Superior Gold (SGI) - "The Plan is Get to 100,000ozpa"

Superior Gold Inc. is a Canadian gold producer that owns and operates 100% of the Plutonic Gold operations located in the world-class goldfields of Western Australia. The Plutonic Gold operations include the Plutonic underground gold mine and central mill, numerous open pits projects including the Plutonic Main Pit push-back project, the Hermes open-pit projects, and an interest in the Bryah Basin joint venture. 

Matt Gordon caught up with Chris Jordaan, CEO and President, Superior Gold, and Paul Olmsted, CFO, Superior Gold. 

Chris Jordaan has over 3 decades of experience in international processing and the mining industry. He has worked extensively in management and operations in senior and mid-tier mining companies globally. He previously worked as a Program Director at Newcrest Mining Ltd. and General Manager at Lihir Gold Mine. He has also served as the CEO at International Ferro Metals Ltd. His educational credentials include Master's degrees in Mechanical Engineering and Business Administration. 

Paul Olmsted has been an executive in the gold mining industry for over 20 years and has been involved with the mining industry for 2 decades. He previously served as the Senior Vice President of Corporate Development at IAMGOLD Corp. He played a key role between 2003-2014 for IAMGOLD's acquisition and divestiture program to attain strategic growth objectives. Paul was a part of Bank of Nova Scotia's corporate lending group, specializing in mining finance. His educational credentials include a B.Sc. degree in Mining Engineering along with an MBA.

Company Overview

Superior Gold is a gold producer focused on expanding production at the Plutonic Gold Operations and building an intermediate gold producer with superior returns for shareholders. The company was founded in 2016 and is headquartered in Toronto, Canada. It is listed on the Toronto Stock Exchange (TSX-V: SGI). Billabong Gold Pty Ltd. is the company's subsidiary. 

The Plutonic Gold mine is a single-asset operation located in Western Australia. This mine has been under operation for over 30 years and has significant upside potential. 

Superior Gold's former interim CEO Tamara Brown had taken significant measures in business development and the technical space around opportunities. The company is currently looking to scale up the business while seeking growth opportunities through its drilling operations. 

The company is currently focused on stabilizing the business for the long term and achieving scale. This includes the increase of throughput at the underground mine as it serves as the mainstay of the company's supply for the mill. It is also focusing on the Plutonic East Mine, an open-pit mine with operations set to begin in May 2022. 

Currently, the company is targeting Perch, its second open-pit along with a set of other open-pits to follow. It is looking to solve the challenge of building an ore inventory to meet the market's growing demand. 

Cash Position

Superior Gold has a few low-capital opportunities which it plans to fulfill through its open-pits. The company's Plutonic East Mine is delivering without any major capital requirements. The cash generation from operations has also helped the company support its ongoing operations. The company is looking for a similar operation at the Perch site. 

According to a recent announcement, the company's cash balance continues to grow despite ongoing investments. The company is looking to increase its production numbers to gain a larger headroom in relation to gold pricing. 

In 2020, Superior Gold faced constraints due to its outstanding term debt loan with Oremet. This loan was costing $2.5M per quarter in terms of cash flow. This debt was paid off in June 2021, providing the company flexibility to utilize capital towards exploration and advancement of both underground and open-pit operations. This led to a significant improvement in the company's balance sheet over the past year.

Superior Gold's current cash flow stands at $20.5M with no outstanding debts. In the short term, the company is focused on increasing its production profile with a strong focus on volume. It is looking to generate more ounces underground, recovering higher grade ore from the open pit along with increasing the mill feed to produce more gold. The company anticipates that it can achieve a supply of 100,000oz with fixed base costs, leading to a direct cost reduction while improving the overall cash flow. 

The company has a market cap of CAD$80M and is currently producing 19,000oz on a quarterly basis. The company is looking to recover from past quarters where it did not meet set targets. Based on the engagement in the past 3 months, the company is looking to demonstrate repeated performance through its operations. 

Superior Gold is looking to build its cash balance going forward by achieving overall cost reductions. Another major area of focus is towards being open and transparent with its business strategy through measurable performance. 

Business Strategy

Superior Gold had an opportunity review initiative in which the company analyzed the overall potential of the business. This initiative has enabled the company to gain a better grasp of its growth strategy and financing outlook. This review is set to conclude within the coming weeks. The company is looking at options that offer both a low capital requirement while simultaneously helping the company improve its production profile. One of these opportunities is to analyze the potential of the main pit. 

