Theta Gold Mines (OTCQB:TGMGF) (ASX:TGM) is a junior mining company on the cusp of becoming a gold producer by targeting high-grade, near-surface gold 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 225,000 oz. Au during Phase 1 of management’s 4 Mine Strategy. Management’s method is based on the optimization of the project, not only with respect to initially targeting higher-grade near-surface deposits, but also by optimizing the methods of both mining and processing.
Synopsis of Recent Events
Management anticipates that a Pre-Feasibility Study (PFS) for the near-surface Beta and Frankfort mines will be completed during 1Q 2021, which will include a maiden underground mining reserve.
The PFS will include details of the modern mining methods to be employed that will dramatically improve rate of production and the grade of the recovered ore. Some granularity has been given on the company’s planned use of modern mining methods in the company’s investor presentation and quarterly report (see Modern Mining and Processing Methods in Recent News section below).
Modern gold processing techniques are expected to enhance the gold recovery rate. Select results of a metallurgical from a 450 kg bulk sampling program were in a press release. Average gold recovery rates between 91% and 94% for some of the bulk composites from the Rietfontein, Beta and Vaalhoek Mines were well above management’s expectations.
Theta Gold Mines acquired a 5% equity interest in Bullion Asset Management through the issuance of 2,087,682 TGM shares (worth AUD$700,000). The investment vertically integrates Theta Gold Mines up the precious metals value chain. Management foresees possible future synergies by collaborating with Bullion Asset Management (see Recent News section below for further details).
While advancing the Theta Open Pit Starter Project, the Board of Directors has approved the commissioning of a Pre-Feasibility Study (PFS) in order to simultaneously advance the development of the Beta and Frankfort underground mines.
Drawing on the 2017 scoping studies on the Rietfontein and Beta Mines and the easily accessible gold faces encountered in the recent 450 kg underground gold bulk sampling program, the PFS is anticipated to convert some of Theta’s Measured and Indicated (M&I) Mineral Resources at the Beta and Frankfort Mines (currently 575,00 oz.) into a Mining Reserve.
Work that has already been completed will be incorporated into the PFS includes
• the 450 kg underground bulk sampling program, along with the related metallurgical results
• a review of the immense repository of historic information for the locations of easily accessible gold reefs
• an underground workings survey carried out to assist metallurgical studies, which led to the “discovery of many kilometers of accessible, on-reef, pre-developed underground tunnels,” (1) as well as access to old mining faces
o identified targeted underground stopes, along with mode of access through existing historical adits and shafts
o completed rock engineering drilling and tests of unconfined compressive strength (UCS) at targeted stopes
o reviewed suitability of mining method
o completed mine planning and scheduling
This maiden underground mining reserve for the Beta and Frankfort Mines would supplement Theta’s existing 205,000 ounces of open-pit mining reserves from MR83. Management anticipates that the PFS will be completed by the end of first calendar quarter of 2021.
Metallurgical Results from Bulk Sampling Program
On November 18, 2020, Theta Gold mines provided an update on the underground gold bulk sampling program. Sampling was undertaken at the Rietfontein, Beta and Vaalhoek mines in order to assess the viability of reopening these historic underground mines. The underground rock chip samples were collected manually from the in situ vein exposures on face, sidewall and roof channels across the total vein widths. On the surface, samples were taken from the Rietfontein tailings dump in order to gauge historical Run-of-Mine (ROM) ore. All told, nine 50 kg bulk samples were collected totaling 450 kg.
Diagnostic leach tests (DLT) and conventional Carbon In Leach (CIL) process test work were performed. The highlighted metallurgical results using CIL resulted in an average gold recovery between 91% and 94% for bulk composites from the Rietfontein, Beta and Vaalhoek Mines, all of which had average head grades between 4.79 g/t and 7.52 g/t (see table below). The average gold recovery rates were well above management’s expectations.
The average gold recovery from the Rietfontein dump composite was 62.7% on an average head grade of 1.15 g/t. A unique composite sample from the Rietfontein ROM pad (RTFWRMet) assayed at a much higher average head grade of 11.23 g/t, though was processed with a lower average gold recovery rate of 78.7%.
Modern Mining and Processing Methods
Management has shared some specifics about bringing modern mining methods and technology to the company’s South African gold projects in the latest Investor presentation (January 2021). Historically, conventional manual (mining by hand) methods were utilized to extract ore from gold reefs. Manual operations are time-consuming with low levels of ore extraction. The potential use of normal-sized mining equipment is not economical, since the ore’s average grade is too low.
