Battle North Gold (BNAU) - Joining Up the Dots & Pouring Gold in 2021

Battle North Gold is a Canadian gold mine developer that owns the Bateman Gold Project, located in the prolific Red Lake gold district in northwestern Ontario, Canada.

We caught up with George Ogilvie, President and CEO of Battle North Gold who we last spoke to at the end of October about the company business plan and now we wanted to talk about some of the things they've done since October. 

Company Overview

Battle North Gold has its primary asset located in Red Lake, Northern Ontario. It's a Gold mine with significant infrastructure and CAD$700M worth of previous investment. Over the last 4-years, they’ve been technically de-risking the project which is now fully funded. They're now back into the construction and development phase and anticipate pouring their first Gold Dore bar before the end of this calendar year.

Progress & Results: 43-101, McFinley Resource Estimate, & CAD$40M Credit Facility

We saw the 43-101 at the McFinley zone which Battle North is very happy with as an 111,000oz initial global resource. The McFinley deposit has only been drilled off about 200m below surface and there is 40,000oz measured and indicated at just over 6g/t and 70,000oz of inferred material at almost 8.5g/t. This is not the primary deposit and will be supplemental, incremental feed into the mill because the Bateman Gold mill has a capacity of 1,800tpd. The Feasibility Study for Bateman showed an average life of mine production of 1,300tpd which means that the plant is only running at 80% of its designed capacity. So if they get a supplemental 300t - 500t per day into that mill from McFinley, the incremental ounces at current Gold prices will carry a significant margin with them.

The company plans this year to continue to drill the deposit at strike and down plunge where it's open. So over the course of this year and the ensuing years, they'll continue to look to grow that resource which will improve their business model and increase the life of mine.

A CAD$40M credit facility was agreed with Macquarie bank which is one of the most recognised commercial banks that lend in the mining space. The bank has their own due diligence team that did all the technical work on the deposit and the assay, and they also brought in an independent engineer. Given the former technical challenges of the project, when a bank like Macquarie bank sign-off on a CAD$40M facility and get through their technical due diligence, it is validation of the project for Battle North.

2020 Challenges & Preparation for 2021

At the beginning of 2020 the company knew that the NI43-101 resource they had was not large enough and they didn’t have enough measured & indicated resource that would convert into reserves to give them a strong, robust, financial, and economic model. So, in 2019 they continued to do infill and expansionary drilling and in early Q2/20, put out an updated NI43-101 on the Bateman project. The reserves had grown substantially and the density of the infill drilling was now down to an average of 17m which was required for the deposit. When they did the conversion of those reserves into the Feasibility Study, they ended up with about 635,00oz of contained Gold or 603,000oz of payable Gold over the 9-year initial mine life (LOM). 

The Feasibility Study itself came out in October 2020 and showed a very robust project using conservative Gold prices when compared to the spot price. They ran everything at CAD$1,525 Gold, which is a good CAD$300 below today's spot range and ended up with a project with an NPV in excess of CAD$300M. There was over CAD$400M of free cash flow, which comes off the project over its initial 9-years. And if you use the price of CAD$1,900/oz Gold, the numbers are significantly higher. The company is determined that this will be a producing mine by the end of the year, generating significant free cash flow and returns for their investors.

Cash Position: Repaying the Sprott Loan Facility

In October 2020, the company had access to over CAD$110M. Since then, they've paid off the Sprott loan facility of approximately CAD$15M at the end of December. Today, the company and its bank account are sitting with CAD$50M in hard cash, and access to an additional CAD$52M through the debt facility with Macquarie Bank. So access to about CAD$100M in total.

Strategy Going Forward & Money Allocation

The company is planning to accelerate into the marketplace and take advantage of the current gold price. Some critical path items have already started up at the mine site late 2020. They are re-commissioning the 240-man camp to house some of the fly-in fly-out employees which hasn’t been used for 5-years. There's an Ammonia reactor that is required in the wastewater treatment plant in order to run the mill to treat for Ammonia and discharge into the natural environment. 

