Integra Gold (ICG.V) has announced yesterday after-hours it is acquiring the Sigma-Lamaque mine and mill from the receivers appointed by the court to monetize the assets of Century Mining which went bankrupt a few years ago. It is very likely that all proceeds go to Deutsche Bank which was owed money by Century Mining.
This is a very logical step by Integra Gold, as the Sigma-Lamaque mill is located not just down the road, but literally across the road from Integra’s property. This seems to be a much better option than toll-milling the ore at another mill with excess capacity, as internal calculations estimate a cost saving of C$25-30/t which would translate in a decreasing cash cost of up to C$100/oz. Additionally, the company is now avoiding having to truck its ore through the city center of Val D’Or and the nuisance will be very limited now, as the nearby inhabitants got used to the Sigma-Lamaque mine which has a very rich history of 60 years of mining and producing not less than 9 million ounces of gold. Another benefit which cannot be ignored is the potential to access Integra’s ore zones from existing underground mine workings at Sigma-Lamaque which would reduce the initial capital expenditures and thus improve the operational efficiency of the combined projects.
We are very surprised to see that the acquisition of the Sigma-Lamaque mine and processing facility will cost just C$7.55M of which only C$1.8M will be payable in cash (and the remaining C$5.75M will be payable in shares of Integra Gold based on the 5 day VWAP before the closing date of the transaction). Of that C$1.8M, a partner will provide just over C$1M in exchange for the right on waste rock on the combined property. This net acquisition cost of C$6.5M is really buying the property for cents on the dollar, as an independent report estimates the replacement value of the processing facility at C$100M and this value doesn’t even include the 2.5 million ounces of gold which are still in the ground at Sigma-Lamaque.
We consider this acquisition to be of extremely high importance and this will have a huge impact on Integra Gold’s plans for the future, and this impact will be so important that once the deal closes, a ‘New Integra Gold’ will stand up with almost 4 million ounces in its resource estimate, a fully permitted processing plant and tailings facility with excellent access to existing infrastructure. Keep in mind that the airport of Val D’Or with direct connection to Montréal is located next to Integra’s land position. The importance of this acquisition cannot be underestimated and this will change the company’s entire future.
We will be releasing a Q&A report with Senior Vice-President Hervé Thiboutot shortly, and will very likely follow up on that with additional coverage of this acquisition as well.
> Click here to read the press release
Disclosure: The author holds a long position in Integra Gold. Integra Gold also is a sponsor of the website. Please see our disclaimer for current positions.
