct permitting in Q1 2022, a year ahead of schedule. Although this is for longer-term potential growth, the Rio Tinto Exploration and Calibre JV copper-porphyry drill program is well underway.  

Defiance Silver: Provided an update to the ongoing drill program and the company’s Zacatecas project. The current phase of the drill program has been successful in defining a new zone of mineralization near the Veta Morada fault and further outlining wide zones of mineralization on the Veta Grande vein system at the Zacatecas project. Highlights include:

• 8.28m @ 188 AgEq g/t.
• 1.25m @ 253 g/t Ag, 0.20 g/t Au and 0.47% Zn.

Discovery Silver: Announced results from 21 diamond drill holes targeting bulk-tonnage mineralization in the North Corridor at its flagship Cordero silver project in Chihuahua, Mexico. The results from this release will be incorporated in the new resource estimate scheduled for completion later this quarter and PEA in 4Q 2021. Drill highlights include:

• 132.6m @ 78 g/t Ag, 0.11 g/t Au + 4.5% Pb + Zn.
  • Including 21.5m @ 194 g/t Ag, 0.12 g/t Au + 13.8% Pb + Zn.
• 19.6m @ 137 g/t Ag, 0.25 g/t Au + 6.9% Pb + Zn.
• 36.5m @ 97 g/t Ag, 0.16 g/t Au + 6.5% Pb + Zn.

 

Endeavour Mining: The newest senior gold producer reported record Q2-2021 results. Q2 production increased 18% over Q1 to 409k oz. Au, while AISC decreased marginally to $853/oz. This brought 1H 2021 production to 756k oz. Au @ AISC of $860/oz., putting the company on track to meet the upper end of its 2021 production guidance [1.365-1.495m oz. Au] at AISC of $850-$890/oz. The company generated operating cash flow of $286m and $549m for the 1H 2021.

Endeavour spent most of 2019/2020 deleveraging, only to take on more debt through the Teranga acquisition. Endeavour has quickly deleveraged with a net debt/Adj EBITDA leverage ratio of just 0.07x. Endeavour also announced a dividend increase for its semi-annual dividend payment, totaling $70m, up from $60m for the 1H 2021. Endeavour also bought back shares in Q2 of $59m and $70m for the 1H 2021. Catalysts are coming in the form of the Phase I expansion at Sabodala-Massawa (scheduled for completion before year-end) and feasibility studies underway for Sabodala-Massawa Phase II, Fetekro, and Kalana, with the latter expected in 1H 2022. Endeavour is on track to increase Indicated resources by over 2.5m oz. in 2021 due to significant discoveries at Ity, Hounde, Sabodala-Massawa, and Fetekro.

Equinox Gold: The company reported a quarter more or less in line with what was expected. 2021 is a transition year, marked by heavy stripping campaigns at several mines, higher AISC at Los Filos (due to mine blockades), and lower output while the company advances two of the three planned expansion projects and a mine build (Santa Luz). Production is expected to increase throughout the remainder of the year while costs moderate, setting up for a greatly improved 2022 regarding production and costs. In Q2, the company produced 124.7k oz. Au at cash costs and AISC of $1,089/oz. and $1,382/oz. ($100/oz. lower vs. Q1 2021). Equinox generated operating cash flow of $31.6m and incurred $34.1m of sustaining capital costs and $53.1m of expansionary capital costs. While Equinox carries a fair amount of debt, a sizeable portion is via convertible debentures. The company also has $334m in cash and approx—$400m of equity investments (Solaris Resources and I-80 Gold).

Fabled Silver: Reported additional drill results as underground diamond drilling continues to intercept multiple zones of silver mineralization. Drill highlights include:

• 9m @ 50 g/t Ag, 0.10 g/t Au
• 2.20m @ 122 g/t Ag and 0.11 g/t Au
• 4.8m @ 88.60 g/t Ag and 1.20 g/t Au
• 2.90m @ 92.70 g/t Ag, 0.06 g/t Au

Underground drilling is currently taking place from drill stations in the ramp or mined-out areas, where previous property holders took bulk samples. The ramp was centered down the Santa Maria vein to access mineralized material as they advanced the ramp. This has resulted in the higher-grade portion of the Santa Maria Vein being absent from the beginning of most of the drill holes. So, what is the purpose of drilling?

The Santa Maria vein and Santa Maria Dos veins are the footwall and hanging wall of a mineralized structure, and the purpose of the program is to determine the widths of this structure. As the ramp is restrictive, useful available drill locations will become sparser. Therefore, the company is planning to establish new proper drill bays for future holes.

Fortitude Gold: The company reported record production from its Isabella Pearl mine, with high-grade production sourced from Pearl @ 6.75 g/t Au in Q2. Q2 production totaled 14.58k oz. Au @ AISC of $628/oz. The company generated YTD free cash flow of $16.4m and has increased its cash position to $41.5m at the end of Q2, a 50% increase ($13.8m) from year-end 2020. Earlier in the year, when the spinout was complete from Gold Resource Corp, the company immediately initiated a dividend of $0.24/share (annually), which was subsequently increased by 50% to $0.36/share and now to $0.42/share, equating to a current dividend yield of 5.38%.

