Interview with Theta Gold Mines Limited
Interview Theta Gold Mines: This team has already brought 20 mines into production
time to read: 9 minutes | The interview was conducted by Nico Popp on May 28th, 2021 in Australia (AUS).
Chairman | Theta Gold Mines Limited
Level 35 (ServCorp), Intl Tower One 100 Barangaroo Ave, 2000 NSW Australia (AUS)
+61 2 8046 7584
Table of contents:
Requirements for success
news|financial: "You have set yourself the goal of developing a high-growth gold company. What are the prerequisites for this?"
"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
Theta Gold Mines has a promising property with great potential. We have doubled our resources within the past three years and currently have 6 million ounces in the ground. Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. Also, the actual capital expenditures to bring our project into production step by step starting in 2022 are low. In addition, there is further exploration potential, which gives us the chance to positively surprise the market even after production begins. We are sitting on massive gold deposits, which are the best conditions for us to grow.
news|financial: "Tell us more about how you plan to process the mined rock!"
We plan to bring our underground mines into production first. There we expect high concentrations between 5.5 g/t and 6.5 g/t gold. That means that we can increase the gold content again to around 8g/t through preliminary operations before the rock is finally processed in a central mill. Specifically, the high grades have the advantage that the mill's capacity does not have to be as large as for rock with low grades.
Metals & Mining Conference - What the industry thinks
news|financial: "You have just participated in the Metals & Mining Conference Europe. How do you assess the current situation on the gold market, and what does this mean for smaller companies?"
"[...] Many investors expect a rising gold price but are cautious because of the consolidation during the past months. It is precisely in this environment that Theta Gold Mines scores, leaving many similar companies behind. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
The conference was a success for us! Theta is characterized by low costs at all levels. It applies to the transformation to a gold producer and also to the specific mining costs. This risk-reward profile is currently very well received by investors. Many investors expect a rising gold price but are cautious because of the consolidation during the past months. It is precisely in this environment that Theta Gold Mines scores, leaving many similar companies behind. Many investors recognized this during the Metals & Mining Conference.
Experience of the management team
news|financial: "Good conditions are important, but a young company must be able to seize these opportunities. Your team has developed 20 gold and copper projects in the past. Please outline your management team and their experience."
We have all successfully developed and brought projects into production in the past. In addition to experience in Australia, Europe and Asia, we also know Africa very well. Finn Behnken was CEO of Tshipi é Ntle Manganese Mining in South Africa and led the Company during the mine's construction phase and its initial production phase. Mitford Mundell (CEO) and Jacques Du Triou (COO) has overseen several mining projects in South Africa through various stages of development. Among others, Jaques was responsible for the deepening of Doornkop South Reed for Harmony Gold and worked on the Kalgold open pit project. I have 28 years of mining experience and have worked for Longford Resources and Bligh Resources, among others. At Jupiter Mines, I was Exploration Manager. This combined experience will help us achieve our goals in South Africa.
Even though every mining project has its peculiarities, there are also commonalities. Developing a mine requires staying power and forward planning. Knowing South Africa, we knew how the development of a mining project works in this legal framework. Historically, one can see some very good examples of companies that started small with promising projects and are now billion-dollar companies. One example is Northern Star in Australia. In 2009, the Company had AUD 7 million in market capitalization. Ten years later, it was worth more than AUD 10 billion. At Northern Star, too, half of the success is due to the property and the other half to the strong management team.
Special features of Transvaal
news|financial: "Your project is located in South Africa's Golden Triangle. What is so special about this region?"
"[...] The Golden Triangle is geologically very interesting and similar to the Carlin Trend in the United States. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
South Africa is one of the most important countries for the production of gold. The Golden Triangle is geologically very interesting and similar to the Carlin Trend in the United States. The Carlin Trend unearthed between 17% and 19% of the world's gold deposits. There are sizeable sedimentary basin deposits there that extend for several kilometers. Exploration companies can use these structures as a guide and discover new deposits more easily. Not far from the Golden Triangle is the Bushveld Complex, a very metal-rich structure that contains massive platinum reserves. It is believed that the Bushveld is the origin of the gold deposits in the Golden Triangle, which contributed to more than 40% of the world’s accumulated gold production to date.
Step by step to success
news|financial: "What advantages do you expect from bringing four mines into production in five years?"
