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VIDEO: Galane Gold (CVE:GG) Potential Acquisition of Andy Well Gold Project

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Galane Gold Inc (CVE:GG) (OTCMKTS:GGGOF) (FRA:25G) CEO Nick Brodie shares that production at the company’s Galaxy project in South Africa will ramp up to 26,000 ounces of gold each year. Brodie provides an update on the company’s Mupane project in Botswana, which produces 30,000 ounces of gold annually. Galane has a new $4 million exploration agreement with B2Gold Corp (TSE:BTO) (NYSE:BTG) (FRA:58G), allowing B2Gold to investigate a 1000 square kilometre Galene land holding. Earlier this month, Galane announced the potential acquisition of the Andy Well gold project in Australia, which has been closed to production since November 2017. The Andy Well project has the potential to be both profitable and presents considerable potential, with 350, 000 ounces available.

Transcript

James West:   Nick Brodie is the CEO of Galane Gold.

Ed Milewski:  That’s right. Well pronounced.

James West:   Thank you, thank you.

Ed Milewski:  The ticker is GG, I believe.

James West:   GG on the TSX-V. Nsk, nsk, nsk. So tell us, Nick: Galane Gold, operating in Botswana and in South Africa.

Nick Brodie:  Ravi Sood was here about a month ago and had a chat with you.

James West:   Yes.

Nick Brodie:  And we’ve had some good news flow since then, so I thought it was worth coming and having another chat.

James West:   Awesome.

Nick Brodie:  So in the last couple of weeks, we announced that we closed a financing on the Galaxy, so we’ve raised 5 million in debt; we closed a $2 million USD equity, and we’ve got 3 million in cash flows, and we’re going to put that back into production probably April 2019.

James West:   Fantastic.

Nick Brodie:  7,000 ounces next year, ramping up to 26,000 ounces, at an all-in of around 900.

James West:   Oh, okay, that’s good.

Nick Brodie:  Add that to Mupane, which is around 30,000 ounces a year, an all-in of 1,050, and in 2020 you’ve got a 56,000-ounce producer and an average all-in of around 1,000.

James West:   Wow. And we’re starting to see some cooperation in the gold price, finally.

Nick Brodie:  It’s come up a little bit, you know. Ravi is a big bull; I’m a finance guy, I concentrate on the costs. I can’t do anything about gold, yeah, I’ve got to worry –

James West:   Costs, you can control. Price of gold, you can’t. Interesting. So in terms of operationally, like, where are the risks in these projects?

Nick Brodie:  So Mupane, there’s no risk, to me. That’s a mature mine, you know. If you know Botswana, Botswana is a great place to do business; it’s always Top 10 in the Fraser index of places in the world to go mining, yeah, so it’s a different Africa. I’ve worked in the Congo with Katanga Mining, I’ve worked in Zimbabwe, you know, I’ve been to these places; trust me, Botswana is lovely.

James West:   Really, is it?

Nick Brodie:  It’s a game drive to work every morning.

James West:   Do you live there?

Nick Brodie:  I live there 50 percent of the time. Based in London, but you know, I fly around the world wherever I’m needed.

James West:   Right.

Nick Brodie:  And it’s a mature mine. So now we’re kind of, we’ve gone underground, which was the big thing we needed to do to reduce costs, and it’s, we replace what we mine, now. So I see that as a mature asset with very little risk.

South Africa, we’ve de-risked it as much as we can. You know, there’s always a political risk in South Africa; I understand that. But you know, part of the financing meant that we had to get a new order mining license, we’ve done all the environmental, we have an economic partner, we’ve done everything we can to de-risk.

Also, it’s a greenstone belt; we’re greenstone miners, and it’s the same greenstone that we’re mining in Botswana, so we understand it. Metallurgically, the mining method will be the same, the mining contractor we’re using is exactly the same mining contractor. So in my mind, we’ve de-risked it a huge amount.

The last key to that was something we signed a couple of weeks ago, was an offtake agreement, because we’re going to be producing a concentrate. So the ore is highly refractory, which it’s got sulphur in it; so recovery is around 55 percent if you run it through a normal CIL plant. But as we’re selling it as a concentrate, we’re going to get 75 percent, which is a recovery we get at Mupane producing gold ore.

