Theta Gold Mines - 6Moz Resource & Chasing High-Grade Underground

• Theta Gold Mines has shifted its strategy from opencast to underground mining for high-grade gold.
• The company boasts a 6 million ounce gold resource in South Africa, with 40 old mines still unexplored.
• Theta Gold Mines has set up a $15 million at the market facility to support its operations.
• The company's strategy aims for self-funding after the first phase, with future expansion plans targeting up to 260,000 ounces per year.
• Mitford Mundell, the new CEO for Africa, emphasizes the potential growth of the mines, ensuring investor confidence in the project's feasibility and profitability.

High-Grade Underground Gold The New Focus for Theta Gold Mines

Theta Gold Mines is shifting focus to high-grade underground gold mining at its large, historical gold project in South Africa. The company believes underground mining can deliver better economics and quicker production than the originally planned open pit approach.

Theta's project area in South Africa's Eastern Transvaal gold fields produced over 6 million ounces of gold historically from some 40 mines over a 150-year period. Mining effectively stopped in the 1940s as the focus shifted to the richer Witwatersrand deposits. This leaves Theta with a 6 million ounce JORC resource and underground access to re-start mining quickly and cost-effectively.

New CEO Brings Underground Expertise

Theta's new CEO for Africa, Mitford Mundell, joined in October 2021 to lead the strategic shift to underground mining. He is a South African mining engineer with over 30 years' of experience across underground and open pit mines, including senior roles with Harmony Gold and De Beers.

Mundell initially came in as a consultant mining engineer in mid-2020. After reviewing the project, he believed underground mining could deliver better economics and faster payback than the planned open pits. The board agreed, appointing him CEO of Africa to lead the revised strategy.

Mundell is supported by Theta Gold's CEO Bill Guy and COO Jacques Du Triou, who focus on financing, capital markets and exploration.

Underground Mining Advantages

The advantages Mundell sees in underground mining are:

• The high-grade underground resources can be accessed as easily and quickly as the open pits. The underground deposits occur as near-surface, shallow dipping reefs that can be simply walked into off of  surface.No shafts or declines are required.
• Metallurgical test work has shown underground ore is free-milling with excellent gold recoveries over 80% and likely over 90% with optimization.
• Underground mining will deliver grades over 5g/t, at least double the planned open pit grades of 2-3g/t.
• All-in sustaining costs are projected to be under $800/oz gold for the underground operations.
• The initial underground scenario will produce around 70,000 oz gold per year, ramping up to 160,000 oz per year within 5 years.
• The underground mines have a much larger resource base of 4.5 million oz, versus 1.5 million oz in the open pits. They can support a multi-decade mining operation.
• Underground mining can fund all future expansions after the initial capital investment. No further equity capital is envisaged as being required.

Revised Development Strategy

The new development strategy will be:

• Complete a full feasibility study and exploration program in 2023, budgeted at around $50 million. This will upgrade resources and reserves.
• Construct an initial 350,000 tpa CIL processing plant and infrastructure to support the first 3 underground mines. Capex is around $40 million, funded through a combination of debt and equity.
• Bring the first 3 underground mines into production from mid-2024 to produce around 70,000 oz per year. Further mines will be added progressively.
• Expand annual production to 160,000 oz by 2027 and continue at that rate while incorporating additional resources.

Attractive Economics

Preliminary studies have shown attractive economics for the underground mining strategy, including:

• Estimated All-in Sustaining Costs below $900/oz over the initial 8 year Life of Mine, reducing below $800/oz at peak production.
• An estimated free cash flow of $91 million NPV at a 5% discount rate, based on $1,570/oz gold.
• Capital payback within the first 13 months from first gold pour.
• Peak funding requirement is around $90 million, with strong potential for self-funded expansions after start-up.

Untapped Exploration Potential

In addition to the current 6 million oz resource, Theta's large tenement package holds excellent exploration potential. Historical records from the 40 old mines provide a valuable dataset to target extensions to known mineralization. Further resources can be readily added once underground access is opened up.

Surface and underground drilling can systematically test for additional mineralized zones around old mines. The underground development drives will provide excellent drill platforms to cost-effectively test for orebody extensions.

There is also potential for open pit mining of shallower oxide mineralization later to supplement underground production. The 1.5 million ounce open pit resources remain available for future treatment through expanded plant capacity.

Finally, Theta has large stockpiles of mineralized waste dumps from historical mining that can provide supplemental mill feed to augment underground production.

Investment Thesis

The investment thesis for Theta Gold Mines could be a good long-term if investors are patient:

• Large gold resource base offers potential upside if successfully brought into production.
• Projected low all-in sustaining costs could provide a profitability cushion.
• Exploration upside through systematic testing of historical mines.
• Once in production, self-funded growth is possible minimizing dilution.
• Skilled management team with a track record of building mines.
• Gold price has an upside which could enhance project economics.
• Potential takeover target once de-risked and in production.

However, key risks remain in the next couple of years:

• Securing full project funding remains a challenge in current markets.
• Operational delays and cost overruns are common execution risks.
• Further study work is still required to confirm economics.
• Multiple years to production so patience is required.

With its revised strategy, clear development timeline and exploration upside, Theta Gold Mines represents an attractive investment opportunity in the gold mining sector for those prepared to wait. The company is positioned to make the most of its extensive landholding to build a substantial long-life gold mining operation in South Africa.