The story for upstart mining companies is all too often the same. It goes something like this: The project is in a highly prospective location, perhaps even includes an historic mine that never used any modern mining technology, in a friendly mining district where majors are active. The leadership team has experience in both the resource and capital markets. That is where most start and, candidly, there is nothing wrong with that.
However, there is a new kid on the block that is doing things a bit differently and it hasn’t taken them long to amass a cash hoard and a shovel-ready project. Owing to the high degree of insider, institutional and industry holdings keeping the float negligible, most retail traders probably don’t even know about G Mining Ventures Corp. (TSX-V: GMIN) yet, but there is no shortfall of impressive material available for due diligence today.
A Step Back: The GMIN Factor
Before jumping into where G Mining Ventures Corp. (GMIN) is today, it’s imperative to understand how it got here. GMIN is backed by the management of specialized mining consultancy firm G Mining Services (GMS), a privately owned company founded and run by Canadian Mining Hall of Fame inductee Louis Gignac Sr. and his three sons. Formed in 2006, GMS built a reputation on reliability and efficiency to develop a resource from exploration to operations, particularly as a one-stop shop for mine construction for some of the premier major mining companies.
GMS’s recent track record includes construction of three operating mines, including the Essakane Mine for IAMGOLD Corporation (NYSE: IAG)(TSX: IMG), which achieved commercial production in 2010, and is now one of their flagship mines given it is the largest gold mine in Burkina Faso. That was followed by completing Newmont Corporation’s (NYSE: NEM)(TSX: NGT) Merian Mine in Suriname in 2016, one month ahead of schedule and $190 million under budget.
Most recently, GMS optimized the feasibility study for the Fruta del Norte Project for Lundin Gold (TSX: LUG)(OTCQX: FTMNF) in Ecuador. In July 2017, after receiving full project approval, GMS successfully led the construction of this project to commercial production in February 2020, and just finished working on Fruta’s process plant expansion.
Each of the three mines built by GMS produced over 400,000 ounces of gold respectively in 2021
All told, GMS has completed over $2.2 billion in projects 100% on budget (including 66% below budget) and 100% on schedule or earlier. How is this possible when mine construction is notoriously late and over budget? Because GMS does essentially everything in-house. There is no arguing amongst contractor or padding contracts with change orders. They have the team to get it done and have proven it over and again.
Let’s Build Our Own Mine
After building mines for others – and often working on projects backed by Sprott Inc., founded by billionaire Canadian mining legend Eric Sprott – the decision was made to form a pure gold mining development company - G Mining Ventures.
The impetus to form G Mining Ventures was the recognition that an expert project development team, and one with a track record of performing on time and on budget, is more scarce than cash and more scarce than projects; a great team would attract both of those other ingredients, and that has been proven out with the initial investor backing and the flow of acquisition targets.
Thing was, the company was a bit a SPAC reverse engineering how to build a mining company. They assembled an incredible team with Louis-Pierre Gignac as CEO and President leading a group with CV’s that included key positions at Kinross Gold (NYSE: KGC)(TSX: K), Lundin, Newmont, IAMGOLD, Sprott, and more. The team also includes GMS lending their experience through a Master Services Agreement.
Without a single asset yet, the company (still called Kanadario Gold) in November 2020 raised about C$43 million, as people bought into the team. In January 2021, an agreement was signed with Sprott Resource Lending Corp. whereby Sprott will, subject to good faith negotiation, provide access for up to US$200 million in financing for the acquisition and development of mining assets.
Now it was time to get an advanced asset.
Brazil Perfect for GMIN: Buy, Build, Operate
GMIN and its leadership team have successfully developed four mines in South America, providing the team a rich understanding of geopolitics, economics, climate, infrastructure and more. When the opportunity arose to negotiate with Eldorado Gold for Tocantinzinho, an older project their younger leadership considered non-core, GMIN relished the opportunity. According to Dušan Petkovic, VP, Corporate Development & IR at GMIN, during a phone conversation with Baystreet.ca, an acquisition deal was a perfect match for GMIN and Eldorado wherein GMIN could come in, optimize the project, and put it in production within a few years.
In August 2021, a deal was forged for G Mining Ventures to acquire the Tocantinzinho Gold Project (generally shortened to just “TZ”), a permitted open pit gold deposit at the time containing 1.8 million ounces of P&P gold reserves (at 1.42 g/t) located in northern Brazil. Estimates were for a 10-year reserve life and annual production of 187,000 ounces for the first 8 years. The completed deal resulted in Eldorado becoming the largest single shareholder in GMIN with a stake of 19.9%.
