US Gold Corp. Advances Permitted Gold-Copper Project in Wyoming

• US Gold Corp is a NASDAQ-listed copper and gold development company with its flagship CK Gold project in Wyoming.
• The CK Gold project is fully permitted except for one final air quality permit, with strong economics including $800 all-in sustaining costs.
• The company is exploring alternative financing options, including potentially monetizing 35 million tons of waste rock as aggregate material.
• US Gold Corp is working on optimizing the project economics further before pursuing full project financing.
• The potential for the mine pit to be used as water storage for the local community post-production is under consideration as development advances in the gold-copper project in Wyoming.

US Gold Corp (NASDAQ:USAU) is a gold and copper development company focused on advancing its flagship CK Gold project in Wyoming. With permits in hand and strong projected economics, the company is now working to optimize the project and explore creative financing options as it moves towards a production decision. This article examines the current status of CK Gold, the company's near-term plans, and the potential opportunity for investors.

Advancing a Permitted Gold-Copper Project in Wyoming

The CK Gold project is located just outside Cheyenne, Wyoming, about 1.5 hours north of Denver, Colorado. This proximity to major infrastructure and population centers is a significant advantage for the project. As Luke Norman, Chairman and Co-Founder of US Gold Corp, explains:

"CK is a flagship project, it's located in Cheyenne, Wyoming.  is about an hour and a half due north of Denver, Colorado on the highway system. So it's in Southeastern Wyoming."

This strategic location in a mining-friendly state has likely contributed to the relatively smooth and quick permitting process the project has enjoyed.

Permitting Status

One of the most notable achievements for US Gold Corp has been securing key permits for CK Gold. The company has obtained both the industrial siting permit and the permit to mine, which are typically the most challenging hurdles for mining projects. There is just one remaining permit needed:

"We have one last air quality permit to come in, but that's just a little laggard," Norman stated. "The real drivers were the industrial siting permit and the permit to mine, which we've received."

Given the project's location in a sparsely populated area with good air quality, the company does not anticipate any issues obtaining this final permit. This advanced permitting status significantly de-risks the project and positions US Gold Corp ahead of many peers in the development stage.

Interview with Chairman, Luke Norman

Project Economics

The most recent pre-feasibility study for CK Gold, completed in December 2021, outlined robust economics for the project. Key highlights include:

• 1 million ounces of gold and 248 million pounds of copper in reserves
• All-in sustaining costs (AISC) of approximately $800 per ounce
• AISC based on $625/oz gold and $325/lb copper price assumptions

Norman emphasized that these economics look even more attractive at current metal prices. The low projected AISC suggests the project could be profitable even in a weaker commodity price environment, providing a margin of safety for investors.

Financing Considerations

Despite the strong project fundamentals, US Gold Corp is taking a measured approach to financing CK Gold. With a market capitalization of around $60 million, the company recognizes that traditional equity financing at current levels would be highly dilutive. Instead, they are exploring several alternative options:

• Non-Traditional Capital Sources: The company is in discussions with potential partners outside the typical mining finance sphere who may be interested in the project's unique attributes.
• Municipal Bonding: Wyoming has a precedent for using municipal bonds to fund up to 50% of capital expenditures for mining projects, which could be an attractive low-cost financing option.
• Aggregate Sales: US Gold Corp's key focus is monetizing the approximately 35 million tons of waste rock that will be extracted during mining operations. This material could be sold as aggregate or rail ballast, creating a significant additional revenue stream.
• Prepayment Agreements: The company is considering forward-selling a portion of its initial production to help offset capital expenditures.

Norman explained the company's thinking on financing,

"We don't have to race out the gates and wreck our equity. More importantly, we have a slew of elements to this project that came up through our permit process and engineering that are optimization points that can increase the value of this project on a project level."

Aggregate Opportunity

One of the most intriguing aspects of the CK Gold project is the potential to monetize what would typically be considered waste rock. The company has identified approximately 35 million tons of granodiorite to be extracted during mining operations. This rock type is similar to material being mined and sold by Martin Marietta at a nearby quarry for $20-25 per ton.

US Gold Corp is actively exploring ways to capture value from this material:

"We've been approached by a large senior railway in the US. They're desperate for rail ballast," Norman revealed. "Railways specialize in running rail just like our power... I'm not running power to our project, Black Hills Energy is, and they amortize it to us. So it's the same concept."

This initiative could add significant value to the project without requiring substantial capital investment. The company plans to provide more detailed economic projections for the aggregate opportunity in the coming months.