Golden Minerals: Reported Q2 earnings. The company produced 3.63k payable gold equivalent ounces with total cash costs, net of silver by-product credits, per payable ounce of gold of $915 at the company’s Rodeo Au-Ag mine. While this generated negative operating cash flow, economies of scale [increased production] will cause costs on a per-unit basis to fall, perhaps considerably. In April 2021, the company installed a new regrind mill circuit at the Velardeña oxide plant that processes Rodeo gold and silver-bearing material. The circuit enabled the company to reach and exceed Rodeo's targeted 450tpd throughput, averaging greater than 500tpd in May and June. The company ended the quarter with $6.9m in cash and equivalents vs. $9.7m in Q2 2020.

Hecla Mining: Reported Q2 results. Hecla produced 3.5m oz. Ag @ AISC of $7.54/oz. and 59k oz. Au @ AISC of $1,254/oz., generating operating and free cash flow of $86.3m and $54.4m. On the back of material cash flow generation over the last several quarters, Hecla's Net Debt/EBITDA over the last 12 months is the lowest in 9-years at 1.20x.

Further, gold production guidance was increased while silver cost guidance was reduced. Hecla has ample liquidity with over $400m available. The last of the oxide material at Fire Creek/Midas mill was processed, and the mine and mill were placed on care and maintenance. Pre-development for the Hatter Graben area at Hollister and exploration at Midas are ongoing.

IAMGOLD: Reported Q2 2021 results. The company produced 139k oz. Au @ cash costs and AISC of $1,083/oz. and $1,354/oz. Au, generating operating cash flow of $54.9m, although free cash flow was just $1.9m. The Rosebel mine being adversely affected by heavy rains. Essakane performed well and drove operating cash flow generation. Cash, cash equivalents, and ST investments totaled $830m, giving the company available liquidity of $1.3B. The company is expected to have adequate financial capacity to finance the ongoing development of the Côté Project (which the company recently increased expected capital investment to bring the mine online). In Q2, the company entered into gold sale prepayment arrangements at a weighted average cost of 4.45% per annum regarding 150k oz. Au. These arrangements have an average forward contract price of $1,753/oz. On 50k oz. Au and a collar range of $1,700 to $2,100/oz on 100k oz. Au gold. This will result in a total prepayment to the company of $236 million for 2022 and the requirement on the part of the company to physically deliver such 150k oz. over the course of 2024. These transactions have the effect of rolling the company's 2019 prepayment arrangement on 150k oz. Au from 2022 to 2024, which is after the completion of the construction of Côté Gold.

McEwen Mining: The company produced 31.7k oz. Au and 611k oz. Ag in Q2 @ cash costs and AISC of $1,200/oz. and $1,470/oz. This is an improvement over previous quarters, and there are catalysts to look forward to including commercial production from the Froome deposit (at Black Fox) in Q4 2021. The company is on track to meet its 2021 production guidance of 141-160k AuEq oz. On July 6, 2021, the company announced that a subsidiary that holds 100% of the Los Azules copper project will be raising financing for the continued development of that project and funding a modest exploration program for its Elder Creek copper exploration property in Nevada. McEwen Copper is seeking to raise up to $80m in a private offering, and Rob McEwen has committed the first $40m. This is a smart move as McEwen Mining will unlock value as Los Azules can be valued independently, with McEwen Mining owning a sizeable interest. At quarter-end, the company had $42.2m in cash and $50m in LT debt.

Novo Resources: Reported record monthly production from the Nullagine Gold Project. July production totaled 8.59k oz. Au, a 46% increase over June production. Exploration drilling is ongoing at near-mine and East Pilbara conglomerate and orogenic basement targets. The company ended July with a cash balance of C$49m, a 6% increase over June, and an equity portfolio worth approx. C$170m (primarily New Found Gold).

Outcrop Silver & Gold: Announced the assay results from the deepest hole drill in the San Antonio shoot on its high-grade Santa Ana silver project in Colombia. Two immediately adjacent veins are composited (merged) for 4m @ 484 AgEq g/t, demonstrating how close-spaced packages of narrow veins can be composited together for good widths along hundreds of meters of vein segments. San Antonio, along with Roberto Tovar and La Ivana, is the third shoot where close-spaced narrow vein packages can be composited together to provide attractive widths and grades along significant segments of the veins. Furthermore, if San Antonio merges with two adjacent open shoots, Santa Ana will cumulatively contain 2km of mineralized vein strike distributed within six large high-grade shoots. All shoots open along strike all are open at depths of 200m or more.

PureGold: The company declared commercial production at the PureGold Mine, effective August 1^st, 2021. The mine, milling facilities, and other systems are all operating in line with or quickly approaching the 800tpd initial design capacity. 

