Gold Seeker #89: Earnings Dominate Headlines

While gold and silver continue to be rangebound, it is encouraging to see both metals bounce back hard again after getting slammed down. Gold continues to test $1,800/oz but has failed to break through on a sustained basis, but the metals look poised to break out at any time. Earnings news dominated this past week and will do so next week as well.

$AEM, $BTG, $GOLD, $CXB, $EQX, $AG, $FNV, $HL, $IAG, $KL, $LIO, $OCG, $RGLD, $SAND, $SSRM, $TXG, $WPM

Agnico-Eagle Mines: Provides an Update on Exploration Results: Extension of East Gouldie Deposit on the Rand Malartic Property 1,500m from Current Mineral Resources Outline; Additional High-Grade Gold-Copper in Footwall Zone at Upper Beaver. Project updated include:

• Odyssey Underground Project at Canadian Malartic: Infill drilling continues to return wide, high-grade intersections in the core of the East Gouldie deposit, with recent results of 6.8 g/t gold over 41.4m at 1,069m depth, including 10.2 g/t gold over 21.7m at 1,064m depth. The eastern extension of the deposit continues to be tested, with the easternmost hole drilled to date returning 6.3 g/t gold over 4.8m at 1,989m depth on the adjacent Rand Malartic property. 1.5 km east of the current mineral resource, further demonstrating the excellent potential to significantly grow the size of the East Gouldie deposit.
• Kirkland Lake Project [Growth Asset]: Conversion and expansion drilling at the Upper Beaver deposit continues to hit significant high-grade mineralization, further expanding the Footwall and Porphyry zones at depth. Recent results include a highlight intercept of 8.7 g/t gold and 0.81% copper over 18.2m at 1,435m depth in the East Porphyry Zone.
• Meadowbank – Exploration at Amaruq has focused on the area between the Whale Tail and IVR underground mineral resources, with highlights such as 26.6 g/t gold over 2.6m at 247m depth, demonstrating the potential for conversion to mineral resources near the planned underground mine infrastructure. Drilling in the western extension of the Mammoth Zone intersected 4.4 g/t gold over 36.4m at 264m depth, and the zone remains open at depth beneath Mammoth Lake.
• Hope Bay [Growth Asset]: More than 71,000m of drilling have been completed year to date, with seven drill rigs operating on the Doris and Madrid deposits. Recent results at Doris confirm the potential to expand the BTD Extension Zone and the West Valley Zone along plunge, and highlights include 32.0 g/t gold over 3.2m at 319m depth, and 19.1 g/t gold over 8.0m at 302m depth, respectively. At Madrid, exploration drilling has identified a new zone in Naartok West with results including 10.3 g/t gold over 5.9m at 247m depth and 6.6 g/t gold over 8.3m at 283m depth.
• Meliadine: Conversion and exploration drilling at the Meliadine mine is confirming and expanding high-grade gold mineralization. Shallow high-grade intercepts include 10.6 g/t gold over 3.1m at 158m depth in the Normeg deposit and 7.0 g/t gold over 8.8m at 218m depth in the Wesmeg deposit.

B2Gold: Reported strong Q3 results, including higher than budgeted gold production and operating cash flow generation ($320m). B2 also increased full-year production guidance to a range between 1.015-1.055m oz Au. B2Gold produced 310.26k oz Au (including 14.538k of attributable production from Calibre) or 295.72k oz Au from operations. The Company set another record at Fekola, achieving record quarterly production of 165.55k oz Au. AISC during the quarter was $777/oz. On October 25^th, the Company entered into an agreement with West African Resources to sell its 81% interest in the Kiaka project in Burkina Faso for a combination of cash, common stock, and royalties. B2Gold’s balance sheet remains strong with cash and equivalents of $547m [excluding the cash and shares received after quarter end] and working capital of $683. The Company also has access to a fully undrawn $600m revolving credit facility.

Barrick Gold: Reported attributable production of 1.09m oz Au @ AISC of $1,034/oz. Barrick generated $1.05b in operating cash flow and $481m in free cash flow. Barrick will see production increase, driven by the commissioning of a new heap-leach facility (and ramp-up) at Veladero, the ramp-up of production from the Bulyanhulu mine, and development assets.  

