Mawson Gold (MAW) - How You Value this Explorer Explained!

Mawson Gold Ltd. is a Canadian exploration and development company focused on the advancement of its flagship project, the 100%-owned Rajapalot Gold-Cobalt project in Finland. The project holds a land position of 17,989 hectares and consists of five granted exploration permits and eight exploration permit applications.

Mawson Gold Ltd. on the 20th of October 2022 published the maiden preliminary economic assessment (PEA) of its Rajapalot Gold-Cobalt project. The PEA is based on an envisioned 1.2 million tons per year underground mining operation, with the envisioned operations also including an on-site processing facility and a life-of-mine of 9 years. The envisioned operation would be the 3 Cobalt mine and the 6 largest gold mine in Europe.

The PEA shows highlights including a post-tax NPV5% of USD$ 211 million and an all-in sustaining cost (AISC) of USD$ 824 per ounce of gold produced. The PEA further shows a capital cost (CAPEX) of USD$ 191 million, a post-tax internal rate of return of 27% and a post-tax payback period of 3 years.

Mawson Gold Ltd. plans to conduct additional geochemical sampling as well as exploration drilling at the Rajapalot project. The exploration drilling will be aimed at extending the mineral reserve of the project which is open at depth as well as identifying repeat prospects across the project. The company will also conduct additional metallurgical test work to advance the project.

Rajapalot Gold-Cobalt project

The 100%-owned Rajapalot Gold-Cobalt project of the company consists of five granted exploration licences which total a land position of 5,727 hectares. Mawson Gold Ltd. further holds eight exploration licence applications which leads to a combined land position of 17,989 hectares. The project lies within the Lapland district of Northern Finland approximately 35 km away from the city of Rovaniemi.

The company in August 2021, published an updated mineral resource estimate of the Rajapalot Gold-Cobalt project. The highlights of the mineral resource estimate include 10.91 million tons of mineralisation at a grade of 2.5 g/t gold and 443 ppm cobalt. The project hosts a total of 887 Koz gold and 4.8 kt of cobalt.

The mineral resource of the project leads to the project holding the potential to be the sixth-largest gold mine and third-largest cobalt mine in the European Union. The project is envisioned to be an underground mining operation, with a low-impact layout. The major infrastructure of the project is envisioned to be located in commercial forestry areas with the project also planned to implement backfill, minimising any long-lasting disruptions.

PEA

Mawson Gold Ltd. on the 20th of October 2022 published the maiden preliminary economic assessment (PEA) of its Rajapalot Gold-Cobalt project. The PEA is based on an envisioned 1.2 million tons per year underground mining operation, with the envisioned operations also including an on-site processing facility and a life of operation of 9 years.

The PEA shows highlights including a post-tax NPV5% of USD$ 211 million using a gold price of USD$ 1,700 per ounce of gold and USD$ 60,000 per ton of Cobalt. The PEA also shows an all-in sustaining cost (AISC) of USD$ 824 per ounce of gold produced over the life of the mine as well as an average steady-state production rate of 92 Koz of gold equivalent per year. The production rate leads to a total of 700 Koz of gold and 2800 tons of Cobalt to be produced over the project’s 9-year lifespan.

The PEA further shows a capital cost (CAPEX) of USD$ 191 million, a post-tax internal rate of return of 27% and a post-tax payback period of 3 years. The project is furthermore forecast to have a USD$ 338 million free cash flow in years 1 to 5 and then a further USD$ 101 million revenue for the remainder of the project’s life.

Ivan Fairhall the CEO of Mawson Gold Ltd. explains the attraction of the project’s monetary values shown in the PEA but also the jurisdiction in which the project lies as an attractive set of factors.

“We're extracting a lot of the resource and we've got very high recoveries. We’re in a jurisdiction and a location and have an ore body geometry that helps drive low costs and high Gold recoveries drive low all-in sustaining costs on a unit of Gold production basis. And when you put all those things together, you've got quite an attractive set of project economics as a start-up project for us at Rajapalot.”

The PEA also enables the company to approach investors with a set value associated with the project. Fairhall explains that through the PEA, all further raises will only increase the value of the Rajapalot Gold-Cobalt project.

“I can go to investors and say, look, we've just extended the mine life or here's a drill plan to add ounces. This is what it's going to cost and this is what it's going to do to the NPV, how does that look like for return on capital? You've got a very compelling opportunity to talk to. It's a sensible de-risking approach and you're not spending capital on things that don't work. And it's also telling you what's important, what moves the needle and how to add value in a quantifiable way. And that's a bit that's really allowing us to valorise the upside that we truly believe is here.”

