First Mining Gold (TSX-V: FF) - Low EV/oz Valuation Indicated Growth Ahead

First Mining is a Canadian gold developer focused on the development of the Springpole Gold Project in northwestern Ontario and the Duparquet Gold Project in Quebec, two of the largest gold projects in Canada. It is listed on the Toronto Stock Exchange (TSX-V: FF), the OTC markets (OTCQX: FFMGF), and the Frankfurt Stock Exchange (FSE: FMG). The company was founded in 2015 by Mr. Keith Neumeyer, Founding President and CEO of First Majestic Silver Corp. The company is headquartered in Vancouver, Canada.

Matt Gordon caught up with Dan Wilton, CEO and Director, First Mining Gold. Mr. Wilton has more than 25 years of experience in M&A (Mergers and Acquisitions), corporate finance, and principal investing in the mining sector, having executed as principal or advised on more than $10Bn of mergers, acquisitions, and divestitures and more than $1Bn of financings. Dan was previously a Partner at Pacific Road Capital Management, a mining-focused private equity investment firm with approximately $800M under management. Prior to joining Pacific Road, Dan’s previous roles included Managing Director and Head of the Global Mining and Metals Group at National Bank Financial Inc., Managing Director in Business Development at General Electric based in London, England, and other corporate finance and M&A roles at global financial institutions based in Toronto and New York. Dan is a Director of Providence Living, a residential care and assisted living provider based in Vancouver, BC. He also serves on the Audit & Finance, and Quality Committees. Dan served on the Board of Providence Heath Care for 11 years, including acting as Vice Chair for 6 years and Chair of the Audit and Financing Committee during the financing and approval process for the New St. Paul’s development. Dan holds a B.Comm (First Class Honors) from Queen’s University and an MBA (with Distinction) from INSEAD in France.

Company Overview

First Mining has commenced a Feasibility Study at the Springpole Gold Project where permitted activities are ongoing with a draft EIS (Environmental Impact Statement) for the project published in June 2022, which is available on the Environmental Assessment portal. The company also acquired a 100% interest in the Duparquet Gold Project in September 2022 and is developing plans to advance the project along with its nearby Duquesne and Pitt Projects in Quebec. The company is the largest shareholder of Treasury Metals which is advancing the Goliath Gold Complex in Ontario. First Mining also has active partnerships with operators advancing other Canadian projects including the Pickle Crow Gold Project (Auteco Minerals) and Hope Brook Gold Project (Big Ridge Gold). In addition, the company owns a growing strategic royalty portfolio along with the Cameron Gold Project in Ontario.

First Mining Gold is a gold project developer with two 5Moz gold projects in Canada, including the Springpole Gold Project in Ontario, which is currently moving through the Environmental Assessment process, and the Duparquet Gold Project in Quebec. The company recently consolidated ownership of the asset.

Springpole Gold Project

One of the most notable developments in 2022 was the Environmental Assessment process at the Springpole project, where the company submitted a 10,000-page Environmental Assessment document draft. The company has received the first round of comments from all the regulators. As more questions and concerns are addressed, the company gains more confidence moving forward. In 2022, the company ramped up operations in the background, building a highly-skilled exploration team led by James Maxwell. James has put together a highly-talented team, that has carried out mapping and sampling on the ground in the Birch-Uchi district around Springpole. This has enabled the company to better understand the deposit’s fundamental geology.

The company anticipates that the exploration and environmental work will start bearing fruit in 2023, enabling it to advance exploration programs. There is also a lot of ongoing work in the background in terms of technical de-risking.

One of the reasons for investing in advancing the Springpole project is that the asset has the potential for increasing the resource from a 5Moz to a 6Moz gold project. The company isn’t advancing the deposit simply for the sake of growth. Instead, it is looking to demonstrate another strategic angle to change the perception of the market that the Springpole deposit is confined and cut-off and does not present any real upside opportunity. In order to get real strategic value for large projects, companies need to have both a defined resource along with some exploration potential.

The company anticipates that the Springpole asset has a lot of exploration potential in and around the deposit. Furthermore, there is also exploration potential within a couple of kilometers of the asset. This can potentially enable the company to expand the deposit’s current resource from its existing footprint.

Interestingly, First Mining Gold has consolidated 70,000 hectares of ground for greenfield exploration around the project. It currently has a number of million-ounce-plus targets, making the project a generational development opportunity. From a strategic standpoint, the company believes that this can truly set a project apart.

First Mining Gold’s strategy is to advance the project with the team and resources to arrive at a construction decision. The company is cognizant that there are a number of alternatives that can come out once the project reaches that point. The company is currently 2.5 years away from an Environmental Assessment approval. If it is able to meet the milestones, it can significantly de-risk the project while simultaneously increasing the per-ounce trading value. The company is currently trading at $8/oz and based on historic numbers, however, a $50/oz or $100/oz trading value would be better suited for the project.

