Energy markets continue to grab investors’ attention worldwide as prices continue to rocket, most notably in Europe as uncertainty around the Nord Stream 2 pipeline continues. German regulators have said, the pipeline must show it would not break competition rules and many experts believe the pipeline may not be ready for winter.
China continues to get aggressive to secure supplies to keep its factories operational as the country’s senior vice-premier, Han Zheng, told China’s energy companies to make sure there is enough fuel and “do whatever it takes” to fight off this ongoing power crisis.
It is worth noting that major companies in the west are already feeling this power crisis in China.
Some of Apple and Tesla’s suppliers have already halted operations in addition to ten semi-conductor suppliers.
Why does this matter?
It matters because this ongoing global energy crisis will continue to accelerate inflation pressures if it is not resolved, which could serve as a significant tailwind for the precious metals industry as investors shift from risk on to risk-off assets.
This is all happening as central banks around the world continue to stockpile gold.
In fact, Central banks in India and Uzbekistan continue their gold-purchasing streak adding 12.9 and 8.7 tonnes, respectively, in August.
Poland surprised the market this week by announcing that its central bank will buy 100 tons of gold in 2022.
The general gold thesis remains strong as we approach continued inflation pressures, significant stagflation risk, market volatility and geopolitical uncertainty.
Gold Mountain Mining: (TSX-V: GMTN)
I will begin covering Gold Mountain Mining in the months ahead as the Company is nearing a transformational next few months as it is on track to be Canada’s newest gold producer.
Management has done an excellent job of achieving numerous milestones in a relatively short time frame as the company plans to deliver phase 1 production in the weeks ahead.
The Company will produce 19,000 ounces annually for three years with industry-low all-in sustaining costs of US $554/ounce and by year four, will be delivering 65,000 ounces/year.
The company is heavily focused on exploration and adding more ounces to the resource and has successfully done that leading up to phase I production.
The recent exploration program added over 260,000 ounces of gold to the Siwash North resource.
Moving forward, the Company will remain focused on adding ounces and making discoveries at:
- The deep Siwash North Zone
- The Elusive Zone, a potentially large-scale copper-gold porphyry
- Satellite drill-tested gold zones that have similar grades and structures as the Siwash North Resource Zone.
In the coming weeks, I will be providing an in-depth analysis with an editorial on the company, but today I am pleased to interview Gold Mountain’s CEO, Kevin Smith, to give my readers an introduction to the story.
Alexander Deluce:
Thank you, Kevin, for taking the time to provide the Gold Telegraph readers with an introduction to the exciting Gold Mountain story.
To start, can you provide a general overview of the Elk Gold Project?
Kevin Smith:
Alex, thanks so much for taking some time for an update on Gold Mountain.
The Elk gold project is a past-producing mine located 57km from Merritt, BC and 70km from West Kelowna. The project is just over 21,000 hectares with resources of 810,000 oz of high-grade gold and silver. Most importantly, the project’s mine permit is scheduled to land any day now.
Alexander Deluce:
The project has fantastic economics with all-in sustaining costs projected to come in around $550/ounce, which would undoubtedly be nearing industry lows.
Can you touch on the phased approach the company will take regarding scaling up operations in the coming years?
Kevin Smith:
On the production side, we initially go into an open-pit scenario where we produce 19,000 oz in Years 1-3, which allows us to get into positive cash flow almost immediately and look to expand this project in a non-dilutive manner.
We project a minimum of 65,000 a year by Year 4 when the project transitions into an open pit / underground hybrid scenario. The model is designed around the lowest risk and capital outlay to get into production and then use mining proceeds to fund rapid growth.
On the exploration side we want to continue to add ounces not only in the Siwash North Zone, where all of our current resources lie, but establish maiden resources in other zones of property such as the Lake, Gold Creek, South and Elusive zones. We also will continue to define high-quality targets throughout our very large and under explored land package.
Outside of the Elk project, we continue to assess a couple M&A opportunities, but our focus right now is getting the Elk up and into cash-flow.
In December of last year, we came out with a lot of aggressive timelines, and it’s important to management that we execute on all of those before we start taking on too much, too soon.
Alexander Deluce:
The Company has certainly displayed its expansion potential as the phase 1 exploration program added over 260,000 ounces of gold to the Siwash North resource, which achieved the internal goal of exceeding 800,000.
Can you touch on the companies phase 2 drill program, the size of the program and the areas you will be targeting?