Calibre Mining: One of our preferred junior producers reported strong Q3 production and cash flow. Calibre sold 44.47k oz Au @ $1,781/oz at AISC of $1,097/oz. Calibre generated $28.3m in operating cash flow and free cash flow of $6.6m, which brings its cash position to $73m. By the end of the quarter, Pavon Norte contributed 1,077tpd of ore in September, surpassing its target rate of 1ktpd three months earlier than expected. 2022 will be a year of growth as it integrates the Fiore acquisition (and the operating Pan Mine). Further, by 2024/2025, the Company will see significant production growth through the development of the Goldrock Project [which is highly scalable], mill feed from the higher-grade Eastern Borosi Project, and a likely expansion at the Pan Mine [17ktpd vs. 14ktpd].

Equinox Gold: Q3 operating and financial results were as expected. In Q3, the Company produced and sold 139.76k oz Au and 137.14k oz Au @ AISC of $1,327/oz. However, costs will fall in Q4 and sequentially over the next three to four years. Equinox generated $48.3m in operating cash flow, but capital investments led to negative free cash flow. Cash flow generation will turn up in Q4 due to higher output and lower costs [production in October totaled 65k oz Au].

Furthermore, the Santa Luz mine build is 70% complete and on track for production in Q1, 2022, and costs at most operations will fall in the new year. Equinox remains well-capitalized with $300m in cash and equivalents, investments in I-80 Gold and Solaris Resources worth roughly $450m, a net debt position of $245m, and $200m available under its revolving credit facility. However, there are two convertible notes worth a total of $279m, which are all but guaranteed to be converted into common shares. Equinox Gold continues to be one of the better value plays among mid-tier producers. As we head into 2022, costs at Los Filos will start to normalize, though they will remain elevated [to a lesser degree than 2021] through at least the first half of 2022.

First Majestic Silver: Reported Q3 financial results and quarterly dividend payment. Revenue fell 1% due to the decision to withhold 1.4m oz Ag in inventory. Cash costs increased due to the addition of the high-cost Jerritt Canyon mine, though the Company will reduce costs as it optimizes the operation, perhaps considerably. AISC increased to $19.93/AgEq oz due to increased sustaining capital costs related to the tailings storage facility 2 life project at Jerritt Canyon. Despite holding back 1.4m oz Ag, the Company still generated $22m in operating cash flow. First Majestic ended the quarter with $192.8m in cash and equivalents and $262.5m in working capital. 

Franco-Nevada: The Gold standard among equity gold investments posted another strong quarter, selling 146.5k AuEq oz in Q3, 2021. Franco generated $207m in operating cash flow in Q3, which further improved its financial position with no debt and $1.6b in available capital. Franco also increased its 2021 revenue guidance from its energy-related assets to $195-$205m from $155m-$170m. Franco has several growth assets over the next four to five years. However, these will be partially negated by the cessation of mining at select operations due to depletion [i.e., Sudbury Au/PGM stream]]. In addition, Franco saw its fixed-delivery stream on the Karma gold mine fall to a small stream in Q3.

Hecla Mining: Hecla produced 2.581m payable silver oz and 53k payable Au oz in Q3. Lower silver production resulted from lower grades at Greens Creek due to mine sequencing, which will revert higher going forward. Highlights from Hecla’s Q3 quarter include:

• Sales of $193.6m.
• Generated $42.7m of operating cash flow.
• $190.9 million in cash and over $420m of available liquidity at quarter-end.
• Record quarterly exploration spend of $13.7m.
• Casa Berardi achieved record quarterly throughput of nearly 400,000 tons as the mill improvements delivered 13% higher gold production.
• Silver AISC of $12.82/oz, gold AISC of $1,450/oz

IAMGOLD: Reported Q3 operating and financial results. The Company has produced 448k oz Au year-to-date in 2021. IAMGOLD generated $79.6m in operating cash flow, primarily driven by its Essakane mine in Burkina Faso. Its other operations have higher costs and contribute much lower output. The significant catalyst for IAMGOLD is its tier-I development project, Cote, which was 36% complete at quarter-end and on track for commercial production in the 2H 2023. This will significantly increase production and lower companywide AISC by a fair degree.

