Jim's Mining Letter - May 12, 2024

Galiano Gold (GAU.TO GAU OUIT.L B7U.F) announced first quarter operating and financial results. Gold revenue of $65.5 million was generated from 31,840 gold ounces sold at an average realized price of $2,056/oz during the quarter. Net income was $14.5 million and adjusted EBITDA $21.7 million. The company generated positive cash flow from operations of $26.1 million and free cash flow of $5.8 million, notwithstanding investing $12.4 million in waste stripping costs at the Abore deposit. Gold production was 30,386 oz during the quarter and is expected to increase in the first half after completion of the waste stripping. 2024 production guidance remains at 140,000 to 160,000 oz. Following successful 2023 and early 2024 infill drilling programs, an increase to the Abore resource estimate was completed effective 31 March 2024, with the measured and indicated mineral resource increasing by 181,000 oz or 38%. Planned 2024 exploration programs include drilling at Midras South to advance the deposit towards a potential maiden mineral reserve estimate, infill drilling at Adubiaso, early-stage drill testing at Target 3 and extension drilling at Gyagyatreso. A property wide reconnaissance program has also been designed to identify new target areas of interest.

Capstone Copper (CS.TO CSC.AX CSCCF OUW0.F) announced financial results for the three months and quarter ended 31 March 2024. Consolidated copper production was 42,121t at C1 cash costs of $2.88/lb, consisting of 15,672t at Pinto Valley, 10,967t at Mantos Blancos, 9,476t at Mantoverde, and 6,006t at Cozamin. Net loss attributable to shareholders was $4.8 million for Q1’24 compared to net loss attributable to shareholders of $20.0 million for Q1’23. Q1’24 adjusted net loss attributable to shareholders of $4.5 million is lower than Q1’23 adjusted net income attributable to shareholders of $17.5 million due to the lower realized copper price. Adjusted EBITDA was $80.1 million for Q1’24 compared to $66.0 million for Q1’23, the increase driven by higher copper sold (41.0kt in Q1’24 versus 37.5kt in Q1’23), partially offset by a lower realized copper price of $3.86/lb compared to $4.12/lb. Operating cash flow before changes in working capital was $62.1 million in Q1’24 compared to $41.7 million in Q1’23. 2024 guidance remains unchanged.

Patriot Battery Metals (PMET.TO PMETF PMT.AX R9GA.F) announced that it has entered into a definitive agreement to increase the land position at its Corvette property through the acquisition from Azimut Exploration (AZM.V AZMTF)  of a 100% interest in a proximal claim block termed JBN-57, which is comprised of 39 claims (1,995.0 ha) located on trend with the Corvette property, located in the Eeyou Istchee James Bay region of Quebec. The CV5 Spodumene Pegmatite, with a maiden mineral resource estimate of 109.2 Mt at 1.42% Li2O inferred, is situated approximately 13.5 km south of the regional and all‑weather Trans-Taiga Road and powerline infrastructure. Consideration comprises an aggregate cash payment of $500,000 to be paid to Azimut upon closing, an aggregate of 150,000 common shares in the capital of the company to be issued to Azimut upon closing and the grant to Azimut of a 2% net smelter returns royalty interest in the future minerals produced from the block.

Nouveau Monde Graphite (NOU.V NMG NM9A.F) announced that it has closed its private placements previously announced on February 15, 2024 and May 1, 2024, representing a gross aggregate amount of US$37.5 million from Mitsui & Co. and Pallinghurst Bond. Nouveau Monde Graphite is developing mining and advanced manufacturing operations to supply carbon-neutral active anode material to power EV and renewable energy storage systems. The company is developing a fully integrated ore-to-battery-material source of graphite-based active anode material in Québec, Canada.

Contango ORE (CTGO F85.F) and HighGold Mining (HIGH.V HGMIF) announced that they have entered into a definitive arrangement agreement pursuant to which Contango will acquire all of the issued and outstanding shares of HighGold by way of a court approved plan of arrangement. Each HighGold share will be exchanged for 0.019 shares of Contango common stock based on the respective volume weighted average price of Contango for the five-day period ended May 1, 2024. The exchange ratio implies total consideration of C$0.55 (approximately US$0.40) per HighGold share and total HighGold equity value of approximately US$37 million (C$51 million). The consideration represents a premium of 59% based on Contango’s and HighGold’s 20-day VWAP. Upon completion of the transaction, existing Contango shareholders will own approximately 85% and HighGold shareholders will own approximately 15% of the combined company.