Current and planned activities

Mawson Gold Ltd. Sit with approximately USD$ 3 million in its treasury, with low overhead costs and burn rate. The company believes that in the current market, it is wise to implement your cash in a way that provides the maximum effect for the lowest price possible.

“We've got about USD$ 3 million in cash today so we have cash and we've reduced the burn because we've come to the end of the PEA. And absolutely, exercising discipline in this market is an important thing but at the same time continuing to build on the story and keep your capital markets and opportunity alive, are all important things as well. And so what we're trying to develop here is a strategy that is a bang for your buck in terms of exploration and the ability to do what really moves the needle for the project.”

The most efficient way to allocate its funds is according to Fairhall through exploration initiatives and as such increasing the project’s intrinsic value.

“We haven't announced we're doing a PFS. Now, this is not the market to be going out and drilling out this project. It's not the right allocation of capital, in our view. And so, we think there's an opportunity to explore and to add to it and to do that meaningfully that we need to raise capital but we're in no rush at the same time. So it's really about focusing on where we can get the biggest bang for your buck, where we can add value for the least amount of capital is really the sensible approach, I think in this market.”

Current Market and future plans

Mawson Gold Ltd. Believes that the current market, even though it is at a low point, provides the perfect opportunity to implement a Contrarian investment strategy. Contrarian investment is the term used to refer to an investment strategy in which an investor purposefully goes against the grain. A contrarian investor buys when most of the market is selling and sells when most of the market is buying.

Fairhall explains that the company is focused on that which it can control, and laying the correct foundation for future value creation. The company spun out its Australian assets through the creation of Southern Cross Gold Pty Ltd., an ASX-listed company. Mawson Gold Ltd. believes that through the spin-out it may be able to fully devote the company towards the Rajapalot Gold-Cobalt project as well as further create value for its shareholders. The 60% stake the company holds in Southern Cross Gold Pty Ltd. has since the spin-out grown from CAD$ 6 million to CAD$ 30 million.

“We've focused on the things that we can control. And that's what everyone will tell you they'll do in a market like this. And how do we demonstrate the value of our assets? We started by spinning out Southern Cross. We had great projects that were being ignored, not valued, not fully appreciated. So we spun those out and raised new capital into a market that will reward us for the exploration that's being done down there. And Mawson retains 60% of that company, that's fully funded, it's shooting the lights out, they've got amazing results. And our share of that, we've got CAD$ 6 million into that company, groomed their projects, listed them and now our share, our 60% is worth CAD$ 30 million and you can look at the price on the screen, that's the value of our state.”

The company further believes that it is laying the correct foundation for future value creation through initiatives such as the published PEA.

“We've shone a light on the value in Southern Cross, which was being lost in Mawson before. So that's one thing that we've done, and is a good example of how you rearrange the deck chairs a little bit and make more of what you've got. And the PEA was the other big thing that we did. Rajapalot is a great project and we believe that. When you look at the valuation on any metric that you could pick, we were not seeing value for it but we were lost in a sea of resource valuation multiples.”

Fairhall believes that through the PEA it has been able to show the quality of the Rajapalot Gold-Cobalt project and as such placed the company in the best possible position to weather the downed market.

“And I think that being able to actually put economics around the project demonstrates a level of quality that a lot of companies are either unwilling or unable to go to. So we've done that and the high-quality stories will survive and we've really just been working hard on articulating the value of the assets that we've got.”

Mawson Gold Ltd. plans to conduct additional geochemical sampling as well as exploration drilling at the Rajapalot project in the future.

“We've got exploration ongoing at the moment. We announced that we were doing a big geochemical soil sampling and till sampling programme. We've got this area in the middle of the property that's never seen a drill hole. There's 8 kms between where we found the Rajapalot deposit which goes into the PEA.”

The exploration drilling will be aimed at extending the mineral resources of the project as well as identifying repeat prospects across the project. The company will also conduct additional metallurgical test work to advance the project.

“we're working out targets in new areas that we haven't been to, to generate new opportunities. And that's low-cost exploration work starting with the geochemical sampling, we can move to base and till drilling to develop targets without blowing your brains out during drilling. So that's one part of the exploration, it's like where's the potential for a big bang moment to double, triple that kind of optionality given the size of our property and the lack of exploration.”

To find out more, go to the Mawson Gold website