Pure Gold: Canaccord Suspends Rating After Operational Struggles

On Friday, Pure Gold Mining (TSXV: PGM) announced a number of updates for its investors. First, the company announced that it has received US$6 million from Sprott in a secured first-priority, non-revolving credit facility. In the terms of the facility, PureGold has to provide Sprott with a weekly budget for the business.

PureGold’s CFO, Chris Haubrich stated “The Additional Credit Facility and support from our lending partner Sprott provides the Company with the liquidity and time needed to maintain the positive momentum of the operational turnaround and optimization initiatives currently underway.”

The company also announced an “operational turnaround plan.” This starts off with the company announcing that Mark O’Dea will be taking the role of interim President and Chief Executive Officer, effective immediately. This comes after newcomer Tory Fierro stepped down due to personal health issues.

On top of this, the company has let go roughly 20% of its workforce, with its operation now down to 275 employees. The company also transitioned to a campaign milling schedule, which means the mill is only operational for 2 out of every 4 weeks. The mill will gradually increase use time as mining production increases. On top of this, the development of the Main Ramp has been temporarily paused.

They also announced that the PureGold mine will continue to increase its throughput and will be ramping up towards 800tpd. On top of this, they expect to see an additional $1 million per month in cost-savings.

PureGold currently has 7 analysts covering the stock with an average 12-month price target of $0.95, which represents a 340% upside to the current stock price. Out of the 7 analysts, 1 has a strong buy rating, 2 have buys and 4 have hold ratings on the stock. The street high price target sits at $1.70 or an almost 700% upside.

In Canaccord’s note on the changes, the firm put the company under review, and states this news release left them with more questions than answers. As the company is now under review, Canaccord has suspended its hold rating and C$1 12-month price target on the stock.

Though the note is fairly short, Canaccord says that since PureGold started commercial production in August of 2021, the mine has “significantly underperformed relative to expectations.” While also noting that they have no clear insight into the additional challenges that might come along in the pending updated LOM plan.

Lastly, Canaccord says that they had to put the company under review because of a lack of clarity and “the uncertainty as to how the company will meet its near-term financing requirements.” They will update their rating and price target once there is a more concrete basis from which to value the company.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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