Canadian miner PureGold has arranged a private placement with billionaire mining investor Eric Sprott, who will invest CAD15m in exchange for 9.87 million shares of the company. The financing is expected to close on 17 June, subject to the satisfaction of all applicable regulatory approvals including the approval of the TSX Venture Exchange.

The proceeds from the financing will be used for “Canadian exploration expenses”. In consideration for their services, a finder’s fee equal to 6% of the gross proceeds is payable to financial advisors led by Clarus Securities.

Understanding the deal

PureGold is an exploration and development company developing the PureGold Red Lake mine, which was subject to a feasibility study in February 2019 that outlined a 12-year, high-grade underground mining operation with a production rate of 800 tonnes per day. The mine is the highest-grade development-stage project in Canada and is expected to be in the top eighth percentile globally when production ramps up.

PureGold has had several investment partners including Newmont Goldcorp and AngloGold Ashanti, which collectively represent 30% of share ownership in the country.

Eric Sprott is a Canadian billionaire investor with stakes in several mining companies. Perhaps his most successful investment in gold mining was Kirkland Lake Gold, which he purchased shares in when they were priced below CAD5, but which now trade at around CAD55 per share on the Toronto Stock Exchange. Sprott stepped down as chairman of Kirkland Lake in 2019.

As of 2019, Sprott’s portfolio comprised some junior mining companies including Irving Resources, Wallbridge Mining, Aurion Resources and others. Sprott’s considerable experience in growing gold mining companies will be seen as a boon to PureGold’s ambitions and could stand to attract further investment.

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Executives respond to the deal

Commenting on the investment, Sprott said: “PureGold has all the attributes I look for in a company, location, grade, size and growth.”

“The ultra-high grade hits in the eight zone remind me a lot of the HG zone that built Goldcorp, as well as SMC at Macassa and the Swan Zone at Fosterville,” Sprott added. “These are the types of discoveries that have the potential to be company makers and tend to lead to a much higher production profile than originally given credit.”

PureGold President and CEO Darin Labrenz said: “We are fully funded and on-track to pour our first gold in Q4 2020 into a record high gold price environment for Canadian producers.  This new investment in exploration enables us to concurrently ramp up our focus on aggressive resource growth without impacting our capital budget for final mine completion and first gold pour.  We believe this combination of near-term cash flow through production and organic resource growth will create significant value for our shareholders in the near term.”

PureGold company overview and share price

PureGold’s primary asset, the PureGold Red Lake mine, is a fully-funded project on track to begin initial production in late 2020. The mine is situated within a 7km long gold system, and multiple discoveries by the company suggest opportunities for near-term growth.

PureGold is listed on the TSX Ventures Exchange. The company recovered well after a dip in its share price owing to the 2020 stock market crash soured by the Covid-19 pandemic, and its share price now sits higher than it did before the crash.