The company has received a lot of positive feedback in regulatory circles, where the Springpole project is being dubbed as the next big project in Ontario. The asset is currently in the Environmental Assessment process. It has received a lot of support from the regulators. While there’s still a lot of work to be done, the company anticipates that it’s ultimately about framing the project, so that at the time of the construction decision, it leads to a long-term opportunity. Regional exploration is an essential part of the project advancement strategy.

While the project expansion is expensive, it can lead to a resource potential of an additional 3Moz to 5Moz. This has the potential to turn the project into a world-class asset.

It’s been long theorized that inside the current footprint, there’s a fault offset at the Springpole Project that abruptly cuts off at about 500m. Based on the geotechnical drilling, the company has reason to believe that there is more mineralization to be found. Building the geologic team and exploration team has enabled the company to revisit the first principles in order to better understand the underlying geology. This, in turn, has opened up a lot of potential growth opportunities. The company intends to test some of the targets. Gaining another exploration success will enable the company to strategically reposition itself in the market.

As the company goes through the Environmental Assessment approval process, it is also looking at various project financing options. Depending on the potential risk and reward, the Board would need to make decisions on either building the project on its own, bringing in a partner, or finding an interested party for a potential M&A (Mergers and Acquisitions).

In a robust market, price discovery is usually quite efficient. This way, companies are able to get the maximum value before the construction commences. The current market cycle hasn’t seen such a conducive environment in some time, where the gold price at the outset is pushing towards $1,900. The gold producers that had budgeted at a $1,600 price at the end of last year now have an extra $300 margin, making strategic investments affordable.

Project De-risking

One of the biggest de-risking events for the Springpole project is the Environmental Assessment process. This has a lot to do with the deposit’s legacy perception as it sits under the bay of the lake. Once the EIA (Environmental Impact Assessment) is approved, the market will realize that the project can be built. This could lead to significant re-rating for the company. Historically, permitted projects are known to trade between $50/oz to $100/oz.

Achieving this plan could bring the project’s value within the $500M-$600M range, while the company’s market cap is around $200M. It is important to note that the company also has the Duparquet project in Quebec, which also offers a significant upside. The company has recently initiated an Economic Study on the project, which is expected to be completed by Q3 2023. Notably, the Duparquet project was brought at $5/oz, and it is worth significantly more on an NPV (Net Present Value) basis.

According to First Mining Gold, there’s room to work on both the Springpole and Duparquet projects simultaneously, and it’s simply a matter of capital availability. In 2022, the company leveraged some of its other assets on the balance sheet to acquire funding to help it move forward. It has successfully monetized $15M-$20M worth of strategic investment through the Gold Royalty towards the end of the year. In addition, the company has 20 other royalties. It also has project interests in Pickle Crow and Hope Brook assets. In addition, the company is also a majority shareholder in Treasury Metals.

The company has several opportunities to turn the existing assets into capital. It is aiming at a well-thought geoscience program along with target testing at Springpole. Based on the success, the company will be able to demonstrate whether the belt offers resource opportunity, a pursuit that is likely to be rewarded. The company is cognizant that the value generated won’t shift the share price in a day, but fundamentally, it will pay rewards down the line when discussions are being had with different groups in relation to potential partnerships and strategic interests. This will help move the project into a milestone status.

The Duparquet Gold Project

This is the first time in 70 years that a company has committed some money to understand Duparquet’s environmental legacy. The Duparquet project serves as a great opportunity for First Mining Gold to build its social license. From an exploration perspective, the deposit has exceptional growth potential, requiring some infill drilling and exploration.

Over the course of 2023, the company is hoping to gain a much better understanding of the path going forward. On the environmental side, the Dupartquet asset is similar to Springpole in the sense that the company’s team spent 6.4 years on the permitting process. Working on the environmental legacy provides the impetus for development that aligns everyone’s interest in moving the project forward.

The company would need to carry out additional work and establish an environmental baseline for the project. Following this, the company intends to start Economic Studies on the project in order to determine different ways to scope the project. First Mining Gold is certain that the higher-grade, lower-tonnage project can function as a starter pit with the potential to be one of the higher-grade open-pit operations in Canada. There’s a lot of work to be done, but in a case where the company has some exploration success by the end of 2023, it will be able to demonstrate confidence in the underlying resource. The company is looking to showcase preliminary project economics, that could potentially lead to a timeframe and a path forward for the asset. It anticipates that by the end of 2023, it could potentially declare victory.