The company's underground operations currently serve as the major revenue source. The open pit offers the potential to supply additional ore. Its operations feature a latent capacity of 1.2Mt/annum supply in an oxide circuit. However, the main bottleneck for the company is gaining access to the ore. The company would require additional capital to restart the plant which would provide a sufficient supply of ore as feed for the process plant. 

Tolling Considerations

As the company scales up its mill capacity, it intends to add between 50,000oz - 60,000oz yearly to the supply, bringing the mill processing capacity to 100,000oz/annum. 

The company is also looking at tolling opportunities for its second mill. This would require an external supply of feed. Since the company is the only entity with a milling capacity within a 150km radius, it has a strategic advantage. 

A major consideration for tolling is the cost-benefit analysis for setting up the second mill. The setup of the mill is a fixed cost component that is currently being calculated on a per-ton basis. The company is considering the reconfiguration of the plant to process ounces at a significantly lower cost. This would lead to incremental ounces being produced at a much lower cost, leading to a cost-effective production profile. 

Superior Gold has several options apart from tolling, it can either enter a JV (Joint Venture) or acquire potential assets in the future. For a tolling opportunity, the company is expecting the opportunities to be available by 2023, including the sourcing of feed for the plant. To develop the mill, the company will require 9-12 months to set it up and running. The estimated development cost ranges between AUD$20M-AUD$25M. The company is looking to further optimize the costs and infrastructure. 

Once the ore feed is available, the plant operations can be started fairly quickly. The second process plant is expected to have similar operations and characteristics as the company's current plant. This allows the company to start the second mill by hiring a few extra operators and maintenance staff. The plant would serve as a potential for quick entry into the market with significantly low capital costs. This also makes it more economical than building a new process plant, as the technology has already been demonstrated. 

The company is looking to further augment the plant with a gravity circuit, depending on the ore supply. The type of circuit to be used is currently under consideration.

Underground Drilling and Exploration

Superior Gold has faced challenges with its underground operations. This is mainly due to the spatial positioning of the orebody. To address this issue, the company started a technology project in May 2021. This project is focused on achieving better forecasting and predictions for the underlying ore within the resource. The project is planned over 2 phases. Phase 1 concluded in August and Phase 2 is set to conclude by November end. 

Once the project concludes, it will serve as a key factor in the company's 2022 budget while also leading to the reconsideration of its existing block models, resource statements, and reserve statements. The resource and reserve statements are set to be published by Q2 2022, including life of mine. 

Presently, the company is working to improve the ratio of inferred, M&I (measured and indicated) resource against its reserves. It is looking to increase these reserves while improving the spatial prediction and the quantity of ore present in the current orebody. 

Superior Gold added another drill rig to its operations a few months back. This rig is dedicated towards underground exploration and has been successful in acquiring significant targets. The company is looking to publish a new report in mid-November outlining its drill results from its operations on the western front. This area is expected to serve as a fundamental part of the company's future underground operations. The current mining operations by the company are remnant-based, and these new areas will contribute towards expanding the throughput over time. 

The company's underground exploration comprises drilling from the current infrastructure to determine the deposits lying in nearby areas. So far, the company has received strong results from this exploration strategy. 

A large portion of the property within Superior Gold's tenements remains unexplored. The company is currently sinking the first surface hole within Q4 2021 and is planning to publish exploration results by mid-November. The company is also targeting several other target areas while ensuring a planned approach towards exploration spending.

Surface Exploration and ESG

Superior Gold is looking to grow its supply through drill operations. There have been 2 major challenges with surface exploration. The first is a mandatory heritage survey required to gain access to the land. To achieve this, the company is working closely with the local community, the Jidi Jidi group. 

The land is ancient in nature, belonging to several Aboriginal committees. It has significant cultural importance for the local communities. Hence Superior Gold is working closely with these groups to ensure the community's close participation in its operations. 

Following the heritage survey, the company plans to engage the local community through regular meetings with representatives. The company is looking to define its operations through these meetings and is working to ensure that the operations have the absolute minimum impact on the cultural heritage land. 

Superior Gold is expecting that the heritage survey will conclude within the next 2-4 months. It has come up with interesting and elegant ways to utilize the existing infrastructure to accelerate the survey process. 

The company has received strong support from the Jidi Jidi community. This initiative also helps the company's ESG (Environmental, Social, and Governance) component.

To find out more, go to the Superior Gold Website