Gold Co. Oversubscribed in CA$3.4M Private Placement

Source: Streetwise Reports 10/24/2024

The Canadian junior intends to use the funds to progress and optimize its advanced-stage gold project in Liberia. Learn more about this Buy-rated company and its post-feasibility study asset.

Pasofino Gold Ltd. (VEIN:TSX.V) secured subscription agreements for all of the 4,806,767 units available for issuance through its non-brokered private placement announced earlier this month, noted a news release. Sale of the units, at CA$0.70 each, is to generate gross proceeds of CA$3,364,739. The offering should close on Monday, October 28, 2024.

Each unit consists of one common share of Pasofino and one-half of one common share purchase warrant. With each warrant, the holder may purchase one Pasofino common share for CA$0.90 during the 18 months after the issue date of the units. The demand for the offering was extremely high, and all of the participants ended up being reduced on allocation.

Pasofino’s two largest shareholders and insiders, Hummingbird Resources Plc. (HUM:AIM) and ESAN (Esan Eczacibasi Endustriyel Hammaddeler Sanayi ve Ticaret Anonim Şirketi) did not participate in the financing, allowing for new shareholders to come into the stock. Currently, Hummingbird owns 52.95%, and ESAN holds 10.01%, according to Reuters. Hummingbird will hold 50.43% of the issued and outstanding common shares of Pasofino after closing.

Pasofino will use the private placement proceeds to conduct further optimization studies on its bankable feasibility study announced in 2022 on the Dugbe gold project in southern Liberia and for general working capital purposes.

Mining Executive Joins Board

In other related news, Pasofino appointed mining and metals professional Brett Richards as a non-executive director to its board. His 37 years in the industry include experience in operational management, project development, construction, and corporate business development.

During his career, Richards drove transformational change, led mergers and acquisitions, and participated in finance and development, particularly in West Africa. He has held several chief executive officer roles and now is on the boards of Nickel 28 Capital Corp., Goldshore Resources Inc. (TSXV: GSHR; OTCQB: GSHRF ; FWB: 8X00), and Midnight Sun Mining Corp. (MMA:TSX.V; MDNGF:OTCQB).

“His extensive experience and deep understanding of the mining sector will be instrumental as we work towards realizing our vision and maximizing shareholder value,” Pasofino Chairman Dan Betts said in the October 4 release. “We believe his diverse experience and building three mines over 15 years working in Africa is crucial for Pasofino’s ongoing projects and will benefit the strategic direction and growth of the company in the coming years.” Brett is expected to take on a leadership role in Pasofino through these next phases of development.

Developing a Gold Project in Liberia

Headquartered in Ontario, Canada, Pasofino Gold Ltd. is a mineral explorer-developer advancing its Dugbe gold project, spanning 2,078 square kilometers in the southwestern corner of southern Liberia’s Birimian Supergroup. This collection of rich gold-bearing rocks is a major source of gold in West Africa, according to Africa Mining IQ. Dugbe, about 70 kilometers (70 km) from the Greenville sea port, is accessible by road and air.

Pasofino came to own Dugbe per an agreement with then-project owner Hummingbird Resources, entered into in June 2020. By advancing Dugbe through an exploration program and a feasibility study, Pasofino earned a 49% interest in the project. Subsequently, Hummingbird converted its 51% interest in Dugbe into a 51% controlling interest in Pasofino in late 2023. Then, in January of this year, Hummingbird increased its stake in Pasofino by 53% via a US$2 million (US$2M) investment. Today, Pasofino owns Dugbe through its wholly-owned subsidiary, ARX Resources Ltd.

“For investors and industry observers, the progress of Pasofino Gold’s Dugbe gold project represents an important development in the West African gold mining sector,” CityBuzz wrote in August. “As exploration continues and more resources are potentially identified, the project could become a significant contributor to the global gold supply, potentially impacting gold prices and market dynamics.”

The Dugbe feasibility study (FS) is based on the Dugbe F and Tuzon deposits and the results of extensive exploration work by Hummingbird and Pasofino, including 82,000 meters of core drilling. Completed in June 2022, the FS outlines an open-pit operation producing 2,270,000 ounces (2.27 Moz) of gold over a 14-year mine life, with an output of 200,000 ounces per annum for the first five years, at an all-in sustaining cost of US$1,005 per ounce (US$1,005/oz).

At a US$1,700/oz gold price, the economics would be a US$530M after-tax net present value discounted at 5% and a 23.6% internal rate of return. An Inferred resource of 2.88 Moz of 1.58 grams per tonne (g/t) gold, in and adjacent to the outlined open pit, not included in the FS, is upside. At a US$2,600 gold price, the economics compound materially, including a post-tax NPV8 of $1.108B, with a post-tax IRR of 42.5%, with a US$405 pre-production CapEx using FS operating costs and AISC of US$1,005. However, there is significant scope to optimize the FS from a cost and recovery standpoint in this current environment, and management feels they can improve the economics by greater than 20%. while maintaining CapEx and OpEx estimates.

Additional upside also exists in the present expansion and exploration potential. The Dugbe F and Tuzon deposits remain open, and within a 10 km radius of them, there are many drill-ready gold prospects, according to Pasofino’s website. These include the Bukon Jedeh area and the DSZ target on the Tuzon-Sackor trend, where the company discovered a broad zone of surface gold mineralization in trench and outcrop along strike from Tuzon. Sampling from this area returned gold grades up to 31 g/t.

