With vaccine headlines continually crossing the wires, it has brought some selling pressure to the gold space. However, as pointed out numerously on Twitter, even though I favor scientific breakthroughs with the development of an effective COVID vaccine, I don’t think anyone should think that even with a vaccine, the structural economic damage that has happened will be erased anytime soon.
Central Banks around the world continue to print money at unprecedented speeds to support their respected financial markets.
Governments continue to signal that significant fiscal support is far from over and global debt continues to explode.
This emerging global debt crisis should NOT be blamed strictly on the health pandemic, even though I am not disputing the fact it has accelerated the process of how governments are going to have to address this issue.
The debt issue has been created by central banks by keeping monetary policy loose for far to long, which is one of the reasons why they are printing money at record speeds.
An essential tool for fighting a recessionary environment has always been adjusting and lowering the federal funds rate in times of distress. Today that cannot happen.
This is why central banks globally are proposing the radical idea of lowering interest rates below zero, which in effect, charges bank depositors to hold their fractionalized savings. It is such an absurd idea and has completely failed in Japan, but central banks have NO choice if they cannot achieve their inflation targets.
With all this debt, economists will do whatever they have to do to keep real interest rates NEGATIVE, which is a very powerful tailwind for gold.
In this environment, a company that I feel is heavily under the radar is Gold X Mining.
If you haven’t done so yet, I highly encourage my readers to read the interview I did with the CEO of Gold X, Paul Matysek, where we went in-depth of the companies recently announced definition and resource expansion program which has commenced at the company’s 100% owned Toroparu gold project in Guyana. (CLICK HERE TO READ THE INTERVIEW)
The Toroparu Gold Deposit is situated in the highly prospective Cuyuni-Mazaruni Region of western Guyana, host of both Zijin’s Aurora Gold Mine and Gold X’s Toroparu, one of the largest in-situ gold projects owned by an independent junior mining company in South America.
Gold X’s 100% controlled 53,283-hectare Upper Puruni Concession lies within the Cuyuni-Mazaruni Region (Region 7) of Western Guyana. The region’s hilly terrain is accessible by air and road. Facilities at Toroparu include a 200-person camp and a 2,500-foot all-weather airfield.
In June 2019, the company released an updated preliminary economic assessment (PEA) which truly highlighted the scale and world-class nature of this asset.
Highlights from the Assessment include:
- 7.353 million ounces of Measured & Indicated Gold Resource and 3.150 million ounces of Inferred Gold resource.
- 4.5 million ounces of cumulative Gold production (3.64 million ounces produced in Au doré bars) over the 24‐year Mine Life, with:
- 1.476 million ounces gold doré production over the first 10 years
- 2.148 million ounces gold doré and 876,000 oz gold in concentrate production over balance 14 years
- Annual Life of Mine gold production of 187,500 ounces per year & annual production of 147,600 ounces per year of over first 10 years..
- $378 Million pre‐production capital expenditure estimate with
- $272 Million pre‐production financing requirement (Capex less $106 million Wheaton precious metals purchase agreement deposits)
- $232 Million Phase 2 expansion financed from internal cash flow
- $2.544 billion Cash Flow from Operations at $1,300/oz Gold Price
- $1.25 Billion After‐Tax Free Cash Flow (net of $974 million life of mine capital cost estimate & $135 million Wheaton CAPEX deposits)
- 20.3% Internal Rate of Return
- 496 Million Net Present Value at 5% discount rate
- 2.92-year payback of initial capital expense
These are extremely robust economics that would significantly add to a major gold producer’s production profile once the asset is built and rolled into production with a very reasonable payback period at under three years with $1,300/oz gold.
The all-in-sustaining costs projection would be nearing industry lows at $826.38/oz, which showcases this mine’s high margin component, which would generate some serious cash flow once in production.
At a gold price of $1,700/oz the project economic results include:
- $4,033 billion Operating Cash Flow
- $2.294 Billion After‐Tax Free Cash Flow (net of $974 million life of mine capital cost estimate & $135 million Wheaton CAPEX deposits)
- 34.9% Internal Rate of Return
- 1,023 Billion Net Present Value at 5% discount rate
- 1.72-year payback of initial capital expense
Current gold prices are between $1,800/oz and $1,850/oz with several analysts predicting a return to +$2,000/oz in the new year once the fiscal stimulus program is reintroduced in the US and other countries.
The company certainly has the team to see this asset through to either an outright sale or rolled into production internally.
The company’s management team has an unparalleled transaction pedigree of C$3.14 billion created over the past 13 years:
The company is now focused on completing a 12,000-metre drill program designed to define continuity of grade within recently discovered sub-vertical high-grade gold-bearing structures coming up from depth as well as upgrade and expand the current open-pit mineral resource at the Toroparu gold project.
The results should be very interesting as the Gold X team completed a comprehensive review before commencing this program. In fact, Mr. Matysek, the CEO of the company said in our recent interview:
“This review focused on finding the structural controls of mineralization that occur within every deposit but looked at all mineralization within the existing 3.2 km Toroparu Gold Trend and not only that constrained by the open-pit grade shells. The team focused on the abundant higher-grade assays within the projects database that seemed to occur along structures in cross sections within the Toroparu Main Zone published previously by SRK.
During the review the team identified several discreet east-west oriented thin sub-vertical structures that contained the majority of the 1,811 high grade gold assays above a 3 g/t cutoff grade. These structures can be traced from the depth of the historic drilling to near surface over about 2.5 km of the strike-length of the Toroparu trend and are open further along strike.
A drill program was designed targeting several areas where clusters of high-grade mineralization within these structures can be tested for continuity of grade. If confirmed, additional drilling will be required to expand these areas into underground resource targets. If additional drilling supports the structural model the deposit may contain a mineable thin-veined mesothermal geologic model similar to those controlling mineralization at the Campbell-Red Lake District in Canada.”
This is a very interesting piece of information. If my readers are not familiar, the Red Lake Mining District has produced over 22 million ounces of gold through 2004, worth over $US 35 billion at 2014 prices. The two principal mines, Campbell and Red Lake, both have historic ore grades averaging about 0.57 oz/ton Au (22 g/tonne)
It will certainly be a very exciting time for Gold X and its shareholders in the coming months as drilling continues and as assays begin to be released.
I will be doing another Q/A with the company in the next 3-4 weeks for an update.
I invite my readers to view the companies:
The company trades on the Toronto Venture Exchange under the symbol GLDX and also on the OTC under the ticker GLDXF.
The current valuation is C$152 million.
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