Gold Mountain Mining: A 2021 Retrospective
2021 proved to be an excellent year for Vancouver-based Gold Mountain Mining Corp. (TSX:GMTN). The 21,187 hectare property is host to the past-producing high-grade Elk Mine, which is located 35 minutes southeast of Merrit and 45 minutes west of Kelowna, and is easily accessible by road and can be operated year-round. The company’s story is a unique one in the junior mining space, with Gold Mountain focused on generating cash-flow to fuel exploration and grow its resource estimate.
Gold Mountain achieved a series of significant milestones in 2021:
Exploration
When Gold Mountain acquired the Elk Gold project, the asset came with 127,000 metres of historic drill core, most of which coming from the Siwash North zone. For its Phase 1 Drill program, Gold Mountain executed a step-out and infill campaign in this well-established zone to strategically add ounces to the resource. This 8,500 metre program proved to be a low-risk kick-off campaign that increased it’s resource by over 250,000 ounces.
After the success of its Phase l drill program, the company’s Phase 2 program continued to focus on extending and expanding the high-grade vein system at the Siwash North zone while exploring the property’s drill tested satellite zones. By exploring zones outside of the Siwash North Zone the company had ambitions to delineate maiden resources and push the project’s resource estimate past 1M oz. The company also became the first operators to execute a drill campaign in the project’s highly prospective Elusive zone. Located 10 km away from Siwash North, Gold Mountain took a risk in hopes of finding untapped gold.
In late November and early December, Gold Mountain announced assay results from its completed Phase II drill program, which continued to indicate high-grade mineralization along its well-established vein systems near the Elk Project’s open pits, showing strong grade continuity and openness on strike and at depth throughout the Siwash North zone.
The company also hit one of the widest intercepts ever recorded at the Elk Gold project, 150 metres south of the open pits which included 2.4 metres grading 20.2 g/t gold including 0.4 metres of 127 g/t gold.
The 13,900 metre Phase Two diamond drilling program was a major success, enabling Gold Mountain to increase its resource estimate by 24% to 806,000 oz of Measured and Indicated Resources at 5.8 g/t gold equivalent, and 262,000 oz of Inferred resource at 5.4 g/t gold equivalent, a 65% increase. The 37 new holes served to connect the Siwash North Zone with the Gold Creek Zone, and the 10 holes that were completed in the Lake and South Zones enabled GMTN to also establish an initial Mineral Resource estimate for these two satellite deposits. To put this into perspective, in January 2021, the Elk Gold resource estimate stood at 454,000 oz (Measured & Indicated) and 95,000 (Inferred) meaning Gold Mountain has been able to more than double its resource in less than 12 months.
Permitting and production
In a development that validates the quality of the Elk Gold Project, on January 27, 2021, Gold Mountain announced that it had entered into an ore purchase agreement with New Gold to offtake all of Gold Mountain’s production, which will defer the need for GMTN to build a mill onsite. By deferring this cost, Gold Mountain can get up and mining for under $9M, a figure that is unheard of in the mining space. Economics will determine if and when the company would build its own mill in the future.
Gold Mountain has retained the services of Vancouver-based Mining Engineering firm JDS Mining & Energy Inc., who have determined that Gold Mountain’s Prefeasibility Study should include a component examining underground mining at the Elk Gold Project that, along with its open pit operations, that could potentially produce more than 65,000 ounces per year in years 4 through 11. Initial production mining will be at 19,000 oz/year for 3 years with fixed mining costs as an open-pit operation which will allow the company to fund its exploration ambitions and the technical studies for its proposed Phase ll production ramp up.
The company retained Vancouver and Kamloops-based Nhwelmen-Lake LP, as its mine construction partner, who began production preparations in the late-spring to develop BC’s next high grade Gold and Silver producer. This is a strategic relationship for GMTN as Nhwelmen-Lake is a majority Indigenous-owned mining contractor who comes with decades of mining experience, and work on a number of mines in the region. This relationship ensures cost certainty through fixed pricing on mining and mineralized material delivery to the New Afton Mill, which mitigates the risk of cost overruns small scale operations typically experience.
In another significant milestone for Gold Mountain, on November 2, the Company announced that the Ministry of Energy, Mines & Low Carbon Innovation Communications Office (EMLI) had awarded the Company its M-199 Mining Permit. This authorization is the first Gold mining permit issued in British Columbia in almost a decade and is a testament to management’s execution. According to the Company’s Preliminary Economic Assessment (PEA), the open-pit nature of the mine suggests an extremely low capex and an average life of mine operating cost to mine and haul its material to New Afton of just USD $554/ounce.
