×

Montage Gold (MAU) - 'NEW' 3.2Moz Gold Project with FS YE/21

March 7 2021, 11:43 GMT

Montage Gold

  • TSX-V: MAU
  • Shares Outstanding: 104.9M
  • Share price C$0.74 (04.03.2021)
  • Market Cap: C$78M

Montage Gold is a Côte d’Ivoire focused, precious metals exploration & development company. Led by key former executives of the highly successful Red Back Mining operation, along with strong shareholder backing, Montage is well-equipped to deliver shareholder value from its 3,750km2 property portfolio in Côte d’Ivoire. Their flagship asset is the Morondo Gold Project which was originally assembled by Red Back Mining in 2008 under the direction and leadership of the impressive and capable Hugh Stuart. 

We met with Adam Spencer, EVP, Corp. Development of Montage Gold who talked us through the rather rapid ascent of the company as they were listed in October and plan to have a Feasibility Study (FS) out by the end of this year. We last spoke to Montage Gold back in November 2019 when they were a private company.

Company Overview

Montage Gold is a newly public company focused on Côte d’Ivoire. They are a Gold exploration company and are well backed with a strong shareholder register and significant cash balance after a very robust IPO. They are currently de-risking their flagship property, which is the Morondo Gold project at around 3.2Moz of Gold after only 40,000m of drilling. They have been able to fast track through a PEA, which is planned for April this year, and the Feasibility Study should be out by the end of this year. The team is very experienced and has done it before in West Africa as the former Red Back team. Montage Gold has the money, the shareholders and the experience so are ready to go.Montage Gold (MAU) - 'NEW' 3.2Moz Gold Project with FS YE/21

Philosophy & History of Montage Gold: The Journey so far 

The Morondo project has the Koné deposit which was the focus of some very early diamond core drilling to do metallurgical test work by Montage Gold whilst they were still a private company, before they did any significant drilling on it to find a resource. 

They did the initial drill out and defined a 1.2Moz resource. They ran an early-stage PEA internally and discovered that it needed to be bigger so decided to remain a private company whilst doing some more deep drilling to test depth extension of mineralization. The results of that drilling gave them the confidence that it could be an economic project and it was then they decided to take it public. Montage Gold started very strongly with CAD$12M in cash when they first created the company in August 2019 which was enough money to test the depth extension of the mineralization.

They have completed 40,000m of total drilling on the deposit. Koné was the very first anomaly that was ever discovered on this land package and it is the only one that's received any significant exploration work. It is an advanced deposit in terms of its size, but the exploration story is still very early stage.Montage Gold (MAU) - 'NEW' 3.2Moz Gold Project with FS YE/21

Team Experience & Background 

Hugh Stuart is CEO and the face of the company as a geologist. During his career in Africa, he has discovered 35Moz of Gold and is focused on not just finding Gold but finding an economic Gold mine. Kevin Ross is a director of Montage and the Chief Operating Officer of Orca Gold and was also the chief operating officer of Red Back Mining. He has taken numerous Gold deposits from exploration stage through economic studies through to operation expansion. Rick Clark is the Chairman and was the CEO of Red Back Mining. He is the CEO of Orca Gold and an expert in capital raising, promotion of mining projects and dealing with government negotiations. Adam Spencer has a background in mining capital markets in mining investment banking for the first half of his career, focused on financing junior and mid-tier mining companies across all commodities, but with a focus on Gold. For the last 7-years, he has led up the corporate development activities for Sandstorm Gold Royalties.

The Jurisdictions: Obstacles of Mining in West Africa

West Africa and Cote d’Ivoire, politically have had a rather chequered past and it is an interesting jurisdiction in which to do business. North American investors are slightly nervous about investing in West Africa at the moment. 

Covid has settled down in Cote d’Ivoire and there are no reported cases of Covid currently. Montage Gold has put safeguards in place which are a logistics and timing exercise but haven’t had any problems on site which has interrupted their drill programme. There has been some political risk which goes with investing in Africa in general. There was a presidential election at the end of October which caused a lot of controversy but in the months since the election, everything has settled down and it's business as usual for Montage Gold. 

Timing of the IPO: What did Investors Buy Into?

The IPO was in October and the raise happened at the height of the Gold bull run. Investors were buying into well-known names and were very familiar with Orca and the Red Back story. The timing was great from a market perspective, in a strong situation for Gold financing but Montage Gold wanted to make sure it was all completed prior to the upcoming US election, the IPO and the Côte d'Ivoire election.

Valuation: Fully Valued at Market?

Montage Gold has a USD$90M market cap with a 3.2Mozs inferred resource which when compared to others in the space, they are trading at the lowest dollar per ounce of resource in the ground. This is because they are a relatively new story and although they have great shareholders that bought into the IPO, it has been difficult given the market conditions to generate additional institutional buying in the market. 

Allocation of Money: Shortcutting Value Creation & Growth  

Montage Gold plans an exploration programme with 50,000m of drilling in 2 phases, the first being 20,000m to grow the resource. The second +30,000m would be to upgrade the resource from inferred to indicated. Money will also be spent on economic studies, the first one being the PEA that will come out in April this year. They plan to go straight to feasibility after that which will be possible because the studies and test work within the PEA will be up to PFS standard. They will be upgrading the existing 3.2Moz inferred resource to indicated.

