Financing Jumps in December

Project financing recovered in December, and opportunities for equipment companies and service suppliers during the past week included a new gold project in Western Australia and enhanced prospects for a cobalt project in Idaho.

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After collapsing to an historical low in November 2018, the total amount raised in financings by junior and intermediate companies was up 45% month over month in December 2018 to US$397 million. This total, however, is less than one-third of the amount raised in December 2017.

A report from S&P Global Market Intelligence (SPGMI) shows that the number of reported financings by these companies (overwhelmingly funds raised for exploration and project development) also increased, by 55% to 238, which is the highest level in 12 months. This is not unexpected as December is a historically active month for financing. In four out of the past five years, December has seen the most financings completed by junior and intermediate companies (even if the amount raised was not the highest monthly total for the year).

SPGMI reports that US$228 million was raised for gold projects, an increase of 32% over the total in November 2018, with the 123 gold financings representing an increase of 62% month over month. ASX-listed companies were responsible for the lion's share of this increase in December, with their US$96 million raised being nearly triple the November total. In contrast, the total raised for gold by Toronto Stock Exchange- and TSX Venture Exchange-listed companies was down almost 10% month over month.

At the project level, Matsa Resources Ltd has started preparing mine plans for two small-scale operations at its Lake Carey gold project in Western Australia. The company recently completed mining at the Red Dog project.

A new mine plan has enabled Cobalt Solutions Inc. to increase the target production rate at its Idaho cobalt project by 50% to 1,200 t/day. The plan will increase cash flow during the early stages, and improve overall project economics. The change will require retrofitting of the mill, but the additional cost will be supported by increased production. The company is working with Micon International Ltd to complete an updated feasibility study for Idaho, which was valued at US$136 million in the previous study.

DRA Global has been awarded an engineering, procurement and construction (EPC) contract for the Dargues gold mine in New South Wales, Australia. The construction of a 355,000 t/y gold processing facility and mine backfill plant will start in February, and the first ore is expected to be processed in early 2020.

An EPC (valued at A$155 million) has also been secured by Sedgman, which is the mineral processing unit of IMIC Group Ltd. The contract, from QCoal Ltd, is for the Byerwen coal mine in central Queensland, Australia. Early work has already started, with the project expected to be completed in early 2020.

Project financing announced during the past week included news that Australian Vanadium Ltd has raised A$7.4 million through the conversion of ASX-listed options. This funding will accelerate development of the Gabanintha vanadium project in Western Australia. A pilot-scale metallurgical study, part of work to complete a definitive feasibility study, will begin this month. In December 2018, a pre-feasibility study on the Gabanintha project outlined a net present value, discounted at 8%, of US$1.41 billion based on a steady vanadium pentoxide price of US$20/lb over the operation's initial 17-year mine life.

Chimata Gold Corp. announced last week that it had signed a US$9.5 million finance and off-take facility with Transamine Trading SA for concentrate produced from the Kamativi lithium tailings project in Zimbabwe. Zimbabwe Lithium Ltd, Chimata's local partner, owns 60% of the project with the government owning the remainder. Chimata said it will use the proceeds to build the first phase of the project's processing plant and for working capital. The agreement comes after Chimata won a dispute with Beijing Pingchang Investments Co. over the rights to the project.

Early Stage Opportunities

Early stage opportunities announced during the past week included news that New Pacific Metals Corp. is set to expand the Silver Sand silver-tin project in Bolivia. This follows the securing of exploration, mining and production rights on adjacent ground. Bolivia's Ministry of Mining and Metallurgy recently approved a mining production contract between New Pacific and state miner Corporacion Minera de Bolivia (Comibol) that covers an area of 57 km2 in two separate surrounding areas.

PJSC Alrosa has opened a new subsidiary in Zimbabwe, called Alrosa (Zimbabwe) Ltd. The company plans to develop new mining operations in the country.

Montero Mining & Exploration Ltd has posted an initial resource estimate for the Uis lithium-tin tailings project in Namibia. The inferred resource is given as 14.4 Mt at 0.37% lithium (as lithium oxide) and 17.1 Mt at 0.05% tin (as tin oxide).

A pre-feasibility study for Filo Mining Corp. at its Filo del Sol copper-gold-silver project in Chile has estimated a net present value, discounted at 8%, of US$1.28 billion. The project, on the border of Chile's Region III and Argentina's San Juan province, has a mooted annual production of 67,000 t copper, 159,000 oz gold and 8.7 Moz silver, based on 12 years of leaching. This yields an undiscounted post-tax cash flow of US$3.23 billion, based on metal prices of US$3/lb copper, US$1,300/oz gold and US$20/oz silver, with an initial capital expenditure of some US$1.27 billion.

Vista Gold Corp. plans to complete fine grinding and leaching tests for the Mount Todd gold project in Australia's Northern Territory in the first quarter. This work will be followed by an updated preliminary feasibility study in the second quarter.

Lucara Diamond Corp. has approved a budget of US$14.8 million to complete a feasibility study for an underground mining operation at its flagship Karowe diamond mine in Botswana. The company expects revenue of up to US$200 million from the sale of at least 300,000 carats from Karowe in 2019.

An updated preliminary economic assessment on K92 Mining Inc.'s Kora and Kora North gold deposits (part of an expansion project at its Kainantu mine in Papua New Guinea) has given a net present value of US$710 million, discounted at 5%. The expansion study defined gold-equivalent production averaging 120,000 oz/y over a 13-year mine life, with all-in sustaining costs of US$615/oz. For the first five years of operations, annual production is expected to average 135,000 oz gold and 2,100 t copper. 

Source: All material is taken from S&P Global Market Intelligence's Metals & Mining database.

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.