Nothing Small about Junior Mining Company Galane Gold Ltd (CVE:GG)

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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 Ltd (CVE:GG) (OTCQB:GGOF) CEO Nick Brodie joins Midas Letter to discuss the gold junior mining company’s latest developments. Galane Gold has two gold-producing mining operations located in South Africa and Botswana. The latter of the exploration sites produced over 36,000 ounces of gold, which represents its best annual output since 2013. The company’s Galaxy mine in South Africa is now operational after being purchased in 2015 with its first ore production achieved. The management team have ramp-up plans to expand the plant to 30,000 tonnes per month by next year. The CEO explains how Galane Gold is differentiated from its junior mining and exploration competitors due to the sheer scale and production of its operations. Galane Gold is also generating revenues and looking at “up to $100 million, in 2020 at today’s gold prices.”

Transcript

Narrator: Galane Gold is an un-hedged gold producer and explorer with mining operations and exploration tenements in Botswana and South Africa. Galane Gold’s management team is comprised of senior mining professionals with extensive experience in managing mining, processing operations and large-scale exploration programmes. Galane Gold is committed to operating at world-class standards and is focused on the safety of its employees, respecting the environment, and contributing to the communities in which it operates.

Galane Gold trades on the TSX Venture under the ticker GG.

Fraser Toms: Joining us now is Nick Brodie, who’s CEO of Galane Gold. Nick, how are you doing?

Nick Brodie: I’m fine, thank you, yourself?

Fraser Toms: I’m good, good. Yeah, we were just talking about the company a little bit, but to give our audience a bit of an overview, you’ve been on the show before, but it never hurts to just sort of recap what the company has going on.

Nick Brodie: Yeah, so we’ve got two assets. We’ve got the first one, which is Mupane, based in Botswana, which we acquired back in 2011 from Iron Gold. We’ve worked very hard to transition it from an open pit to an underground mine.

Last year was our best year since 2013. Produced around 36,000 ounces at an all-in of 1,050, so positive operating cash flows.

The second asset we have is Galaxy. We acquired it back in 2015, and really the idea there was to buy an asset that we could take our strong management team that we’ve built, and move them across to a new asset and put that back into production. Last year we secured the financing, and this year we’ve started putting that plan together. We produced first concentrate a couple of weeks ago, actually shipped out now, and we’ve got a ramp-up plan to get into full production by next year.

Fraser Toms: So I watched the site tour that we put out on your operation, needless to say, and I was pretty impressed by just the sheer scale, just looking at all that you have that’s going on. Can you give us a little detail about the scale of the operation?

Nick Brodie: Yeah, sure. So when people hear junior mining, they think junior company, small. That’s not what Mupane is. Mupane, the specific asset that’s running at the moment, that plant’s a 1.1 million tonne plant. The thing that constrains the production is the grade, and the grade runs between, you know, 1.5 to 2 grams a tonne, so it’s only a 36,000, in a good year. But the reality is, you need a big plant to produce that, yeah? So we have a workforce of around 200 people, but outside of that, bringing in the subcontractors, etcetera, we’re talking about 500. So it’s a big operation. 

Yeah, if you look at Galaxy which is there as well, you can see we’re doing the ramp-up there, but come back in six, twelve months, and that’s up in production, you’ll see something very similar to Mupane, and it’s going to be, you know, only 30,000 tonnes per month, but you’ve got two underground operations running, you’ve got a concentrate bagging system, so it’ll look pretty similar, but it’ll be just as impressive.

Fraser Toms: You guys are generating revenues, you have an operating mine, it’s not an exploration-stage company like so many other juniors out there. So you know, how were you able to get to that point?

Nick Brodie: You know, look, I mean, when it comes to Mupane, when we bought it, there was only one year life there, and what we did is, we looked at the asset and we understood there was an opportunity to go underground in the open pits. And seeing those opportunities, we actually executed on it. We raised money, we’ve repaid that debt, and now we’re in a strong position because we’ve got an underground mine there that could continue for a long time.

But what we’re not doing is, we’re not an exploration company. We’re a production company; that’s what we concentrate on. And we’re spending our money on doing the drilling around the production areas, extending life that way. So if we take 36,000 ounces like we did at Mupane last year, we’ll try and replace it with 36,000 ounces into the resource, and just continue the life that way. So now we’re talking about it as a three-plus-year life, and next year, when I’m here and we’re talking again, maybe I’ll be talking about a three-plus-year life.