Montage Gold has completed the initial 20,000m drilling that took the strike length of mineralization of the deposit up to 2.4km, up to 450m wide at surface which enabled them to recalculate the resource from 1.5Moz to 3.2 Moz. The PEA is around 2/3 completed and they have been releasing results of studies as they’ve been completed. They have had very positive geotechnical-study results, which means they will steepen the pit walls of the deposit, which will lead to a lower strip ratio. The metallurgical test programme shows that the rock is soft from a grinding perspective, so has a lower process cost and a big impact on the economics. Once the Feasibility Study is completed by the end of this year, they should still have somewhere between USD$8M-10M in excess cash left over.

End Goal & Options Available

Montage Gold will continue to advance the project towards financing and building the mine as they have the team in place to do that. Other ways to demonstrate value beyond a single deposit, is to explore the broader land package using the excess cash that they have to ramp up exploration activities.

The total land package is around 1,400km2, and 300km2 of that is licensed and the rest has license applications pending. They are pushing for those licenses and they know of anomalies within the ground that would be trackable to Koné which is the potential that they intend to develop.

They are fully funded to explore within the land package and once the licenses are granted, they can inform the market that they have the 3.2Moz Koné deposit but that's just the start. There are also a number of satellite exploration opportunities that would be able to supplement feed into a mill, potentially at higher grades, which is another key aspect of the strategy that they are pursuing.Montage Gold (MAU) - 'NEW' 3.2Moz Gold Project with FS YE/21

Low-Grade Bulk Projects Unfairly Underappreciated?

People say that grade is king but there are many other factors that make a project work and there are a lot of higher-grade projects than Morondo that don't work. The average grade is around 0.8g/t, but it does have a higher-grade component, so of the 3.2Moz at 0.8g/t, there’s around 2Moz that sits at 1.1g/t. That enables Montage Gold to mine the ore body at an elevated rate, stockpile lower grade, but process higher grades, for the first 5-7 years of the project life which has a major impact on the economics. The lower grades have then already been mined and the stockpile is processed at the end of mine life. 

The pit walls of the open pit can be upwards of 55 degrees, both hanging wall and footwall, which allows a strip ratio closer to 1:1. If you look at most open-pit projects in West Africa, the strip ratios are 5:1 or higher. The metallurgical test work shows that the rock is relatively soft, which means lower power consumption to grind, low reagent consumption, low cyanide and lime which are major cost inputs. With low processing cost, a large-scale operation with low strip ratio, it's very likely that this resource could grow beyond 3.2 Moz.  

Project Overview: Approach, Plans, & Priority

Montage Gold has other projects with the Korokaha North and Korokaha South exploration licenses and the Diawala application just to the north where they’ve been doing early exploration. The Korokaha North license has an 8km strike length soil anomaly where they’ve been doing some infill soils and now need to do some drilling on it to see what's there. The Korokaha South license has been granted and the initial work has identified some anomalies. Montage Gold needs to do follow-up work there as the exploration licenses only last for a fixed time. 

Korokaha sits within 15km of the Tongan Mill, which is a Barrick operation getting down to its last 2-3 years of reserves and they've been talking about trying to extend the mine life there so that asset starts to have some strategic significance and importance for Montage Gold.

Bobosso sits more on the eastern side of the country on the southern extension of the Hounde belt and hosts a number of producing operations in quite a prolific Gold region. The same belt of rocks extends down into Côte D'Ivoire. There are some very interesting, shallow, higher-grade intercepts there 2.5g/t - 3g/t, but it is a lot more structurally complex. There's a lot more work to be done at Bobosso and it is currently on the back burner for Montage Gold. Given the market environment for juniors and the appetite for exploration in Côte D'Ivoire, there's an opportunity to potentially sell that project off, spin it out into a new vehicle with a management team, but it's not something that will distract from capital allocation to Morondo.

Montage Gold IPO’d in October, raised USD$35M and set the target to have the Feasibility Study complete on Morondo by the end of 2021. It's an aggressive timeline, but with the team of people involved, they're confident that they can deliver on time.

They have doubled the resource to over 3Moz. And now with the follow-on 30,000m drill programme, they hope to report results at regular intervals and are pressing forward with the PEA, which is being done in parts to a PFS standard which should be released in mid-April. Due to the advanced nature of the study, that allows them to fast-track to Feasibility Study without cutting any corners. They are now advancing the project that was significantly de-risked even prior to taking it public which will allow them to advance a lot faster than you would normally see a junior do.  

We really appreciate the catch up with Montage Gold. Things have progressed significantly since we spoke to the company. It looks like they’ve got a busy few months ahead and we look forward to following their progress going forward.

To find out more, go to Montage Gold's Website


Club Waitlist CTA
Share this article
cruxLogo

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Crux Investor does not verify information provided by contributors or video interviewees on this site, and makes no assurance as to the adequacy, completeness or accuracy of any such information. Crux Investor steadfastly disclaims any liability or responsibility for the outcome of any investments made by users of this site or our branded affiliates. Users of this site (and our branded affiliates) should consult with their own financial advisors to assist them in making investment decisions. By accessing this site and our branded affiliates, you agree to the terms of service and privacy policy.