On November 9,2021 GMTN announced that it mined its first significant mineralized material from its 1100 vein system in Siwash North. The company will take a 21 kg sample representing each day’s production and assay the material at a third party laboratory before delivering it to New Gold as per the Ore Purchase Agreement. This now makes Gold Mountain a producer and the company’s PEA forecasts its high-grade material generating an annual after-tax profits in excess of $10 million in Year 1 of its mine plan. The revenue from production de-risks the Company and enables it to conduct its production and exploration activities from cash flow, and therefore eliminating the need to access capital markets for dilutive financings.
Financing
In February 2021, Gold Mountain announced that it closed an oversubscribed $10 million brokered Unit private placement at $0.97 per Unit. The financing was co-led by Canaccord Genuity Corp. and Gravitas Securities Inc. with the lead order coming from Denver, Colorado-based Crescat Capital, a prominent and influential precious metals investor. The units consisted of one common share and one-half of one Common Share purchase warrant exercisable at $1.25 per Warrant Share.
In June 2021, in a move that further expressed investor optimism and confidence in the prospects for the price appreciation for Gold Mountain shares, the firm completed a $12 million bought-deal unit financing at $2.10 per share, consisting of 4,255,190 units at a price of $2.10 per unit and 1,326,450 flow-through units at a price of $2.31 per unit. The underwriting syndicate was led by Canaccord Genuity Corp. and included Eight Capital and Red Cloud Securities Inc.
These financings have helped GMTN to aggressively advance the Elk project for open-pit production. Cash flow from anticipated production could likely negate the need for future dilutive market financings and help preserve the company’s reasonably tight capital structure.
Corporate Initiatives
2021 was a banner year for Gold Mountain:
- The company succeeded in receiving the first Gold Mining Permit issued in BC in almost a decade.
- Its exploration activities resulted in a significant increase in the Elk Project’s resource calculation and exceeded the company’s arbitrary target of over 1 million ounces of Gold.
- The Company listed its common shares in the US under the trading symbol (OTCQB: GMTNF), making it easier for American investors to buy Gold Mountain shares and graduated to the Toronto Sock Exchange (TSX: GMTN) in November.
- Insiders and management purchased just over $1.0 million worth of GMTN shares in the open market in 2021.
- Management continues to confirm its confidence in the future of the Company by deferring salaries until they hit revenue. This retains an interest in common with shareholders whereby their compensation will be reflected in the price appreciation of GMTN shares.
What to Expect in 2022
The Company doesn’t appear to be slowing down, as they recently announced they had completed their first ore delivery to New Gold Inc, marking the company’s transition into cash-flow and revenue generation.
The company will now look to achieve steady-state mining operations as outlined in its Year 1 production profile of 19,000 oz/annum. As per the mine plan set out in the company’s PEA, Gold Mountain will target some of its highest grade mineralization in the first year which is expected to result in annual revenues topping $40,000,000.
Gold Mountain will continue to ramp up its mining operations in 2022 by targeting the Elk Property’s high-grade 1300 vein systems. The company will continue to truck its processed material to New Gold’s New Afton Mine in Kamloops; all for USD $554/oz over the life of mine.
Gold Mountain has begun its 10,000 metre Phase Three Drill program that will further define the size and scope of the Siwash Zone and to continue drilling to be able to expand its resources at the Siwash North and Bullion Zones.
The Elk Property has eight previously identified gold mineralization zones within a consistent geological structure throughout most of the property, and future drilling programs will better determine if the various mineralized zones are part of a much larger overall deposit, which would have a significant impact on the value of the project. Gold Mountain will also receive assay results from its highly prospective Elusive zone. The company hopes they will find untapped mineralization in this zone which could uncover new blue sky potential and significant upside to the project.
For shareholders, Gold Mountain has significantly de-risked the project by initiating production which will ultimately lead to generating cash flow from its initial 19,000 ounce target. The company’s strong cash position, robust economics of the project, and recent cash flow should ensure that they will not need to do dilutive financings to fund operations. With 69.98 million shares outstanding and a market capitalization of $96.6 million, Gold Mountain appears to be somewhat undervalued, especially when considering that the shares are currently trading at a discount of almost 50% from the $12 million bought-deal financing at $2.10 per share in late June 2021.
As its production and corresponding profitability increases, Gold Mountain Mining could become an attractive takeover candidate for a mid or large tier company seeking an acquisition to bolster their asset portfolio. With seven other mineralized zones on the Elk Mine Property, there will be continuing exploration activity to complement the production, and shareholders could expect a steady stream of news as Gold Mountain continues to advance the Elk Mine Project.
FULL DISCLOSURE: Gold Mountain Mining is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover Gold Mountain Mining on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. We may buy or sell securities in the company at any time. Always do additional research and consult a professional before purchasing a security.
