Pure Gold Mining fails to meet 2021 guidance, sees cash flow shrink to $6.0 million

Pure gold mining (TSXV: PGM) late last night released its fourth quarter financial results – and the timing of the release tells you just about everything you need to know about the results. Despite reaching commercial production on August 1 last year, the company continues to burn capital as operating results fall far short of what was originally projected in the company’s feasibility study.

For the fourth quarter, the company mined a total of 167,078 tonnes of rock, including 46,949 tonnes of usable ore. A total of 51,129 tonnes of ore was milled during the three-month period, averaging 556 tpd, at an average head grade of 4.8 g/t gold, while recoveries from gold stood at 95.3%.

A total of 7,565 ounces of gold were produced, while 7,100 ounces were sold at an average price of C$2,260 per ounce, resulting in revenue recognition of $15.9 million for the fourth quarter, as well as a net loss of $17.9 million. Production costs per ounce were not provided.

For the full year, 208,874 tonnes were milled, an average of 485 tpd, with an average head grade of 4.2 g/t gold and a recovery rate of 95.1%. Production was 26,899 ounces, missing previous guidance, while revenue was $31.9 million. The company posted a net loss of $34.9 million for the full year.

In terms of performance, the company had previously guided throughput of 800 tpd in H2 2021 by the end of the year, with feed grades expected to improve beyond 6.9 g/ t of gold, according to an Aug. 13 update. Production of 27,000 to 32,000 ounces of gold was also guided, while all sustaining costs were expected to be between US$1,600 and US$1,750 per ounce. Production over the whole year did not reach this indicative value, a fortiori in the second half.

Production costs, meanwhile, were so high, that the company stated in its management report, “Until the Company achieves expected steady-state throughput and grade levels, non-IFRS financial measures such as cash costs per ounce and all-in sustaining costs (“AISC”) per ounce , which rely on produced ounces in their calculation, are not representative of the future mine plan and are not provided here.

The company now expects the first half of 2022 to see production of 600 to 700 tonnes per day, with average head grades between 4.0 and 5.0 g/t gold, with 95% recoveries. As a result, production is expected to be between 15,000 and 20,000 ounces of gold for the six-month period, which “should improve in the second half.”

The results go against a feasibility study conducted in 2019, which estimated mill rates of 748 tpd and head grades of 7.0 g/t gold for the first year, with machined gold estimated at 62,000 oz. Additionally, the company had announced an average grade of 9.0 g/t gold as expected for the entire mine – with actual results around half that figure.

The company is now expected to update its technical report in the second half of this year, following an updated resource estimate that needs to be completed.

In terms of finance, the company reported a cash position of just $8.5 million, while loans and borrowings currently stand at $123.4 million as of December 31, 2021. Derivative liabilities of 44, $7 million also exists for a gold stream.

The company after the end of the quarter raised $31.2 million at $0.53 per share, but the company needs a lot more capital. As of March 28, the company said it had cash of just $9.0 million and was in desperate need of additional capital within 30 days. External funding of up to $50 million is also needed over the next six months.

The need for additional capital appears rather short-term, with the company filing last night that its cash balance now sits at around $6.0 million, down from around $3.0 million in just three days as invoices come due. The company would work with Sprott Private Resource Lending II, which is a collection agent, to find financing solutions.

Pure Gold Mining last traded at $0.39 on the TSX Venture Exchange.

Information for this briefing was found via Sedar and the companies mentioned. The author has no security or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author holds no license.

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