Pure Gold, which last month added an LSE main market quote to its Toronto listing, is targeting first gold production in the second half of 2020 from Madsen, which is located near Newmont Goldcorp Corp’s (TSE:NGT) established Red Lake complex.
A recently released feasibility study outlined probable reserves of 1mln ounces and an 800-tonne per day underground mining operation with a 12-year mine life with an initial capital cost of C$95mln.
In a note to clients on Friday, Peel Hunt liked the look of Pure Gold’s “high-margin, low-capex gold mine restart project in an established mining area”, with an existing portal, shaft, plant, tailings facility and civil infrastructure, “implying capital and time savings when operations restart”.
“This translates to a low capital intensity and a rapid payback,” analysts said, with the recent preliminary economic assessment suggesting the mine life could be extended 3.7 years for an initial capital requirement of C$57mln and a rich database of local exploration data indicating the chances of expanding the resource inventory “look high”.
Estimating management needs a C$40mln capital raise and C$65mln debt package to fund the development, Peel Hunt set a price target of 39p as it initiated coverage on the stock.