Victoria Gold (VGCX) - Stacks More Growth Potential

Victoria Gold Corp's Eagle Gold Mine poured its first gold in Q3/19 and achieved commercial production on July 2020. In full production, the mine will produce 210,000oz of gold a year. The reserve is 3.3Moz of gold and the mine life is +11 years. The deposit is open at depth and along strike. Exploration potential of the greater Dublin Gulch property is good and includes priority targets Olive-Shamrock, Bluto and Nugget-Raven.

We spoke to John McConnell, President & CEO of Victoria Gold having last caught up with the company in August 2020.

Company Overview

Victoria Gold is now a producing Gold company with their main asset as the Eagle mine in the Yukon which has been producing Gold for about a year.

From C$17 per share to C$13; Reasons & Solutions

McConnell is a candid and realistic individual. It is clear that he certain of the quality of the project, but also recognises there will be small bumps along the way. Afterall, this mining we are talking about. That said, he is more than qualified and capable to deal with what lies ahead. The Victoria Gold share price has gone down from C$17 to C$13 since August. The company missed their guidance in Q3/20 which they partly attribute to Covid-19 and partly to ramp-up of the mine. They found that the ore is more abrasive than they originally anticipated which required some design changes in the plant to modify the liner in chutes which was further complicated by Covid travel restrictions and availability of skilled contractors. 

Due to Covid, they were unable to bring in any specialist contractors to the plant so had to rely on diagnosing issues via Zoom, which was far from ideal. The Yukon opened up the border in July, so specialist contractors could visit the site and the plant is now running properly. In Q4/20 the mine produced good results so Victoria Gold is confident that this is an indicator that they now have a stable operation and hopeful that the share price will return to where it was in August 2020. 

The problems at the plant resulted in less tonnage going through the plant due to the time delay. So, they produced about 10,000 less ounces than anticipated in H2/20. The company believes that they have 80% solved these problems and will continue to make further changes into the first half of 2021. In Q4/20, they stacked over 1Mt on the pad and the numbers were back on track to their guidance.  

1Mt Stacked in Q4: Process of Stacking & Seasonality 

Eagle mine is in Kinross, Fort Knox in Alaska, where it is very cold for the first quarter of the year. During this quarter, they are unable to operate the leach process which was reflected in the Feasibility study in which they would not be stacking on the pad for the 3 coldest months of the year.  The problem is the likelihood of freezing a layer in the leach pad and then not getting the solution penetrating through it.  They are being careful but now have one winter behind them and think they will be able to reduce the non-stacking period and eventually get to year-round stacking with more experience of the process.  So, they stopped stacking in early January 2021 and will resume stacking later in March 2021 when the weather warms up.  In the meantime, they continue to mine primary crush and stockpile material and to put a solution on the pad and leach Gold. The production of Gold will drop off over the next couple of months and pick back up in April, May. 

Process of Issuing Guidance Whilst Subject to 3 months of Uncertainty 

They will achieve about 80% of the Gold production in the first 50 or 60 days and as there is more material on the pad, they get closer to steady-state Gold production and expect to achieve steady-state operations sometime in Q3-Q4, 2021.  

It is difficult to provide the appropriate guidance for leach pad systems due to their unpredictable nature but the market expects it.  So, Victoria Gold will put out some guidance in the next 6 to 8 weeks, but are going to be very careful. It is better to underestimate guidance so the actual numbers are better than the guidance.

Orion Mine Finance Bought Deal: Terms & Market Views

Victoria Gold made an announcement regarding a secondary financing by Orion who were 46% and are now 36% shareholders. Orion has had a very successful investment with Victoria Gold and originally participated in equity financing to support building the mine. They have now been paid back in full but are still a 36% owner.    

$200M Credit Facility; What's The Upside & Savings? 

Victoria Gold chose to go with the C$200M credit facility to refinance out the project for the much lower interest rates. It will save the company more than CAD$10M, so even though it has cost more than C$1M in legal fees and banker fees, it is well worth it. 

Goals for 2021: Are Investors to Expect a Growth Story?

Victoria Gold has now cracked 80% of the abrasive ore element, they’ve got the money in place and are refinanced. The company is focused on getting Eagle optimised by aiming for all year-round stacking which alone will add 40,000oz to 50,000oz per year to annual production.  There are some opportunities on the mining and leach pad to increase throughput through the crusher which will add further increase to production. These modifications are planned for later in 2021 so will impact on future years. There is potential to go from 200,000oz per year over the near 3 years to 275,000oz per year, just through tweaking operations during 2021.

2021 will be a year of perfecting operations to get to a point where the company understands how to operate the leach site, how to process it and how to maximise recovery rates and 2022 will be the year that everything starts moving. From the operations point of view, 2022 will be a good year once the leaching operation is fully established.  There are a few capital items built into the budget this year as they need to build a truck shop and a water treatment plant during 2021.

Making it Attractive: Means of Extending Life of Mine 

The current plan for the open pit takes it down to just over 300m over the life of the mine.  During the current exploration programme, Victoria Gold has drilled 6 holes down to 600m and can see that the mineralisation continues. At the current Gold price, it would make financial sense to have a deeper pit so the plan is to drill off the Ore body at depth from below 300m to more than 600m.  It makes sense to increase the stripping ratio right now to go deeper and it also adds value to the company, making it an attractive takeover target by extending the life of the mine. 

Eagle mine is on a very large land package of over 500 sq km, and during the last 3 years Victoria Gold has started to step out from Eagle and look at the regional potential.  They have completed airborne geophysics across the entire land package and where anomalies are found, ground geophysics and ground geochem surveys are implemented. The results have found 14 high priority exploration targets.  They are currently focused on an area out to the East called Nugget with very similar characteristics to the intrusive that hosts Eagle. 

It is early days for the exploration team but they are seeing multi-gram intercepts there over large areas and are planning a C$10M exploration programme for this year. There are 2 camps with 3 drills ready to start in early April and most of that C$10M is focused on drilling new discovery Raven.

Does the Market Understand the Potential & Opportunity? 

Victoria Gold is concerned whether the market understands their production numbers for Q1/21. Certainly, there are 5 analysts that cover the company and understand the production and stacking process at Eagle mine so the message is certain to get out to potential investors and shareholders. The planned exploration programme and the information from assay results will provide more value to this story for potential investors to get excited about. 

We are keen to follow the Victoria Gold story as the 2nd half of the year looks like when everything falls into place. We also look forward to seeing assay results from the exploration programme once the drilling starts in April. 

To Find out more, go to the Victoria Gold Corp. website