Kirkland Lake Gold: The premier Tier-I focused senior gold producers announced record earnings in Q3. Production totaled 370k oz Au during the quarter at lower AISC ($740/oz), generating $323m in cash flow from operations and $141.8m in free cash flow. Kirkland used $183.6m to buy back 4.466m shares and paid out $150.4m in dividends. Kirkland is executing on all of its objectives, including record-low AISC at Detour Lake of $937/oz. or 26% lower ($1,259/oz) relative to the comparable period in 2020. Other than the mega-merger announced with Agnico-Eagle Mines, Kirkland continued grade outperformance at Fosterville and announced an increase of 10.1m oz of open-pit M&I resources at Detour Lake. Lastly, the Macassa Expansion remains on track for completion before year-end 2022, which will propel production to 400k oz Au at lower AISC.

Kirkland Lake also reported new wide, high-grade intercepts at Detour Lake as it is proving that Detour will become one of the world's largest gold mines with a long mine life and significant exploration potential. Highlights include [Note reserve/resource grade is under 1 g/t]:

• 25.3m @ 20.10 g/t Au [Saddle Zone]
• 34m @ 3.92 g/t [Saddle Zone]
• 30m @ 3.31 g/t [Saddle Zone]
• 20m @ 3.23 g/t [West Pit Zone]
• 75m @ 1.09 g/t [West Pit Zone]
• 22m @ 3.95 g/t [Saddle Zone: outside of resource pit shells]
• 36m @ 2.85 g/t [Saddle Zone: outside of resource pit shells]
• 54.8m @ 2.83 g/t [Saddle Zone: outside of resource pit shells]
• 32m @ 4.77 g/t [West Pit Zone: outside of resource pit shells]
• 2m @ 157 g/t [West Pit Zone: outside of resource pit shells]
• 2m @ 52.90 g/t [West Pit Zone: outside of resource pit shells]
• 10m @ 8.21 g/t [West Pit Zone: outside of resource pit shells]
• 5m @ 8 g/t [West Pit Zone: outside of resource pit shells]
• 2.2m @ 17.7 g/t [West Pit Zone: outside of resource pit shells]
• 21m @ 2.07 g/t [West Pit Zone: outside of resource pit shells]

Lion One Metals: Reported new high-grade intercepts, expanding the deep feeder zone 500 at its Tuvatu project in Fiji. The deep feeder zone 500 now extends over 300m vertically and 150m laterally. The weighted average grade of 23 g/t Au from zone 500 intercepts is 2.6x higher than the average grade of the resource [which is already high-grade]. Zone 500 connects with the base of the existing resources at 470m depth, and the drilled extent of the Tuvatu system increased 52% to a depth of 720m.  Drill highlights include:

• 3.90m @ 33.40 g/t Au
• 0.3m @ 65 g/t
• 0.3m @ 112 g/t
• 0.6m @ 48.74 g/t
• 0.6m @ 33.06 g/t

Zone 500 remains open in all directions and is part of what looks to be a sizeable alkaline gold system, though additional deeper drilling is required.

OceanaGold: The Company reported it has started processing at the Didipio Au-Cu mine in the Philippines. This will increase the Company’s production by approx. 120k oz Au and 12,000 tons of copper annually, once the operation is ramped up to 3.5Mtpa. While this won’t increase gold production by a material degree, it will increase cash flow rather substantially given the projected AISC of $100-$150/oz (net of copper byproducts). 

Royal Gold: The smallest of the “Big 3” royalty and streaming companies reported record cash flow generation, which will continue [assuming flat gold prices] in Q4 and into 2022, driven by its growth assets. Key growth assets include the NX Gold stream [received its first gold delivery in Q3], its silver stream on Khoemacau [received its first silver delivery in Q3], and the recently acquired royalty on the Red Chris Mine. In addition, Royal Gold increased its silver stream at Khoemacau by 6% to 90% in mid-October. During Q3, Royal Gold's attributable production was 97.4k AuEq oz, generating operating cash flow of $130m.  Royal Gold ended the quarter with $60m in net cash and $1.1b in available liquidity.

