– Momentum Public Relations –
Press Release: March 17, 2017
The aggregation of Kirkland Lake Gold (CN:KL) into a far larger beast over the past two years has left the historic Timmins gold camp, Ontario, without a natural consolidator for its multiple small-deposit companies, but it’s a mantle near-production junior Sage Gold (CN:SGX) is happy to assume in the absence of others.
Sage chief executive Nigel Lees told an investor lunch in London this week he did not expect the market to take much notice of the company in its current state, but it would not be in its current state for too much longer.
The first part of the junior’s transformation will be to bring its modest Clavos brownfields, underground project into production.
Clavos has a 316,000 ounce indicated and inferred resource that it plans to mine at a rate of 25,000oz per annum and truck down the road to a mill owned by precious metals producer, Primero Mining (CN:P), which is running severely below capacity.
The life-of-mine arrangement with Primero underpins an initial capital expenditure of just C$8 million for the Clavos start-up, according to a 2013 preliminary economic assessment.
The mine permit was updated in record time – three weeks – which allowed Sage to secure the equity finance to start mining operations.
Much of that money will be spent on dewatering the previously established decline and updating the PEA to a prefeasibility study. Not that Lees considers a PFS necessary for a decision to mine – that has been made – but it provides greater market confidence.
So far, all work is on time and on budget and so Sage will be expecting to be mining by mid-year with the first ore delivered to the mill by end-September.
That will satisfy Lees’ need to see cash flowing from the business. It will also provide the market with confidence in management’s ability to execute on its plans and reassurance Sage is not a company that expects to be perpetually topped up through equity issues.
Though the commencement of mining operations is seen as the first key step in the company’s evolution, initial work has already started on the Clavos growth strategy.
Surface drilling began this quarter as Sage investigates the potential to grow the resource, which it and former owner Kinross Gold (CN:K) believe has every chance of swelling to 1 million ounces.
That is likely to come from three distinct opportunities.
First and most straight forward will be the inclusion of intercepts that meet the cut-off grade (2.75g/t Au) but fell outside a previous mine plan.
Second, and only slightly more complicated (it will require the drill rig), Sage is testing an untouched area between the Main mineralised zone and the established 960 zone.
And finally, requiring more effort still, will be the pursuit of ounces expected to be delineated at depth below the Main zone, where historic holes have returned exceptional hits such as 65.3g/t Au over 4m, including 374.1g/t Au over 0.7m.
But establishing a 1Moz resource is not going to put Sage on the map in a gold bull market, which is exactly what Lees believes we’re experiencing at the moment, albeit the early stages. He said an element of M&A is inevitable to build the “critical mass” needed to attract institutions.
“We’ll be looking to buy similar size projects to Clavos,” he told Mining Journal, adding there were “five or six” such projects in public and private vehicles in the immediate Timmins vicinity being evaluated.
Asked whether he expected stiff competition for these assets given his assessment of the market as one in a burgeoning bull run, Lees was relaxed. He said Sage was viewed as the district’s natural consolidator, having established itself with the locally “unique” standing as a fully-permitted, fully-financed company.
He said at one point Kirkland Lake may have bought these projects but with that miner having built itself into a position where it is a circa C$2 billion market capitalisation, international producer, few others are left with an appetite for district consolidation at this level.
Meanwhile, playing a supporting role in the Sage development story, is a polymetallic volcanogenic massive sulphide property, which is also in an established mineralised district in Ontario.
The Onaman property is being drilled in tandem with Clavos and is focused on the Lynx copper-gold deposit, though historic exploration results indicate an economic discovery could also include zinc, lead and silver, too. An inferred resource at Lynx was estimated at 1.94 million tonnes grading 1.44% Cu, 39.6g/t Ag and 0.58g/t Au.
However, unless Lynx turns out to be a gold-silver project with base metal credits, it is difficult to see it remaining part of the Sage stable. More likely, exploration success could provide Lees with an opportunity to sell the project into what appears to be a parallel, early-stage bull run in both the copper and zinc markets.
A sale at Lynx would then combine with cash flow from Clavos to build the arsenal for Sage’s consolidation bid in Timmins.