Integra Gold (ICG.V) has been on fire-sale lately as investors seem to have been anticipating the expiration of the lock-up period of the shares which were issued in the June placement. The share price dropped to C$0.20 after trading as low as C$0.185, but this could be an excellent opportunity to either get in or average down.
Since Integra has raised the cash in June, the company has really transformed itself from a potential developer to a company with a turn-key ready mill ready to re-start operations. Indeed, Integra Gold will no longer have to use other mills to treat its ore, but has acquired the Sigma Lamaque mill out of a bankruptcy procedure. As this mill – which has a nameplate capacity of 2,200 tonnes per day- is located literally across the street, Integra’s operating costs will tumble as an owner-operated milling procedure is much cheaper than toll milling the ore (which was anticipated to cost C$20/tonne). On top of that, the capital expenditures will very likely be lower as well, as Integra now has several options to access its ore. It could still construct its own decline, but it’s not unlikely the company will now try to access the ore bodies from the existing underground workings at the Sigma Lamaque mine.
Additionally, we are confident the permitting process will be much smoother as well, as the company now just would have to truck its ore across the street instead of all around town. The mill – which has a replacement value of approximately C$100M according to independent reports – was acquired for just C$7.55M of which the majority was settled in shares. As Integra also struck a deal with a local company whereby the latter purchased the rights to the waste rocks from Integra, Integra only had to cough up roughly C$800,000 in cash and 25 million shares. We received various questions about the overhang of these new shares as investors seem to fear that Deutsche Bank will dump the shares as soon as the lock-up periods expire. However, we do think this risk is rather minimal as Deutsche Bank has to recoup much more money from the bankruptcy of Century Mining. We wouldn’t be surprised if Deutsche Bank would prove to be a longer term shareholder of Integra Gold and it might even be an option to approach the bank for debt financing later on. That being said, we do think it’s likely Deutsche Bank will reduce its position to 9.9% of the outstanding shares but the bank is smart enough not to flood the market and kill the share price.
We expect Integra Gold to trade around C$0.20 for the next few days but we have heard positive comments from investors and potential investors, so we are not expecting a further crash in the company’s share price. As the project has now become more appealing through an expected lower opex, lower development capex and longer mine life, Integra is now in a much better shape than ever before. We participated in the previous placement in June and will probably add some shares if the share price dives lower as Integra’s Lamaque project now is one of the best development-stage assets in Canada. Integra already has the asset and is building an outstanding operational team. The next stop will probably be becoming Val D’Or’s newest gold producer.
Disclosure: The author holds a long position in Integra Gold. Integra is a sponsor of the website. Please see our disclaimer for current positions.
