Standing Out in a Field of Shrinking Advanced Gold Developers

• First Mining Gold has two of the largest undeveloped gold projects in Canada that are in advanced stages
• There is a shrinking field of advanced gold projects as M&A has picked up, making First Mining's assets more valuable
• Accessing capital has been challenging but First Mining has raised $60M+ without dilution to advance projects
• Permitting is a key hurdle but First Mining is further along than peers, with Springpole expected permitted by end of 2025
• Investors can position for revaluation as First Mining reaches key milestones in a rising gold price environment

Introduction to First Mining Gold & Market Overview

First Mining Gold (TSX: FF) is a Canadian gold development company with a portfolio of advanced-stage projects located in premier mining jurisdictions. The company's two flagship assets, the Springpole Gold Project in Ontario and the Duparquet Gold Project in Quebec, are among the largest undeveloped gold projects in Canada.

CEO Dan Wilton shared his perspectives on the current gold market dynamics and the company's positioning. He emphasized several key factors that make First Mining a compelling investment opportunity. Wilton explained:

"We're at a point where the larger companies have started to realize that [large advanced projects] are going to find these projects that can produce 200,000 ounces plus per year. And they're going to have to take construction risk, and they're going to have to take permitting risk. So we're going to see more of that activity in the sector in projects like ours."

To unpack this further, it's important to understand the context of the gold development and production lifecycle. Gold miners are always looking to replace and grow their reserves through exploration, development or acquisition. However, finding large, economically viable deposits in favorable mining jurisdictions is becoming increasingly difficult.

As gold producers deplete their existing reserves, they will need to identify new sources of production. This typically involves either exploring for new discoveries, advancing early-stage projects through drilling and studies, or acquiring advanced projects or operating mines.

Given the scarcity of new major discoveries and the long timelines associated with advancing early-stage projects, M&A has become an increasingly important source of reserve and production growth. Gold producers, especially the larger companies, have shown a willingness to pay premiums to acquire projects that can move the needle for them.

This is where First Mining comes in. With two advanced-stage projects hosting over 10 million ounces combined, the company offers meaningful scale that would be difficult and time-consuming to replicate through exploration. And with both projects located in Canada, they check the boxes in terms of a favorable jurisdiction.

However, developing gold projects is very capital intensive. Taking a project from discovery through permitting and a construction decision can cost hundreds of millions. This has created challenges for developers in terms of financing.

The Shrinking Field of Advanced Gold Projects

Building on the previous section, another key point that Wilton raised is the dwindling number of large, advanced gold development projects. Over the past several years, there has been a steady pace of M&A as gold producers have moved to secure development-stage assets.

This has significantly reduced the number of projects available for acquisition, especially those hosting more than 5 million ounces in attractive jurisdictions like Canada. In fact, nearly every gold project over that threshold in Canada has been acquired for over $500M.

Some notable examples in recent years include Goldcorp's acquisition of Kaminak Gold for its Coffee project in Yukon for $520M in 2019, and the $590M takeover of Integra Gold and its Lamaque project in Quebec by Eldorado Gold in 2017. More recently, Gold Fields acquired Osisko Mining and its Canadian Windfall Project in Quebec for $1.39B and Agnico Eagle has successfully completed its takeover bid for O3 Mining, acquiring 95.6% of the outstanding common shares at $1.67 per share in cash.

However, this wave of M&A has not been matched by new discoveries. Exploration success has been limited and the project pipeline is not being adequately replenished. This is creating a tight market for high-quality, advanced-stage assets.

Wilton provided additional color on recent transactions, highlighting that there isn't always a perfect correlation between project stage and timing of acquisitions. He pointed to the $1.8 billion acquisition of Great Bear Resources by Kinross Gold in 2021 as an example of a company being acquired very early in the development cycle.

At the same time, Wilton emphasized the value of projects nearing the end of the permitting process, like First Mining's Springpole project. He explained:

"With the others, as you get within a year of that EA [Environmental Assessment] approval, you can see that value surface pretty quickly."

The takeaway is that as the field of available projects continues to shrink, those remaining are becoming increasingly strategic. Companies holding advanced assets should be well positioned to benefit from this supply/demand dynamic.

Challenges in Accessing Capital & Project Development

While the merits of First Mining's projects are compelling, the challenge for any developer is securing the necessary capital to advance them. Developing gold projects is highly capital intensive, with costs ranging from tens of millions of dollars in the early stages to hundreds of millions or even billions to construct an operating mine.

These high capital requirements can create challenges for developers in raising money, especially in a cyclical industry like mining where commodity prices and investor sentiment can shift rapidly. This has been highlighted in the current market, where many gold developers saw their share prices come under pressure in 2022 despite the strong gold price.

