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Savvy investors know how important a company’s objectives and mission are in order to deliver results for the company and also shareholders.
Galane Gold Ltd. (TSX-V: GG, OTCQB: GGGOF, Forum), with headquarters in Toronto, has a mission of shaping the company to be a low-cost operation with a long-life cycle that can provide investors with positive returns.
As an unhedged gold producer and explorer, the company has mining operations and exploration tenements in Botswana and South Africa and positions itself as a unique gold play for investors.
Galane Gold has been a public company for almost 10 years after it completed the acquisition of Gallery Gold Pty Ltd. from IAMGOLD. Since then, the company has expanded its portfolio by acquiring South African company Galaxy Gold Ltd. in 2015 and the acquisition of the Summit Mine and Banner Mill in May 2021 with plans to recommence operations at the mine sometime in the near future.
In tandem with this news, Stockhouse Editorial’s Jocelyn Aspa had the opportunity to catch up with Galane Gold CEO Nick Brodie to discuss the company’s recent acquisition, what is has coming down the pipeline and what investors should be watching for.
TRANSCRIPT BELOW
SH: For investors who are new to Galane Gold, can you first provide us with a brief overview of yourself and the company?
NB: I'm the CEO of the company. I started working for it nine years ago. Before that I was an accountant, initially working in London as the head of finance for Total, and then moved on to Glencore where I was a CFO for Katanga Mining in the DRC. The company itself Galane Gold has been in existence for around 10 years now. It started off by acquiring an asset in Botswana called Mupane mine. And they transitioned that from an open pit to an underground mine. Secondly, back in 2015 we acquired a second mine called Galaxy Gold in South Africa. That asset now is put into production and it's ramping up production there. And then finally, we've just acquired a new asset called the Summit Mine in New Mexico.
SH: The company is focused in regions like Botswana, South Africa and the United States. What makes these countries attractive areas for mining?
NB: I would like to twist your question around a little bit, the fact is as a company, we look for opportunities that are undervalued by our peers. I mean, we use our knowledge and experience to add value. So in these cases, the decision to focus on a region was more driven by the economic models for each of the mines, but we also took into account the regions, of course we have to. So probably a better question would be what attracted us to Mupane, Galaxy and Summit. And the answer would be, each of them provide a significant return based on that initial investment required. I mean that aside, if we talk about the countries themselves, Botswana was always ranked in the top 20 places to go mining in the world, which speaks for itself. South Africa has a whole wealth of experience in gold mining, has infrastructure to assist in mining far in advance of the rest of Africa. And also it's very supportive of mining operations. And then finally I think New Mexico in the United States, I probably don’t need to make your viewers aware of the advantages of mining in America
SH: The company just acquired the Summit Mine and Banner Mill in May of this year. Can you talk about the significance of this acquisition and how it will strengthen the company’s portfolio?
NB: As I stated in the previous answer, as a company we're always looking for opportunities that are undervalued by our peers, and we try to use our knowledge and experience to add value. If we look at the Summit Mine and Banner Mill, it just provides a perfect example of this. In summary, it's located in a low-risk mining jurisdiction, New Mexico, which is very supportive of gold, silver and copper mining projects. It already has an NI-43 101 compliant resource around it, which contains 6.5 million ounces of silver and around 100,000 ounces of gold. The mine already has existing infrastructure. There's a underground mine there with over 15,000 feet of workings in it and added declines straight into the ore bodies with stopes, ready to go. And in addition to that, there's Banner Mill is already there fully permitted, and that can operate around 240 tons a day, all the key permits are in place to restart the operation.
The water use licenses are ready to restart tomorrow. If we look at the project itself and there's a PEA that was done in 2014 already around the operation as the low restock CapEx estimate because the operations already there of around $4 million and if we look it up how that looks at a model at a pro price forecast of a $25 an ounce silver and $1700 an ounce for gold. The economics can evolve. As I said, in two ways, I can look at it as a silver mine or a gold mine. If look at it as silver mine, it will generate around one and a half million ounces of silver a year for seven years, at an only cost of around $12 an ounce or alternatively, we look at it as a gold mine. It can generate around 22,000 ounces of gold a year for seven years, and then we'll end up with $733 and that's very economic, for that PEA, it generates about $16.4 million US cash a year or an NPV
5 after tax around a $100 million.
But you know, there's always the mind that it doesn't stop with the drilling stop and there's a huge potential around exploration. We'll look at the Summit deposit itself is open at depth. And for once I don’t normally say this, it’s open at surface as well. So, we have the opportunity to extend the resource and we've already done that. But when we took over Mupane, it only had a year's life left in it; that was 10 years ago, and here we are still mining. If you look at Galaxy, we have added over a million ounces to that resource since we have acquired it.
So there's a huge potential to extend this past the seven years for it to be a very productive asset for Galane as we go forward, you know, it just fits perfectly into our portfolio. It draws on the skills we've already got as a company, as already said, we've transitioned Mupane from a high cost, short lifetime, which was open pit into a low cost extended life and underground operation. If we take Galaxy, we took it out of the care and maintenance, similar to Summit. We've doubled the resource. We’ve tripled the size of the processing plant, and we're changing it to a large volume mechanized underground mine, and unlocking the value of reducing the concentrate, which is similar to the Summit mine. So, you know, we've already done this twice before. It just seems to us that there's a good fit for our portfolio.