They have to put in a primary crusher on the surface to crush the run-of-mine muck from the mine to feed into the sack mill. Then they have to reinforce the tailings dam and start the first raise so they are prepared for years 2 and 3 of production to accommodate the additional volume of tailings and rock that will be coming out of the project. 

There's approximately 8.7km of underground development that has to be done between now and the end of 2022 which is when they aim to be declaring commercial production so they are now in the process of awarding the underground development contract. 

Commercial production is defined as running at 75% of the nameplate capacity of the mill. So the nameplate capacity is currently 1,250tpd and 75% of that would be running at 900tpd per day. They have to do that continuously for 90-days in order to declare commercial production.

Potential Difficulties & Barriers

There are a few things that still need to be done. The company has exploration agreements with their 2 First Nation groups who they have very good relationships with but will need to negotiate and set up an Impact Benefits agreement. These negotiations with the 2 First Nations groups in early November 2020 and by Q2/21 they hope to have signed IB agreements with First Nations stakeholders. Currently, the mine site has access to 5.2 megavolts of power but in full production, they will need nearer 11 or 12, so they have an application with Hydro Ontario to gain access over the next 12-months to an additional approximately 6 to 7Mw of power.

There are also plans for further infill drilling that will take place this year in order to get the reserves down to below 10m, which is what they're striving for.

End Goal & Blue Sky Exploration Potential 

The strategy of putting this mine into production and then organically growing the company through close proximity assets and the regional land package which they haven't touched on yet, is the primary objective and goal for this company. They believe this will generate the most significant returns for their shareholders. As they continue to de-risk the project and to grow the reserves, now that they have a fully-funded project and have a technical report out, the M&A activity will pick up and people will look at Battle North Gold as a potential target. But that is not the primary goal for Battle North. They are building it, putting it into production and believe that will generate the most significant returns for their shareholders.

In November 2020, Battle North hired Maura Kolb who is a professional geologist with approximately 12-years of experience in the industry, and for the last 7-years, has been working entirely in Red Lake. She was formerly the regional exploration manager for Gold Corp, then Newmont Gold Corp, and then over the last year, she had been the regional exploration manager for Evolution Mining, which is the CAD$6Bn market cap Australian company that came in and acquired the Red Lake assets from Newmont Gold Corp. 

The first permits were received in December, and they're busy mobilising the first regional drill and will be drilling on the regional land package in the first week of February. 

Battle North has allocated CAD$6M as initial drilling phase 1 with a supplemental CAD$2M that will probably be allocated to exploration drilling in and around the mine on the targets called the string of pearls, which includes McFinley. 

2021 Goals: Model & Strategy Development

So 2021 is about getting into production by the end of the year, getting a re-rate by being a producer, and further exploration on the existing land package. Battle North controls 28,000Ha of land in Red Lake which is the second-largest land package in the camp behind Evolution Mining and one of the most prestigious Gold mining camps in Canada, if not the world. It's been around for 80-years and almost 30Moz of Gold has come out of this camp. 

Now with a fully funded project and the level of technical due diligence and work that they’ve done on the project, they have de-risked the core asset which is now heading towards production. 2021 will be a pivotal year for Battle North as they turn their attention to exploration on the close proximity targets, and the regional exploration, which they believe will increase value for the shareholders over the next 12-months and beyond through success with the drill bit. It is unlikely that CAD$8M will be enough money, so once they have some production success, they will become more aggressive on the regional exploration. They plan to be diligent and prudent, and go after targeted areas on the regional land package and are prioritising targets in a systematic way.

We believe that the exploration component could be the game-changer for this company, and success could impact enormously on the share price and valuation of Battle North going forward. It will be interesting to see how they get on as they move towards production but also to see results of the planned exploration programme into 2021.

To find out more, go to Battle North Gold's Website.