Supply: Peter Epstein for Streetwise Experiences 17/01/2019
Peter Epstein of Epstein Analysis discusses the strategic funding that this gold explorer has simply acquired.
Velocity Minerals Ltd. (VLC: TSX.V; VLCJF: OTCQB), a Bulgarian exploration and improvement firm with a robust PEA on its Rozino mission and 6 different near-surface gold prospects, introduced a key strategic funding from Atlantic Gold Corp. (TSX-V: AGB, OTCQB: SPVEF).
A vote of confidence for velocity minerals
Atlantic Gold is a $ 400 million Canadian firm with confirmed capabilities in mine building. It produced 90,531 ounces of gold in 2018 at a really low general sustainable value of 521 USD to 566 USD / ounce. The mine was constructed on time and inside price range and manufacturing exceeds feasibility ranges. The mine is expanded to 200,000 ounces / yr.
This is a crucial threat discount occasion for Velocity, which can obtain a $ three.9 million Canadian fairness funding at a better market worth plus an funding in convertible bonds ensures of C $ 5.1 million at 5.5% with a conversion worth of C $ zero.25 / share (a premium of 35%). The convertible bond has no situations (no warrants or different "kickers"). In complete, Atlantic Gold will obtain US $ 9 million from Velocity.
Velocity CEO Keith Henderson stated, "We’re delighted to welcome Atlantic Gold as a strategic investor within the firm." Atlantic's experience in New Improvement -Scotland enhances the success of our exploration in Bulgaria Our enterprise methods are aligned with Velocity's improvement targets A profitable strategy to satellite tv for pc deposits feeding a centralized processing plant. will advance our Rozino gold mission on the PEA stage towards feasibility and allow the exploration and definition of sources for a number of further tasks 2019 will probably be a yr of transformation for Velocity. "
An quantity of $ 9 million in income will go a good distance ….
When deploying the 9 million Canadian , Atlantic Gold will maintain 39.2% of Velocity Minerals on diluted foundation. Atlantic Gold and Velocity plan to work intently collectively to advance Rozino's Velocity mission by feasibility research and in the end, if mandatory, building and commissioning.
The proceeds of the strategic funding will probably be used to fund the progress of the Rozino gold mission in the direction of feasibility and licensing, together with useful resource enlargement and definition drilling , engineering research, in addition to environmental monitoring and evaluation. As well as, Velocity will conduct exploration and evaluation of satellite tv for pc deposits for which Velocity has traded choice rights.
Extract from press launch of
"Velocity is contemplating open-pit mining of satellite tv for pc deposits and its remedy in a CIL plant.An ongoing processing plant is accessible by an alliance of exploration and exploitation with its established Bulgarian associate.Volocity's technique is to create a manufacturing profile of over 100,000 ounces of gold per yr for greater than 10 years. "
Atlantic Gold was interested in the Rozino mission from Velocity due to the enticing options of its PEA.
PEA primarily based on a mine lifetime of solely six years
AISC within the vary of USD 550-650 USD / oz, within the decrease decile of business prices
Preliminary low capex
Low stripping deposits with a gold content material of 1.51 g / t of mine life (LOM)
Potential for extending sources to current deposits
Easy metallurgy and standard remedy strategies
Chance of a number of open pits that may be processed by a central processing facility
An under-explored gold belt, with little or no fashionable gold exploration
Velocity has a further essential attribute, a neighborhood associate with whom it was agreed to course of the mineralized materials by the present CIL processing facility of that associate. The power is positioned close to the Rozino deposit.
The Rozino mission might be extra strong than the PEA suggests. Its after-tax NPV (5%) of C $ 129 million and its post-tax TIR of 33% are fairly enticing for a corporation with a market capitalization of C $ 14 million (funding earlier than Altlantic Gold). However what makes it actually fascinating is the lifetime of the mine. The numerous NPV of Can $ 129 million is for a six-year mine solely.
Many alternatives to increase the lifetime of the mine in Rozino
By means of Atlantic Gold's strategic investments and recommendation, in addition to the funded exploration drilling, the mine's life might probably be doubled. This might additionally result in elevated manufacturing per yr. I cannot attempt to estimate what this might imply for NPV and IRR, however that might be essential. Larger manufacturing ranges, as modeled within the subsequent Feasibility Report, might probably scale back viable prices whereas nonetheless being low.
This Atlantic Gold initiative is a good vote of confidence for Velocity, the Rozino mission and its crew. Additionally it is a vote of confidence in Bulgaria. At a time when this can be very tough to finance younger miners, Atlantic might have chosen to fund dozens of tasks, dozens of administration groups. However, they selected Velocity Minerals. And, trying on the Atlantic Gold press releases of final yr, I see no strategic funding in different juniors.
With a market capitalization of C $ 400 million, money of $ 40 million and operations exceeding targets, Atlantic Gold's actions exceed its goals, it’s a firm that has the ability to to see Velocity not solely by pre-feasibility this yr, however far past. For my part, the possibilities of Rozino changing into a mine, surrounded by satellite tv for pc deposits that would probably prolong the lifetime of the mine past six years, have elevated significantly. To reiterate, this can be a enormous vote of confidence and an essential occasion to scale back threat.
Will the market acknowledge this threat discount? Time will inform us. Nonetheless, with CAN $ 9 million, Velocity Minerals will go a good distance towards creating substantial shareholder worth. This money injection frees the administration of the arduous process of elevating capital, which permits the crew to give attention to what fits them greatest: the exploration and improvement of mining services. ;gold.
Peter Epstein is the founding father of Epstein Analysis. His background is within the enterprise and monetary evaluation. He holds an MBA in Monetary Evaluation from the Stern Faculty of Enterprise at New York College.
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(firms cited: VLC: TSX.V; VLCJF: OTCQB,