G Mining Ventures (GMIN) - $480M Financed to 300,000oz Gold Production

G Mining Ventures Corp. was established in 2020 to acquire direct ownership of projects and capitalise on the value upliftment that successful mine developments offer.

The company is focused on developing its Tocantinzinho gold project into the third-largest gold producer in Brazil. The Tocantinzinho gold project is a fully permitted, open-pit gold deposit that hosts 2 million ounces of gold and is open at depth. The project was acquired by G Mining Ventures in late 2021 from Eldorado Gold Corp., which invested over USD$ 90 million into the project.

G Mining Ventures Corp. on the 18th of July 2022, announced that it had entered into binding commitments with various stakeholders regarding a comprehensive construction financing package. The strategic investors consist of La Mancha Investments S.à r.l., the Franco-Nevada Corporation and Eldorado Gold Corporation.

Company Overview

The company released an updated feasibility study at the start of 2022 of the Tocantinzinho Gold project, which showed an envisioned low-cost, large-scale, conventional open pit mining and milling operation. The initial capital cost (CAPEX) of the project is estimated at USD 458 million, which shows an increase from its predecessor of 7%. The company does not foresee the capital cost fluctuating greatly, in part thanks to the Brazilian Real and its price against the US dollar.  The company has also started procuring long lead items such as the milling circuit equipment as well as the necessary mining equipment, to mitigate any fluctuations in delivery times which may lead to a delay in the schedule.

G Mining Ventures looks to initiate the construction of the Tocantinzinho Gold project in the near future, pending the obtaining of the correct construction permits. The company plans on investigating possible acquisitions in South America when the project has reached construction, with exploration initiatives at the project also envisioned.

Financing

The financing package earmarked for the development and construction of the Tocantinzinho Gold project totals USD$ 481 million. The financing package consists of a private placement with strategic investors, the undertaking of a gold stream, a term loan and equipment financing.

The private placement offering component of the financing package consisted of the issuing of common shares of the company at CAD$ 0.80 per common share. The total gross proceeds of the private placement towards the company are USD$ 116 million and consist of USD$ 68.8 million from La Mancha Investments S.à r.l., USD$ 27.5 million from the Franco-Nevada Corporation and USD$ 20.0 from Eldorado Gold Corporation.

The gold streaming agreement the company has undertaken with the Franco-Nevada Corporation totals USD$ 250 million and will see the company receive 12.5% of the gold production from the Tocantinzinho gold project which reduces to 7% after the delivery of the first 300,000 ounces of gold at the project. The financing package also includes a term loan from the Franco-Nevada Corporation for the sum of USD$ 75 million over a term of 6 years.

Louis-Pierre Gignac the President and Chief Executive Officer (CEO) of G Mining Venture Corp. explains that the stream and loan were implemented instead of increasing the private placement to ensure that the financing package created minimal dilution in the company shares, he states:

“We were really looking to minimise dilution through this exercise and financing. Obviously, we were very concerned about the cost of capital that we would incur with this financing package as well, and we're very happy with the outcome of this, with a stream financing and a term loan from Franco-Nevada, that provides us with a relatively low cost of capital.”

The final component of the financing package is a USD$ 40 million equipment financing agreement with Caterpillar Financial Services Limited. The equipment financing will be for the supply of a Caterpillar primary and ancillary mining fleet as well as construction machinery.

The financing package has also enabled the company to have a cash buffer of approximately USD$ 40 million, to compensate for any price variations or delays it may experience, Gignac, explains:

“We essentially have a USD$ 40 million cash buffer to account for any variations that may occur, but also to provide the financing parties with additional comfort that we will have sufficient capital to get through the full construction period.”

Project Timeline

G Mining Ventures Corp. released an updated feasibility study at the start of 2022 of the Tocantinzinho Gold project, which showed an envisioned low-cost, large-scale, conventional open pit mining and milling operation. The feasibility study showed highlights such as an after-tax NPV5% of USD$ 622 million and an after-tax internal rate of return (IRR) of 24% at a gold price of USD$ 1,600 per ounce of gold. The life of mine (LOM) of the Tocantinzinho Gold project is estimated to be 10.5 years with average annual gold production of 175,700 ounces at an all-in sustaining cost (AISC) of USD$ 681 per ounce. The initial capital cost (CAPEX) of the project is estimated at USD 458 million, which shows an increase from its predecessor of 7%. Gignac explains the feasibility study took into account the high inflationary environment, with the company not expecting much variation from it, he states:

“One thing is that the feasibility study that we issued in February was very fresh. We had a lot of quotes coming into that that really reflected the inflationary environment we're in. Over the last several months, with the cash position that we had, we made a lot of commitments towards purchasing mining equipment, processing equipment, and infrastructure buildings, and so far, we've spent USD$ 20 million on the project with another USD$ 70 million of commitments in terms of expenditures to work with projects and everything is fitting very much in line with our feasibility study. As it stands, we're comfortable with the estimate we put together and don't expect large variations to it.”