"[...] By growing organically, we keep capital expenditure low and avoid unnecessary dilution or interest payments. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
We are taking a step-by-step approach and expect to reap significant benefits. By growing organically, we keep capital expenditure low and avoid unnecessary dilution or interest payments. We have all the prerequisites for this approach in the Golden Triangle. We first want to bring the existing underground mines back into production and then start open-pit mining. Typically, open-pit mining is considered cheaper. In our case, however, the existing underground mines offer the advantage of high grades and we save costs. The mining process in the mines allows vehicles to enter the pit relatively shallow and remove the rock. That further underlines our attractive cost structure. From the cash flow of the first mines, we intend to gradually increase capacity. Our target is 160,000 ounces of gold per year. In the long term, we also intend to pay dividends. The flexible approach of developing the mines step by step allows us to have these plans in mind already today.
South Africa as a mining location
news|financial: "What role does South Africa as a mining location play in your strategy?"
An important one. We work in underground mines that were already in production, which gives us a decisive cost advantage. As South Africa is a mining country, flexible plans can be implemented better here than elsewhere. There are specialized service providers here who understand their business and who can support us at any time.
news|financial: "You updated your feasibility study at the end of April. Could you outline some details of that?"
"[...] As inferred resources are not allowed to be transferred to a mine plan, further exploration will result in the mine's actual life being revised upwards as it operates. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
Compared to the previous study, we managed to optimize some parameters again significantly. The mine is expected to operate for 7.67 years. The investments will have paid for themselves after just thirteen months of production. The operating cash flow of the mine is expected to be generate 241million USD EBITDA. In the new study, the internal rate of return (IRR) increased significantly to 82%. As inferred resources are not allowed to be transferred to a mine plan, further exploration will result in the mine's actual life being revised upwards as it operates. Investors should also keep in mind that we at Theta Gold Mines are very conservative in our calculations. The feasibility study is based on a calculated gold price of USD 1,570 and excluded 3.5 Moz of inferred underground resources not in current mine plan. Once again, there is potential from this.
news|financial: "You have received buy out offers in the past. Since then, the gold resources of Theta Gold Mines has more than doubled. What potential is there today?"
I want to refer to a competitor of ours. Cardinal Resources has a 5 million ounce gold project and received an initial takeover bid in 2020 at AUD 0.35 per share. After that, another interested party bid AUD 0.60 per share. In the end, the takeover was closed at AUD 1.10. We see great potential in our projects and are convinced that the resource potential are much bigger here. Added to this is the orientation of our entire team: We know how to bring mines into production and what potential can arise from them. We often get the question of “are you willing to sell the asset/company?” The Board would make the right recommendation to our shareholders if a premium offer be made to Theta; otherwise we will continue to pursue our production and expansion strategy.
ESG as a success factor
news|financial: "Your ESG program is very important to you. What role does sustainability play when it comes to getting residents and employees excited about a long-term project?"
"[...] We allow local residents to participate in the project and expect our mines to have positive economic effect for over 20,000 people in the vicinity. We are also committed to education and environmental protection. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
Mining is not a one-way street. For us, it is not about just getting the gold out of the ground. We can only have long-term success if our employees, their families, and local residents benefit from our project. To this end, we are implementing an ESG program that is very important to us and applied at various levels. We allow local residents to participate in the project and expect our mines to have positive economic effect for over 20,000 people in the vicinity. We are also committed to education and environmental protection. We will ensure that our project even has a positive effect on the groundwater table and that the impact on the environment is as small as possible. Should we bring more mines into production, Theta Gold Mines could leave its mark on the region for another thirty years. We accept this responsibility and see it as an opportunity to have a positive long-term impact.
Better than the competition?
news|financial: "Which aspects ensure that Theta Gold Mines offers a better risk profile than the competition?"
"[...] The team has collectively brought 20 mines into production. We all have a long history and have worked for Harmony Gold or Jupiter Mines here in South Africa. That means we know our way around one of the top mining regions in the world and are also well connected. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
The move to production can be challenging for inexperienced teams. We do not have that problem. The team has collectively brought 20 mines into production. We all have a long history and have worked for Harmony Gold or Jupiter Mines here in South Africa. That means we know our way around one of the top mining regions in the world and are also well connected. High gold grades characterize our property. High grades ensure low costs and are not an aspect that investors pay attention to for nothing. In addition, we operate in existing mines and will bring them back into production, which ensures that capital expenditures are also lower than elsewhere. Here, the existing infrastructure also plays into our cards, which, in addition to electricity, roads and water, already includes an office building and a tailings pond. In addition, we will be able to gradually expand our reserves very simply during ongoing operations. This mix is unique and makes Theta Gold Mines a very promising Company.
news|financial: "When do you plan to produce the first gold?"
Give us 12 -18 months, and we’ll deliver an operational gold mine site.
news|financial: "Thank you very much for talking to us."