Orezone Gold (ORE.TO ORZCF) updated on its Phase II hard rock expansion and provided a three-year production forecast for its Bomboré Gold Mine located in central Burkina Faso. Following a review of available financing sources, the company has decided to complete this brownfield expansion in two stages: Stage 1 will consist of an initial 2.5Mtpa hard rock plant; Stage 2 will increase the hard rock throughput to 5.0-7.0Mtpa. The existing Phase I oxide plant will continue to process oxide ore at a targeted rate of 6.0Mtpa. Capital cost for the initial 2.5Mtpa hard rock plant is estimated at US$80 million, significantly less than the US$168 million estimated for the 4.4Mtpa hard rock plant, along with the benefit of a shorter overall construction timeline. Costs of construction for this Stage 1 hard rock plant will primarily be financed through senior debt, with the balance from future operating cash flow. The company expects to achieve first gold from the 2.5Mtpa hard rock plant in late 2025. Over the next three years, Orezone will focus on ramping up future production at Bomboré to 170,000-185,000 oz/year, which will help the company to rapidly de-lever its balance sheet. During this period, the company will continue to evaluate the timing of the Stage 2 hard rock expansion which it will look to advance with a strong treasury and cash flow from operations. Additionally, Orezone plans to initiate a multi-year exploration campaign to further determine the size and scale of the Bomboré mine. With current mineral reserves down to an average depth of under 40m across 14km of strike, the company sees significant potential to not only increase the overall mineral inventory at Bomboré, but the potential to systematically target higher-grade mineralization within the much broader structural corridor. Planning and budgeting for this program are ongoing, with drilling expected to commence in Q3 2024. During the next three years, Orezone is forecasting strong growth from its Bomboré operations, with gold production projected to exceed 170,000 oz/year by 2026.

Hot Chili (HCH.AX HCH.V HHLKF) announced that it has arranged a A$29.9 million funding to accelerate the Costa Fuego Copper Hub, Chile and is positioning for near-term, meaningful, copper production. The A$24.9 million private placement received strong demand from Australian, Canadian and overseas institutional investors, as well as existing shareholders, plus the company is undertaking a share purchase plan to eligible existing shareholders under the same offer price as the placement to raise up to an additional A$5 million. Upon completion of the capital raise, the company will be fully funded to deliver key milestones in the growth and development of the Costa Fuego copper-gold project: completion of the Costa Fuego pre-feasibility study, expected in H2 2024, an advance water supply study and the creation of a new water company, expected in H2 2024; up to 25,000m of drilling, exploration and further land consolidation over the next 18 months; and commencement of a bankable feasibility study. Further updates are expected as the company accelerates its growth and development plan with a strengthened treasury and a rising copper price environment. The placement and the share purchase plan aim to increase Hot Chili’s trading liquidity on the TSXV.

Canada Nickel (CNC.V CNIKF) updated on its 2024 exploration program with assay results from four new holes at its Reid property, which included the best drill result to date from the property - 687 metres of 0.27% nickel including 36.0 metres of 0.41% nickel and 7.5 metres of 0.56% nickel in REI24-18. All four holes intersected core lengths of at least 676 metres with average grades of 0.24% to 0.27% nickel. The 2024 exploration program is targeting delivery of seven new resources by Q2-2025 and six further discoveries, unlocking the regional exploration potential of the Timmins Nickel District. With six drill rigs now operating, the company expects a steady flow of drill results from across the exploration portfolio.

Mandalay Resources (MND.TO MNDJF) announced financial results for the first quarter ended March 31, 2024, supported by by what the company described as solid production results, disciplined capital allocation, and favorable metal prices. Significant strengthening of balance sheet was reported with a cash balance of $47.1 million. The company generated $29.5 million and $16.1 million in cash flow from operating activities and free cash flow, respectively. Consolidated revenue was up 32% and 10% as compared to Q1 2023 and Q4 2023 respectively, reaching $55.5 million. Björkdal recorded its highest ever quarterly revenue of $24.9 million and Costerfield generated $30.6 million in quarterly revenue, its highest since Q2 2022. Consolidated quarterly adjusted EBITDA was $26.7 million, a two-fold increase as compared to corresponding quarter last year. Consolidated cash operating cost per gold equivalent ounce produced decreased 15% to $1,039 per ounce in Q1 2024 compared to $1,222 in Q1 2023. All-in sustaining cost decreased to $1,430 per gold equivalent ounce produced in Q1 2024, compared to $1,612 in Q1 2023. Consolidated net income was $5.9 million ($0.06 or C$0.09 per share). Exploration expenditure is anticipated to remain on course, with an expected full-year spending of $12 to $15 million across both operational sites. Additionally, the company continues to look for M&A opportunities in the sector.