If we talk about Galaxy, now, Galaxy is the same. It was an unloved asset, it was in care and maintenance, but add over 1.5 million ounces measured, indicated and inferred there, so there’s a resource. Been over 100 years of mining there, produced over 1.3 million ounces; so there’s obviously an opportunity there, but the thing that was holding it back was how to unlock that value, because it’s high in sulphide refractory ore. And we looked at it, and we looked how to do that, and the 15,000-tonne plant wasn’t big enough, wasn’t, the economies of scale weren’t good.

But we saw if we doubled the size of that plant, and we actually sell a concentrate rather than trying to do gold d’ore, we could actually achieve lower costs and a better recovery, and that’s what we’re executing at the moment.

Fraser Toms: Yeah, and Galaxy looks like it has a lot of upside, and obviously you have to spend some money to make money, but you have, in rough time frame, goals that you have to meet for Galaxy over the next little while.

Nick Brodie: Yeah, look, we’re in the ramp-up stage. So this year’s been all about setting ourselves goals and trying to achieve those goals. You’ll miss some; that’s the way mining works, but we’ve hit the majority of them. This year, we know, we raised the money back in November, we did the first draw-down in January, and the idea was to restart mining, or restart of mining the two main ore bodies: there’s one called Princeton, which is about 5 metres wide but 100 metres strike, and runs at 5.5 grams a tonne, and we try to get first draw out of there was going to be in June, but we actually achieved that in April, ahead of target.

And the other ore body was Galaxy, which is 40 metres, 4.5 grams a tonne, but we’ve got an added that we need to drive through, and we’ve still got 800 metres to do on that, and we’re looking to get into production in perhaps November, December. So that’s a long-term target for us, but we’ll be producing around 20,000 tonnes from there. But bring those two together and then that’s the 30,000 tonnes I need for the new plant.

In addition to that, we needed to refurbish the existing plant, which is 15,000 tonnes, and we did that at the beginning of the year, and that’s already in production. We wanted to produce concentrate; we’ve done that ahead of target. We wanted to start taking oatmeal sand, which is, if you do tailings, yeah? Tailings tend to be near the plant, etcetera; these tailings were three kilometres away and up the top of a hill, and we had to relay a pipe all the way up the hill for three kilometres to get it down. It’s been quite a task. That took us three months to achieve, but we achieved it; a month behind target, but we’re there and we’re running with that now, and we’re seeing much better concentrate grades, and we’re hopefully going to be running at a breakeven this year. We’re producing around 9,000 ounces. By the end of this year we’ll be in full production, and we’ll be producing around 26,000 ounces next year.

Fraser Toms: Yeah, and as, you know, we look at the junior mining space just sort of overall, it seems to be, you know, if your stock, for example, has been hovering around the $0.05 to $0.06 range with a market cap of about $10 million, which, you know, we were just speaking off-camera about, it seems like the tide is starting to change a bit, where you’re getting a little bit more interest from investors than the past little while.

Nick Brodie: Look, I’m always talking to investors. Recently I was at a one-to-one event in London, and I was the most requested meeting. I think the two things there that interested people was gold, because people definitely seem to be more interested in gold; I can understand, with the market conditions as they are at the moment. But also the fact that we’d restarted an asset in South Africa, and historically, a lot of people had concerns about South Africa. But they’ve had elections there, they’ve got a new person in charge, and their view is that maybe it’s changing, that South Africa’s a good place to go back to.

So you know, we’re ahead of the curve, there, so people were very interested in what we’re trying to achieve. But at the same time, you know, we’ve got a good story. We’re actually a producing asset. We’re producing cash flows; we’ve got a clear path to triple our production to 90,000 from 30,000. We’re already financed. So in my mind, you know, if you’re looking for a junior, we’re a good choice.

Fraser Toms: Oh, for sure. And I mean, we’re looking at the numbers a little bit; it seems like it could be possible for Galane to get 70 million in revenues in 2019, is that right?

Nick Brodie: 2019, yeah, but then, even more than that; up to 90 million, 100 million, in the 2020 year at today’s gold prices.

Fraser Toms: Right, for sure. Well, thanks a lot, Nick. That’s a great update on the company, and we’re definitely excited about this opportunity, and we’re going to have you back on shortly as Galaxy progresses. So thanks for joining us today.

Nick Brodie: Thanks for your time, Fraser.

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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