RE:Seeking Alpha Article Summary
i-80 Gold Corp. is a speculative gold miner with valuable resources but has diluted shares significantly through offerings.
Despite declining share value, the company doubled revenues in Q1 and is ramping up drilling programs at key project sites.
i-80 Gold's project sites include Granite Creek, McCoy-Cove, Ruby Hill, and Lone Tree, with potential for vast exploration upside and high-grade gold deposits.
Numerous risks persist, this one is not for the faint of heart.
Today we are honing in on a speculative gold miner named i-80 Gold Corp. (NYSE:IAUX). This company is sitting on some very highly valued resources, but has raised a lot of money to fund operations and has significantly watered down the investor base through dilute share offerings. The chart of the stock is abysmal, but with the strength of gold and silver prices of late, the resources that the company is sitting on are valuable. In this situation, we have a company sitting on Nevada's second-largest gold reserve. Of course, this is a favorable operating location, but sometimes that is not enough. We have here a case of a broken stock, but not necessarily a broken company, in our opinion. Let us discuss.
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Data by YCharts
As you can see, it has been an abysmal 18 months for shareholders, and really a horrendous first half of 2024 for the price of shares. Meanwhile, this year-to-date action comes as precious metal prices have surged.
Chart
Data by YCharts
Chart
Data by YCharts
Why is this happening? Why are shares falling like this despite the strong action in metals prices? This is peculiar stock action, even if there has been sizable dilutive offerings. The link with precious metals is completely broken right now.
Of course, to keep the lights on and fund exploration and development activities, there have been waves of recent share offerings. The company recently did an offering of 60.6M units to fund ongoing operations. In April, the offering was to raise $100 million, but the company ended up closing out $115 million and issuing 69 million shares. The shares outstanding have ballooned by 60% since this 18 month run lower began. What is more, over another 100 million shares could have to be issued thanks to warrants and convertible debt exercises. While that would bring in even more operating cash, it would be around another 30% dilution.
So, the decline in share value is appropriate based on this dilution. While the total value of the company from an EV standpoint hasn't moved all that much when you look at cash on hand, debt etc., everyone's "piece of the pie" is not much smaller. Meanwhile, the market cap has dwindled. But the value of the resources the company is sitting on is vast. Favorable data continues to roll in. Just a few weeks ago, the company's drilling at its Granite Creek location yielded favorable results. The company reported out additional high-grade results from the ongoing drill program to define mineralization in the upper part of the "South Pacific Zone" of this property. With its improved financial position from all the dilution, I-80 is in the process of ramping up a large-scale surface drill program to complete further definition and expansion drilling of this zone ahead of conducting an updated resource estimate and feasibility study for the Granite Creek Property.
Now, although this all sounds quite nice, it makes the company seem like it is development stage only. This is not the case. In fact, the company nearly doubled its revenues in its most recent earnings report. Production and sales totaled 2,486 gold ounces for the quarter at a realized gold price of $2,083 per ounce sold. Additionally, mineralized material sales totaled 10,167 tons for the quarter for proceeds of $3.2 million.
IAUX stock BAD BEAT Investing
I-80 Gold Q1 2024 Press Release
So total revenue was $8.4 million, an 85.0% increase from the year ago quarter. That is strong. Moreover, expenses were significantly lower versus last year, and as such, operating loss was nearly cut in half to $11.1 million. The exploration, evaluation, and pre-development costs were $2.8 million for the quarter, mostly for pre-development work at McCoy-Cove and Ruby Hill project sites.
Discussing project sites
Granite Creek
So we mentioned favorable results from recent drilling at Granite Creek. The project hosts both high grade open pit and underground mineral resources that remain open for expansion. The underground mine at Granite Creek is permitted and is in development with the "goal of ramping up mining into 2024". The feasibility study is likely to be completed in late 2024. Within the just reported quarter, 10,167 tons of mineralized material were sold under its Ore Sale Agreement for proceeds of $3.2 million. A further 28,500 tons of mineralized material were added to its stockpile, bringing i-80's total stockpile of material to 37,907 tons at Granite Creek, before sales. During the quarter, there was an additional 3,178 feet of horizontal development.
McCoy-Cove
i-80 has 100% ownership, the so-called McCoy-Cove. This is a project located on the Battle Mountain Trend. The total land here at this property consists of approximately 31,000 acres with potential for vast exploration upside. This mine has offered up 3.3 million ounces of gold in its past operating history and more than 100 million ounces of silver, the property is host to one of the highest grade undeveloped gold deposits in Nevada. A Preliminary Economic Assessment for McCoy-Cove was completed in 2021 with favorable results. i-80 is in the process of completing an extensive definition drill program from underground drill stations in advance of completing a full Feasibility Study here too.
The Cove deposit and the McCoy-Cove property should be the core asset for the company and "likely the highest-grade gold deposit in i-80’s portfolio." During the just-reported quarter, i-80 achieved high-grade infill drilling results at the Helen and Gap Zones, with 3,594 feet of total drilling completed.
Ruby Hill
This property has a producing open pit mine and multiple deposits that contain sizable gold and silver resources. During the just-reported first quarter, drilling at Ruby Hill was focused on infill drilling of the so-called Hilltop zones for metallurgical sampling as part of a recent announced potential joint venture. 4,032 feet of core drilling was completely funded by the potential joint venture partner. Residual leaching activities at Ruby Hill led to i-80 producing and selling 444 ounces of gold during the quarter at a realized gold price of $2,016 per ounce.
Lone Tree
Lone Tree is expected to become the hub of i-80’s Nevada operations and the central processing facility for gold mineralization from the Granite Creek, McCoy-Cove and Ruby Hill underground gold deposits. This was a previously producing mine in the past. Once the company completes refurbishment efforts, i-80 will be one of only three companies in the United States capable of processing both oxide and refractory mineralization. In Q1, the company worked on determining total refurbishment costs, efforts that are ongoing. Lone Tree produced and sold from its residual leaching activities 2,042 ounces of gold during the quarter at a realized gold price of $2,097 per ounce.
Risks
There are numerous risks. First, although rising gold (XAUUSD:CUR) and silver (XAGUSD:CUR) prices have not helped shares recently, if gold and silver have a sizable correction, the pressure on shares is likely to mount. A possible reverse split may be necessary if the stock falls under $1 and no longer meets listing requirements. Nearly every reverse split that is done when a stock has been in free fall leads to more downside post split. And of course, while the company has raised significant money to fund operations for a number of quarters, yes, future dilution remains a paramount risk.
Looking ahead
As we look ahead, we rate i-80 Gold Corp. stock as speculative. It is not quite an exploratory only stage company, but it is closer to one than it is to a full-fledged operational miner. However, residual activities do lead to revenue generation, and we are pleased to see operating losses having declined.
For the long-term i-80 Gold Corp. investor, if you look at the resources they are sitting on across all properties, which can be found in their latest annual report, there is some $35 billion in potential between Gold and Silver. That value only increases if gold and silver continue to rally. Another possibility is that with the severe declines in share value, another competitor tries to scoop them up.
Shareholders who have purchased anytime in the past are underwater, but especially those who have been invested for the last year or two. Outside tactical trading, it has been difficult to make money here. There is substantial long-term potential, but there remains much to be done. As such, we rate this highly speculative.