Laiva is looking to bring Europe’s largest gold mill back into production
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There are times when the opportunity that comes knocking is just too attractive to miss and that’s exactly the situation that private Canadian company Laiva Gold’s management team found themselves in last October.
To be precise, the team of former Morgan Stanley, BHP and Newcrest executives – who were then part of Brazil-focused Pilar Gold Incorporated, had the opportunity to acquire Europe’s largest gold plant for cents to the dollar just when gold prices fell to US$1,620 per ounce and right before it surged to over US$2,000/oz.
And the Laiva Mine in Finland is a real prize indeed that would never have been available under such lucrative terms without everything coming together as it did for the company.
The previous owners had made a variety of mistakes, including poor gold hedging and debt funding pressures which was further compounded by executional failures such as insufficient grade control drilling, little blast management and lack of computerised maintenance management system resulting in lower than expected head grades and the mill never reaching capacity.
All of which resulted in Laiva Gold landing a state-of-the art 2MMtpa processing plant with a US$400m replacement value as well as a 6,000 hectare land package that currently hosts a 854,000oz gold resource with potential for growth to as high as 4Moz with further exploration.
Its status as a previously producing mine also allows the company to sidestep the lengthy (and often uncertain) permitting process and construction period, allowing it to start production at a time when gold prices are elevated.
Laiva chief executive officer Jeremy Gray told Stockhead there was plenty of luck involved.
“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,” he added.
Laiva, which was spun out from Pilar Gold in March 2023, has plans to list – most likely in Canada – in the fourth quarter of this year and start gold production in the near-term.
Here’s where picking up a relatively new asset is a tremendous advantage with funds required to restart production expected to be highly palatable while operations are anticipated to be profitable right from the get go.
Laiva estimates that while first year EBIT would be relatively modest at about US$3.3m, once the mill gets up to speed and produces some 50,000oz to 80,000oz of gold per annum, EBIT could rise first to US$36.1m by Year 3 and up to US$71.8m by Year 7.
All-in sustaining costs are expected to start at US$1,450/oz before dropping to below US$1,000/oz once production scales up.
Mine life is currently estimated at more than 11 years though recent modelling has indicated that resources could grow from 854,000oz to 2Moz, which will deliver a corresponding increase in mine life.
While the potential increase in resources, driven by independent expert studies by SRK and COFFEY in 2014 and 2019 reporting 2Moz and 1.58Moz respectively in the pit shell, are a definite positive, they represent just the start.
Laiva’s geology team already sees the potential to discover up to 4Moz of resources, which will allow the company to increase annual production to 120,000oz and extend mine life well beyond 20 years.
The company noted that the 146 hole drill program completed by the previous owners during 2019-21 repeatedly intersected mineralisation in four other target areas around the two open-pits.
This provides support for long-term plans to merge all areas into a single, large open pit.
Acting also to address the issues faced by the previous owners, the company has input all available drilling data into Leapfrog, an industry-leading 3D resource modelling software program.
This is expected to give the company unprecedented understanding of the mineral resource, and will significantly enhance Laiva’s ability to mine it efficiently and profitably.
Laiva will also use Blast Movement Technologies monitoring system to accurately map ore movement after blasting and has planned an extensive grade control drilling program to better understand the ore body.
Gray himself is the former head of equity mining and metals research at Morgan Stanley, Credit Suisse and Standard Chartered Bank.
He has made a series of gold mine acquisitions in Brazil and successfully brought some of them back into production where they serve as Pilar Gold’s core assets.
General Manager Jim Jackson has worked at both Newcrest and BHP. He brings with him extensive experience in gold mining operations – namely Newcrest’s Telfer mine.
Head geologist Max Forsman has 25 years of mining industry experience and has worked in both underground and open-pit mines while consultantgeologist Paulo Aguirre spent 12 years as a senior geologist at Anglogold Ashanti in Brazil before joining Pilar Gold (and now Laiva Gold).
This article was developed in collaboration with Laiva Gold, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.