Production starts to roll at Sage Gold’s Clavos mine
We have expressed our thoughts on Sage Gold Inc. (TSXV: SGX) (“Sage”) fairly recently, but these have since been echoed by renowned New York equity analysts Hallgarten & Company (“Hallgarten”). In his report, analyst Christopher Ecclestone highlights that Sage, through its persistence, survived the big dip to snap up a 40% share held in Kirkland Lake just in time for the recovery, which has now resumed production of gold metal on minimal capex.
As a result of the interest in the Clavos mine, Sage’s most recent offering was so oversubscribed that total proceeds amounted to nearly $2.36 million, $1 million more than anticipated. Meanwhile Sage’s management is also negotiating an equipment loan facility in order to access the highest grade stopes below 200 metres that were previously identified by St Andrew and hold the greatest potential for high grade ores.
The report agrees that the move to production rarely runs smoothly, and at Clavos this has been no exception, with five shipments having made it to the mill in recent months despite exceptionally adverse weather conditions. Dewatering of the lower levels is almost complete, and production should reach commercial levels during the first half of 2018.
Hallgarten goes on to say that mining stocks having retreated from 2016 highs, and the old dichotomy of producer versus explorer has come back into play. The move by Sage into production secures it a place in the most favoured category of mining stocks, those with cash flow. The current year will give management the opportunity to show how a junior can succeed where a well known mid-tier could not.
The secret, Hallgarten believes, is a combination of a team that is heavy with skills from first tier players (two of the board are involved at Yamana) combined with restoring the previous synergies of the various assets and doing so with a strict approach to costs and efficiencies. The firm reiterated its Long rating on Sage with a twelve-month share price target of CAD$0.49.
The mine is located within the Timmins mining camp in German, Stock and Clergue townships and is comprised of 69 patented and leased claims and 14 unpatented claims. The patents, leases and claims are 100% owned by Sage. The property comprises 2,540 hectares in total area, and is only 20 kms from the Hoyle Pond mine, which has produced more than 2.4 million ozs since 1985 and remains in operation.
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The Clavos deposit was mined briefly between 2005 until August 2006, and again until May 2007, with total production of 120,746 tonnes grading 4.3 g/t Au, or 16,745 ounces of gold.
Part of the strategy to minimize the capital spend at Clavos is the utilization of McEwen Mining’s nearby mill to process the ore from the mine. The mill is a 2,500 tonnes per day facility with electricity supplied from a local 27kv power line. Sage has signed a binding toll milling agreement with McEwen Mining over the flow of ore they expect to send to the mill, processing up to 200,000 tonnes per year for a total of 1.1 million tonnes over the estimated seven-year mine life of the Clavos Mine.
The management of Sage intends to complete a new estimate of mineral resources and reserves utilizing 1,000 surface and 550 underground drill-hole composites that are now in the gradex thickness database. An additional 200 drill-hole assay composites from more recent underground definition and exploration drilling will also be incorporated.
The latest drill results show there is more to find in all directions at Clavos. Grade control is improving as knowledge and understanding of the deposit has improved, which will culminate in the estimation of an updated Mineral Resource, potentially enabling mine life extension.
Sage is currently trading at only CAD$0.09 and is unlikely to dilute much more in the near future considering the success of the recent placements.
To access the Hallgarten & Company report, click here