Kevin Smith:
Our Phase 2 drilling in the Siwash North zone is complete and we upsized the meterage an additional 30%, because we liked what we were seeing in our infill and step out targets. Depth continues to be persistent, which plays nicely into our proposed underground scenario.
We’ve made a commitment to deliver 1,000,000 oz in this zone alone by the end of 2021 and we’re still optimistic that this target is achievable.
We’ve also completed some infill and step out drilling in our Lake and South zone with a goal of delineating maiden resources.
Our Gold Creek zone had substantial historic drilling that had never been recorded or modelled and it’s looking like there is enough historic drilling to establish a maiden resource which would be an awesome bonus on the amazing discount we were able to acquire the project for.
We’re currently drilling holes in our Elusive zone, which is a previously undrilled target and has the second-highest gold in-soils anomalies on the property. Early core that has come back is looking very good, so we are keen to see what type of assays we’re able to produce.
We feel this zone has the potential to be a more bulk-style tonnage deposit which would add an interesting new dimension to the high-grade sulphides that we plan to ship to New Gold ($NGD) by Q4/2021.
Alexander Deluce:
The Company has done an excellent job solidifying strategic partnerships to advance the asset in an efficient and non-dilutive model.
Can you highlight some of the partnerships the Company has built leading up to the first gold pour?
Kevin Smith:
We’re proud of the partnerships we’ve established and believe we’ve joined forces with some of the most respected names in the mining space and feel really blessed to have all this talent surrounding our project.
JDS Energy and Mining Inc. is completing our Pre-Feasibility Study (“PFS”) and are engineering the underground portion of our mine plan. They are located 45 minutes from site in Kelowna and are undoubtedly one of the best in the business.
Nhwelmen-Lake, who is doing all our construction, production and highway hauling, is a majority-owned Indigenous Mine Operator involved in 6 separate mineral projects throughout British Columbia.
Having surrounding Indigenous Communities sharing in the positive net economic benefits that the Elk Gold mine generates is something we’re extremely proud of.
A big part of doing business in British Columbia is to emphasize inclusive and transparent dialogue with Indigenous Communities and Governments right from the beginning.
HEG Exploration is an extremely talented group of young operators out of Kelowna, BC. The Elk’s Exploration program is designed and led by John Ryan, Teck’s former Lead Exploration Geologist at the Highland Valley Copper project.
They’ve put a brand new lens on our geological model and had an extremely successful Phase 1 and 2 Drill Program, hitting mineralization on almost every single hole. They’ve also put together an extensive historic core relogging program to reassess the 127km of historical drilling that was included with the asset purchase from Equinox Gold Corp ($EQX).
The relogging has proven to be an extremely efficient way to unlock ounces and has accounted for over 50% of the resources we’ve added to date. John and the HEG team are currently averaging less than CAD$8 an ounce discovery cost.
New Gold Inc. located in Kamloops British Columbia, is our Ore Purchase partner. Their New Afton facility is capable of processing 18,000 tonnes per day and is currently only operating at 11,000 tonnes. We are able to use their available capacity to process our Ore and can defer the capital requirements of building a mill early in our mine plan.
They have an ideal flow sheet with a gravity circuit on the front end and a sulphide flotation that results in a 92% net recovery of our gold and silver. The agreement that we have in place with them is unique in that it’s not toll-milling, but instead we are selling the Ore in raw form. As a result, New Gold takes on all risk of recovery and we receive 89% of the metals payable on the 17th of each month.
Being able to partner with proven operators and leverage another mine’s milling infrastructure, eliminates a huge amount of capex and operational risk.
Alexander Deluce:
Finally, Kevin, what are some near-term catalysts investors should be looking out for in the coming months from Gold Mountain?
Kevin Smith:
We’ve been patiently waiting for the province to award us our mining and effluent discharge permits as we aggressively build out the project. In the meantime, we’re getting all aspects prepared that are within our control, so that when the permit lands we can hit ore in the first few weeks, and hit our target of kicking off cash-flows by Q4/2021.
On top of that we have over 2,900 assays at the lab and are confident that those results will increase our resources to over the million-ounce goal that we’ve set for ourselves. Having only gone public on Dec 31st of 2020, to have a million-ounce gold and silver producer that’s generating positive cash-flow in less than a year, will be a huge accomplishment that I believe the market is going to respond positively to. If we’re able to link up with a more bulk tonnage style target in the property’s Elusive zone, it should add some serious torque to Elk’s perceived exploration upside potential.
We also have ambitions to up-list on the TSX big board as well as one of the American major indices in very short order. With our healthy treasury and well-developed property, we are fortunate enough to meet a lot of the requirements already.
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