VANCOUVER – Pure Gold Mining Inc. [PGM-TSXV] on Friday announced details of an agreement with Sprott Resources Lending that will provide the company with additional liquidity while it works to overcome operational challenges at its Red Lake, Ont., gold mine.
In Friday’s news release, the company also provided an operations update and said director Mark O’Dea will assume the role of interim President and CEO, replacing Troy Fierro who has stepped down for personal health reasons. Fierro will remain a director of the company.
Pure Gold shares rallied on the news, rising 15.7% or $0.03 or 22 cents on volume of 2.7 million. The shares are currently trading in a 52-week range of $1.81 and 13.5 cents.
The company said Sprott has pledged to provide it with an additional, secured, first-priority, non-revolving credit facility worth up to US$6 million. Sprott has also agreed to waive any existing defaults under the credit agreement, stream purchase agreement and production payment agreement for a period ending May 15, 2022.
Under the deal, Pure Gold has agreed to immediately raise US$5 million from an equity financing, with proceeds received by May 15, 2022.
Pure Gold recently became a gold producer when it delivered on a promise to build Canada’s newest gold mine in the heart of Red Lake. The first gold was poured on December 29, 2020.
That marked the return to life of the former Madsen mine, which produced 2.5 million ounces between 1938 and 1976.
However, Pure Gold recently announced a series of executive management changes aimed at dealing with operational challenges at the mine site.
The company said a key challenge has been maintaining access to enough high-confidence, high-grade stopes to provide high-grade ore to the mill. “Shortages of high-grade ore at various times have led to blending of low-grade development material and stockpiles which has reduced the overall feed grade to the mill,” Fierro said recently.
“These shortages were caused by a combination of factors including development delays, insufficient scheduling flexibility, insufficient geologic information available for stopes prior to mining, equipment downtime, and strategic misalignments.’’
Fierro said significant changes to mine planning and scheduling were implemented during the fourth quarter of 2021 to address these underlying causes, with early signs of positive progress evident in December’s operational results.
Following operational management changes beginning in the fourth quarter of 2021, the company said its operational leadership team has designed and is accelerating an operational plan for the mine.
Key objectives include fast-tracing the operation to a state of positive site-level cash flow by the third quarter of 2022, ramping up throughput to nameplate capacity (800 tonnes per day) by the second half of 2022. Another objective is to define a life of mine plan and deliver an updated NI 43-101 technical report by the fourth quarter of 2022.
“The additional credit facility and support from our lending partner Sprott provides the company with the liquidity and time needed to maintain the positive momentum of the operational turnaround and optimization initiatives currently underway while, in parallel, we continue working toward updating our Life of Mine plan and evaluating a wide range of strategic and potential financing alternatives,’’ said Chris Haubrich, Pure Gold’s CFO and vice-president, business development.