First Mining has not been immune to these headwinds. However, the company has been able to distinguish itself by raising over $60 million from non-dilutive sources like asset sales, royalty sales, and project-level investments. These funds have allowed First Mining to continue advancing its projects without highly dilutive equity raises. Wilton elaborated:

"Listen, it would be impossible for [gold producers], through their own exploration, unless it's right beside an existing mine, to develop a project for less than they can acquire these projects for today. And it's not just us. Look across the board at the sunk cost into these projects. For our projects, it's probably somewhere between $350 and $400 million of capital that was spent by us and our predecessors in advancing these projects to where they are. Starting today, that's what it is going to cost for someone with a new discovery to advance a project to a permitted stage in Canada."

As Wilton estimated above, the all-in cost to take a project from discovery through to a permitted stage is now in the range of $350-400 million in a jurisdiction like Canada. He added that First Mining and its predecessors have already invested that amount into Springpole and Duparquet.

This speaks to the value-creation opportunity for First Mining shareholders. If the company is able to continue hitting its development milestones, there is potential for its valuation to re-rate higher and close the gap between its market cap and the intrinsic value of its projects.

It also highlights the challenge for gold producers looking to organically build out their project pipelines. Building greenfield mines takes considerable time and money that producers may not have. M&A can provide a faster route to reserve and production growth, albeit often at a premium.

Interview with Chief Executive Officer, Dan Wilton

The Future of Gold Projects & Market Dynamics

Looking ahead, Wilton sees several factors that are likely to drive ongoing M&A activity and competition for advanced gold projects. Central to this thesis is the outlook for gold prices and the resulting implications for gold producers.

At a high level, periods of rising gold prices are very positive for gold miners. It means they are generating more revenue and cash flow from their existing operations. This excess cash can be used to pay down debt, return capital to shareholders, or reinvest in growth.Unsurprisingly, the gold industry is enjoying a particularly cash-rich moment with the strong gold prices over the past few years. However, this cash flow is not being directed in meaningful quantities to organic growth – at least not yet. Wilton expounded:

"The real question is, are you replacing reserves or are you trying to replace production? Because those are two very different equations that one needs to solve for."

This is an important distinction and gets to the heart of the challenge facing gold producers. While generating lots of cash is great, it's not sustainable if mines are not replaced as reserves are depleted. Reserves are the lifeblood of any mining company.

Acquiring an advanced-stage project like Springpole or Duparquet would provide an immediate boost to a producer's reserve base. This can help extend the company's production profile and support its long-term valuation.

However, the challenge is that there are precious few projects that check all the boxes in terms of scale (>200,000 ounces per year of production), location (favorable mining jurisdiction), and permitting status. This is where Springpole and Duparquet stand out from the pack.

Ultimately, Wilton believes this combination of factors has created an environment where First Mining is very well positioned. He concluded:

"It's all going to be worth it...you're getting a pretty good deal to get in at these levels."

Permitting Processes & Their Impact on Projects

Another major topic covered in the interview was the permitting process and how it can impact project development and M&A. Permitting is the process of securing the necessary regulatory approvals to construct and operate a mine. It involves extensive environmental studies, indigenous and community consultations, and detailed engineering and design work.

Permitting timelines have gotten longer and less predictable in recent years, creating additional uncertainty and risk for developers. This is an area where First Mining has made significant progress and differentiated itself from many peers.

The company has been advancing its Springpole project through a federal and provincial permitting process in Canada since 2018. Importantly, Wilton noted:

"Springpole, that's where, for projects of size that can produce in the ounce profile that we think Springpole is going to be able to, it is a pretty unique asset. As we hit our milestones here through the course of this year and next, that value is going to surface."

First Mining expects to receive a final federal environmental assessment decision on Springpole by the end of 2025. While this may seem far away, it's a firm and achievable target for such a large project in Canada. Importantly, it gives investors clear line of sight to a major de-risking catalyst.

Astute investors can (and should) dive into the details of the permitting process to understand exactly where a project stands and what the key milestones and risks are. Permitting is highly technical but absolutely critical to understand.

In the case of Springpole, all of the major technical permitting documents are publicly available. Investors can review them to gain insight into the robustness of the environmental assessment work and gauge the likelihood and timing of permit approvals. While nothing in permitting is guaranteed, this transparency gives investors the tools needed to assess a project's progress and potential.

Wilton contrasted this with many of First Mining's developer peers, which are generally earlier stage in the permitting process. He estimated that only two or three projects, including Springpole, could potentially be permitted by 2030.

This is hugely important context. It means that as the market looks ahead to the next wave of growth and production, there will be limited options available. If gold producers want exposure to large, long-life projects in top jurisdictions, they will likely have to look at developers like First Mining and be willing to take on some permitting and construction risk.

Investor Strategies & Market Positioning

With all of this context in mind, Wilton offered some thoughts on how investors can approach the market and assess opportunities like First Mining. A key message was to closely follow company progress and look for milestones that can drive a revaluation.

