How Aussie Mining veterans acquired Europe’s largest gold plant

Finding the perfect entry point in a commodity cycle and picking up infrastructure at a steep discount is how fortunes can be made in the resources sector. A team of veterans from Morgan Stanley, Newcrest and BHP may just have done that – by acquiring Europe’s largest gold plant for cents on the dollar.

Finding the perfect entry point in a commodity cycle and picking up infrastructure at a steep discount is how fortunes can be made in the resources sector. A team of veterans from Morgan Stanley, Newcrest and BHP may just have done that – by acquiring Europe’s largest gold plant for cents on the dollar.

The Laiva Mine consists of a state-of-the art, 2Mtpa processing plant with a US$400 million replacement value, as well as a 6,000 hectare land package here with an 854koz gold resource – that could be as high as 4Moz with further exploration. It is located in Finland, frequently ranked among the top mining jurisdictions in the world and the company considers that it is ready to resume profitable production within months.

The previous owners had made a variety of mistakes, including poor gold hedging and debt funding pressures. Executional failures such as insufficient grade control drilling, little blast management and no computerised maintenance management system resulted in lower than expected head grades and the mill never reaching capacity. 

Creditors took over and an auction was launched to find a new owner. A bidding process began, and by the time October 2022 came around, as gold touched US$1,620/oz in its last point of weakness for the year, and right before it surged 25% to over US$2,000/oz – the Laiva team managed to seal the deal. 

CEO Jeremy Gray was astounded – “Never in my wildest dreams did I believe I could buy Europe’s largest gold mill, in one of the friendliest mining jurisdictions in the world for a fraction of its cost. There was a lot of luck involved.”

Reach Markets will soon be opening a small raise to restart the mine – being done at a modest valuation of US$22.73 million. Bear in mind their 2024 forecast of 50koz, initial 7 year IRR of 81% and EBIT of approximately US$37 million at 50koz. With an initial 11 year mine life, the company sees potential to increase annual production to 120koz with a deeper drilling program and maintain this for over 20 years.

This opportunity is open to wholesale investors only.

If you qualify as a wholesale investor click here to request the offer docs.

Click here to attend a webcast we are running with CEO Jeremy Gray at 2pm (AEST) this Thursday 18th May.

Join us on Monday, 22nd May 2023 at 2pm (AEST) for The Insider: Investing in Gold Summit, a special event featuring expert analysts and commodity experts, mining veterans and industry insiders to discuss gold’s recent performance, how they expect it to perform in 2023 and share some of their favourite stocks. Click here to attend.

World Class Infrastructure, Exploration Upside and Production Plan

Laiva was only built in 2011 with European infrastructure. The mine has an estimated US$400 million replacement cost, and the management team have a comprehensive execution plan.

Its previous operators took large amounts of unfavourable debt and were forced to hedge future production at unfavourable gold prices, two factors that Laiva has strategically avoided.  

Image: Laiva

Located in Finland – one of the world’s best mining jurisdictions according to the Fraser Institute – the project has an exciting 11+ year mine life with a long-term 100koz annual production target.

The company believes there is also significant exploration upside, with Independent expert studies by SRK and COFFEY in 2014 and 2019 reporting 2.0moz and 1.58moz in the pit shell models, which is substantially higher than John T Boyd´s very conservative 854koz estimate. Laiva Gold’s geology team see potential to discover up to 4Moz, which would increase annual production to 120koz and extend mine life well beyond 20 years.

The 146 drill hole program completed by previous owners during 2019-21 repeatedly intersected mineralisation in 4 other target areas around the two open-pits. The 10km drilling campaign supports the long term plan of merging all areas into one large open pit mine.

With the plant fully built and debt free from historical lenders, the company believes its operation is in great shape to restart this summer during Finland’s 24-hour per day sunlight. The company has acquired a high quality asset, for a fraction of its cost – at a time when gold was trading at a significant discount to its current price.

One of the first actions the company took after acquiring Laiva was to input all available drilling data into Leapfrog, an industry-leading 3D resource modelling software program. This gives the company unprecedented understanding of the mineral resource, and will significantly enhance Laiva’s ability to mine it efficiently and profitably.

Laiva will also be using Blast Movement Technologies monitoring system to accurately map ore movement after blasting. Additionally, an extensive grade control drilling program has been planned in order to better understand the ore body, namely changes in grade and the boundaries where waste rock that should not be processed shows up and mineralisation temporarily ends.

This opportunity is open to wholesale investors only.

If you qualify as a wholesale investor click here to request the offer docs.

Join us on Monday, 22nd May 2023 at 2pm (AEST) for The Insider: Investing in Gold Summit.  Click here to attend.

