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Dear Fellow Investor,
With a long-term gold bull market having been confirmed both fundamentally and technically, which companies will general investors pick up first as they rotate into the sector?
If recent history is any guide, the answer is those gold companies that can immediately convert the newly higher prices into cash flow.
And that means production stories — companies that are already generating gold and not wading through the lengthy permitting and construction phases needed to get a mine up and running.
Bonus points accrue to companies that are currently producing at the margins of profitability, as they will see the biggest lift from rising gold prices.
And if the company also happens to have the ability to increase production substantially in the short term?
Well, that combination may create the near-ideal lever on the secular gold bull market that is emerging before our eyes.
And that’s exactly the combination of elements that Galane Gold (GG.V; GGGOF.OTC) offers investors — steady state production at the margins of profitability, bolstered by a big increase in gold production just ahead.
Steady-State Gold Production Today
Galane’s story starts with the gold production it is getting from its Mupane gold operation in Botswana.
The combined open pit/underground operation at Mupane is forecast to produce over 30,000 ounces of gold per year over the next three years at all-in sustaining costs of $1,050/ounce.
Galane acquired Mupane from IAMGOLD in 2011. It was a higher-cost open pit producer for IAMGOLD at the time, and the team at Galane saw the potential to transition the mine to an underground operation.
Since then, the company has generated steady gold production from Mupane and managed to extend its Tau deposit at depth.
The mine produced 35,527 ounces of gold in 2018 and boasts a measured and indicated resource of 414,374 ounces. It has another 219,765 ounces of inferred resources.
With the potential to significantly expand its current three-plus years of expected mine life, Mupane is ideally situated to benefit from improving gold prices.
Next Year:
A 50% Production Increase
And then there’s the real kicker for Galane in terms of leverage — the soon to be resuscitated gold operation at its Galaxy mine in South Africa.
Located near the town of Barberton, the Galaxy property is part of the Barberton Greenstone Belt that has been producing gold since the turn of the 20th Century.
As of Aug. 31, 2015, the Galaxy mine had 169,568 ounces of proven and probable reserves and 602,696 ounces of measured and indicated resources. Moreover, it had another 886,199 ounces of inferred resources. With those totals, the mine boasts at least 10 years of projected mine life.
They have already started production using the existing 15,000 tonne-per-month plant and ore mined from the Princeton ore body. Impressively showing net positive operating cash flows in October this year. In addition Galane expects underground mining to start on Galaxy’s 22 Level by August of 2020, at which point a 30,000-tonne-per-month feed rate to the plan is targeted.
First ore is expected to be produced by September 2020.
Combined with the ounces of gold projected from Mupane next year, and the ounces of gold from Galaxy will allow Galane to grow its production by more than 50% to over 45,000 ounces and the following year to 60,000 ounces
In other words, just as the gold bull market kicks into high gear, this company will have not one, but two, operating gold mines that offer investors a chance to cash in on higher prices for the yellow metal.
A Large Resource To Tap At Galaxy
Adding to this aggressive production profile is the potential for growth via the drill bit.
Because of the nature of the mineralization in this part of South Africa, the gold at Galaxy extends to significant depths.
By targeting just six of the 21 recognized ore bodies at Galaxy, management believes it could expand the mine’s gold resources to 4.0 million ounces at depth.
That’s ore that could dramatically extend the mine’s already solid 10-year mine life.
Production + Growth = Leverage
With Mupane providing a base of production of around 30,000 ounces per year, Galaxy could eventually add another 56,000 ounces per year to that total by 2028.
The growth profile for Galane ramps up in stages, with the first big jump coming next year as Galaxy comes online. The next jump comes in the out years for Galaxy beginning in 2024 and continuing through 2028.
Bottom line: At current gold prices, Galane plans to produce gold profitably for the next 10 years.
But the time to invest in this company is now — before the gold bull starts galloping ahead, and before the market realizes Galane’s steep production increase beginning next year.
Because when you put all this together, and combine it with the stock’s current trading levels, it’s apparent that Galane Gold is a fantastic lever on rising gold prices.
With gold’s best days ahead of it, those who invest in Galane Gold now will likely be very glad they did.
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