Stifel GMP said it expects 2022 to be a transition year for Pure Gold Mining Inc (TSX-V:PGM, LSE:PUR, OTC:LRTNF) as its Red Lake, Ontario mine ramps up and proves its production and cash generating potential.
In a note following news of the Toronto-based company's $30 million private placement announcement, Stifel analysts wrote that the additional financing would provide the company an opportunity to prove up the potential of its Ontario mine.
Pure Gold’s pending C$30 million private placement includes an upsize opportunity to C$40 million pending demand and is expected to close on or about May 13.
READ: Pure Gold Mining arranges non-brokered private placement of 200 million units for aggregate gross proceeds of $30M
Stifel has a Speculative Buy rating on the stock.
“Should Anglo Gold participate in the offering and all warrants be exercised, this could raise C$79 million, above the C$50 million financing requirement the company previously stated,” analysts wrote.
Analysts wrote that the proceeds of the financing would allow the company to “execute the operational turn around of the Pure Gold mine”.
“As liquidity concerns have eased, the company is focused on sustainably mining higher grades, at a higher rate and at lower costs,” analysts wrote.
“Positively, we have reduced our near-term operating cost forecasts as the company notes they are making good progress on a 30% quarter-over-quarter cost reduction.”
Delivering on turnaround plans
Stifel noted that the next couple of quarters are "critical" for Pure Gold to deliver on its turnaround plans, while the resource update and life of mine plan in 4Q are necessary to provide clarity on valuation.
Analysts also highlighted the appointment of former Kirkland Lake Gold CEO Tony Makuch as technical advisor to the board as a positive development.
“His extensive experience advancing several projects and mines through construction to commercial production, we think, is well aligned to the current requirements of the company as it executes its turnaround,” analysts wrote.
However, Stifel has reduced its target price to C$0.40 per share from C$0.70, citing a 31% reduction to net asset value per share as extra cash is offset by increased shareholder dilution. Pure Gold's shares were trading at C$0.18 in Toronto on Tuesday morning.
Based in Red Lake, Ontario, Pure Gold Mining is a gold mining company that owns the operates the Pure Gold mine.
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