James West:   Right.

Nick Brodie:  So we’ve added 20 percent revenue on the top end; on top of that, I’ve reduced my operating costs, because no longer am I running the CIL plant. I don’t have to buy the cyanide, etcetera. So it’s unlocked a lot of value there, and made it a very, you know, great, good proposition for us.

James West:   Interesting. What’s the sort of the blue sky in terms of exploration potential at these projects?

Nick Brodie:  So, look: Mupane, another bit of news we put out two weeks ago, so thanks for asking – we’ve signed a farming agreement with B2Gold.

James West:   Right, okay.

Nick Brodie:  We have over a thousand square kilometres of exploration land; we just didn’t have the money to go out there explore ourselves. So B2 and their geology team are actually the team that found Mupane, so they know it very well.

James West:   Wow.

Nick Brodie:  Approached us.

James West:   Serendipity.

Nick Brodie:  Approached us and said, Look, we’d like to do some exploration; we think there’s a million-plus mineable resource there, and we are going to do that work. So they’re going to pay 4 million over the next three years, for a seven –

Ed Milewski:  Is that like a 50-50 deal? Is that -?

Nick Brodie:  So, no, for that 4 million, they’ll get 70 percent of the joint venture that we formed just on the exploration. So, Mupane as a mining operation carries on; they don’t have any play in that. So we could end up with a 30 percent free carry and a 100,000-ounce plus producer.

Let’s say they don’t find that asset; it does happen, it’s exploration. Maybe they only find a 400,000. That’s great for me, because they’re going to give it back to me, and they’re going to walk away, and then I’ll be 100 percent owner in a 400,000-ounce resource, which is just going to add to Mupane’s life.

Ed Milewski:  Sounds like you got the numbers figured out quite well, here, Nick.

James West:   Yeah. So do you own 100 percent of Mupane with no royalty?

Nick Brodie:  Yeah, 100 percent. There’s a 5 percent royalty in Botswana.

James West:   Five percent royalty to the government?

Nick Brodie:  To the government, yeah.

Ed Milewski:  What kind of mine life do you have in these producers?

Nick Brodie:  So if we look at Mupane, it’s, I call it a four-plus, okay? So the resource we’ve got there, I can only talk about a four-year life. But as I said, there’s a mining I’m a replacing. So a mature underground mine, I’m going to tell you next year I’m going to have another press release saying I’ve added another year. And the year after that, I’m going to say I’ve added another year. So I can only talk about four, but I think it’s got a long life in front of it.

Ed Milewski:  You think, like, at least ten?

Nick Brodie:  At least ten. You know, when we acquired it in 2011, we were told we only had one year life. So here we are in 2018, I’m talking about a four-plus. So you know, I’ve proved that the resource is there, and that you can extend the mine life.

James West:   So the – I’m curious about the risks in South Africa. Not to belabour the point, I’m sure you get this all the time, but the, you know, you’ve got your labour risk, you’ve got your electricity access to electricity risk, the broader political risks, and how do all of these things get managed by a small company like Galane?

Nick Brodie:  So you’ve got us wrong.

James West:   Oh, okay!

Nick Brodie:  So, you’re thinking of a deep mine in Johannesburg with a huge workforce, narrow veins, yeah? We’re not. We’re up in the hills in Barberton, right next to the Kruger National Park.

James West:   Oh, okay.

Nick Brodie:  Added access, sloping, mechanized mining…you know, we have 170 people at Mupane; we’ll probably have a similar amount of people working for us at Galaxy. So even though we’re talking about 26,000 ounces, we’re not going to have a huge workforce. A lot of that is going to be subcontracted. I’m a great believer in bringing other people in; they’re doing what’s best.

So again, I’m not really concerned about that side. But you imagined a political risk, I mean, the political risk is there in a way because of the empowerment, but you know, there’ve been, the new guy in charge has done some good things. He’s pulled back on some of the changes that were proposed, and taken it back to 26 percent, and I think it’s moving in the right direction.

James West:   Interesting.

Ed Milewski:  Do you plan on doing some production in Australia as well, right?

