Pure Gold Mining Inc. [PGM-TSXV; LRTNF-OTC] said Monday September 9 that it has started construction at its flagship Madsen Red Lake Mine in northwestern Ontario.
“Today we hit yet another milestone on our road to near term cash flow,” said Pure Gold President and CEO Darin Labrenz. “I am incredibly proud of our team for what they have accomplished over the last five years.”
The announcement comes after Pure Gold recently completed a US$90 million project financing package with Sprott Resource Lending Corp. That followed an equity raise of $47.5 million that was backed by Eric Sprott and AngloGold Ashanti Ltd. [AU-NYSE; AGG-ASX; ANG-JSE]. AngloGold currently owns approximately 14.3% of Pure Gold on a non-diluted basis.
The company said the financing would fully fund the cost of developing an underground mine at the historic Madsen Gold Project. After signing agreements with the Wabauskang First Nation and Lac Seul First Nation, the company said it was set to commence development activities immediately and is now aiming for a first gold pour by the end of 2020.
Pure Gold said it has awarded the surface Engineering and Procurement contract to JDS Energy & Mining in partnership with Hatch Ltd. and Knight Piesold. Additionally the company has awarded the underground mine design engineering contract to Dumas Mine Contracting Ltd.
With the engagement of the engineering partners, the company has commenced construction, Pure Gold said in a press release Monday.
Pure Gold shares were unchanged at 58 cents. The shares are currently trading in a 52-week range of 49 cents and 81 cents.
The former Madsen Mine is situated in the Red Lake area, an established mining district with more than 29 million ounces of high-grade gold production to date. Interest in the region is being fueled by high grade gold discoveries at Great Bear Resources Ltd.’s [GBR-TSXV] 100%-owned Dixie Lake Project.
Madsen boasts production of 2.5 million ounces between 1938 and 1976. The project benefits from existing infrastructure, including a mill and tailings facility, paved highway access, and access to power, water and experienced labour.
In February, 2019, Pure Gold achieved a key milestone at the Madsen Project, by announcing an updated mineral resource estimate. This resulted in an 18% increase in the indicated resource to 2,063,000 ounces gold at 8.9 g/t gold (in 7.2 million tonnes) and a 58% increase in the inferred resource of 467,000 ounces gold (in 1.9 million tonnes) at 7.7 g/t gold (in 0.59 million tonnes) at a cut-off grade of 4 g/t gold.
A feasibility study that was also released in February 2019 envisages a 12.2-year mine life based on 1.0 million ounces of probable gold reserves. The feasibility study also foresees peak annual production of 125,000 ounces, with average production in years three through seven reaching 102,000 ounces annually.
The initial capital requirement was estimated at $95 million.
On Wednesday, Labrenz said Madsen began as an exploration concept in late 2014, and has evolved into a multi-million ounce gold deposit that is now under construction as Canada’s highest grade gold development
“Along the way, the team has hit every milestone we set: from first resource estimate, to early conceptual studies, through a comprehensive feasibility study, an agreement with our First Nation partners, and now a fully funded financing package,” he said.
“Today as we commence construction, our project is perfectly timed to benefit from a rising gold market, and looks set to generate well over $800 million in cumulative pre-tax cash flow with gold currently near C$2,000 per ounce.”