Mako Mining (MKO) - Cashflows Ensure Balance Sheet Transformation

Mako Mining is a gold mining, development, and exploration firm listed on the Toronto Stock Exchange (TSX-V: MKO) and the OTC Markets (OTCQX: MAKOF). The company was founded in 2004 and is based out of Vancouver, Canada. The company's flagship property is the high-grade San Albino Gold Project in Nueva Segovia, Nicaragua. 

Matt Gordon caught up with Akiba Leisman, CEO and Director, Mako Mining.

Akiba previously worked as an Executive Chairman and Interim CEO at Marlin Gold Mining Ltd. He currently serves as a consultant at Wexford Capital LP, Executive Chairman and Director at Sailfish Royalty, and a Director at Bonterra Resources Inc. His educational credentials include an MBA from New York University and a B.S in Chemical Engineering from Carnegie Mellon University. 

Company Overview

Mako Mining is a publicly listed company focused on gold mining, development, and exploration. The company's premier asset, the San Albino Gold Project is based in Nicaragua. The company is focused on bringing this project into production while continuing to explore the prospective targets in Nicaragua. 

Mako Mining has commercialized the highest-grade open-pit mine globally. It has a daily capacity of 500t. The company declared commercial production on July 1, 2020, and plans to report the first production quarter in November. The company also made a discovery 2km south of San Albino. This area is planned under development for a resource that will start mining post permitting at Las Conchitas along with San Albino by 2021 end. It will enable the company to reach a production target of 1000t/day. 

As per Mako Mining, its asset is an orogenic gold mining camp. The company has only assessed the surface so far from an exploration point of view. Each discovery made confirms the presence of orogenic deposits, making it a unique mining camp. 

Cash Position

Mako Mining announced the extension of the Wexford Capital loan along with an $8M loan from Sailfish Royalty earlier this year. Following the management changes in 2019, the company had 2 tranches of equity that came within the company. The first was a backstop rights offering in July 2019, amounting to $20M. The second was a $20M syndicated, underwritten bought deal in June 2020. $12M of this capital was assigned to Wexford Capital while $8M was assigned to the broader markets by way of a well-executed bought deal. 

The company's construction operations were hit by 2 major hurricanes in November 2020. This pushed back the commercialization of the company's assets by 3 months, leading to a $6.4M third-party loan from Nebari in February 2021. This provided the company with sufficient capital to continue its exploration program and assign working capital for any unanticipated start-up issues. 

Mako Mining then decided to refinance the Nebari loan into a finite-tenure gold loan through Sailfish Royalty Corp. This enabled the company to remove all associated financial and balance sheet covenants. 

The company's mine has been highly cash-generative. Since May 2021, the company no longer needs to deal with third parties. Currently, it has incredible flexibility in terms of the balance sheet, exploration, and capital returns for shareholders. The company also announced a buyback recently where the cash will go back to shareholders while the company continues to generate excess cash through operations.

The association with Wexford Capital has allowed Mako Mining to support its valuable assets. The company has been open and transparent with its finances. The current Wexford loan was undertaken at a 10% ROI (Rate of interest). In case the loan is extended past February 2022, there is a planned bonus payment of 500oz gold. The company is focused on repaying the principal amount at the earliest. 

Mako Mining is prioritizing the repayment of all existing debts. Following this, the company will focus on the complete repurchase of 33M stocks as part of its buyback strategy. Once the debts are cleared and repurchasing of shares is complete, it will no longer require external capital raises. 

The San Albino Gold Mine

Mako Mining's San Albino Gold Mine is currently in the optimization phase. The company started feeding the high-grade material through the mill in mid-May. The mill processing was successful in reaching commercial production numbers. However, the company pushed back the official commercial production declaration to November 2021. 

Once the numbers are published, the company will take a comprehensive accounting of its costs which will be followed by a significant capital movement. This capital will be a result of the company offloading its stockpiles. These stockpiles feature over 12,000oz gold along with 3,000oz that was reserved for long-term property plants, equipment, and long-term assets. The offloading of inventory will enable the company to gain over $10M in working capital once the official numbers are announced in November. 

Operational Challenges

Mako Mining originally planned to conclude its plant development by the end of Q1 2021. However, the company faced teething issues in April and May where its primary circuits, namely the gravity circuit and the cyanide reactor faced challenges in processing gold through the back end. This was due to carbon in the leach circuit, leading to issues with production slowdowns. 

The company was successful in remedying these challenges in May and was able to reach profitability from its mining operations. Currently, the company is fine-tuning its operations to deal with the ongoing global logistics crunch. 

Between June and September, the company faced various bottlenecks requiring adjustments within the plant. One of the issues was the presence of high-turbidity water feeding into the Knelson concentrators. Additionally, the company also identified the presence of toothpicks that were the result of 19th-century timber operations at the mine site. This led to the deposit of toothpicks on the company's illusion circuit. 

Lastly, the company observed an increase immigration of team members from Nicaragua to the US. This led to the adjustment of salaries across to the board to ensure that everyone was incentivized to stay on-site.

Mako Minings' current production capacity averages at 429t with 85% availability. The mine is cash generative with a production capacity of 2750t/month. Current operating costs stand at $2M on a monthly basis. The company is looking to iron out the existing bottlenecks, allowing a significant jump in production numbers. 

The company is expecting to reach 4000oz/month in November and is looking to surpass 10,000oz production for this quarter with fixed operating costs. 

Ongoing Operations

Mako Mining is currently operating 3 rigs on-site. It has plans to add 2 more drill rigs, however, it is facing challenges due to the global logistics supply crunch leading to a few weeks' delay. These 5 rigs will enable the Las Conchitas asset to become a secondary production center by 2022.

Mako Mining is in the very late stages of acquiring drilling permits on Potrerillos and La Segoviana deposits. Once the permits are in place, the company is looking to carry out drilling operations on both sites. The company is looking to generate capital from the mine and reinvest it into the ground. 

Mako Mining has an average monthly cost ranging between $1.9M-$2.0M. This includes mining and processing costs along with mine G&A (General and Administrative) and external G&A expenses. 

When the company's mine was running at 75% capacity, it was able to sell 2700oz/month with an average price of $1,787. Presently, the company is looking to ramp up production while maintaining the existing material and processing costs. Mako Mining is currently spending $600,000/month on exploration and drill rigs. This number is expected to reach the $1M mark as the 2 additional rigs are added to the operations. 

Targets 2021 and Beyond

Mako Mining is a self-funded exploration company. At a 40,000oz yearly production capacity, the company is expecting margins in excess of $1,000, making it an extremely profitable mining operation. The company's mine was built to gain a better understanding of geology. Over time, the company took extensive measures to develop and publish a geological model and a resource update out in 2020. This enabled the company to utilize the geological model towards various deposits present within the property. 

Mako Mining plans to initiate underground mining operations for all its deposits. The 270,000oz resource developed by the company in 2020 is a starting point for its development plans. 

The company is focused on raising capital and generating a healthy cash flow. Following this, it will focus on the expansion of near-mine areas. This can lead to the direct association of Las Conchitas and San Albino, paving the way for an orogenic gold mining camp in the future. Once this camp is complete, the company is expecting millions of ounces of gold produced from the operation. 

To find out more, go to the Mako Mining Website