Deep Value in Existing Infrastructure

The reduction in mine development capex over the past decade has been largely led by gold, and existing infrastructure has become more valuable. Capital expenditure peaked in 2012 at US$164.1 billion, due to extremely high spending on gold assets. This dropped to US$65.8 billion in 2016, with iron ore and gold again accounting for the largest decreases.

Image: Laiva

The mine is compliant with all environmental permits, has existing mining licences and has a strong institutional shareholder base. This includes Crescat Capital, one of the world’s most prominent resources asset managers, has a level of expertise and research capability that has led them to achieve market-beating returns over the long term in all of their funds as of December 2022 – their Global Macro Hedge Fund up almost 700% since it’s 2006 inception (12.3% annualised), and their Precious Metals Hedge Fund up 143.2% since August 2020 inception (44.4% annualised).

This opportunity is open to wholesale investors only.

If you qualify as a wholesale investor click here to request the offer docs.

Join us on Monday, 22nd May 2023 at 2pm (AEST) for The Insider: Investing in Gold Summit.  Click here to attend.

Top Notch Management

CEO Jeremy Gray, former head of equity mining and metals research at Morgan Stanley, Credit Suisse and Standard Chartered Bank – and he has seen his fair share of commodity cycles. After extensive experience in funds management, Jeremy has made a series of gold mine acquisitions in Brazil that have formed the company Pilar Gold, and has successfully brought some of them back into production.

General Manager Jim Jackson has worked at both Newcrest and BHP, and is a qualified mechanical fitter with extensive experience in gold mining operations – namely Newcrest’s Telfer mine. He has spent a long time on the ground in Finland learning about the mine’s requirements.

They are supported by a team of geologists with deep expertise. Head Geologist Max Forsman has 25 years of mining industry experience and has worked in both underground and open-pit mines. Max holds an MSc in geology and mineralogy, and has spent many years as head of exploration.

Consultant Geologist Paulo Aguirre spent 12 years as a senior geologist at Anglogold Ashanti in Brazil before joining the Pilar Gold team. He was instrumental in modelling all of Laiva’s drilling data into Leapfrog to create a 3D resource.

Gold in Action

Gold is trading above US$2,000/oz as of 15/5/23 – 25% higher than it was in November last year (3/11/22). In AUD terms, it has even breached all-time highs recently after breaking through $A3,000/oz in April and ending that month there. Spurred on by the US banking crisis and a looming debt ceiling, miners’ valuations are skyrocketing – and M&A deals are starting to fly. Many experts are forecasting the precious metal to be at the cusp of a major breakout.

Central bank’s increased their net gold reserves by 1,136 tonnes worth US$70 billion in 2022 – the largest amount of any year in records going back to 1950. This trend continued into 2023 during the March quarter, as central banks bought a net 228 tonnes of the precious metal, the highest amount for the year-to-date period since they became net buyers in 2010.

M&A activity is starting to become more prevalent in the market, as large and small miners and developers seek to consolidate potentially undervalued projects. 

Newmont’s potential A$29.4 billion acquisition of Newcrest has kicked it off, but there are interesting deals coming through at the smaller end of the market as well. Ramelius Resources takeover of Breaker Resources looks to be going through, and the merger of Tulla Resources and Pantoro Limited has received the irrevocable support of Tulla’s majority shareholder.

This opportunity is open to wholesale investors only.

If you qualify as a wholesale investor click here to request the offer docs.

Join us on Monday, 22nd May 2023 at 2pm (AEST) for The Insider: Investing in Gold Summit.  Click here to attend.

A Truly Rare Opportunity

These types of transactions that are done at such a favourable valuation for the purchaser usually take place when a commodity is in a prolonged downtrend. The Laiva Gold team managed to finalise the deal in October 2022 – literally right at gold’s bottom for the year at around US$1,620/oz. The precious metal then proceeded to run for 6 months, putting on over 25% of gains as well as breaking the US$2,000/oz barrier it was trading at just a year earlier.

If the mine were to be newly developed, it would first have to endure a two year uncertain permitting process, followed by an additional two year construction period. In the current high interest rate and restrictive credit environment, even if the company was able to source the debt – the lending terms would be extremely onerous and likely unfeasible.

We expect there to be significant demand for this offer that will open next week. This opportunity is open to wholesale investors only.

If you qualify as a wholesale investor click here to request the offer docs.

You can also join our live investor briefing with CEO Jeremy Gray on Thursday 18th May at 2pm (AEST). Click here to book your spot.

Join us on Monday, 22nd May 2023 at 2pm (AEST) for The Insider: Investing in Gold Summit, a special event featuring expert analysts and commodity experts, mining veterans and industry insiders to discuss gold’s recent performance, how they expect it to perform in 2023 and share some of their favourite stocks. Click here to attend.

Past performance is not a reliable indicator of future performance.

Reach Corporate provides Corporate Advisory Services including managing this offer for Laiva Gold Inc and may receive fees for its services.

 

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