The company has also started procuring long lead items such as the milling circuit equipment as well as the necessary mining equipment, to mitigate any fluctuations in delivery times which may lead to a delay in Schedule, Gignac explains:

“The mining equipment was procured several months ago. Actually, we have our first shovel in the country as we speak and we'll have 4 mining trucks delivered in a few weeks’ time as well. We were very strategic in placing those orders well in advance and anticipating these long lead times that we've seen in the market. In terms of the grinding circuit, which is typically a long lead item, we've also made the procurement for that. We're strategically placing those orders to fit with the construction schedule that we put together in the study.”

Gignac also explains that the company does not foresee large variations from the feasibility study values, with a majority of the construction expenses being in Real, the official currency of Brazil. The weakening of the Real will assist in lessening any inflationary prices the project may experience, he states:

“We see ourselves coming out at the end of this project very much in line with our feasibility study budget. The other factor that's playing in our favour as we speak now is the exchange rate. We do expect to have 60% of our expenditures on the project in local currency, and as we've seen over the last couple of months, the Real has been weakening compared to the dollar, so that's going to help us offset some costs as well.”

The company believes that the Brazilian mining environment remains favourable to operations, with Gignac referencing the number of new mining operations to go into construction in the near future, he states:

“I definitely think that Brazil is one of the better jurisdictions in South America for investing, especially in mining. We see many operations announcing construction decisions in Brazil as well, so you can tell that the environment for investing in Brazil is quite favourable. We obviously feel the same, and in the state of Para, we know that that's a very supportive mining jurisdiction.”

Gignac accredits the stability of the share price of G Mining Ventures Corp. to its shareholder base which has a long-term investment in the company, he explains:

“In terms of our share price, that's attributable to the fact that we have very large shareholders with a long-term perspective, and they understand what the game plan is here: building this mine, getting it operating and unlocking value through that process. They are definitely there to see us go through that phase”

Future plans

G Mining Ventures Corp. will continue to progress the Tocantinzinho Gold project in the future with the company awaiting its new construction permits. Gignac explains that when the new permits are obtained the company will be comfortable enough to make the final construction decision, he states:

“There are several [construction permits], but the bills would come in as we need them, and our idea is that once we get the initial ones that we require, we'll have sufficient comfort to make that decision to start constructing the project.”

Once the final construction decision has been taken, the company will begin to investigate possible acquisitions. Gignac explains the company’s intentions regarding future acquisitions as follows: 

“We want to start building that pipeline and preparing the next project for construction once we get the Tocantinzinho Gold project up and running. I think that's one of the reasons why La Mancha came into G Mining Ventures; they are very much aligned with that strategy of growing the company, like they've done through their other investments, Endeavor and Evolution, where they were early entrants into these companies and helped grow those companies over the years, tripling or quadrupling in size over their investment horizon. We are very much aligned with them in that respect, so we will definitely be looking at other opportunities in the future.”

The company will primarily investigate acquisitions in South America according to Gignac, with him explaining that the projects in South America hold greater value for money, he states:

“The best fit and where we feel there are the best opportunities is in South America. North America, we feel, is a bit overvalued compared to what we can see in terms of projects in South America. That's definitely where we will be looking. In terms of Brazil, there are several other projects out in Brazil that would meet our criteria in terms of size, quality of resource and potential.”

G Mining Ventures Corp. will also continue to conduct exploration initiatives at its Tocantinzinho Gold project in the future whilst underway with the construction phase of the project. The company has approximately USD$ 2 million allocated to exploration initiatives with the possibility of more funds allocated. Gignac explains the company’s exploration initiatives as follows:

“We do have a large land package that's unexplored, so we are doing some exploration now and we will be continuing to do some groundwork on our property that's largely unexplored, about 5% of it is drill tested at this point. We definitely see upside with the land package that we have, and we'll be continuing to put effort into generating drill targets and doing some exploration, even through the construction phase.”

To find out more, go to the G Mining Ventures website