First Mining Gold (TSX-V: FF) - Time to Take Advantage of Discounted Stocks

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 is a project developer with two world-class assets in tier-1 jurisdictions in Canada. Over the next 12-24 months, the company will be moving towards significant milestones.

First Mining has added its Duparquet project and consolidated 5Moz plus Gold project in Quebec, a tier-1 jurisdiction. The company is moving the project forward and is starting to surface its value. At the same time, the company’s 5Moz Springpole project is moving through the Environment Assessment process and a Feasibility Study. Both projects are advanced-stage quality assets. The company anticipates that as it comes out of the current market environment, investors will take advantage of the discounted share prices, benefitting from the returns.

Market Landscape

A lot of precious metal companies have seen a drop in share prices in recent times. First Mining is currently at a $160M-$165M market cap.

According to the company, investors should look at company fundamentals, especially during the current market landscape. A number of really good stocks are currently available at discounted prices. The company anticipates that as the market enters the tax loss selling period, the situation will get worse.

The company’s representatives visited a conference last week and found that the sentiment in the industry and the market is similar to 2015. Companies are leveraging market conditions for better end results. Notably, 2015 had the most depressed mining investor sentiments that the industry had ever seen. The share prices for mining companies had peaked in April 2011. Over the course of a 4-year period, there was a continuous outflow of capital from the sector. During this time, raising basic capital for advancing projects was highly challenging. As institutions walked away from the exploration and development sector, there was a significant structural change among investors in the industry. The gold price had come down from $1,900 to $1,100.

The current market landscape feels quite similar to 2015, as the gold price is trending at $1,600, which is in the mid to high range. The pricing has had a pullback from a couple of pushes to $2,000. It is important to note that the macro fundamental setup today is much better for gold than it has been in the last 40 years.

A lot of people are in search of safe assets, which has led to challenges for the financial systems. According to the company, this is the time for gold to shine. When compared to every other currency except the US dollar, the gold price is at an all-time high. Gold is serving as a safe haven, however, this isn’t being reflected in the underlying share value of companies that are advancing gold projects.

Looking across the mining company spectrum, there are a number of explorers with new discoveries that have between $500M to $1Bn in market caps. Producers all the way up to large-cap provide exposure to the gold price increases, providing investors with some of the operating leverage. The most unloved part of the market is the development sector, which is seeing the majority of the sales at the moment.

In 2022, companies that are actively advancing projects have seen a 50%-70% drop in share prices. First Mining has fared a bit better than the competition. There are companies that have 20% of the evaluation compared to where they would be normally across the cycle. Once the funds start flowing back to the mining developers, things are expected to turn around quickly. The current market cycle offers an opportunity to invest in great assets at heavily discounted prices, particularly over the next 6-8 weeks.

It is important to always look closely at the quality of the asset and the underlying fundamental value of the company before making an investment decision. According to First Mining, the companies that are highly likely to offer multiples in returns are the ones with large-scale globally significant projects in tier 1 jurisdictions along with significant catalysts coming up over the next 18-24 months.

The bigger gold developers are focused on advancing the projects through the permitting process, which a lot of investors have been avoiding at all costs over the last 2 years. Demonstrating progress through permitting in order to get to the key value milestones has done little to drive the share price over the past couple of years. This development has also been the driver of strategic interest which really underpins the value. According to a company, if a strategic project is available, at some point, there will be a mining company that is looking to build the project.

It’s tough for the current market to get excited about Feasibility Studies. There’s a high degree of scepticism as a result of an inflationary market environment. Despite the market cycle, the companies that can put out something robust can leverage the increase in gold prices. Being able to put out something robust demonstrates that the companies can leverage the increase in gold prices. This helps reduce some of the project risks, which are expected to reflect the higher value going forward.

Investors also need to look out for companies that are well-financed and have other potential opportunities as opposed to just raising equity at any price available in order to move the project forward. First Mining has a portfolio of other projects for which the company brought partners with a shared interest in the assets. The company has project interest along with royalty in these projects. This gives it the financial flexibility to have alternatives to straight equity dilution moving forward.

Important changes in material pricing are expected in case of an upcoming recession. The labour shortages will be a challenging situation. The market is currently in the beginning stages of a series of wage push inflation which will be really hard to break without some pain in the economy. The commodity prices and the increase in structural steel prices will cause construction to slow down. Sometimes, the availability of good quality construction resources and good engineering talent will come into long-term averages as opposed to the companies that have been putting out Feasibility Studies, trying to quantify it over the course of the last 2 years, while the costs are doubling or even tripling.

According to First Mining, companies that are heavily reliant on diesel for energy requirements will experience the pinch. Companies that rely on less volatile energy resources, such as sourcing energy from the power grid could weather the storm. Economic studies are of paramount importance as they will give an accurate outlook on a company’s fundamental value.

Targets 2022 and Beyond

First Mining has alternatives to equity dilution by virtue of its optionality, a couple of big projects, and a number of other assets in its portfolio. The alternatives could potentially breed other alternatives as well.

Mr. Neumeyer’s original vision for First Mining was fulfilled through the acquisition of the Duparquet project 6 years ago. In fact, the Duparquet project was one of his favorite assets. It is important to note that all of First Mining’s assets were first acquired in 2015-2016. The company’s portfolio was put together in the last downturn of the market, where it acquired the asset at $10 an ounce. During this time, one couldn’t explore for, and find ounces cheaper than buying them. The company anticipates that it’s back in the situation once again.

According to the company, the current time comes with conviction and a little bit of capital, which can potentially lead to some really amazing things. By virtue of the Duparquet acquisition, the company has added another globally significant project in a tier-1 jurisdiction and has increased its resources by 40%. The company has been successful in taking advantage of a situation as these opportunities don’t come around very often in a cycle. This was been made possible by way of a highly-supportive shareholder base. Mr. Keith Neumeyer, the company’s Founder has been an actively engaged Chair that has provided a lot of opportunity to the company by virtue of the decisions made 6 years ago when the asset portfolio was being put together.

According to the company, there are more opportunities available out there if one has the capability to pull them together. The company is currently sitting with $2Bn in asset value and trading at a $160M market cap. The current environment is highly accretive to additional opportunities. This is the time to take advantage of opportunities to achieve some truly extraordinary outcomes. The company is still holding on to a market cap that gives it some flexibility to position itself in order to become stronger for the longer term.

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