Water Storage Potential

Another unique feature of the CK Gold project is its potential post-mining use. The open pit, which will measure approximately 86 acres and 700 feet deep, could serve as a valuable water storage facility for the local community:

"Post-production, that 86 acres by 700 ft would more than double their current capacity," Norman explained, referring to the nearby Curt Gowdy State Park's existing reservoirs. "There's a very high likelihood that post-production, CK will be an extension to the park."

This potential future use could help strengthen community relations and provide additional value beyond the mine's operational life.

Market Valuation & Upside Potential

US Gold Corp's management believes the company is significantly undervalued at its current market capitalization of around $60 million. Norman argues that based on the project's reserve base and permitted status, a more appropriate valuation would be closer to 0.8 times net present value:

"In any normal case, the market conditions in our space, we would be trading somewhere in the region of about 0.8 of our net present value, which is about a $323 million net present value."

The potential addition of revenue from aggregate sales could further increase this valuation target. The company's near-term focus is on closing the gap between its current market cap and what management sees as a more appropriate valuation in the hundreds of millions of dollars.

Next Steps & Timeline

US Gold Corp is now focused on several key initiatives:

• Finalizing the air quality permit
• Completing economic studies on the aggregate opportunity
• Engaging with local and state stakeholders on project optimizations
• Continuing discussions with potential financing partners

The company expects to progress significantly on these fronts through the summer and fall of 2024. While no firm timeline for a production decision has been set, the advanced stage of the project suggests that construction could begin within the next 12-24 months, subject to financing and final optimizations.

US Gold Corp's CK Gold project represents an advanced-stage gold and copper development opportunity in a mining-friendly U.S. jurisdiction. With key permits in hand, strong projected economics, and several potential value-enhancing optimizations in progress, the company appears well-positioned to advance towards production.

The primary challenges facing US Gold Corp are typical of junior mining companies: securing project financing on attractive terms and closing the valuation gap in the public markets. However, the company's creative approach to both issues – exploring non-traditional funding sources and working to monetize waste rock as aggregate – could provide a revaluation catalyst.

For investors interested in the gold and copper sectors, US Gold Corp offers exposure to a de-risked project with near-term development potential. The coming months should clarify the project's optimized economics and potential financing path, which could be catalysts for the stock.

The Investment Thesis for US Gold Corp

• Advanced-stage gold-copper project in mining-friendly Wyoming
• Fully permitted except for one final air quality permit
• Strong projected economics with $800/oz AISC
• Potential for significant additional value from aggregate sales
• Experienced management team with a track record of creating shareholder value
• Current market cap likely undervalues the project's potential
• Near-term catalysts include:
  • Finalization of air quality permit
  • Economic studies on aggregate opportunity
  • Engagement with potential financing partners
• Exposure to both gold and copper, providing a hedge against inflation and green energy transition

US Gold Corp's CK Gold project represents a unique opportunity for junior gold-copper development. With permits largely in hand and strong projected economics, the company has cleared many of the hurdles that often stymie junior miners. The potential to monetize waste rock as aggregate material adds an intriguing dimension to the project that could significantly enhance its value proposition.

However, investors should be aware that the company still faces challenges in securing project financing and achieving a market valuation that management believes reflects the project's true worth. The coming months will be critical as US Gold Corp works to optimize the project economics, advance discussions with potential financing partners, and communicate its value proposition to the market.

Macro Thematic Analysis

The US Gold Corp story intersects with several important macro themes in the mining and metals sectors:

• Demand for Critical Minerals: Copper, one of CK Gold's primary metals, is increasingly viewed as a critical mineral due to its importance in renewable energy technologies and electric vehicles. The project's copper content could make it attractive to investors and off-takers focused on securing supplies of these vital materials.
• Reshoring and Secure Supply Chains: The United States is increasingly emphasizing developing domestic sources of critical minerals to reduce reliance on foreign suppliers. As a U.S.-based project, CK Gold aligns well with this trend.
• ESG Considerations: The potential post-mining use of the pit for water storage and the project's location in a mining-friendly jurisdiction with strong environmental regulations could appeal to ESG-focused investors.
• Inflationary Pressures: Gold is traditionally viewed as a hedge against inflation. With ongoing concerns about inflationary pressures in the global economy, gold projects may attract increased investor interest.
• Infrastructure Development: The potential to sell waste rock as aggregate for infrastructure projects taps into the broader theme of infrastructure renewal and development in the United States.
• Alternative Financing: US Gold Corp's exploration of non-traditional financing options reflects a broader trend in the mining industry, particularly among juniors, seeking creative funding solutions in challenging capital markets.

For investors bullish on gold and copper, and willing to accept the risks inherent in junior mining investments, US Gold Corp offers exposure to a de-risked project with near-term development potential in a stable jurisdiction. As always, thorough due diligence and careful position sizing are crucial when considering an investment in this sector.