Interview: G Mining may issue debt, CEO says

Canadian gold producer G Mining Ventures (TSX: GMIN; US-OTC: GMINF) will consider tapping the debt markets if it moves ahead with its $936 million (C$1.34 billion) Oko West gold project in Guyana this year, CEO Louis-Pierre Gignac said. 

G Mining will need to raise at least $300 million to fund Oko West, Gignac said in an interview with The Northern Miner. The company expects to publish a feasibility study for the project in April and receive full environmental permits sometime in the second quarter, with a formal construction decision to be made in this year’s second half. 

Oko West is one of two projects that G Mining is counting on to anchor future output. The other, Brazil’s Tocantinzinho, started producing gold in September and has already allowed the company to start generating cash flow. 

“We do need to secure some external financing to fully fund Oko West,” Gignac said this week by telephone. “We’re looking at $300 million to $400 million of external financing that will complement our cash flow from Tocantinzinho and our existing cash balance.”

Results beat expectations

On Friday, G Mining reported quarterly results that topped analyst estimates. Adjusted fourth-quarter net income of $58 million, or 26¢ a share, beat the 17¢ consensus forecast.

G Mining shares rose 1.9% to $18.49 Friday morning in Toronto, giving the company a market capitalization of about $4.2 billion. The stock has traded in a 52-week range of $7.36 to $19.40. 

“With Tocantinzinho completed successfully, the market should now view Oko West with greater confidence, which should reflect in G Mining’s valuation,” Rabi Nizami, an analyst at National Bank Financial, said in a note Friday.

Financing 

Oko West’s financing package will probably include a revolving credit facility from a group of Canadian banks, as well as vendor financing from the manufacturers whose equipment G Mining is purchasing, Gignac said. 

“We still have to finalize what the mix will be, but there are many options in front of us,” he said. “The key point is that we’re looking to minimize equity dilution at this point, given our ability to use debt.” 

The high-yield debt would probably carry an interest rate of 8%, “which is quite attractive,” the CEO said. 

Before it can issue debt, G Mining will need to obtain a credit rating. 

“Typically, you need to show a couple quarters of financial statements so that credit rating agencies can do their assessment,” Gignac said. Once G Mining has reported its first quarter results this spring, “we will have the ability to do that process.” 

Path to production 

After receiving its interim environmental permit by Guyana last year, G Mining has started infrastructure work such as building a barge landing that will help to bring in equipment and workers by boat. Oko West is located about 100 km southwest of the capital Georgetown. 

If all goes well, commercial production at Oko West would begin in 2028 with about 1,500 employees. Annual output is projected to average 353,000 oz. over an expected mine life of 13 years. 

“That will make it one of South America’s largest gold mines,” the CEO said. “We have an open pit that we will be putting in production first. Once the plant is commissioned and operating, we’re going to start the development of the underground mine. Three years later, underground activity will be starting to feed the plant.” 

Gignac spent several days in Guyana earlier this month to review developments at Oko West. He also met with government officials such as the ministers for natural resources, energy, home affairs and finance. 

“That’s the type of access you don’t get in many other jurisdictions,” he said. “Guyana is a pro-business country. They’ve been very supportive of our project and the mining industry at large. People make themselves accessible.” 

Jewel in Brazil 

Gignac and his management team are also keeping an eye on Tocantinzinho, which the company acquired for about $115 million in 2021. More than 1,000 company employees and contractors work at Brazil’s third-largest gold mine. 

Tocantinzinho, nicknamed TZ, produced 63,556 oz. last year. Annual output is expected to average 175,000 oz. over 10.5 years. 

“TZ is obviously very important because that’s our source of cash flow generation,” Gignac said. “Since we commissioned the plant, we’ve been generating positive cash flow.” 

As a result, G Mining finished 2024 with about $141 million in cash. That’s up from $104.6 million at the end of the third quarter. 

Soaring gold prices have also helped. 

“Our first gold sale was done at 2,450 an oz., which is pretty remarkable given that the highest sensitivity in our feasibility study was $2,000 an oz.,” Gignac said. “Every gold sale that we’ve done since has been at higher prices. It’s nice to hit the market right. It’s a strong gold market.” 

Although Gignac says Tocantinzinho has been performing well, there have been occasional hiccups – such as the faster-than-expected wear and tear of the semi-autonomous grinding mill’s liner system. 

“The rubber is degrading, and that was not expected. This has caused us to have many shutdowns to repair liners,” he said. “We’re going to be transitioning to metallic liners in April and once that change is complete, the problem will basically disappear.”

Exploration push 

G Mining’s rising cash balance is allowing the company to ramp up exploration efforts. About $22 million will be spent on exploration this year, to be split between Tocantinzinho, Oko West and the company’s other Brazilian property, Gurupi. 

G Mining acquired Gurupi from BHP (NYSE, LSE, ASX:: BHP) last year in exchange for a 1% net smelter royalty. The property, located in Maranhao state, covers about 2,100 sq. km. Developing Gurupi will be a multi-year process as it focuses on Oko West, the CEO said.  

“This is a project that had received permits in the past, but there were gaps in the permitting process. We’re really going back to the exploration stage,” Gignac said. 

 “It’s all about building a pipeline. If everything goes well it could be project No. 3 for us, once we get Oko West built,” he said. 

“Our goal is to always have an idea of what could be next,” Gignac concluded. “We like to think of ourselves as an Americas-focused company. We think there are lots of opportunities in South America.”