Today, we will be assessing a new business that has delivered very interesting results in the last two years; FIRST MNG FIN CORP (OTCMKTS:FFMGF).
There are several things to highlight in this Canadian mining company. Firstly, the company’s financial situation.
FFMGF has a tremendous amount of assets and very little liabilities, which we appreciate much.
But, that’s not all.
The company is growing at a faster pace and the market is reacting. A large amount of other mining businesses have been acquired by FFMGF providing new assets, know-how, and credit to the company.
We believe that these acquisitions originated the increase in share price seen in 2016 and the first part of 2017.
Have a look at it before we provide some more details:
Business and Mineral Properties acquired
First Mining Finance Corp. was formed on April 4, 2005 in Alberta, Canada, and is headquartered in Vancouver, British Columbia, Canada.
The company is focused “on the acquisition of high-quality mineral assets and exploration and evaluation of its North American property portfolio.”
As we said, the number of acquisitions has been large.
A reverse merger was executed on March 30, 2015 when the company acquired a private business called KCP Minerals Inc. As a result of the transaction, the shareholders of KCP obtained control of the consolidated entity.
We believe that it was a great corporate move for both companies. The net assets of both KCP and First Mining Finance Corp. increased and FFMGF acquired a new business model. Additionally, KCP obtained access to the financial markets by becoming a public company, which provides recognition, and cheap financing.
It did not end there.
The following were, which we believe, the most significant transactions executed. Please note the large amount of mineral properties acquired.
- On December 31, 2015, Coastal Gold Corp. acquiring CAD$16,563,815 in net identifiable assets including CAD$17,466,287 in mineral properties.
- On July 7, 2015, Gold Canyon Resources Inc. acquiring CAD$66,102,809 in net identifiable assets and CAD$66,170,491 in mineral properties.
- On November 16, 2015, PC Gold Inc. acquiring CAD$14,966,113 in total assets including CAD$15,308,538 in mineral properties.
- On April 8, 2016, Clifton Star Resources Inc. acquiring CAD$20,516,267 in total assets including CAD$4,980,624 in mineral properties.
- On June 9, 2016, Cameron Gold Operations Ltd. acquiring CAD$25,960,055 in total assets including CAD$25,799,192 in mineral properties.
- On June 16, 2016, the company executed an amalgamation with Tamaka Gold Corp.; CAD$83,562,753 were exchanged.
Nowadays, the amount of mineral resources is, therefore, quite large. Have a look at the following table that we acquired from the company’s website. Remember to note the large amount of measured resources in Cameron and Duparquet; these are the most advanced projects. Additionally, note the large grade of gold hidden in these mineral properties. If gold price increases, the share price could take off.
The total amount of assets went from less than $5 million to more than $200 million in less than three years, which is astonishing. The reaction of the market was obvious. If the company grows its business and the assets increase, the intrinsic value of the stock increases and the market price reacts positively.
The key is that the company did not use debt to acquire. Market participants trusted the company and many acquisitions were made using stock.
On September 11, 2017, the company announced seventh and final set of assay results, comprising 26 drill holes from its Phase 1 infill diamond drill program, at the Goldlund Gold Project in Ontario, Canada. The company noted the following gold grams per ton gold:
- Hole GL-17-103 intersected 52.0 metres of 2.18 grams per ton gold
- Hole GL-17-069 intersected 66.0 metres of 1.51 grams per ton gold
- Hole GL-17-068 intersected 68.0 metres of 0.91 grams per ton gold
- Hole GL-17-041 intersected 60.0 metres of 1.02 grams per ton gold
We believe that these are interesting gold grades, but that’s not the most significant. We believe that the most interesting and new fact is the following new development: “a Phase 2 drill campaign to identify new areas of gold mineralization and to expand the overall resource base at the Goldlund property.”
This means that the company will be able to measure new resources in the area soon. It was said that new estimated resources may be ready in 2018. Readers need to follow the news closely, as if new resources are measured and the gold grades are high, the share price could take off.
Keith Neumeyer, the Chairman of First Mining, explained:
“We are very encouraged by the assay results from the Phase 1 drilling at Goldlund and I believe that further drilling with the Phase 2 program has the potential to add ounces to the existing resource and further advance this project.” Source
The good news continued in September.
On September 21, 2017, the company announced the positive results provided by SRK Consulting for its Springpole Gold Project in northwestern Ontario, Canada. The study showed the following astonishing financial results for a case scenario of $1,300 per ounce of gold and $20 per oz of silver.
- Total estimated capital expenditures of $703 million over the projected 12-year mine life.
- After-tax NPV at a 5% discount rate of $792 million and after-tax IRR of 26.2% for the base case.
- Estimated payback of initial capital in 3.5 years from the commencement of commercial production.
We believe that market participants will be able to understand how good is IRR of 26.2%. The market did not seem to react to this information, which we didn’t really understand.
On October 26, 2017, the company provided an update on the Springpole Gold Project. It was noted that the company was already contacting departments of the Canadian (federal) and Ontario (provincial) governments. A project description is being prepared to be filed to the Canadian Environmental Assessment Agency. It is expected that it will be filed before the end of 2017. Additionally, the company intends to contact local stakeholders to negotiate future agreements.
We appreciate these new developments, as the start of production seems closer. We also appreciate the tone of the words of directors. Read the following form Keith Neumeyer, the Chairman of First Mining:
“I believe that moving Springpole forward is the best way to add considerable value for our shareholders and I’m confident that the permitting process for Springpole will be successful.” Source
On October 30, 2017, the company noted that it had filed on SEDAR the Preliminary Economic Assessment prepared by SRK Consulting. The good news is that the report is in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). It will help international operators understand the way the company measures reserves. In addition, we need to highlight the following words from Keith Neumeyer, First Mining’s Chairman, about the project:
“The PEA demonstrates that Springpole has excellent margins with low cash costs of US$619 per ounce of gold equivalent and an average annual payable production of 322,000 ounces of gold equivalent, over the life of mine. On that basis, once in production as contemplated by the PEA, Springpole would be one of the largest gold mines in North America.” Source
Currently trading with a market cap of $223 million, FFMGF is an exciting story among small caps. With $16 million in cash, $206 million in total assets and $0.4 million in total liabilities, the financial situation is sound. To sum up, there is a lot to like on FFMGF!
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Image courtesy of Neal Wellons via Flickr
Disclosure: We have no position in FFMGF and have not been compensated for this article.