Pure Gold Mining Inc (CVE:PGM) (LON:PUR) (OTCMKTS:LRTNF) has set itself up with a dream-team of key investors, the most recent of which is Sprott Capital Partners, founded by billionaire investor Eric Sprott.
Sprott joins a list of key investors in the project: Bay Street financier Rob McEwen, Newmont Mining (NYSE:NEM), Anglogold Ashanti (NYSE:AU) (ASX:AGG) amongst others.
The firm just announced it is set to raise C$32 million via a bought-deal financing for exploration and development at its Madsen Red Lake gold project, as well as for general corporate purposes. Sprott Capital is leading the syndicate of underwriters, taking around two-thirds of the bought-deal private placement basis or 59.1 million units at C$0.55 each, for gross proceeds of C$32,505,000.
READ: Pure Gold Mining ready to begin aggressive drill program at Madsen project
Each unit consists of one share, and one-half of one share purchase warrant. Each whole warrant will entitle the holder to acquire one company share for three years from the closing for C$0.85.
Pure Gold is advancing the Madsen gold project in the historic Red Lake district. More than 29 million ounces of high-grade gold has been mined from the Red Lake mining district of northwestern Ontario, making it one of the largest gold-producing districts in Canada.
The mining company is aiming to put the project into production within the next year – an achievable goal given the scale of the project and the amount of infrastructure already in place in Red Lake.
Brownfields are the recent success stories
The Madsen Gold project is an advanced brownfield site with existing infrastructure in a proven jurisidiction.
And it is brownfields that have been the recent success stories in the last wave of the sector, with examples that include Kirkland Lake Gold (TSE:KL), Integra Gold Corp (TSE:ICG), Wesdome Gold Mines Ltd (TSE:WDO), Claude Resources, which was acquired by SSR Mining (TSE:SSO).
Sprott recently made around C$1 billion on Kirkland Lake Gold in Ontario and is re-deploying C$200 million of that into other companies that appear to have potential: Pure Gold has made the list and the hope is Sprott can duplicate the success seen with Kirkland Lake Gold.
Economics of the project appear strong
With the rising price of gold (US$1,423.39 on Tuesday), the economics of Pure Gold's Madsen project appears to be growing even stronger.
At a base case of US$1,275 per oz gold, the firm's study in February projected an after-tax NPV (net present value) of $247 million (using a 5% discount rate) and an internal rate of return (IRR) of 36%.
If one uses a base case of US$1400 per oz gold, the after-tax NPV is $247 million and an internal rate of return of 45%.
In short: these are compelling numbers, and even more compelling with a rising gold price.
Good timing
The timing of Pure Gold's Madsen project is also promising, timed to deliver into a rising gold market, with the goal of reaping the rewards for shareholders.
For investors, Canadian gold is around C$1900 per ounce, making it one of the more attractive and profitable gold producing countries in the world. For now, Pure Gold's raise is the last one needed for the mine, according to the firm, representing a window of opportunity.
The firm says it plans to close the offering around July 16, 2019, or another date as the company and its lead underwriter agree on.
Shares of Pure Gold were $0.57 on Tuesday. In London, they were up 4.4% at 33.9p.
Contact Katie Lewis at katie@proactiveinvestors.com