Jeremy’s Next Move: Tucano Gold Takes Over Great Panther’s Tucano Mine in Brazil
Jeremy Gray, CEO of the private gold companies Pilar Gold and Laiva Gold, has done it again – for the third time. Following the acquisition of Equinox’s Pilar Mine in Brazil (April 2021) and the Laiva Mine in Finland (October 2022), now comes the largest transaction to date: the takeover of Great Panther’s former flagship project, the Mina Tucano Mine, by the newly founded Tucano Gold (October 2023), again in Brazil.
The logic behind all deals is always the same. In true contrarian fashion, Gray and his group are using the slump in the gold market as an opportunity to acquire financially distressed production-ready gold assets, including infrastructure and permits, for a fraction of their replacement value.
The advantage of the private group compared to publicly listed competitors is their ability to make quick decisions. Jeremy Gray likes to refer to his portfolio companies as the “fastest growing group of gold companies that no one knows yet.” This is likely to change if the three affiliated but independent companies Pilar, Laiva, and Tucano actually manage to produce a combined 300,000 ounces per year by the end of 2024. With such performance, Tucano, Laiva, and Pilar, or a sensible combination of these companies, would undoubtedly prove to be attractive IPO candidates. Especially in a strong environment for gold. Jeremy also has a catchy image for this: You play cricket in summer, not in winter.
In the specific case of Tucano, the acquisition, including legal fees, costs around $4 million USD. The replacement value of the mine including infrastructure is likely to be hundreds of millions of dollars. The mill on the project, with a capacity of 10,000 tons per day, is the second-largest gold processing plant in all of Brazil. The operation includes a state-of-the-art CIL plant with a capacity of 3.5 million tons per year, which produced an average of 134,000 ounces per year from 2014 to 2020. In 2020, Mina Tucano generated an EBITDA of over $80 million US. In 2022, the mine produced 60,000 ounces in the first 9 months before operations were unexpectedly halted.
According to a 43-101 report updated by Great Panther on June 8, 2022, the mine has proven and probable reserves of 12.9 million tons at 1.59 g/t for 656,000 ounces. The M I resource amounts to 1.8 million ounces with significant expansion potential. The associated land package alone covers an area of 90 x 30 km outside of immediate mining activities. More than 90 percent of creditors formally approved the change of ownership in court on September 15.
Tucano Creditors Agree to Halve Their Claims
The creditors were willing to agree to a dramatic reduction of their claims by 40 to 50 percent. Only through the operation of the mine can they hope that their remaining claims will be serviced in the long term. The new owner Tucano Gold was also granted generous deadlines for the payment of the remaining claims amounting to around $60 million USD. The creditors have agreed to a 3-year payment deferral. But it’s also about securing around 1,000 jobs. As early as next year, Mina Tucano aims to be the largest employer in the Brazilian state of Amapá again.
Gray and his Pilar group have earned their reputation as deal-makers and turnaround specialists in Brazil, but also beyond, especially over the past two years. At the Pilar project, the local team is proving that it’s possible to successfully run an underground mine with average gold grades of only 1 g/t – despite inherited deficiencies and legacy issues. The respect for the high competence of the Pilar team was likely one of the trump cards in negotiations with creditors. This certainly also applies to the spectacular takeover of Europe’s largest gold processing plant, Laiva in Finland. Its creditors, including a Blackrock fund, are now shareholders of Pilar. The restart of the Laiva Mine is planned for next spring.
Tucano Production Start Already in November 2023 – First Underground Mining in 2024
The Tucano Mine is set to gradually resume production starting from November this year. For the first time in the mine’s history, underground production is planned for 2024. The extensive experience of the Pilar team should be particularly helpful in this regard, especially since the underground ore body in Tucano shows average grades of 5 g/t, which is many times higher than the values at Pilar.
The subscription period for the seed round ends on Friday, October 13, 2023
Due to strong investor interest, Tucano Gold has decided to increase the capital raise to C$10 million at $0.50 per share. This offering is priced at a post-financing valuation of only ~C$20 million. At the same time, Tucano Gold is expected to start operations with a cash balance of about US$10 million. Investors in this round of Tucano Gold will also benefit from the planned spin-off of Tucano Exploration in 2024. Tucano Exploration will own arguably the largest and most promising properties of any junior explorer on the Guiana Shield, surrounding the Tucano Mine. The subscription period for the seed round is expected to end on Friday, October 13, 2023.
More information on this is available at: http://eepurl.com/izRS4-/
A very informative video interview with Jeremy Gray can be found below:
