Can you give an overview of Montage Gold and the company’s operations?
Montage Gold is an early-stage exploration and development company focused on unlocking the potential of our flagship Koné Gold asset in Côte d’Ivoire, West Africa. We are not yet in production, and up to this point, our activities have all been exploration and engineering of the project. We will be completing the engineering process by the end of 2023 and hope to make a development decision in Q1 2024, which will naturally lead to financing the project, hopefully relatively quickly, after which we will commence with construction.
Montage is a spin-out of a company called Orca Gold which was sold to Perseus Mining in February 2022. Prior to Orca Gold, our management team ran a company called Red Back Mining in West Africa, which went from a pre-development company to a 500,000 ounce per year gold producer. We eventually sold Red Back Mining to the Canadian gold company Kinross in a very significant deal. This is evidence that Montage is led by a team recognized for discovering, building, operating, and growing major gold deposits in West Africa. We start by identifying what we think are going to be actual viable projects, and then we proceed to evaluate them and, if warranted, make the decision to develop them. This leads to various types of optionality on the corporate side, but we have done everything from selling early to taking a project all the way to production and creating mining companies.
Can you elaborate on the feasibility you saw at the Koné Gold project?
The Koné Gold property was staked and acquired By Red Back Mining in 2008/2009 when I was CEO. When we sold Red Back Mining to Kinross, the project was caught up in Kinross for many years, but we were finally able to convince Kinross to sell it back to us. Why we were interested in this ground as Red Back Mining was that this area in West Africa - this Archean Greenstone Belt that is Côte d’Ivoire, Ghana, Senegal, Mali, Burkina Faso, etc. - is prolific with a substantial number of mines on it, and in our view, most of those deposits are controlled by structural geology. Our head of exploration, Hugh Stuart, who has been one of the biggest gold mining discoverers in Africa, certainly in this era, said that we had an opportunity to acquire ground that looked great geologically and was grassroots with no work done on it. We acquired the land, were the first ones to ever own and explore it, and in early 2024, we will make a development decision.
What will the role of gold be in the economy over the coming few years?
The role of gold has historically been the same for hundreds of years and is effectively a hedge, or insurance, against currencies and instability in the markets. This is effectively still what drives gold, but supply and demand are also a factor in the gold price. Being a gold producer at $1,900 and having an all-in sustaining cost under $1000 is extremely profitable. The producers are doing extremely well in terms of the current price of gold, generating significant cash flow and value for their shareholders. The problem is that the explorers and developers have to rely on the equity and the debt markets to get the financing to put projects into production.
There is a huge disconnect between the producers and the exploration companies in the gold space because of cash flow, cost of capital and availability of capital.
Fluctuations in the gold price are a reflection of the world economy, the central banks, and governments. They are using their financial and economic tools to try to deal with inflation and hold off recession, and this is changing interest rates.
Gold does not have an interest rate, and people are jumping towards other financial instruments for low risk and some positive return.
That being said, the central banks have a broader view of gold, generally, we are seeing them accumulate gold. Gold price is thus sustained by central bank buying - supply and demand - and to some degree by the broader investment market. Unfortunately, the gold equities are trading at a huge disconnect from the current gold price notwithstanding the strong financial performance of gold producers.This discrepancy is even more evident in the value of explorers and developers. This disconnect in the market is going to cause a problem for the producers in terms of replacing their resources. There has been extremely little grassroots exploration due to lack of funding and, consequently, the number of projects that can potentially become mines in the near term are limited; it is probably going to take 10 years to catch up to the gold market demand. The gold price will continue to increase based on supply and demand analysis as the majors are not funding greenfield exploration anymore, and the commodity will become scarcer.
What challenges are you currently facing in efforts to grow Montage?
We are very fortunate that we have a spectacular project and were able to engineer the project by applying low gold prices – there is a large spread between the pricing we are using for our engineering and the current gold price. When a bank comes in to evaluate a project, they stipulate a certain spread they require the project to have that will cover their downside against a fluctuating gold price. Many projects now coming into the financing market (although these are few and far between) are using gold prices very close to the spot price in their pre-development studies, and thus they are not getting bought by other companies or financed easily. Deals on these projects will only happen when gold sustains over $2000. There is, however, a good chance that the gold price will increase to this level soon, as we are nearing a perfect storm over the next six months to a year as the feds try to deal with the issue of interest rates and resource replacement declines over the next 10 year period.
Why are you passionate about the gold industry?
As a young man I got fascinated with rocks and then with how huge and important the mining business is to the world. For example, as a collateral benefit to mining, when we started building a mine in Ghana in 2004 we were treating approximately 700 cases of malaria a month in the local community. Five years later, we were only treating 20 cases. Making a difference to local communities and propagating wealth in underdeveloped areas drives me forward. The world cannot function without mining and the industry will always remain key for economic and social development, especially in Third World countries who are rich in natural resources and ready to trade.
