Finally, after more than a decade of exploration, Victoria Gold has secured financing for its Eagle Gold Project.
Over the last two months Victoria has secured a construction financing package totalling approximately C$505 million to develop its Eagle project into an operating mine. It’s a big deal any time a junior miner gets its hands on this kind of money. The Eagle Gold Project is projected to be the biggest gold mine in the history of the Yukon, producing some 200,000 ounces annually. Victoria is on the cusp of taking its flagship project from an exploration target into production.
Victoria Gold Secures Funds From Resource Sector
The means by which Victoria secured financing is very interesting. Instead of looking to the banking system for support, Victoria found the necessary capital within the resource sector. A valuable lesson, proving capital is always available for the right asset.
A mid-tier gold royalty company has stepped into the picture for Victoria. Osisko Gold Royalties Ltd. is providing finance for the Eagle project in a few ways. Firstly, Osisko purchased gold royalties from Victoria that total C$98 million. In addition to this, they bought 100 million common shares in Victoria at a price of C$0.50 a share. The financing details are creative and inspiring for the junior resource space as a whole. On March 8th, Victoria Gold Announces Comprehensive C$500 Million Financing Package for Eagle and Continuation of Construction Activities. Below are the highlights:
- two credit facilities totalling US$175 million (approximately C$219 million);
- an equipment financing facility for up to US$50 million (C$63 million);
- a C$98 million royalty financing; and,
- a private placement of Victoria common shares to two separate subscribers for a total of C$125 million.
Click here to read the entire press release.
Victoria’s share price has been typically volatile, over the past few cycles, considering the space it operates within. The red line represents the $0.50 mark where much of the latest financing will be done at.
Victoria Gold – 20 Year Stock Chart
Certainly, this is more than enough to begin construction on the Eagle project. Additionally, Orion Mine Finance has also invested C$75 million, which is part of their $295 million financing package for the project.
In the company’s own words from an April 16th press release titled Victoria Gold Announces Execution of Definitive Documentation for the Eagle Financing Package and Closing of Equity and Royalty (First Tranche), they explained,
“…it has finalized and executed definitive transaction agreements with Orion Mine Finance (“Orion”), Osisko Gold Royalties Ltd (“Osisko”) and Caterpillar Financial Services Limited (“Cat Financial”) with respect to the previously announced construction financing package totalling approximately C$505 million in aggregate (the “Financing”) that will fully fund the development of the Eagle Gold project through to commercial production.”
Victoria Gold | A Bellwether for the Sector?
The market for junior resource stocks may be beginning to turn around.
Even after securing financing for a very important project, Victoria Gold’s market cap sits at about half the amount in financing it secured – roughly C$272 million Thursday afternoon. What is the market missing? During the lean years (2011-2016) Victoria Gold kept financing and dilution has played a tragic role in the company’s history. With more than three-quarters of a billion shares out, Victoria has issued shares at many different prices.
Victoria Gold | Feasibility Study and Mine Life
The Eagle project is expected to produce around 200,000 ounces of gold per annum. An initial estimated mine of ten to twelve years will provide significant revenues. However, the project is highly leveraged to the price of gold. Victoria’s feasibility study boasts all-in sustaining costs of US$638 per ounce. While impressive, we always err on the side of caution and add a few hundred dollars per ounce. For argument’s sake, if we assume a gold price of US$1,300 and conservative average profit of C$500/ounce, the gain realized by Victoria would be somewhere in the C$100 million per year. Given the conservative estimate of this exercise, Osisko’s investment comes into perspective.
Upon completion of the Eagle Gold mine, extending its mine life will likely become a priority through developing exploration targets within the 555 square kilometer project, such as Olive-Shamrock. The strike at Eagle is open in both directions, and at depth. It has also produced very encouraging exploration results, which make ongoing operations in the area a real possibility. Much of the news flow in 2017 was derived from exploration work. Furthermore, in an April 4th, 2017 press release titled Victoria Gold Begins $6.2M, Phase 1 Exploration Program, Yukon its CEO clarified the company’s position.
McConnell Continues to Focus on Exploration Upside
John McConnell, President & CEO stated at the time, “Drilling has begun and will continue throughout 2017, with the aim of demonstrating additional, definable resource gold deposits across the highly prospective Dublin Gulch Property.”
One glance at 2017’s press releases shows the exploration upside.
On September 19th, the company reported:
“Victoria Gold: 146m @ 0.67 g/t Au; including 14m @ 4.87 g/t Au Trench Results at Newly Discovered Bluto Target, Dublin Gulch, Yukon”
On October 10th, the company reported:
“Victoria Gold: Mineralization Extended 390m Below the Eagle Reserve Pit; Including 104.6m @ 1.20 g/t Au from 539m to 644m, Dublin Gulch, Yukon”
Eagle Gold and The Big Picture
It is easy to overlook projects like Eagle in the current geopolitical environment. However, when it comes to gold, nations all over the world are trying to get their hands on the yellow metal as quickly as possible. Despite gold being range bound for what seems like a long time, but remains stubbornly above US$1,300 per ounce.
Turkey is the most recent country to demand their gold be returned from vaults in the USA. They are following other nations like Germany and the Netherlands in repatriating their gold reserves. Russia and China have both been buying gold on the open market, despite both being major producers.
200,000 ounces of gold may not seem like a tremendous amount at the moment. However, in a world where known reserves are declining, the Eagle project is significant.
The term ‘peak gold‘ is being used to describe a world with limited new gold discoveries. We have written about the topic for years at Pinnacle. Industry insiders debate whether or not the lack of new gold supplies will affect price. The vast majority of gold is not consumed, but hoarded for investment purposes. For that reason, some believe a lack of supply will not boost prices, while others think the opposite to be true.
Yukon Heats up as Majors Put Up Cash
Mining companies do not have the luxury of idle speculation. If a miner is going to make money, they need fresh resources to extract at a profit. Victoria Gold is not the only junior attracting capital in the Yukon. Perhaps why ATAC Resources and Barrick Gold just committed to spend US$13 million on the Rackla gold project in the Yukon.
Barrick can gain up to a 70% interest in the Orion zone, part of the Rackla project, once they spend C$63.3 million on exploration. Certainly, the Yukon is heating up. The junior end of the gold market may be well positioned to capitalize on years of underinvestment.
Victoria Gold’s story is one of unbridled confidence and persistence in the face of a retail and institutional market that has cared little about gold exploration for the better part of the last decade. Finally, with gold stable above $1,300 per ounce and the U.S. set to run near trillion dollar deficits for the foreseeable future, a little Victoria might go a long way a few years from now.
