[Update] Brigus looks to a brighter 2013

Brigus Gold (BRD-T, BRD-X) has hit its 2012 production target and is eyeing more gold production and growth in the new year.  

For 2012, the Halifax-based junior produced 77,374 oz. gold within its 77,000–85,000 oz. guidance and is now aiming to generate 90,000–100,000 oz. gold in 2013 at cash costs of US$700-US$750 per oz.    

The company’s chairman and CEO Wade Dawe says gold grade and output improved in each quarter ­­at Black Fox – its sole producing mine in Timmins, Ont. – as it started mining more high-grade underground ore, resulting in higher average grade ore going through the mill. This trend should continue at least through the first quarter of 2013 until the junior reaches steady state production level.   

For the last quarter of 2012, the combined open-pit and underground operation at Black Fox generated 22,672 oz. gold from 185,727 tonnes of 4.04 grams gold per tonne.

Haywood Securities analyst Kerry Smith comments Brigus had “a nice finish to 2012” pointing out gold grades gradually climbed from 3.04 grams in the first quarter to 4.04 grams in last quarter, due to better underground mining techniques.

For 2013, Smith forecasts the firm should deliver 102,000 oz. at cash costs of US$665 per oz., assuming it recovers 900 tonnes per day from underground and 1,100 tonnes per day from the open pit. 

The analyst estimates the majority of the underground ore, about 400 to 500 tonnes per day, should come from the long-hole stope in the West zone that Brigus started mining last September.

The Halifax-based firm is still ramping up production at Black Fox and is striving to recover 800 to 1,000 tonnes per day from the underground. “So that’s our target and that will be steady state production for the underground portion of the Black Fox mine,” Dawe says.

In addition, the gold producer is drilling underground and has two rigs that are focused on the extending the ore zones at depth. Preliminary exploration results from the drilling which began in June have been “very good,” Dawe says, explaining the holes have been showing continuity of the zones at depth and remain open to further expansion.  

“We believe that Black Fox will be a long-life asset and our intention moving forward is to add ounces as we are mining to at least replace the ounces that we mine each year,” Dawe comments.

To continue to develop Black Fox and its other operations, Brigus has budgeted US$59.5 million for capital costs in 2013. Of that, US$16 million will go towards underground development, US$13 million for open-pit stripping, US$20 million for equipment purchases and maintenance, and US$10.5 million for underground exploration at Black Fox and Grey Fox.

The Grey Fox property is part of the 18-sq.-km complex that hosts the Black Fox mine and mill. It is 4 km southeast of the operating mine and hosts the 147, Contact and Grey Fox south zones. The first two zones contain more than half of the resource on the Black Fox Complex. 

With that much potential in the ground, Brigus is working to make Grey Fox its next gold mine.

Brigus has commenced permitting activities and environmental studies on the deposit. It is currently drilling Grey Fox with four rigs, where recent results from the 147 zone show that the orebody has been extended to a true vertical depth of 300 metres below surface. Notable intercepts include: 35 metres of 14 grams gold and 29 metres of 4.7 grams gold.

“The total average grade and width of the [47] holes reported is 4.2 grams over 9.5 metres, with grades increasing at depth in general,” BMO Nesbitt Burns analyst Brian Quast writes in a note, pointing out most of the intercepts are amenable to open pit mining.

The results will go towards updating the September 2012 resource estimate for the 147 and Contact zones by mid-2013. The zones currently contain a combined 480,850 indicated oz. from 7.1 million tonnes at 2.1 grams gold and 91,061 inferred oz. from 1.7 million tonnes at 1.7 grams gold.  

A feasibility study on the project should be out in the second half of the year, with first production from the open-pit mine expected in early 2015.

Brigus plans to fund the construction of the mine through a combination of internally generated cash flow and externally funded sources in 2014, and is fully funded for 2013.

About two years after the company brings the proposed Grey Fox mine online, Dawe says it will then bring its Goldfields project near Uranium City, Sask., into production.

“Right now we are a gold producer in Canada with only one producing mine. By 2015, we will have two operating mines on Canadian soil. And by 2017, we expect to have three.”

The Goldfields project is envisioned as a 5,000-tonne-per-day open-pit operation and is fully permitted. 

Brigus recently closed at 95¢, within a 52-week range of 69¢-$1.34.

Quast rates the stock as “market perform” and has a $1.05 price target, while Smith of Haywood Securities has a “sector outperform” rating and $2 target.