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TORONTO (miningweekly.com) – Wade Dawe, the CEO of Brigus Gold – formed this year by merging juniors Linear Gold and Apollo Gold – is on a mission to improve what he sees as a “serious valuation gap” in how the company is viewed by the market.
Brigus has one Canadian mine in production and a second project is permitted and scheduled to start up in 2013, which should boost annual output to just shy of 200 000 oz/y of gold by 2014, Dawe said in Toronto on Friday.
Apollo's main asset was the Black Fox gold mine in the Timmins area.
The company started mining in May 2009, but ran into teething problems that, together with balance sheet difficulties, ended up taking a big chunk out of its share price.
“It basically cut the market value of their company by more than 50%, at a time when normally a company going into gold production would be going the other way,” Dawe said.
Since the merger was announced, most of the operational and financial issues have been dealt with, but the improvements have yet to show up in Brigus' market cap, he commented.
Since the first quarter of the year, grades at Black Fox have improved, production is increasing and costs are actually beating forecasts, said Dawe, who was CEO of Linear before the merger in June.
The summer months were spent focused on integrating the two companies and tackling operational issues at Black Fox, and Dawe is now taking his story on the road, to improve the new firm's visibility, convince the market of the improvements made so far, and talk up the potential upside for the company.
The company has also reduced its total debt – one of the big issues for Apollo before the merger - by 40% since March, to around $42-million, and expects to be down to some $37-million by year end.
The company has a market capitalisation of C$190-million, based on its share price of C$1,35 apiece on Friday afternoon.
“We have a valuation gap to fill, and we intend to do that,” Dawe said.
Brigus expects to produce about 85 000 oz of gold this year, and will target 110 000 oz by 2011 from Black Fox as underground mining ramps up.
Dawe is also upbeat on the exploration potential of the property, which already has reserves of 1,3-million ounces.
The deposit remains open at depth, and there is potential for additional discoveries to be made on the property, he said, commenting that a reserve increase to at least two-million ounces is quite possible.
The company does not have full exposure to the gold price though, about half of the current production until about 2013 is covered by hedges, Dawe said.
The hedge book will stand at around 143 000 oz by the end of this year.
SASKATCHEWAN, MEXICO
Brigus also owns the Goldfields project in Saskatchewan, from which it is targeting first production in 2013.
The project is essentially ready to go, but Dawe said he wants to have Black Fox running on full steam and generating strong cash flow before taking on the $100-million capital cost the company expects to need for the Saskatchewan project.
Output from the mine is forecast at between 70 000 oz and 90 000 oz/y as mining moves from one pit to the next, at cash costs of between $400 and $425/oz over the 14-year mine life.
Besides a handful of very early stage exploration prospects, Brigus' other project – from the Linear side of the family - is the Ixhuatan project, in Mexico.
Dawe indicated he will look at potentially selling or taking on a joint venture for the asset, although the company could still decide to develop it itself.
