RE:The other side of the VG sagaClearly VG has proven that the Eagle mine is / was profitable and that was when the price of gold was no where near $2400 to $2500 an ounce. Things seemed to be on track until 2022 where production and earnings dipped. I believe this was due to VG attempting to stack ore 'fines' on the pad in attempt to increase annual production by around 20,000 ounces a year. The production seemed to drop after this was done and later VG stopped stacking the 'fines', so to me that was an indication that there was a problem (although the company never publicly elaborated on the effects of 'fines' stacking). Then in 2023 you can see that the earning started to improve, but then they had a conveyor breakage that cost several milllion to repair and had lost production. Then there was the wild fires last summer, and just when everyone thought more wildfires in 2024 was the biggest risk to VG, they get hit with a landslide that is now threatening the entire Eagle mine operation that with gold hovering between $2400 and $2500 couldn't have happened at a worse time.
Earnings & Estimate Ranges Quarterly Data Annual Data
VGCX Price Scale Reported Earnings Estimates Positive Surprise Negative Surprise
My point is that this company has the gold reserves (~ 6 million ounces to date) and prior to this event projected the extension (of just) the Eagle mine itself from around 11 years to 20+ years). They've proven that this operation can be profitable and potentially very profitable at a $2500+ ounce gold price. And that's with all their creative financing and royalty commitments! Osisko has royalty dibs on not only Eagle but all of VG's future actively mined properties, Olive, Raven, etc and so it's not in their best interests to merely recover pennies on the dollar if this can be resolved. And so if the environmental aspect can be largely contained and remediation successful, AND sound measures taken to avoid an even worse future event, then I believe VG will get the money they need either by issuing more shares or additional financing, provided there is a willingness for EMR, FN, and the company to stop pointing fingers and get to work (as MDJBrown and I have been saying for some time now). How far the cyanide from the ore that left containment actually gets is still largely unknown, but sampling to date is not indicating the environmental damage is anywhere near what was initially perceived. Of course the FN hired expert is publicly stating that the worst is yet to come is to be expected. What do you think he's going to say, everything is under control and crisis averted? Of course not, but until the facts support his expert opinion, his statement is just that an opinion and not fact.
You can bet there are some very deep pocketed investors watching this one very closely and whether they step up to the plate is largely contingent on the extent of the environmental impact, containment and remediation aspects level of success, cost and timeframe which will further ultimately determine the company liability. Right now, although containment measures seem to be having success in mitigating the cyanide exposure to the environment, no one really knows for certain and so why would any investor (including retail investors) step up and provide bridge financing until more is known?
Then the next major consideration by any deep pocketed investors is
what caused this slide and who is responsible? Is it solely the company? Is it EMR responsible for overseeing operations and licencing and / or the Ykon Govt who approved the mine design? Is it the engineers that designed the HLF? Maybe it's a combination of all these? Well, right now there's plenty of theories BUT until a full investigation is conducted no one knows for sure (no not even you Singola58). Once the outcome of these two key factors are known / better understood, then and only then will the ultimate fate of the company be known.
Now, before anyone is quick to comment that the company finances won't survive the timeline it will take to determine the full extent of the environmental impact and an official investigation,
IF (and I realizie at this time this is a big IF) the deep pocketed investors (yes those definitely sitting on the sidelines) see progress that perhaps the environmental damage is largely contained and far less severe than expected, and perhaps an investigation signals that the event was largely a HLF engineering design flaw and the slide outcome was inevitable and can be resolved through reengineering, further reducing VG company liability, then will a deep pocketed investor step up to the plate with at least initially enough capital to keep the company operating (a going concern) until the full cost and who is responsible for paying what is determined? Has anyone even stopped to consider that perhaps the reason that VG managment hasn't already walked away and the Yukon Govt stepped in and started to spend the $104 million dollar bond money is because they too are waiting for definite answers to the two major factors I've mentioned? Imagine the lawsuit that the Yukon Govt and EMR would be facing by the company if they forced VG out and triggered the bond fund use and then it eventually was proven that the slide was infact an engineering design flaw and really no fault of VG management.? VG could sue for not only their loss of Eagle but for the loss of all future profits that the company could have made. That kind of claim could cost the Yukon governernment billions of dollars so my guess is they are treading carefully for now.
My guess is that VG management is already speaking with some deep pocketed investors about short term and long term financial support on condition that they can reach certain key milestones. I highly doubt these deep pocket investors are going to let the banks and Osisko walk away with this company for
$250 million CAD in debt at this early life of mine stage and the significant potential for future profit over the next 15 to 20+ years. Years ago $190 million US ($250 million CAD) was a lot of money to larger investors and now a days that's pocket change and a good tax write off for the larger investors that now work with billions not millions. VG was on the verge of going District scale and with their ~ 6 million ounces and Banyan's ~ 7 million ounces and Banyan still drilling, the economic benefit to Yukon Govt and FN was and still is significant. The FN Chief's recent statement back peddling about the shutting down of all mining on their traditional territory is proof that even she recognizes the need for mining in the Yukon and appears willing to work to resolve this (and this in itself is a huge step forward from her position on June 24th).
Think mining isn't a significant asset to the Yukon and all the FN people living there? Well the entire Yukon population is a whopping 46,259 people.
fin-population-report-q1-2024.pdf (yukon.ca) VG was committed to hiring FNs workers and supproting the local Yukon economy. Besides the mine site employment, VG spends about $70 million a year on local contractors and the purchase of other goods and services supporting the local economy, including the town of Mayo, etc. So is it in everyone's best interest to stop pointing fingers and collectively get to work to resolve this and get Eagle operational and profitable again, you bet it is. Should VG management be allowed to continue to operate the mine? Well, that answer will largely depend on the outcome of the two key factors I previously mentioned. If the environmental impact is much less severe than what is / was expected and it turns out that the slide was actually an accident that occurred due to flawed HLF engineering design, then how could EMR or FN legally block VG from continuing as mine operator unless some of the more recent VG Mangement allegations can be proven and are severe enough to force VG management out?
There's just way too many unknowns yet to know for certain how this will all develop but one thing is for sure, it's all about the money like SWHusky says. You can bet liability concerns are at the forefront of the Yukon Govt's decision making and VG management and if they were both smart, they'd work together and with the FNs to resolve this in a manner that is everyone's best interest. Of course that would mean that the lawyers won't get to make millions of dollars litigating this for years to come.
And who knows, even if the Yukon Govt, FNs and VG agree to work together to resolve this, maybe VG will still simply restructure, wipe out or extend their debt repayment timelines, maybe even sever their legal royalty commitments with Osisko and Frank Nevada in the process and re-emerge as
New Victoria Gold. Re-issue shares of the old VG under the new company on a 1:1 basis (a mere 67 million shares is certainly doable and that way JM would still have his ~ 900,000 shares and his wife would still have her VG shares (think it's around 600,000 along with the institutional and retail investors). Now that would be an interesting outcome! This would of course require court approval but is not entirely out of the question to buy more time for this to play out.
So for those that believe VG is done. I wouldn't be so quick to put a final nail in that coffin...just yet. The real reason behind this slide will be determined in due course and I'd venture to say that if VG managment believed this slide was completely their fault that they'd have already walked away. And if the Yukon Govt and EMR knows for certain that this slide was completely VGs fault, VG gold would already be gone and use of the $104 million bond would have already been triggered.
My opinion only, please DYODD.
HB77