SH: Following this acquisition, what are the company’s next steps with the Summit Mine and Banner Mill?
NB: Just to put it simply, our plan is to target putting Summit back into production as soon as possible, but as I've already stated, the infrastructure and permits are already in place. So what we needed to concentrate on in the short term, if you try and break it down is putting together the economic plan to support the restart of the mine. As I said, there's already a PEA or preliminary economic assessment out there. It was done back in 2014, but we need to build on that and leverage off that and go into more detail. So for example, we may need to go in and build a detailed mine plan, detailed costings - these kinds of things. And once we've completed that, we'll be back to the market and we'll be telling you about that detailed plan and costings for us to put Summit back into the production.
SH: The company’s other operations also include Galaxy and Mupane. Are there any recent updates or things coming down in the pipeline regarding these operations investors should know about?
NB: Mupane as an operating asset, is probably different from other juniors, and that, you know, we're not putting junior results out there. So really if you're looking at Mupane, what you should be looking at is the quarterly news reports on the cash generation, operations and the production. That's where you're going to see the news around Mupane. If we look at Galaxy in the last four months, it's made some great strides. We've just completed the new and upgraded 50,000 ton per month processing plant back in December. In February, we announced we completed the adit to reach the Galaxy ore body. I'm actually in there mining now. And we're really seeing a big increase in the feed to plant. So for example, we retake the first quarter of this year. We've actually exceeded that first quarter production in April alone as we've increased the feed. So really keep an eye out for the increase in production at Galaxy, as we go forward.
SH: Galane also released its fiscal 2020-year financial results recently. Can you walk us through some of the result’s highlights and key takeaways?
NB: 2020 was a good year for Galane. We generated over $14 million in free cash flows at the operating level. And we had net earnings around four and a half million dollars. You know, that was created through production at Mupane of around 27,500 ounces. And in fact, as we achieved around $1,766 per ounce on sales price at an all-in cost of production of around one, $1,070 per ounce. In addition to that, with a ramp up at Galaxy, we produced around 4,000 ounces of gold and generated around $5 million worth of revenue there. That enabled us to repay $5 million worth of our debt and finished the year with around $5 million in our bank balance. The key takeaways of 2020 were: generating significant positive cash flows, we're increasing production at Galaxy. We're reducing our debt burden and we have funds in the bank. A great start into 2020 and a great place for us now to build on in 2021.
SH: Shares of Galane have increased this year. What makes the company a good investment right now?
NB: At the beginning of the year, our share price was around $0.23. It's now going up to $0.26. So an increase of over 10 per cent, but the reality is there’s a variety of reasons why we're still a good investment in my mind. I can tell you we are undervalued and all the other things that CEOs will do, but I just look at what Galane is going to deliver in the next three years, as a potential for us to triple even quadruple production. That's the ramp up of Galaxy plus bringing Summit on taking us to about over 100,000 ounce produced. Building on top of that, people really don't understand Summit yet. We've not been able to get to the market and market that yet because we've been closing the transaction. The transaction only closed on May 14.
We're now in a position where we can start talking to the market about Summit as I am to you, Jocelyn. And when I think people really understand what we've acquired here, they're going to be very excited and that's going to drive our share price.
Then, if I look at our peers and we do compare ourselves to our peers, we are peer undervalued. And there's been reasons for that. I understand that, but you know, we've turned a lot of those issues around. We did and go when the gold price was down at $1,100, $1,200. Mupane was a relatively high-cost producer. We did have debt on our balance sheet and people would have looked at us and, you know, maybe a year and a half ago would consider us one of the riskier juniors to invest in. But here we are, after 2020 gold price has gone up, we've ramped up production, Galaxy’s now in production, producing cash. We are a different operation.
And I would guess that our share price and our valuation needs to change — if I look against our peers. If you look at the various valuation metrics, and in fact that work was done by Fundamental Research and Independent Report, which we pay for which you can go and look at, they evaluated us at around $0.58 cents. So there's still a long way for our share price to go. And then finally on top of that, I think you've got to look at the gold price and I guess now silver price now that we're in the silver market and, and agree, you know, we are in a new bull cycle and the last time goal was at this price, juniors run a multiple of the account valuations, and that really hasn't happened yet in the market. So there's still an opportunity if you're a gold bull or a silver bull to see juniors like ourselves, see multiple increase in our valuations.
SH: As we move into the rest of the year, is there anything in the pipeline investors should be watching for?
NB: I think I'd just probably reiterate what we've already said and let you know, they should really keep an eye out for the continued growth of production at Galaxy. Now we're hoping by the end of this year to have completed phase one, and we'll be putting a news release out around that. Now they should look at our quarterly financial reports, see how we're performing in this new gold price environment. And what's that doing for our balance sheet. And then finally, you know, Summit, I think there's going to be a constant news flow coming out of Summit as we commenced our work, looking at the detail plans around it and timelines, et cetera. And also just being in the market, aware of the full potential of Summit as we go forward.
SH: Finally, if there’s anything I’ve missed please feel free to elaborate.
NB: I think we've pretty covered the majority of the key aspects of Galane and its current status and what we're planning going forward. But, you know, I put out there that the viewers having any further questions, I'm always happy to communicate directly with potential investors or shareholders and my contact details can be found on our website.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.