Mawson Gold (TSX-V: MAW) - Using Portfolio Optionality to Navigate Market

Mawson Gold is a natural resources company that has been continually engaged in the acquisition and exploration of precious and energy mineral interests since its incorporation in 2004. The company’s corporate objectives are to discover and develop large, long-life, sustainable assets with respect and consideration for its employees, communities, stakeholders, and the environment in which it operates. The company’s team has made numerous discoveries and has demonstrated success in advancing them toward mining.

Matt Gordon caught up with Ivan Fairhall, CEO and Director, Mawson Gold. Mr. Ivan is a mechanical engineer and mine finance professional with over 15 years of mining industry experience. Having started his career as an engineer with Hatch Associates, he was involved with the design, construction, and commissioning of several major mineral projects in Australia. After joining GBM Minerals in London in 2010, as a Project Engineer and Manager, he oversaw over a dozen scoping to feasibility level studies for mostly single-asset junior clients with projects across the globe. In 2014, he joined Greenstone Resources, a private equity fund with almost $500M under management based in London. Greenstone’s strategy was to invest in development-stage companies with robust projects that can be funded through to production standalone. As a Senior Investment Manager, Ivan was integral in sourcing, executing, and managing a portfolio of Greenstone’s investments, which included Northern Vertex (TSX-V: NEE), a 50Koz gold producer in the United States - for which he was also a Non-Executive Director up until its merger with Eclipse Mining in 2021. His duties also included representing Greenstone on 6 investee technical advisory committees. Mr. Fairhall holds a B.Eng (Hons, Mech) and a B.Bus, and is a Chartered Engineer with the Institute of Mechanical Engineers.

Company Overview

Mawson Gold holds a 60% ownership of Southern Cross Gold Ltd (ASX: SXG), an Australian Securities Exchange (ASX) listed gold exploration company that controls three of the nine historic Forsterville-style (shallow-orogenic epizonal) exploration projects within 471 square kilometre tenure in Victoria, Australia. The company was founded in 2004 and is headquartered in Vancouver, British Columbia. Southern Cross Gold, Mawson Ab, Mawson Oy, M2 Resources Corp, Mawson Queensland Pty. Ltd, Melbourne Gold Limited, and Clonbinane Goldfield Pty Ltd. are the company’s subsidiaries.

Mawson Gold has a gold-cobalt exploration and development project in Finland, a gold exploration project in Sweden, and a large investment in ASX-listed Southern Cross Gold. The company is looking to publish a PEA (Preliminary Economic Assessment) next month on the 100%-owned Rajapalot gold-cobalt project in northern Finland. Currently, the PEA is in the final stages.

The PEA will help the people understand the project’s current resources and future potential. The company’s current valuation indicates that there needs to be more awareness with regard to its assets. The company has been focused on technical studies and delivering the PEA. It is also working on the project’s exploration story. Last week, the company published a news release highlighting the central portion of the property, a really important part of the project’s upside.

Mawson Gold carried out exploration in order to generate additional targets. Following this, it conducted a magnetic survey. The survey led to the generation of a large number of structural dominant targets in a part of the property that has never been drilled before. This area sits in an 8km gap between 1Moz gold equivalent on one end and 6m at 617g/t at Rompers on the other end, which has never been drilled. The company is moving this part of the story forward alongside the project PEA.

The Beaver Creek Summit

Mawson Gold’s representatives recently attended the Precious Metals Summit at Beaver Creek, USA. It has had several meetings with existing shareholders. The shareholders have been highly supportive and acknowledge the value prospect in Mawson Gold’s assets.

Due to the ongoing market downturn, the company’s shares experienced a dip in recent times. According to the company, the traded volumes weren’t significant. Hence, there is anticipation that the price dip is due to a lack of buying rather than a lot of selling.

Southern Cross Gold Limited

Mawson Gold owns 60% of Southern Cross Gold Limited, an ASX-listed company. The latter has been posting good drill results in recent times and has a healthy cash flow as well. It is important to note that the company was spinned-off of Mawson’s Australian assets in May 2022. The current drill results are simply building up on the discovery that was made by Mawson.

Southern Cross Gold Limited has 3 assets, out of which Sunday Creek is the flagship asset. The company has found really high-grades and nice wide intersections at the asset. According to Mawson Gold, the grades and width of intersections and the mineralization style is comparable to Agnico Eagle’s Fosterville Gold Mine. Both projects have the same geology with really high grades. The Sunday Creek asset was found to have 0.5m-type intervals along with 5g-20g over 10m-20m.