Shortly after announcing the acquisition, GMIN completed a bought deal private placement led by a syndicate of underwriters (Sprott, BMO Capital Markets, PI Financial Corp., Paradigm Capital Inc.) that raised another C$70.5 million.
“Tocantinzinho has all the key attributes GMIN was looking for in an initial acquisition, with clear visibility towards near-term construction and commercial production. This is the first step towards our vision of becoming a leading intermediate gold producer,” commented Louis-Pierre Gignac. The GMIN CEO went on to say the company is now well positioned to advance their “Buy, Build, Operate” strategy that will include more acquisitions of late-stage projects and producing mines.
Benefiting from Others: TZ Gold and the New Economics
Eldorado Gold Corp. acquired TZ in 2010 through the acquisition of Brazauro Resources Corp. for $120 million. $90+ million was invested in the project, including high quality technical work necessary to consider and construct a mine. This included a Pre-Feasibility Study in 2011, a Feasibility Study in 2015, permitting in 2017-2018 and updated Feasibility Study in 2019. Additionally, since 2010, there has been a lot of infrastructure built in the region, including a 72km road Eldorado built in 2015 that connects the site to paved national highway.
The land package surrounding the current deposit is massive, covering 688 square kilometers with less than 5% drill tested. To put that in perspective, TZ is about the size of Edmonton with only a few blocks explored. A total of 82,805 meters was drilled during 2004-2015, with the mineral estimate supported by 45,039 meters of drilling. In November, GMIN announced its intentions for a 10,000 meter drill program.
According to the Eldorado estimate, 1.78 million ounces of gold are contained in the Proven and Probably categories. Inclusive of the reserves, 2.12 million ounces at 1.35 g/t are Measured and Indicated.
For the technical type, analyst coverage abounds on GMIN that digs deep into all the economics and comparables demonstrating the value of the company.
This week, G Mining Ventures gave analysts even more to consider in their valuations and ratings with the big news of a new 2022 Feasibility Study (FS) for TZ. The new report provides a current mineral resource and reserve estimate, re-sequenced mine plan, refined mill design and improved capital and operating cost estimates.
These revisions are right in the wheelhouse of GMS and explain why major gold producers look to them for engineering and construction. Just a few of the highlights from the new FS include a 12% increase in mineral reserves to 2.0 million ounces, an after-tax NPV5% of $622 million and after-tax internal rate of return (IRR) of 24% at $1,600 per ounce gold. Using spot gold of $1,800 per ounce yields an after-tax NPV5% of $833 million and after-tax IRR of 29%.
The mine life has been extended to 10.5 years with annual gold production of 174,700 ounces at an all-in sustaining cost (AISC) of just $681 per ounce, putting it in the bottom quartile of the cost curve. During the first five years, gold production is estimated to be 196,200 ounces annually at AISC of $666 per ounce.
The improved overall economics also include an 7% increase in initial capital (to $458 million) and 44% decrease in sustaining capital (to $83 million), resulting in an overall 4% decrease for life-of-mine capital costs to $564 million. Re-engineering, optimization and favorable local exchange rates have helped offset the inflationary environment we are in.
Full construction is expected to begin during Q3 2022 with commercial production anticipated for Q3 2024. In mining, anything can happen, but measuring by the experience of the team handling the estimates there is little reason to doubt the forecasts.
The long and short here is that TZ is tracking to be the third biggest pure gold mine in Brazil with AISC per ounce that rank amongst the lowest of all open-pit mines in the Americas.
Smart Money is Already All Over This
Those that run in small cap mining circles understand that companies generally are loaded with retail investors, while so-called “smart money” (institutions, insiders, etc.) investors are fewer and further between. Once again, GMIN is the antithesis of small cap explorers. The company actually lacks retail investors.
Eldorado Gold holds 19.9% or the GMIN, followed by the Gignac family (management and board) holding 11.7% and then Franklin Templeton, Lundin Group & Affiliates, Sprott Group & Affiliates, ASA Gold and Precious Metals, CI Global Asset Management, and VanEck Associates hold between 5% - 8.8%, respectively. In aggregate, there is 20% strategic investors, insiders hold 12%, and institutions own 57%, leaving only about 11% for retail investors.
With more than C$72 million in cash on hand, an impeccable leadership team, favorable mining economics and a market cap of only C$195 million, retail traders are going to start hearing about GMIN and looking for opportunities to join the other bigger investors with a stake in G Mining Ventures.
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