Nick Brodie:  So, yeah. Another press release that went out in the last couple of weeks is, we’ve announced the potential acquisition of Andy Well’s. That was an asset that was in production up to November 2017; went into production in 2013. We put a plan together to put it back in at 50,000 ounces a year, at an Aussie all-in of about 1,450. We just – the acquisition is complete at the end of January, but we’re doing a technical report at the moment, and a PEA with Snowdon, a big company, just to prove our view.

Ed Milewski:  So you’re saying your cost will be 1,450?

Nick Brodie:  Aussie dollars. So gold in Australia is $1,700 Aussie dollars, yeah?

James West:   Okay.

Nick Brodie:  So it’s a profitable operation.

Ed Milewski:  Right.

Nick Brodie:  But it’s got huge potential. That’s, at the moment it’s got 350,000 ounces, but it’s open at depth. But it fits our model; it’s greenstone, it was a –

Ed Milewski:  How did you get this contact? How did you get that contact, like, what’s your….

Nick Brodie:  So we’ve been, you know, we’re looking for the next asset. We’re trying, I’ve got a strong management team that I’ve brought on board, we turned around Mupane. The idea is to get Galaxy working, turn that around, find the next asset, so the Australian asset to me is the next asset. So we’ve been looking around for greenstone, which is our skill set, and underground mining. And there’s greenstone all over the world. You know, a lot of people say to me, ‘Why don’t you go to West Africa?’ Do you know how long it takes me to get to West Africa from South Africa? Two days. Do you know how long it takes me to get to Australia from South Africa?

Ed Milewski:  A day and a half.

Nick Brodie:  Twelve hours.

James West:   [laughter] Close, Ed!

Nick Brodie:  So it’s actually closer for me than going up to West Africa. So, you know, people need to realize – and also, a lot of the South Africans are in Australia now, so –

Ed Milewski:  Why does it take you two days to go from South Africa to West Africa?

Nick Brodie:  Because you’ve got to fly all the way to Europe and back out again.

James West:   Really?

Nick Brodie:  Yeah.

James West:   There’s no planes directly from -?

Ed Milewski:  Come on.

Nick Brodie:  No.

James West:   That’s fascinating. So then, the Mupane mine is now a profitable operating gold mine. Is it safe to say that Galane is going to specialize in acquiring smaller, like – sounds like you’re not looking for the 5-million-ounce behemoth that you’re going to upsell to, you know, Rand Gold, or something.

Nick Brodie:  We’re not an exploration company, we’re a production company, yeah? But we’re going to build on the production. So the first asset was 30,000; Galaxy, actually, it could be a potential 60,000 to 70,000 ounces. There’s a great opportunity to scale it up again very easily. And then you know, Andy Well’s was historically a 90,000 ounce producer; we’ll get there again. So we’re building the size of companies that we’re taking over.

Ed Milewski:  Nick was saying to me that, you know, if they’re producing, if they get to the 100,000 ounce and then, you know, gold moves up $100, that’s an extra 10 million a year cash flow. It’s that simple.

James West:   That’s why when I first – Robert first told me about this, he was asking me, What can you do to help a gold mining company? And I said, well, generally, not much. He said, well, this one’s a little different. He told me about it, I said, well, that one, if anything can be moved, certainly Galane Gold can! It sounds like a great story.

Nick Brodie:  Yeah.

Ed Milewski:  It is a great story, but we’ve had some – I’ve observed a couple of smaller producers, there’s one in Nevada that’s having problems because they’re running out of ore, and the other one is the one in Newfoundland, Anaconda. And Anaconda has done nothing in terms of, you know, the stock situation. So you need gold moving in the right direction.

Nick Brodie:  Gold moving in the right direction is great for us, yeah. My view is stay in the game, because gold is going to come back to us.

James West:   Yeah, it’s just a matter of time.

Ed Milewski:  He lives in London, England, so I’m going to have him talk to Peter Cunningham.

James West:   There you go. It’s an international community, here. All right, Nick, that’s a great update on the story. We’re going to actually send our cameramen down there in November.

Nick Brodie:  I’m looking forward to it.

James West:   We’ve got to coordinate while you’re here, so we’ll come back to you in about a quarter’s time, or live from one of your projects down there. And thanks for joining us today.

Nick Brodie:  Thank you very much, guys.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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