First Mining Gold would need to carry out a certain amount of baseline work beforehand in order to have discussions with Quebec regulators for a path forward. The company plans on a continued collection of baseline data to come up with environmental solutions that can help mitigate some of the project’s legacy. According to the company, this would likely be done in a staged manner.

Based on the discussions so far, everyone recognizes that long-term infrastructure will be required for mining. There needs to be a place to process some of the material or move it, which can be achieved by way of a tailings dam and a water treatment plant. The company looking to have discussions on the same in 2023. It has plans to scope the project on a preliminary basis so that once the PEA (Preliminary Economic Assessment) is in place, it can start having discussions in relation to the project’s footprint with the community. This is expected to be an iterative process, which will provide the company with an opportunity to propose a developmental timeframe. A lot of work has already been done and the company is looking to generate interest in the project by proposing a forward-facing strategy.

A PFS (Preliminary Feasibility Study) was carried out at the Duparquet Gold Project in 2014 for a 10,000t per day open-pit mining operation. It featured a mill that would produce 1.7Moz out of the bigger resource. The company found that there’s quite a bit of interred resource in the pits. Over a 2-3 year period, the project saw an increase in exploration activity with around 100,000m of drilling. One of the drill programs was conducted by Osisko Mining. While the program led to significant drill data, the drilling was conducted in a hurry. As a result, there wasn’t a lot of inferred resources or drill core collection.

Since the deposit has had historic drill operations, the company has the opportunity to revisit the project at a much lower cost. Similar to the Springpole project, the company’s team can work on the geology and use it to develop a program scope. This will help increase confidence in some of the resources. The company also intends on infill drilling some part of the deposit, adding ounces and demonstrating continuity. This would place it in a better position to work quickly toward a PFS. This strategy would negate the need for a large drill program to go from PEA to PFS. Following this, the company plans on testing the extremities of the different deposits at Duparquet. Notably, the asset features a series of deposits that are open at depth and along the strike length. Once the company has a good understanding of the project footprint, it can advance the project regionally, similar to the Springpole Gold Project.

The company is starting out with a 0.5Moz high-grade resource in its Duquesne pit project, which is located 10km from the main project area. According to the company, pulling the district together will take some time, attention, and planning. It offers extremely high value for low capital investment. The company anticipates that it can outline the frame of the development project that it is looking to advance, getting buy-in from the communities, the local indigenous community, and the regulators around a path. 2023 will mark an important year for the Duparquet project.

Targets 2023 and Beyond

Over the course of the next 6 months, the company will be working with the indigenous communities, particularly the shared territory protocol nations around the project on scoping and indigenous assessment for the Springpole project. It intends on going through both the provincial and federal Environmental Assessment process. The communities have shown an inclination to carry out their own assessment process and the company has been highly supportive of the decision. The company believes that gaining consent from the communities is fundamental to moving the project forward. Notably, the indigenous-led assessment process has been carried out only a couple of times in Canada before. The company is proud of supporting an indigenous-led assessment process in Ontario, which is likely the first of its kind in the province.

This process will get the company closer to dialogue in order to work with the communities moving forward. Since the assessment process is independent, the outcome isn’t certain. The indigenous community is getting independent advisors. The company anticipates that the assessment will demonstrate its engagement with the communities.

At the same time, the company is also working on fundamental de-risking of the project from a regulatory perspective. This would be built into the project. The company anticipates that by the end of 2023, it would have addressed all the regulatory issues. By this time, the company hopes to make significant progress with the communities. It will also focus on the lead work that the communities require to comment on the Environmental Assessment process.

2023 will be an important year for First Mining Gold in terms of building social license and confidence from a regulatory perspective. The company is optimistic that by the end of the year, it could reach the finish line of the regulatory process with confidence. An ongoing engineering study is also expected to be a part of the process.

The company is currently weighing whether it should update the Economic Study at Springpole by the end of the year. If there are any changes in the project’s scope through the Environmental Assessment process and the comment response process, they could potentially be pulled together for a PFS update. This would reflect the project that’s going to be submitted and from there on, the Feasibility Study will be confirmatory in a sense.

The company seeks to achieve these targets at Springpole. Following this, it will work on the exploration side to demonstrate the near deposit growth potential in the Birch-Uchi Greenstone belt. These milestones are of paramount importance for the company.

At the Dupartquet Gold Project, First Mining Gold is currently working on the initial baseline Environmental Studies that are targeted toward a Q3 Economic Study. Through this process, the company would gain confidence to put forward a developmental timeframe for the project by the end of 2023. It is also looking to carry out infill drilling and resource expansion drilling at Duparquet in 2023, the results for which are expected in the later part of the year.

To find out more, go to the First Mining Gold website