Sage Gold: The birth of a new precious metals producer
Done with exploration, Sage Gold Inc. (TSXV: SGX) (“Sage Gold”) is busy adding several hundred historical and recent drill hole composites from years of definition and exploration drilling at its Clavos mine at Timmins, Ontario. The new model, which factors in a higher drill hole density, has resulted in the identification of three new vein systems (seven total) that are expected to increase the contained gold resource, but the ongoing bulk sampling program has already produced around 1,031 ounces of gold from 18,272 tonnes of material, worth $1,377,127 at today’s spot prices.
Interestingly, junior gold stocks remain depressed into 2018 even though the precious metal is once again battling with the $1,350/oz line. We believe this is because the attention of the retail investor is being held by modern emerging commodities. These are the people who would normally be on the lookout for gold companies approaching production and supporting them. Unfortunately for precious metals guys, the modern investor is currently hungry for marijuana, batteries and blockchain stocks.
However, with the recent Bitcoin tumble having taught a few lessons, we expect that many newly inspired investors will be looking for their first safety net over the next few years. This is invariably gold and gold producers, and crucially, this project is already permitted, having been given the green light from the Ministry of Northern Development and Mines to produce up to a maximum of 700 tonnes of ore each day.
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A preliminary economic assessment from 2013 had Clavos putting out more than 145,000 ounces of gold over a seven year mine life, but the recently discovered mineralised systems are likely to boost this estimate, which should be confirmed in the company’s releases leading up to production.
Furthermore, according to the new model, the thickest intersections are below the 200-metre level, and although the previous operator constructed mine stopes down to 285-metres, they extracted very little material. Sage Gold has since almost completely dewatered the mine, although the severe weather of late has created additional costs resulting from failed milling machinery.
Sage Gold has one of the lowest capex in the industry because previous operator St. Andrew Goldfields spent a massive $70m on its development before optioning it to Sage Gold. The mine is only 20 kms from Goldcorp’s Hoyle Pond mine which has produced more than 2.4 million ozs since 1985 and is still going. It’s also one of the only gold deposits in a prolific and active part of Canada which is already permitted.
The existing resource estimate shows Indicated mineral resources of 1,258,400 tonnes at 4.81 g/t Au totalling 194,600 oz Au, and Inferred mineral resources of 796,000 tonnes at 4.7 g/t Au representing 120,000 oz. Existing infrastructure is already in place, including underground ramp access to the 300 metre level, underground levels developed every 25 metres, power to site, surface ventilation system, and a water management system. Clavos has a life-of-mine toll milling agreement with McEwen Mining’s Stock Mill only 10 km away.
These guys are ready to go; don’t get distracted and miss the birth of a new precious metals producer this year.
Lara Smith has spent over a decade covering commodity markets. She started her career as a buyside analyst in South Africa where she covered soft ... <Read more about Lara Smith>