Ivanhoe Electric (IE IE.TO) announced the signing of a definitive exploration alliance agreement with a subsidiary of BHP (BHP.AX BHP BHP.L). The alliance aims to explore mutually agreed areas of interest in the United States to identify projects within those areas of interest that may become 50/50 owned joint ventures. The initial areas of interest are in Arizona, New Mexico, and Utah. The alliance is for a term of three years, which may be extended. BHP (through a wholly owned subsidiary) will provide the initial funding of $15 million and any subsequent funding will be on a 50/50 basis. Ivanhoe Electric will provide the Alliance with access to one of its new generation Typhoon geophysical survey systems as well as the machine learning algorithmic software and data inversion services of its subsidiary, Computational Geosciences. The alliance aims to explore the untapped mineral wealth of the United States using IE’s Typhoon and CGI technologies; the companies say they have a common goal to find new sources of the critical minerals necessary to meet growing demand associated with the energy transition and the electrification revolution.

Hecla Mining (HL) announced first quarter 2024 financial and operating results. The company produced 4.2 million silver ounces, an increase of 43% over the fourth quarter of 2023. Lucky Friday completed the ramp-up to full production with 1.1 million silver ounces produced and improved safety at Keno Hill increased throughput 29% over the prior quarter, producing 0.6 million ounces of silver. 2024 production and cost guidance is reiterated. Sales were $189.5 million, 44% from silver and 34% from gold. Net loss applicable to common stockholders was $5.9 million or ($0.01) per share and adjusted net income applicable to common stockholders was $6.5 million or $0.01 per share. Consolidated silver total cost of sales was $108.2 million and cash cost and all-in sustaining cost per silver ounce (after by-product credits) was $4.78 and $13.10, respectively. The company received $17.4 million in Lucky Friday fire related insurance proceeds. The first quarter is said to reflect an inflection point with the strong performance from Greens Creek, achieving full production at the Lucky Friday, and significant improvements in safety, environment, and production from Keno Hill. Per Phillips S. Baker Jr., President and CEO, with this strong start to the year, the company is well-positioned to achieve production and cost guidance for 2024. Hecla is the largest U.S. silver producer and is on track to be Canada's largest this year. With silver production growth expected up to 20 million silver ounces by 2026, Hecla is said to be the fastest growing established silver producer.

Tudor Gold (TUD.V TDRRF) announced that crews are on site preparing camp and drill locations for the company’s upcoming 2024 exploration program at the Treaty Creek Project, located in the Golden Triangle of Northwest British Columbia. Phase 1 of the 2024 exploration program is expected to consist of approximately 10,000 meters of diamond drilling at the Goldstorm Deposit. The primary objective of the Phase 1 drill program is to expand and upgrade the recently released mineral resource estimate. Several drill holes have been designed as step-out drilling to the high-grade Supercell One system identified in 2023. Supercell One is a gold dominant, quartz-sulphide, breccia-hosted structural corridor open to the northwest, north and east. Drilling will take place from two drill pads that were built last fall in preparation for this program. One drill rig is positioned just beyond the northern limit of known mineralization and the second rig is located at the northeastern boundaries of the Goldstorm Deposit. Drilling will focus on an area located between 200-250 m northeast of the current mineral resource limit. In addition to testing the SC-1 high-grade breccia, the proposed Phase 1 drill holes are designed to expand and convert much of the inferred mineralization within the CS-600 and DS5 domains that is estimated to contain approximately six million ounces of gold-equivalent resource grading 1.25 g/t AuEq. The concept is to add as much high-grade ounces as possible to the current estimated mineral resource of 26.9 million ounces of 1.19 g/t AuEq. A preliminary economic assessment of the Goldstorm Deposit is planned for release in late Q1 or early Q2 2025.

Lundin Gold (LUG.TO LUGDF) reported results for the first quarter of 2024, highlighted by gold production of 111,572 ounces and gold sales of 108,916 oz at a cash operating cost of $735 per oz sold and an all-in sustaining cost of $868 per oz sold from its Fruta del Norte gold mine located in southeastern Ecuador. Bolstered by strong operating performance, reduced debt servicing costs and record high gold prices, Fruta del Norte generated in excess of $100 million cash from operating activities in the first quarter, and free cash flow of $82.3 million or $0.35 per share, resulting in a cash balance of $324 million as at March 31, 2024. The company says it looks forward to further margin expansion in addition to unencumbered exposure to rising gold prices.

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