To start the next Year, the Bizworld column will review two investment opportunities in gold mining.
The companies are risky long-term opportunities still in development stages. Long-term involves a four to five year horizon before expecting major rewards .
The strategy is risky, looking at companies that still need financing, building a mine and mill and operating them.
The new production in these cases should be profitable even if gold prices slide from current levels.
First on the list is Skeena Resources with properties in the Golden Triangle of Northwestern B.C.
Skeena owns the former Eskay Mine operated by Barrick.
The November feasibility study indicates a 12-year mine life with average production of 370,000 ounces gold per year.
Total operating costs will be $684US an ounce — an exceedingly low cost. The cost is reduced as this is an open pit operation with silver byproduct.
Cost of building the project is estimated at $713 million, with funding to be obtained.
The CEO said in an interview that lenders want 60 per cent equity from Skeena.
Skeena has several options to fund its $427 million share of cost. It can sell a stream of future silver and some gold production royalties. It can sell more shares as the outstanding 88.4 million shares are relatively low for most gold companies at this stage of development.
Or it can sell the nearby 3.3 million ounce Snip gold mine. The CEO says he won’t take on debt until production is near.
Once funding is in place the open pit mine will take about two year to get operating.
All infrastructure — power, power lines, roads — are in place.
At a recent $5.34 a share Skeena is closer to the year’s low of $4.20 than the $10.38 high.
Second on the list is I-80 Gold Corp., a northern Nevada company with four former mines under various stages of re-development both as open pit and underground operations.
The goal is to produce 400,000 ounces of gold a year within five years in stages
Most advanced is the McCoy-Cove underground property with an estimated $949 US per ounce costs and planned production of 102,000 ounces gold a year.
Reserves at all four properties must still be evaluated to the proven category. The Ruby Hill property leach pad produced 4,000 ounces gold this year.
I-80, named for the interstate highway running through the property, has the advantages of processing facilities at two of the mines and silver byproduct that can be sold to finance mine building and a 17 per cent interest owned by miner Equinox Gold.
Trading around $1.93 a share, I-80 is closer to the year’s low of $1.73 than the high of $4.22.
Both opportunities involve high risk with potential for high rewards in four to five years.
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