Sandstorm Gold Royalties: The mid-tier royalty and streaming Company announced Q3 financial results and a dividend program to commence in early 2022. The Company generated attributable production of 15.5k AuEq oz, generating $20.8m in operating cash flow. Attributable production from its Karma stream fell significantly as the Company met its fixed-delivery threshold, and as such, the stream is now 1.625% of production. This was offset by the addition of the Vale Iron-ore royalties and an increase in copper production from the Chapada mine. Sandstorm intends to declare and pay its inaugural dividend of roughly C$0.02/share in Q1, 2022. It is also worth noting that attributable production from its Santa Elena gold stream will fall by approximately 50% beginning in Q2 +/- 2022, as First Majestic will displace some mill feed from Santa Elena with ore from the Ermintano mine (which isn't subject to a 20% gold stream). 

SSR Mining: The Company produced 186.94k oz AuEq oz in Q3 @ AISC of $1,006/oz. This brings year-to-date production to 583k AuEq oz, which is on track with full-year guidance, while year-to-date AISC is tracking below guidance at $990/oz, which caused the Company to reduce full-year AISC to between $1,000-$1,040/oz. SSR generated cash flows from operating activities of $187.9 million and free cash flow of $129.2 million in Q3. The Company's balance sheet remains strong with $862.8m in cash and equivalents, following $77.8m in share buybacks and $10.7m in dividends, while also reducing its debt position by $17.5m. After quarter-end, the sale of the Company's royalty portfolio to EMX closed, and SSR received $33m in cash, $32.5m in EMX shares, and $34m in deferred compensation to be delivered upon achievement of defined project development milestones.  

Torex Gold: Reported Q3 operating and financial results. Torex produced 111.23k oz Au during the quarter and sold 118k oz Au @ AISC of $900/oz. The Company generated $100.2m in cash flow from operating activities [before changes in non-cash working capital] and $41.8mm in free cash flow [before changes in non-cash working capital]. Torex ended the quarter with a net cash position of $217.8m.

Wheaton Precious Metals: The Company reported strong results, although Q4 should be even better. Wheaton generated $200m in operating cash flow in Q3, bringing the year-to-date total to $650m. During the quarter, Wheaton signed a non-binding term sheet with Rio2 limited to enter into a precious metals purchase agreement in connection with the Fenix Gold project in Chile. This will be a small 6% gold stream in exchange for two payments of $50m. The production upside potential at this project is very substantial and the reason why such a small stream got the attention of Wheaton Precious.  Wheaton's balance sheet continues to improve with no debt, $372m in cash, and $2b available under its credit facility. In Q3, attributable production totaled 85.94k oz Au, 6.39m oz Ag, 5.1k oz Pd, and 370k lbs. Co or 184.9k AuEq oz, and sold 67.65k oz Au, 5.49m oz Ag, 5.7k oz Pd, and 131k lbs. Co or 152.43k AuEq oz. Although full-year production will be lower at Salobo than guided initially, the Company's updated guidance remains at the mid-point of original guidance due to outperformance at Antamina, Penasquito, and Voisey's Bay Constancia [Due to Hudbay mining the gold-rich Pampacancha deposit]. As a result, operating cash flow should increase closer to $220-$230m+ in Q4 as gold produced but not delivered increased to 81.2k oz and silver produced but not delivered stayed flat at 4.1m oz Ag. Q4 is usually when metals produced but not delivered falls the most as operators draw down their inventory for window dressing in preparation for their Q4 and full-year financial results. In addition, Wheaton saw a significant shortfall at Sudbury [labor issues now resolved] and will revert higher in Q4. On the Corporate development front, Vale announced the Salobo Phase III expansion was 81% complete, and the Company continues to advance internal studies regarding a Salobo Phase IV expansion. The Fenix gold project is on track to reach its first production before year-end 2022.  These projects should cause attributable gold production to spike quite a bit higher from 2023.