By Steven Ralston, CFA
OTC:TGMGF | ASX:TGM
READ THE FULL TGMGF RESEARCH REPORT
Theta Gold Mines (OTC:TGMGF) (ASX:TGM) is a junior mining company on the verge of transitioning from a junior exploration company to a gold producer. Management continues to pursue upgrading the gold resource (as well as increasing the mining reserves) for the near-surface, underground Beta, Frankfort and CDM (Clewer, Dukes & Morgenzon) mines. A Maiden Underground PFS was completed in April 2021, and work is ongoing to deliver DFS on these three underground mines in the first quarter of 2022. A trial mining program at the Frankfort Mine is expected to commence in the very near future.
Recent significant achievements include:
• the strengthening of the support system in the adits of the underground Frankfort Mine by either reinforcing or replacing structurally compromised support units
• preparations for trial mining operations in the Frankfort Mine
• underground safety training
• completion of Covid-19 vaccination program for mine site employees
• completed capital raise of AUD$7.7 million in debt and equity funding
Trial mining is expected to commence on the Frankfort Bevetts reef in late 2021. Blast holes will be drilled with a mechanical Boart Longyear S36 drill rig and blasting techniques will be tested in order to refine the implementation of long-hole open stoping mining at the underground Frankfort Mine.
The Rietfontein tailings dam has the potential to have a life of mine of nine years. The company continues to test the historic waste and tailings dumps. During the fourth quarter of fiscal 2021, surface sampling of Rietfontein tailings dam was completed. Engineering design work on the tailing dam extension is expected to be completed during the fourth quarter of 2021.
During the fourth quarter of fiscal 2021, Eco Elementum / Triage was appointed as the engineers for waste management facilities as well as for surface water management.
Work on PFS on Rietfontein Mine Progressing
Management is planning a Pre-Feasibility Study on the Rietfontein Mine, building on the Scoping Study completed in February 2017 and revised in September 2018. Currently, the estimated Mineral Resources at the Rietfontein Mine are 242,200 oz. gold (grading 8.2 g/t Au) in the Indicated category and 537,600 oz. gold (grading 14.0 g/t Au) in the Inferred category. As with the Beta, Frankfort and CDM Mines, management believes that a significant percentage of the Indicated Resource can be upgraded to Reserve status. It is expected that a PFS on the Rietfontein Mine would be additive to Theta’s Resource, further increasing the company’s potential production profile.
Timetable of Upcoming Expected Milestones
4Q 2021 Commencement of trial mining at Frankfort Mine
4Q 2021 Expected completion of engineering design work on the tailing dam extension
1Q 2022 DFS on the Underground Project (Beta, CDM and Frankfort Mines)
TBA PFS on the Rietfontein mine, upgrading the Scoping study
Recent Financings
In September 2021, Theta Gold Mines issued AUD$6.0 million in 20% secured bonds to 2Invest AG, a German investment company. In addition, an AUD$1.73 million was raised from a placement of equity to 2Invest AG and various institutional and professional investors through a Share Purchase Plan (SPP) on September 23, 2021.
RECAP OF FY2021 ACHIEVEMENTS
FY2021 Milestones
April 2021 Maiden Underground Mining Reserve declared
April 2021 Pre-Feasibility Study on underground reserve
May 2021 Gravity survey completed of tailing dam and planned extension area
Maiden Underground Mining Reserve Declared
In mid-April 2021, a Maiden Underground Mining Reserve and Pre-Feasibility Study (PFS) for the near-surface, underground Beta, Frankfort and CDM (Clewer, Dukes & Morgenzon) mines were completed. The work for the completion of the PFS contributed to a significant increase in the company’s Ore Mine Reserve. In addition, the company’s Total Mineral Resource (Measured, Indicated, and Inferred) increased to 6.105 million oz. Au.
PFS on Beta, Frankfort and CDM Mines Completed
Also in April 2021, a Pre-Feasibility Study (PFS) for the near-surface, underground Beta, Frankfort and CDM mines was completed. The PFS indicates that 353,012 ounces Au can be recovered over a Life of Mine (LoM) of 7.67 years, assuming an 84% process recovery rate of the 418,845 ounces Au ROM ore. Total capital costs are estimated to be US$78.5 million. The IRR (at a 5% discount rate) is estimated to be 82% at a gold price of US $1,570 per ounce. The average LOM all-in sustaining cost (operating costs and capital expenditures) is calculated to be US$905 per ounce Au.
The PFS assumes ZAR/USD exchange rate of 15.9. The PFS anticipates a pre-production period of 23 months for rehabilitating existing and constructing new processing plant infrastructure, after which the pay-back period is estimated to be 13 months from the time the first gold is poured.
Gravity Survey of Tailing Facilities
In preparation for construction activities to begin on the tailings dam, a gravity survey encompassing the existing tailings dam and the area of its planned extension was completed in May 2021. The South Africa National Standard 1936 requires a gravity survey prior to commencement of any construction work on the tailings dam.
Surface Sampling at the Tailings Dam of the Rietfontein Mine
During the fourth quarter of fiscal 2021, surface sampling of Rietfontein tailings dam was completed. The Rietfontein tailings dam was systematically sampled on a 50m by 50m grid to a depth of 8 meters. Ten-kilogram bulk samples were collected from each of the 55 holes and shipped to a SANAS (South African National Accreditation System) approved gold laboratory. Currently, the tailings dam at Rietfontein is in the company’s resource estimate, but it also has the potential to upgrade the resource.
Survey of Southern Section of the Beta Mine
The southern section of the Beta Mine was surveyed. Certain markers were identified, which will allow current mines plans to be spatially superimposed on historical mine maps and prior sampling information. Contemporary confirmation sampling of historical samples would allow those historic stope samples to be included in future resource estimates. Though part of the southern section of Beta Mine is in the company’s resource estimate, some of the survey was conducted on areas outside of existing JORC Resource.
Progress on Refurbishing the Gold Processing Plant
Management is preparing to refurbish the historic gold processing facility. Management plans on decommissioning certain components, salvaging others and installing new equipment in its effort to construct a new gold processing plant on the already-approved plant & tailings facility footprint.
The absorption and CIL tanks have been pumped out and cleaned for inspection. A structural engineer will conduct an assessment of the tanks in terms of stability and thickness in order to determine whether they can be reconditioned.
The purchase inquiries of long-lead-time, crushing circuit and pre-concentration equipment have been confirmed; however, additional metallurgical optimization work is required in order to determine the final process design, particularly in terms of carbon float recoveries.
By targeting high-grade, near-surface gold reef deposits in the brownfield Pilgrims Rest and Sabie Gold Fields in South Africa, management plans to employ modern mining and gold processing techniques to produce over 350,000 oz. Au through the initial development of three near-surface mines (Beta, Frankfort and CDM) of the 43 historical mines held by the company situated in the Eastern Transvaal Gold Fields. Furthermore, through multiple exploration campaigns, the company’s Total Mineral Resource has increased by over 100% over the last four years.
VALUATION
Based on our calculation of share value of attributable resources, our target for Theta Gold Mines stock is $0.68. Our calculation of share value of attributable resources is based on the ascertained net asset value of each property, which is determined by adjusting the value of estimated resources for the expected recovery rate and mining/processing costs.
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