Pure Gold Mining Fails To Hit 2021 Guidance, Sees Cash Dwindle To $6.0 Million

Pure Gold Mining (TSXV: PGM) late last night released its fourth quarter financial results – and the timing of the release tells you pretty well everything you need to know about the results. Despite having achieved commercial production on August 1 last year, the company continues to burn capital as operational results come in nowhere near what was initially forecasted in the firms feasibility study.

For the fourth quarter, the company mined a total of 167,078 tonnes of rock, of which 46,949 tonnes amounted to useable ore. A total of 51,129 tonnes of ore was milled during the three month period, averaging out to 556 tpd, at an average head grade of 4.8 g/t gold, while gold recoveries sat at 95.3%.

In total, 7,565 ounces of gold were produced, while 7,100 ounces were sold at an average price of C$2,260 per ounce, resulting in $15.9 million in revenue being recognized for the fourth quarter, along with a net loss of $17.9 million. Production costs on a per ounce basis were not provided.

For the full fiscal year, 208,874 tonnes were milled, an average of 485 tpd, with an average head grade of 4.2 g/t gold, and a recovery rate of 95.1%. Production came in at 26,899 ounces, missing prior guidance, while revenues amounted to $31.9 million. The company posted a net loss of $34.9 million for the full fiscal year.

In terms of performance, the company had previously guided to H2 2021 throughput of 800 tpd by the end of the year, with head grades slated to improve beyond 6.9 g/t gold, as per an August 13 update. Production of 27,000 to 32,000 ounces of gold was also guided, while all in sustaining costs were set to be between US$1,600 and US$1,750 per ounce. Production for the full year meanwhile did not achieve this guidance figure, let alone the second half of the year.

Production costs meanwhile were so high, that the company indicated within its MD&A, “Until the Company reaches steady-state levels of throughput and expected grade, non-IFRS financial measures such as Cash costs per ounce and All-in sustaining costs (“AISC”) per ounce, which rely on ounces produced in their calculation, are not representative of the future mine plan and are not provided herein.“

The company now expects the first half of 2022 to see production of 600 to 700 tonnes per day, with head grades averaging between 4.0 and 5.0 g/t gold, with recoveries of 95%. Production as a result is slated to be between 15,000 to 20,000 ounces of gold for the six month period, which is “expected to improve in H2.”

The results are in stark defiance of a feasibility study conducted in 2019, which estimated mill rates of 748 tpd and feed grades of 7.0 g/t gold for the first year, with milled gold estimated at 62,000 ounces. Further, the company had broadcasted an average grade of 9.0 g/t gold as being expected for the mine as a whole – with actual results coming in at roughly half that figure.

The company is now expected to update its technical report in the second half of this year, following an updated resource estimate that is to be completed.

In terms of its finances, the company reported a cash position of just $8.5 million, while loans and borrowings currently sit at $123.4 million as of December 31, 2021. A derivative liability of $44.7 million also exists for a gold stream.

The company subsequent to quarter end raised $31.2 million at $0.53 per share, however the firm needs significantly more capital. As of March 28, the company reported having cash of just $9.0 million, and desperately in need of additional capital within what was then the next 30 days. External financing of up to $50 million is also needed over the next six months.

The need for additional capital seems rather short term, with the company filing last night that its cash balance now sits at roughly $6.0 million, representing a drop of roughly $3.0 million in just three days as bills come due. The firm is reportedly working with Sprott Private Resource Lending II, whom is a debt collector, to find financing solutions.

Pure Gold Mining last traded at $0.39 on the TSX Venture.

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Information for this briefing was found via Sedar and the companies mentioned. 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.