viewPure Gold Mining, Inc.

Pure Gold Mining boosts capital raise to C$45.5mln with the help of the world’s third largest gold producer, AngloGold

A recent feasibility study at the Madsen project has highlighted its attractive economics

Madsen is located in one of the world's premier gold mining districts

AngloGold Ashanti (NYSE:AU), the world’s third largest gold miner by production, is to take a significant additional stake in Pure Gold Mining Inc (LON:PUR)(CVE:PGM) as part of a wider fundraising that was first announced in late June.

Initially Pure Gold put together a C$32.5mln fundraising in a bought deal lead by Sprott Capital Partners and a syndicate of underwriters.

Now though, AngloGold and an institutional investor will together put up a further C$13.3mln at a price of C$0.55 per unit, with each unit consisting of a share and half a warrant priced at C$0.85.

AngloGold already owns a 14.3% stake in Pure Gold, part of a portfolio of investment assets the company has up its sleeve. In some cases, these investments continue to on to become joint ventures, as was the case with the famous Tropicana mine in Australia, owned in conjunction with Independence Group Ltd (ASX:IGO).

How the relationship with Pure Gold will play out though remains to be seen.

The C$45.5mln raise will take Pure Gold a long way towards the projected C$95mln it needs to put its flagship Madsen Red Lake project in Ontario into production.

Typically, mines like Madsen Red Lake are funded with a 70:30 debt-to-equity financing package, so the participation of AngloGold and the other new investor takes Pure Gold comfortably past the required equity component.

The company has not explicitly stated that the money raised will be used for the development and construction of Madsen Red Lake, only that it will be used for “exploration and development activities” and for “general corporate purposes.” 

However, typically a raise like this will be used to cornerstone a debt finance facility, and the ongoing participation of AngloGold will add significant respectability to the project in terms of its perceived viability and attractiveness.

AngloGold are known to trade into and out of assets, as in the recent case of a Colombian asset sale to Royal Road Minerals (CVE:RYR). But for a major gold miner to follow its money into a company that is on the cusp of raising debt finance for construction is a clear indication of belief in the project.

In the case of Madsen Red Lake it’s not hard to see why. Situated in one of the most famous gold mining jurisdictions in the world, the grade of nine grams per tonne is eye-wateringly high. As it stands, the reserve rings in at one million ounces, and will support a 12-year operation mining at a peak production rate of 125,000 ounces per year.

All-in sustaining costs are estimated at US$787 per ounce, allowing for plenty of margin on the current gold price of just over US$1,400.

Pure Gold’s promotional literature describes Madsen as being “the heart and soul” of Red Lake and representing “the future of this prolific district.”

It’s well-known in industry circles that AngloGold is increasingly interested in diversifying away from South Africa. A big slice of the future of Red Lake, with a stake in one of the world’s highest grade, highest margin gold mines, could end up playing a key role in that vision.


Quick facts: Pure Gold Mining, Inc.

Price: 1.28 CAD

Market: TSX-V
Market Cap: $459.82 m

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