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viewPure Gold Mining, Inc.

Pure Gold’s one-two punch: high-grade mine in development, upside potential via drilling

Snapshot

The Madsen Red Lake Mine is Canada’s highest-grade development project, with production scheduled for late 2020.

Gold nuggets

Quick facts: Pure Gold Mining, Inc.

Price: 0.7 CAD

TSX-V:PGM
Market: TSX-V
Market Cap: $250.93 m
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  • Probable Mineral Reserves of 1 million ounces at 9 g/t gold in 3.5 mm tonnes
  • Newly discovered satellite deposits with indicated & inferred mineral resources
  • Aggressive 20,000m drilling program & gold production scheduled for late 2020
  • Strategic Investors: Eric Sprott, Rob McEwen, Newmont Goldcorp & AngloGold Ashanti own around 30% of shares outstanding

What Pure Gold Mining does:

Pure Gold Mining Inc. (CVE:PGM) (LON:PUR) (OTCMKTS:LRTNF) is advancing Canada’s highest-grade gold development stage deposit, the Madsen Red Lake Mine to first production, which is scheduled for late 2020.

Investors should also take note that, concurrent to construction, the company is pursuing an aggressive, fully funded exploration drilling and resource delineation program, centred on the recently extended 7 kilometer (km) Madsen Red Lake gold system.

The short timeline to first production is enabled by the significant infrastructure already in place at Madsen. For those unfamiliar with Red Lake, this mining camp in northwestern Ontario has produced nearly 30 million ounces of gold over the past 85 years, making it one of the largest and highest-grade gold-producing districts in Canada.

You can tell a lot about a company by its major investors. Approximately 30% of the share float is held by four, key strategic investors that have experience building multi-billion dollar gold mining companies.

This includes Canadian mining financiers Eric Sprott and Rob McEwen, who built multi-billion dollar companies (Kirkland Lake Gold and Goldcorp) through transformative discoveries of new, high-grade deposits within brownfield mines. The other two strategic investors, AngloGold Ashanti and Newmont Goldcorp, rate as the top world leaders in gold production.

Pure Gold Mining CEO Darin Labrenz is a Red Lake camp veteran who now leads a multifaceted team of experienced geologists, mine builders, and mine operators, supported by a board with proven capital markets expertise and a rich history of building and operating mines.

As a company founded by Oxygen Capital, the Madsen Gold Project will be Oxygen's third mine to go into production in four years; following Fronteer Gold’s Long Canyon and True Gold’s Karma Gold Mines. To clarify, the firm is not simply talking about asset sales, but projects becoming producing mines. Investors can look at that as another vote of confidence in the company’s ability to advance a project.

How is it doing:

The February 2019 feasibility study on the Madsen Red Lake Mine outlined a long-life, high-margin mine with low initial capital requirements and a fast timeline to production. 

Highlights of the study included a 12-year, 800 ton per day underground operation, with Probable Mineral Reserves of 1.0mm ounces of gold at 9.0 grammes per tonne (g/t) within 3.5mm tonnes, and peak production of 125,000 ounces per year.

With the August closing of a financing package that fully funds the mine to production, the company announced the commencement of construction in September 2019.  In addition, the company has an ongoing 20,000m drilling program designed to produce the next discovery or add ounces to the mineral resource/reserve.

According to the feasibility study, the initial capital requirement to build the mine is C$95 million. The study also outlines robust economics showing a 36% after-tax internal rate of return and a net present value of C$247 million post-tax at a US$1,275 an ounce gold price.

Investors should also look at how highly levered the company’s project is to the price of gold. The high-grade and low-capex nature of the Madsen Red Lake Mine means that an increase in gold price to U$1,500/oz results in an after-tax NPV at 5% of C$390 million and an after-tax IRR of 51%.

The Madsen Red Lake Mine appears well-timed to benefit from a rising gold market, and looks set to generate well over CAD$800 million in cumulative pre-tax cash flow with gold currently near C$2,000 per ounce.

While the 12-year mine plan in the feasibility study offers investors a robust return on investment, that is only part of the picture.  Exploration and resource expansion drilling on the deposit continues to generate new discoveries, successfully extending the structural corridor that controls the Madsen orebody to seven kilometres.

Inflection points:

Given recent drill results from these deposits, there is a tremendous amount of potential that has not yet been unveiled from this system. Pure Gold’s strategic investors probably view the Madsen Red Lake Mine through their own experience of generating value from brownfield projects, and have invested in Pure Gold for their next success.

This investment is certainly an endorsement of Pure Gold’s management team. Pure Gold could not ask for a more accomplished, expert group of strategic investors to back it in its rapid path to becoming a cash-flow positive mine and realize the potential of this world-class mining camp.

What the boss says:

Darin Labrenz, President & CEO Pure Gold Mining, said on October 1, 2019 following results of the ongoing drilling along the Madsen Red Lake Mine Trend, that "these results continue to support our record of discovery to mineral resource in a phased approach to bring a brand new, fully funded mine to life”.

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Pure Gold Mining begins trading in London as it looks to attract greater...

Pure Gold Mining (CVE:PGM)(LON:PUR) CEO Darin Labrenz chats Proactive London's Andrew Scott as the firm began trading on the London Stock Exchange. The Vancouver-based group is developing the Madsen project in the prolific mining area of Red Lake in Ontario, Canada, with first output...

on 22/5/19

5 min read