TD updateMarathon Gold Corp. (MOZ-T) C$1.74 US$81mm Equipment Financing Commitment Arun Lamba, CFA Kul Gill, CFA, (Associate)
Event This morning, Marathon announced the execution of a credit-approved commitment letter with Caterpillar Financial Services Limited for equipment lease financing related to the development and operation of the Valentine Gold Project located in central Newfoundland.
Impact: NEUTRAL The commitment letter contemplates US$81mm of equipment leasing for Caterpillar trucks, excavators, graders, loaders, and dozers, for the purpose of loading, hauling, road maintenance, waste dump maintenance and primary pit support for Valentine.
The Cat Financial lease will be made available to the company following: (1) the release of Valentine from the federal Environmental Assessment (EA) process (last major permitting step); and (2) the company's updated Feasibility Study (satisfaction of a cost to complete certification).
As a reminder, Marathon is planning to complete an updated Feasibility Study (FS) in Q4/22 (prior FS completed in April 2021). The company previously reported that it forecasts that LOM capital and operating costs to be between 15%-20% higher than the April 2021 FS. We currently model pre-production capex of $375mm (April 2021 FS estimate of $305mm).
For the updated FS, Marathon will re-assess the optimum pit size for each deposit (new resource and higher gold price environment). No changes are expected in processing and facilities design, infrastructure, mining methodology, or tailings deposition strategy.
Regarding the resource update (mid-2022E), management reported that it expects a decrease in tonnes and ounces at the Marathon Deposit and minimal changes at Leprechaun. Overall ounces are expected to increase with the inclusion of Berry.
As at March 31, Marathon reported $73mm of cash and no debt. Recall on March 31, the company announced the closing of a US$185mm credit facility, subject to certain conditions (see Flash Note).
Anticipated Timeline Possible Release from Federal EA Process — Mid-2022E (see Flash Note)
Updated Resource — Mid-2022E
Updated Feasibility Study — Q4/22E