Sandstorm Gold: The mid-tier royalty and streaming company had record attributable AuEq production of 18k oz., generating $32.3m in revenue and $17.6m in operating cash flow. Q2 was an active quarter for the company as it acquired a $30m gold stream and $110m for multiple iron-ore royalties, which will generate royalty revenue for several decades. We want the company to acquire moderate to large gold or silver streams to reduce the concentration of its top two or three assets. On the back of the acquisitions, the company increased 2021 guidance to 62-69k AuEq. The Hod Maden FS is in the final stages, and the company expects it to be completed, along with receiving the Environmental Impact Assessment by the end of September 2021. The first production at Hod Maden is now projected for mid-2024. 

Silvercorp Metals: Reported results for its Q1 FY 2022 quarter (calendar year Q2 2021). The company sold 1.6m oz. Ag, 1k oz. Au, 16.8m lbs. PB, and 7.3m lbs. Zn. Cash costs and AISC were negative ($1.43/oz.) and $7.46/oz. The company generated operating cash flow in Q2 of $36.5m even though mined and milled ore was down 9% and 7% due to slowdowns during the contract renewal negotiations with mining contractors, which was completed July 13^th, 2021. The company arguably has the best balance sheet relative to its peer group (mid-tier silver producers), with $214.4m in cash, $15.3m in short-term investments, and equity investments having a market value of $243m (primarily New Pacific Metals) at the end of Q2.

Skeena Resources: In addition to Eskay Creek, the Snip project could present another high-return asset for the company. The company reported diamond drill core results from the 2021 Phase 3 infill and exploration drilling program at the Snip gold project in the Golden Triangle of British Columbia. The Phase 3 program is designed to upgrade areas of existing Inferred resources from the company's 2020 MRE to the Measured and Indicated categories. Phase 3 drill highlights include:

• 0.80m @ 390 g/t Au
• 1.19m @ 109.8 g/t Au
• 4.17m @ 29.31 g/t Au
• 3.50m @ 85.5 g/t Au
• 4m @ 85.91 g/t Au
• 1m 2 164.50 g/t Au
• 12.50m @ 27 g/t Au
• 2.44m @ 83.87 g/t Au
• 2.76m @ 74.59 g/t Au

SSR Mining: Reported robust Q2 2021 results. Q2 production totaled 199.67k oz. AuEq @ AISC of $961/oz., bringing YTD production to 395.75k AuEq oz. @ AISC of $983/oz. SSR generated operating and free cash flow in Q2 of $148.6m and $100.4m. The company announced an NCIB from April 19^th to the end of Q2, during which time the company bought back 4m shares. The company also declared a Q2 dividend of $0.05/share. Following $70.3m in share buybacks, $11m in dividend payments, and the repayment of $17.5m during the quarter, the company has a cash position of $870m. Seabee set a record for both quarterly production (and half-year) of 37k oz. Au, driven by higher head grades of 13.19 g/t. Puna also set a record for half-year production of 3.8m oz. Ag (2m oz. in Q2).

Torex Gold: Reported another strong quarter, but the stock remains depressed. In Q2, Torex produced 118k oz. Au (111k oz. sold) at cash costs and AISC of $637/oz. and $897/oz., generating operating and free cash flow of $82.4m and $21.9m after accounting for the payment of $30m related to the government-mandated profit sharing. In addition, the company increased its cash position to $196m and total available liquidity of $345m.

The company's near-medium term objective is to deliver a seamless transition from ELG to Media Luna, which includes extending the life of the ELG open-pit beyond 2023. The BOD approved a pushback of the open-pit, which will extend mining to mid-2024. In addition, Torex continues to de-risk Media Luna by preparing a FS based on conventional development mining methods, given the outcome of various risk assessments, financial analysis, and the results to date of the Muckahi test program at El Limon Deep.

Wallbridge Mining: Reported the resource definition drill program for the upcoming maiden mineral resource estimate (MMRE) is almost complete. Drilling has been focusing on multiple areas within the approximately 1.0km by 1. km central portion of the Fenelon Gold System to define the gold mineralization in support of the MMRE. The company has drilled approximately 260,000m at Fenelon within the three years since the commencement of systematic, continuous exploration drilling, which will be incorporated into the MMRE. With the drill program for the MMRE now substantially complete, drill rigs are being transitioned to focus on resource expansion and exploration drilling at Fenelon as well as regional exploration on the company's other projects along the Detour-Fenelon Gold Trend. New assay results in this release include:

• 27m @ 3.75 g/t Au (Tabasco-Cayenne-Contact zone)
• 11.7m @ 4.95 g/t (Tabasco-Cayenne-Contact zone)
• 2.4m @ 17.64 g/t (Tabasco-Cayenne-Contact zone)
• 5.50m @ 6.79 g/t (Tabasco-Cayenne-Contact zone)
• 10.8m @ 2.23 g/t (Area 51)
• 13.50m @ 1.93 g/t (Area 51)