Pasofino has a mineral development agreement (MDA) for Dugbe in place with the government of Liberia, securing mining rights and terms for 25 years. According to the MDA terms, the royalty rate on gold production is 3%, the income tax rate payable is 25% (with credit given for historic exploration expenditures), the fuel duty is reduced by 50%, and the Liberian government is granted a free, 10% carried interest in the project. This MDA de-risks the mining license application for Dugbe, according to Pasofino’s investor presentation.

Liberia, a stable democracy since 2013, has a pro-mining government. The country was Africa’s first, according to Hummingbird, to comply with the Extractive Industries Transparency Initiative, a global program promoting transparency and accountability in the management of mineral and other resources. Liberia’s mining laws, based on those in Australia, provide stability and clarity to the industry, noted CityBuzz.

Surrounded by rich gold, diamond, and iron ore deposits, Liberia has a well-established and growing mining industry, particularly with respect to gold, according to Africa Mining IQ. Mining is a significant contributor to the country’s gross domestic product. Last year, mining was a major driver of economic growth in the country, according to the World Gold Council. In 2023, gold production there was 19.9 Moz.

Gold Stocks Breaking Out

The gold market is continuing to heat up, experts say, with the price of the yellow metal having surpassed US$2,700/oz, another all-time high.

Once gold breaks through US$2,800/oz, according to Technical Analyst Clive Maund, it should “go into vertical melt-up mode” based on the charts. “The gains in all gold-related investments at this time should be spectacular.”

FXEmpire Analyst Christopher Lewis thinks gold will reach US$3,000/oz, he wrote in an October 15 article. Factors supporting gold continue to be the U.S. dollar, the Federal Reserve’s monetary policy, central banks’ gold buying and geopolitics around the globe. Short-term pullbacks in the gold price are buying opportunities, Lewis added.

Throughout 2025, other experts estimate the gold price will range from US$2,800–3,200/oz, according to a recent Skilling article. Longer term, analysts predict it could reach US$6,800/oz by 2040, representing a 7.2% annual rate of return. Central bank policies, global economic trends and inflation are forecasted to keep influencing the price.

Brien Lundin of Gold Newsletter predicted a gold price of US$6,000/oz by the end of this bull market cycle, he wrote in the Oct. 18 issue.

What has changed recently is the gold market, purported Ron Struthers of Struthers Resource Stock Report, is that gold stocks have started to out of their doldrums. The valuation gap between gold stocks and gold itself has started to shrink.

“With the gold stocks, we are looking at the investment opportunity of a lifetime,” he wrote in the Oct. 17 issue. “Since the 2000s, there has never been such a divergence between gold and the gold stocks.”

Gold miners’ stocks look to be moving closer to a “critical psychological tipping point,” purported Adam Hamilton of Zeal LLC on Oct. 18. He explained that “when traders flock to gold stocks to chase their upside momentum, massive uplegs ensue where doublings-plus aren’t uncommon. And across entire bull markets, total gold-stock gains can exceed an order of magnitude.”

For a major technical breakout to happen, added Hamilton, the VanEck Gold Miners Exchange Traded Fund (GDX:NYSEARCA) has to move a little bit higher. Such movement should accelerate the tipping point happening.

Gold Newsletter’s Lundin highlighted junior mining stocks recently.

“We’re in a long-term, secular bull market,” he wrote. “And we need to be positioned for it. One of the best ways, of course, is through high-quality junior mining equities.”

Of the three types of mining companies, majors, mid-tiers, and juniors, the juniors offer the greatest leverage to increasing commodity prices and the highest potential return, Ahead of the Herd’s Richard Mills purported recently.

“Investing early in the development cycle of the right gold junior, one that has an excellent project in a safe jurisdiction, led by experienced management with the ability to raise money, can reap huge rewards,” Mills wrote. “Five, 10, even 20 times your money isn’t uncommon.”

The Catalyst: Project Advancement

The next steps for Pasofino, all potential catalysts, include the completion of two key components of progressing Dugbe toward the development phase, according to the company’s Investor Presentation.

One is exploration drilling and trenching of additional targets. The other is the process of obtaining environmental and social impact assessment regulatory approval.

Stock is a Buy, Analyst Says

After reviewing Pasofino’s stock chart, Technical Analyst Maund told Streetwise Reports that the share price is trending up.

“Recent reaction has brought it back to a Buy area,” he wrote. [OWNERSHIP_CHART-11178]

Ownership and Share Structure

According to Refinativ, eight insiders together own 69.59%, or 78.1 million (78.1M), shares of Pasofino. As noted, the largest shareholder is Hummingbird with 52.95% or 59.43M shares, followed by ESAN with 10.01% or 11.23M shares.

The other three investors of the Top 5 are Pasofino Deputy Chairman Stephen Dattels with 4.13% or 4.64M shares, Pasofino Chairman Daniel Betts with 1.34% or 1.5M shares, and Pasofino Director Robert Metcalfe with 0.69% or 0.77M shares.

Given the lack of institutional investors at this time, the remaining 30.41% of Pasofino is in retail.

The company has 112.23M outstanding shares and 34.13M free float traded shares.

Its market cap is CA$52.88M. Its 52-week high and low are CA$0.80 and CA$0.30 per share, respectively.

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( Companies Mentioned: VEIN:TSX.V, )

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