Mining Victoria Gold’s (V.VIT) Eagle Gold Project at Dublin Gulch in Yukon literally means taking off the side of a small mountain. That mountain hosts a National Instrument 43-101 compliant Reserve of 2.7 million ounces of gold at .67 gpt. Operating costs are estimated at US$550 per ounce and the mine is designed to produce approximately 200,000 ounces of gold per year in full operation.
Big numbers, but the critical number was the CAPEX to get the mine built. On March 8, 2018 Victoria announced that it had secured a Comprehensive C$505 Million Financing Package for the Eagle Gold Project. It is a package which includes a C$125 million common share private placement, a C$98 million royalty financing piece, an equipment financing facility for up to C$63 million, and two credit facilities totalling approximately C$219 million. Plus, a separate C$20 million bridge loan, allowing the company to ramp up construction as the company closes the financings.
Victoria CEO John McConnell was, of course, delighted to secure the funds. But he was even more pleased with his new partners, Orion Mine Finance and Osisko Gold Royalties. “Orion has been very honourable throughout the process,” said McConnell. “Osisko are first rate guys. And this deal gives us access to the Osisko technical group.”
Sean Roosen, Osisko’s Chair and CEO commented, “We are very pleased to partner with Victoria Gold to develop Canada’s next premier gold mine, and to generate important benefits for all project stakeholders. Having been to the project and met with many of the stakeholders, we are looking forward to investing in and working with Victoria in the Yukon to bring this project to fruition. With the gold price currently over C$1,700 per ounce, this is a great time to be building a gold project in Canada as there is availability both from suppliers and in the workforce.”
Victoria has been working on the Eagle Gold Project since 2009. Provided everything goes as planned, it will have been ten years from the acquiring the project to the first gold pour. In that time Victoria doubled its 43-101 compliant resource, completed a feasibility study, completed the Environmental Assessment process, received all permits for construction and operations, signed a comprehensive Cooperation Benefits Agreement (CBA) with the local First Nation of Na-cho Nyak Dun, and pre-constructed areas of the site including a 250-person camp, the heap leach embankment area, the gold recovery plant area, and secured the financing necessary to bring the mine into production.
In 2017, Victoria began Phase 1 construction. “Phase 1 removed much of the risk,” said McConnell. “We increased the camp size prepared the leach embankment area down to bedrock, and upgraded bridges.”
“We’ve been working on the financing for a year,” said McConnell. “We were down the road with BNP Paribus with approvals from three royalty companies.”
“Then Orion approached us with a term sheet,” said McConnell. “We decided to only proceed with a full financing package. I was away for three and a half weeks working on the financing details.”
It was crucial that the financing package take account of the escalation in costs since the Feasibility Study done in 2016 plus a contingency, and the first 18 months of sustaining costs.
“We thought it was prudent to raise 18 months of sustaining capital,” said McConnell. “The risk for single asset companies is running out of money at the very end. We now have the full amount to advance this mine into production.”
“We started the day after the financing was announced,” said McConnell speaking two days after announcing the financing. “We’ve opened up the road and have been up and running since Monday. By mid-April we’ll have 250 people in camp.”
“We’ll be spending three-quarters of a million dollars a day,” said McConnell. “By mid-summer the concrete for the crusher will be poured, there will be some steel erected and there will be mining trucks and shovels on site.”
“We plan a modest exploration program this year,” said McConnell. “Our aim is to focus on construction.”
“We are building the mine outlined in the feasibility study,” said McConnell. “We are pretty confident with the timelines and the projections.”
Looking at that 2016 feasibility study there are two things which stand out. First, the Eagle Gold Project is projected to have a 29.5% after-tax internal rate of return based on USD $1250 an ounce gold. Gold has been trading significantly above $1300 an ounce and may go higher. Second, the feasibility study indicates a mine life of 11 years “with expansion potential”. Even the modest exploration program contemplated for 2018 is quite likely to add ounces. Perhaps many ounces.
The next 18 months will transform Victoria Gold from a developer to a significant gold producer. The private placements to Osisko and Orion are at a share price of $0.50 while the shares of the company were trading around $0.40 to $0.42. Osisko and Orion are sophisticated, long-term, investors. They were willing to pay a premium to join the Victoria story. It is reasonable to expect the market will follow as the first pour approaches.
While John McConnell was in Toronto for PDAC he never made it onto the floor of the conference. He was ironing out the final, financial details which will transform the Eagle Gold Project into the Eagle Gold Mine.
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Here is Victoria Gold’s new Corporate Presentation (link)
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