The Significance of a PEA

According to Mawson Gold, it is rare for studies to completely change a company’s fortunes. However, it is confident that the PEA will demonstrate the project’s value, and will help draw out the project’s best qualities, including the ideal mining methodology and associated costs.

As the Rajapalot gold-cobalt project is based in Finland, it benefits from low capital intensity, a well-built infrastructure, better recoveries, and lower taxes, all of which contribute towards a good project. As more ounces are added, the project will get even better with time. The company is looking to marry the exploration story with the upcoming PEA.

One of the reasons to conduct a PEA is to advance permitting. Notably, the company has already started the permitting and land use rezoning processes in Finland. It is difficult to move these aspects forwards until the type of project is established. This also enables the company to engage with the regulators at a formal level. The PEA allows the company to pull various aspects of the project together and express them in an economic sense.

The ounces in the ground are only valuable because they would get mined one day. The ounces are converted to cash through mining. The PEA lays out a development scenario that helps move the company forward. As the exploration side continues to grow, the project size will grow as well. The company anticipates that this is the beginning of the journey, and it is looking to marry the exploration strategy with a developmental strategy. This is a simple project based in a highly-favourable jurisdiction.

Furthermore, the company is looking to showcase the project’s contribution toward investor engagement and raising capital. The company is also looking to understand the project’s potential in a case where the resource increased from 1Moz to 1.5Moz gold equivalent ounces.

The PEA will explain the mine life extension potential, the ability to scale up operations to develop a larger project and calculate its impact on the exploration spend in order to test the upside. This would also help understand the impact on the project’s NPV (Net Present Value). PEA is a tool that is helping the company in planning its work, raising capital, and deploying the funds in the most efficient way while being conscious of the market conditions.

Based on several conversations, the company anticipates that the PEA and Economic Studies will enable it to gain visibility in front of new investors. It will also help the company with future financings and increasing liquidity. Combining the Mawson story with the Southern Cross optionality and price arbitrage makes it a highly compelling story. The company is cognizant that this could play out in a lot of different ways, this is why it is good to have optionality in the current market situation.

According to the company, cobalt is a relatively small by-product of the project. While it is accretive to the project’s value, it does not dictate where the resource will be mined. Notably, the highest cobalt grades coincide with the highest grades of gold. As a result, there isn’t any conflict when it comes to mine planning. Mining gold will enable the company to cover costs. Cobalt will serve as a nice layer of profit that goes on top. The company will need to spend a small incremental cost to take the gold through CIL (Carbon-In-Leach) tailings and run it through a flotation plant. This process is as simple as producing a concentrate.

M&A Considerations

Mawson Gold is always open to an M&A (Merger and Acquisition) possibility. It has had several discussions with various companies for the same. If an M&A opportunity is value accretive to the shareholders, the company is open to conducting a deal. According to Mawson Gold, it is grossly undervalued in the market. As long as a deal is conducted with a company that is also undervalued, it has the potential to generate shareholder value.

The company evaluates each proposal on a case-by-case basis, taking into account the access to capital and whether the assets complement each other. The company is looking to ensure that if the assets are being put together, it needs to have better access to capital than it currently has. It is good to seek out such opportunities when the markets are in a tight position.

During a challenging market environment, a company can either make a decision and wait, raise capital at a higher cost, mitigate it through market reactions, or conduct deals to access capital in a different way. There’s always a dilution equation that needs to be factored in, however, the company believes that these assets should be moved forward. There needs to be discipline when it comes to spending funds, especially when the capital is expensive. Mawson Gold benefits from a lot of optionality given the makeup of its project portfolio. Presently, the company’s main focus is to publish the PEA in order to get more eyes on the stock. Mawson Gold is meeting with a lot of different groups including corporates, existing investors, prospective investors, and advisors, all of which have been intrigued by the company’s story.

Finland is a jurisdiction with a lot of untapped exploration potential. Rupert Resources and Aurion Resources have made significant discoveries here. A lot of people in Finland have shown interest in Mawson Gold’s 1Moz gold equivalent resource. Finland is a low-risk jurisdiction that is relatively under-explored. These aspects make it attractive for investors as there is potential to move the projects forward and develop them combined with a lot of exploration prospectivity.

To find out more, go to the Mawson Gold website