Modern methods employ mechanized equipment. In Theta’s case, the preferred method of underground mining is Mechanized Long Hole Stoping due to the narrow, flat dipping reef systems prevalent at Pilgrims Rest and the Sabie Gold Fields. Low-profile mechanized equipment can accurately cut gold reefs, particularly those narrower than 60 cm. The result is higher grade ore since only the channel width of the ore body is mined. The end result of processing higher grade ore is that cost efficiency per ounce improves dramatically. In addition since less ore is transported to the mill (like the Sandvick low-profile LHD loader), intra-mine transportation costs are reduced. Furthermore, an added benefit is that the life of the tailings dam is lengthened, since less ore and post-processing waste is produced.
Bullion Asset Management
In January 2021, Theta Gold Mines invested in Bullion Asset Management (BAM) by participating in BAM’s $1.7 million Series A financing. The investment was part of a strategic agreement, under which Theta issued 2,087,682 shares (worth AUD$700,000) as an initial subscription to acquire roughly a 5% equity interest in Bullion Asset Management Services Pte Ltd.
The management of Theta Gold Mines views the transaction as a means to vertically integrate up the precious metals value chain and also foresees possible future synergies by collaborating with Bullion Asset Management, including:
• opportunities to invest in advanced gold projects and operating mines through Dec. 31, 2025
• the ability to offer any future Theta dividends in cash or in the gold tokens issued by xBullion.
• the capability to access liquid capital by tokenizing part of future gold production
Based in Singapore, Bullion Asset Management is a fin-tech bullion management business that focuses on the financing, tokenization and trading of gold and other precious metals. Through blockchain technology, BAM can deliver digital ownership of physical bullion at a low cost and also offers a storage solution for the management of bullion and other assets. BAM plans to service precious metal miners, fund managers, gold bullion/precious metal dealers and digital asset investors.
Bullion Asset Management’s wholly-owned subsidiary xBullion Holdings launched a digital gold token (xBullion GOLD) in September 2020 on the Ethereum blockchain. The token trades on Zipmex (a Singapore-based digital assets exchange) and represents direct ownership in vaulted, audited, insured and redeemable gold bullion. GOLD currently trades against the Singapore dollar (SGD), the U.S. dollar, Australian dollar (AUD), Thai Baht (THB) and the Rupiah of the Republic of Indonesia (IDR). One token of GLD represents one gram of gold and is redeemable in 1,000 token increments for an underlying 1 kilogram physical bar of 99.99% pure gold. Bullion Asset Management plans to launch additional commodity-backed tokens for silver and other precious metals.
Bullion Asset Management and xBullion’s accounts and physical gold are audited by BDO, a global auditing firm. The accounts are audited annually and all physical gold is audited quarterly.
Bullion Asset Management already has many metals supply, corporate and logistic partners:
• StoneX (NASDAQ: SNEX), a Fortune100 commodity trading house
• Baird & Co, UK’s largest independent gold refiner & trader and a supplier to the Royal Mint
• Jaggards, a reputable Australian bullion and numismatic merchant
Along with Theta Gold Mines, other significant investors in BAM are:
• Decentralised Capital Pte Ltd, is part of the Aura Group and specializes in blockchain assets and investments
• Jaggards Trading Pty Ltd, Australian bullion and rare coin merchant
• DigitalX Ltd (ASX:DCC) (OTCMKTS:DGGXF) (FRA:VSL), a blockchain technology and digital asset management services company
Theta Gold’s strategic agreement with BAM allows Theta to:
• acquire up to 15% of Bullion Asset Management before January 17, 2022
• opt-in and invest in up to 50% of BAM’s future gold mining acquisitions (advance gold projects or operating mines) through December 31, 2025
• offer shareholders the option of receiving Theta’s dividends in cash or GOLD tokens
• tokenize part of Theta’s future gold production
Progress Report – Environmental Authorization (EA) for Open Pit Mining
In October 2020, Theta Gold Mines was informed by the DMRE (the South African Department of Mineral Resources and Energy) that it supports Theta’s application to amend MR 83, which requests a permit for open pit mining for the Theta Open Pit Starter Project. The last step in the process is the approval of the application for Environmental Authorization (EA) to permit open-pit mining on MR83. Currently, the application is being reviewed. MR 83 already is approved for underground mining, the processing of ore and the use of an existing tailings dam.
Based on our calculation of share value of attributable resources, our target for Theta Gold Mines stock is $0.61. 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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1. Theta Gold Mines Press Release, Theta Appoints Debt Advisor and Strengthens Execution Team, January 22, 2021