Montage Gold raises $180M from Zijin, Lundin for Koné project in West Africa

China’s Zijin Mining Group and the Lundin family are part of a $180 million capital raising to increase their stakes in Montage Gold (TSXV: MAU; US-OTC: MAUTF) and advance its fully permitted Koné gold project in Côte d’Ivoire to construction early next year.

Zijin is investing $57.3 million for a 9.9% stake while the Lundin trust is increasing its holding to 19.9% from 17.7% with a $43 million purchase of shares, Vancouver-based Montage said on Wednesday. It increased the total offering first announced a day earlier by $10 million. The shares are priced at $1.75 apiece, a 1.1% discount to Monday’s close, in a private placement expected to end around Aug. 12. Management and other insiders are investing about $20 million, the company said.

“These investments strengthen our ability to deliver on our strategy to become a premier multi-asset African gold producer and validate the potential of our Koné gold project in Côte d’Ivoire,” Montage CEO Martino De Ciccio said in a release.

“With a strengthened balance sheet, we will be well positioned to rapidly continue unlocking value for our stakeholders by progressing the Koné project towards an anticipated construction launch by first quarter 2025.”

The West African country granted the final mining permit last week for Koné, which is about 600 km north of the capital, Abidjan. Montage has said it’s aiming the US$712-million capital cost project to be among the largest and least expensive mines in the region. It’s slated to produce 300,000 oz. of gold annually over the first half of a 16-year mine life with all-in sustaining costs of US$998 per oz., according to an updated feasibility study released in January.

Foreign investment

Zijin is backing Montage after Vancouver-based Solaris Resources (TSX: SLS; NYSE: SLSR) in May pulled out of a $130 million funding deal that would have given China’s largest producer of copper and gold a 15% stake. Solaris, which is developing the Warintza copper project in Ecuador, blamed a four-month Canadian national security review for the move.

The Montage investment differs in that gold isn’t considered a critical mineral and the stake is small at less than 10%. While both deals concern projects outside of Canada, that hasn’t stopped Ottawa before. It ordered three Chinese companies to divest from Canadian lithium mining companies in 2022 even though the projects were abroad.

The Lundin family trust is associated with The Lundin Group, which includes Lundin Mining (TSX: LUN), Lundin Gold (TSX: LUG; OTC: LUGDF) and Lucara Diamond (TSX: LUC) among others.

Shear zone

The property sits in the same shear zone hosting Fortuna Silver Mines‘s (TSX: FVI; NYSE: FSM) Seguela gold mine 80 km south, and Barrick Gold‘s (TSX: ABX; NYSE: GOLD) Fonondara, Cassere and Caribou advanced-stage targets to the north.

The government last week also issued an eight-year mining permit for Koné’s satellite Gbongogo deposit, one of several within trucking distance that could form the core of a new gold district with processing at a central mill, Montage has said. The Gbongogo Main deposit lies within the former Mankono-Sissédougou joint venture that Montage acquired from Barrick and Endeavour in 2022.

Montage says it’s aiming to drill 90,000 metres this year on about 15 satellite targets across its 2,259-sq.-km land package and outline a resource on several by year-end.

Preliminary drill results show 14.1 metres grading 8.04 grams gold per tonne and 17.45 metres at 2.74 grams at the Diouma North target, the company said July 9. Others include 12 metres grading 6.6 grams at Lokolo Main, 19 metres at 3.08 grams at Sissédougou, and 14 metres at 1.62 grams at Yeré North. Full details weren’t immediately available.

Koné has a US$1.1 billion after-tax net present value at a 5% discount rate and a 39% internal rate of return at a US$2,050 per oz. gold price, the feasibility study showed.

Shares in Montage Gold gained 1.7% to close at $1.80 apiece in Toronto on Tuesday. They were at $1.82 on Wednesday morning, valuing the company at $440.2 million. They’ve traded in a 52-week range of 51¢ to $1.87.