In the case of First Mining, the focus is squarely on permitting at Springpole given its proximity and potential impact. Wilton explained:

"I don't think you need to wait to the approval to have a decent sense of the direction that it's going. You can read and interpret the comments that we are getting from regulators."

This speaks to the importance of doing detailed due diligence and monitoring a company's ongoing progress. Permitting documents and regulatory communications are publicly available and can provide valuable insights into the challenges and opportunities a project may face.

Wilton also referenced the experience of other companies like Perpetua Resources (formerly Midas Gold), which saw a significant revaluation as it advanced through the permitting process for its Stibnite Gold project in Idaho.

He noted, "Look at Perpetua Resources and its share price over the last 12 to 18 months. It's up 4 to 5x...You hit a tipping point where people believed you were going to get to the finish line and you saw that share price start moving pretty quickly."

The Perpetua example is instructive for a few reasons:

• It shows that the market is willing to reward permitting progress and achievement of de-risking milestones, even before final permits are issued.
• It highlights the non-linear nature of how these developments can impact a company's valuation. The share price moved very rapidly once a certain "tipping point" in market sentiment was reached.
• It underscores that these dynamics can play out even for early-stage developers. Perpetua does not expect to bring its project into production until 2027 at the earliest, but the market is already anticipating that potential.

The other major potential catalyst for a company like First Mining is M&A. As discussed earlier, there are a limited number of high-quality projects available. Competition for those projects is likely to heat up as producers seek to deploy their cash and secure their growth pipelines. Wilton candidly acknowledged this:

"[The shrinking number of projects] never used to keep me up at night but when gold went over $2200 - $2300, it does keep me up a little bit at night now that we're a little bit vulnerable. Everyone on this list is vulnerable to an opportunistic takeover. Someone could pay a big headline premium and essentially get these assets for a great bargain."

The key for investors is to try to identify these situations before they become obvious to the broader market. By tracking the permitting process, project economics, and M&A activity, investors can position in developers that are most likely to be targeted for acquisition.

Of course, nothing is guaranteed in mining and every project has risks. First Mining is no exception. It will need to continue to effectively manage its capital, advance permitting at Springpole, and demonstrate the economic viability of its projects. Risks around permitting, costs, and metal prices could all impact the value of its projects.

But the asymmetry of the set-up is certainly compelling. Trading at around US$115 million market cap, First Mining is valued at a significant discount to precedent project transactions, both on a per ounce and portfolio basis. With over 10 million ounces of resources split between two projects in top jurisdictions, the company provides rare scale, exploration upside, and jurisdictional safety.

If First Mining is able to execute on its plans and the market continues to favor gold, there is a strong case for the stock to re-rate higher to better reflect the underlying value of its assets. While the timing of a revaluation is always difficult to predict, the fundamental drivers appear to be moving in the right direction.

The Investment Thesis for First Mining Gold

• First Mining has a rare combination of scale, location and permitting status that positions it as an attractive takeover target
• Springpole is expected to receive permits by 2025, providing a clear catalyst for revaluation as seen with other developers
• At $150M market cap, First Mining is trading at a substantial discount to recent gold project acquisitions on a per ounce basis
• With limited projects available, competition is intensifying among gold producers to secure projects, putting First Mining in a strong position

First Mining provides a compelling opportunity to invest in strategic gold projects at an attractive valuation. The company's projects have the key attributes that major producers are seeking as they look to replace depleting reserves and production. With permitting milestones approaching and a tight market for advanced projects, First Mining appears well positioned for a potential revaluation in line with its developer peers.

Macro Thematic

The macro environment is providing a strong fundamental backdrop for the gold sector. Rising geopolitical tensions, trade uncertainty and inflationary pressures are creating an environment where gold tends to outperform as a safe haven asset. This is evidenced by strong central bank buying and gold prices pushing above $2000 per ounce in early 2023.

For gold producers, this is translating into record free cash flow generation. However, this cash flow is not yet being directed into project development because companies have been focused on strengthening balance sheets and returning money to shareholders. As a result, the project pipeline has continued to diminish while the financing environment has been challenging for developers.

This is creating a unsustainable situation where reserves are being depleted without adequate replenishment. As producers look to the next phase of growth, competition is intensifying for the few advanced projects in top jurisdictions that can meet their long-term needs. This is likely to drive more mergers and acquisitions and put upward pressure on valuations.

The challenge for investors is identifying which projects and companies have the attributes to be successful in attracting capital and/or takeover interest. Ultimately, this comes down to the size and quality of the projects, their location, stage of advancement, permitting status, and valuation. Companies that check these boxes should be well positioned to create value for shareholders in this environment.

This is the lens through which to evaluate First Mining Gold. With two advanced projects in Canada, a permitting path at Springpole, strategic investors, and a depressed valuation, it has many of the key features the market is looking for. How the company executes in delivering on its milestones will determine whether it can unlock what appears to be a significant disconnect between its market value and the potential value of its assets.