Pure Gold Mining needs to raise $50M to keep its Red Lake mine running 

Shares of Pure Gold Mining (TSXV: PGM) fell to its lowest in a year after the company announced it will need to raise funds within the next 30 days to fund its operations and service the interest on its debt. 

The company, which operates the PureGold underground mine, located in Red Lake, Ont., said its cash balance stands at about $9 million.  

“Over the next six months [Pure Gold] will require approximately $50 million of external financing to bring the company to a state of sustainable positive free cash flow at the corporate level,” the junior said in a press release. “This external financing could take a variety of forms including debt or equity and may include proceeds from option or warrant exercises.”  

If the company does not receive the financial backing in the short term, it won’t be able to “meet its obligations as they become due resulting in a default under its debt obligations,” Pure Gold added.   

The company declared commercial production at its mine on Aug. 1 last year. A series of mill upgrades were completed last year, bringing throughput up to 1,000 tonnes per day from 800 tonnes per day. However, the mine has struggled to consistently feed the mill at 800 tonnes per day. 

Gold production at the mine in 2021 fell short of design capacity due to challenges in maintaining access to enough high-confidence, high-grade stopes to provide high-grade ore to the mill, the company said.  

A persistent shortage of high-grade ore from underground resulted in less than full utilization of the mill and at various times led to blending of low-grade development material and stockpiles which also reduced the overall feed grade to the mill, it added.   

Since the beginning of 2022, the company has made a string of new appointments including the president, CEO and the COO with an aim to identify and address the underlying causes of insufficient access to high-grade stopes and “ramp-up and turnaround the experience” at PureGold, the company said.  

“This asset offers tremendous upside in terms of organic growth and exploration potential, but we need to operate efficiently as a first step in order to unlock that potential,” Terry Smith, the company’s COO said in a press release. “We have more work to do and look forward to providing further updates on our progress throughout 2022.” 

The company expects the situation to improve by the end of 2022 and hopes to see a 50% increase in average daily ore production, a 30% increase in average head grade and a 20% reduction in monthly operating costs compared to 2021. 

It’s working towards releasing an updated statement of resources and reserves as well as an updated life-of-mine plan in the second half of the year. 

For the first half of 2022, the company expects to mine and process ore at an average rate of between 600-700 tonnes per day at an average head grade of 4- to 5 grams gold per tonne and average gold recovery of 95% translating to expected gold production of between 15,000-20,000 oz. for the six-month period. 

Resources at the mine are 7.2 million indicated tonnes grading 8.9 grams gold per tonne (2.1 million contained oz.) and 1.9 million inferred tonnes at 7.7 grams gold per tonne (467,000 contained oz.) Probable reserves total 3.5 million grading 9 grams gold per tonne (1 million contained ounces). 

At presstime in Toronto, Pure Gold Mining was trading at 40.5¢, down 27¢ or 42.1%.