With my pick and ax in hand, I am digging through the rubble of a demolished precious-metal equity patch in search of the deepest value for investors.
A tough trailing year for one junior gold miner has forced investors to dig a little deeper for the resolve to await a long-anticipated turnaround, but Brigus Gold (AMEX: BRD) is now showing meaningful signs of operational improvement that I expect will ultimately reward intrepid shareholders for their patience. For a timely first-hand look at these revamped operations, I'm heading back to Timmins, Ontario, shortly for a second visit to Brigus' Black Fox mine complex.
Obviously, I wish I could have foreseen the number of challenges Brigus would face in executing its plan for the underground portion of the mine back when I first visited the operation one year ago. Underground development was chugging right along, and an expanding mill was already realizing excellent gold recovery in advance of ramped-up production from the high-grade underground deposit. Now one year, one senior management shake-up, and one substantially revamped mine plan later, a long continuum of disappointment from the Black Fox mine complex stretching back to the mine's previous owner finally looks primed for reversal.
I am eager to see the revised mining methods in action, and to speak with mine manager Marc Bilodeau and his team about the rapid improvements achieved thus far. Because dilution of high-grade ore stood at the heart of Brigus' underground shortfall, Brigus' improvement can be measured in grams per ton (gpt). From an average underground grade beneath three gpt during the fourth quarter of 2011, Brigus promptly doubled that figure to achieve about six gpt during the first quarter (albeit at modest volume). With the mining process now under control with respect to dilution of grade, the final segment of the turnaround rests with the ramping-up of production volume from an increased number of production "stopes" (individual excavation faces). As Black Fox approaches steady-state production of roughly 100,000 ounces per year, holders of Brigus' shares as well as those of 12% gold-stream royalty holder Sandstorm Gold are bound to realize gilded gains.
While some portion of the trailing weakness in the shares of Brigus Gold was undoubtedly warranted under the circumstances, a number of Brigus' meaningful accomplishments that fell upon the market's deaf ears due to the Black Fox woes have considerably enhanced shareholder value. When I visited the Black Fox complex last year, the high-grade gold deposits known as the 147 and Contact Zones were only just beginning to reveal their hidden treasure. By December of 2011, however, an initial resource estimate for these deposits had already identified 1.69 million ounces of gold to increase the company's total resource by 50%! Epitomized by a recent gold intercept of 26.83 gpt over 15.5 meters in the Contact Zone, Brigus' phenomenal exploration results continue to expand the scale and significance of these major strategic assets. Furthermore, given Brigus' market capitalization of just over $200 million, the market has clearly refused to ascribe any value whatsoever for the company's Goldfields project in Saskatchewan. According to the pre-feasibility study completed last October, the Goldfields project alone commands a base-case net present value of $144 million.
Because I prefer to strike when golden achievements fall on deaf ears, I have added to my own stake in Brigus Gold throughout the trailing malaise. I have remained steadfast in my expectation of a resounding turnaround for the gold mining equities at large. I've resolved to traverse the silk road with Eldorado Gold (NYSE: EGO), to grow old with IAMGOLD (NYSE: IAG), and to stick like glue to Silver Wheaton (NYSE: SLW). Likewise, I perceive powerful upside potential from shares of Brigus Gold, and I look forward to reporting my findings after visiting the Black Fox mine for a second time. Please bookmark my article list or follow me on Twitter to stay tuned for my upcoming piece on Brigus Gold, and please feel free to submit any questions you would like me to ask of Brigus management by using the comments section below.
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