GOLD: Firesteel to buy, restart Laiva gold mine in Finland

Firesteel Resources intends to reactivate the past producing Laiva gold mine located in central Finland, near the Gulf of Bothnia, in early December and begin producing gold in August 2018. To fund the project, it has entered a definitive prepaid forward gold purchase agreement with Pondion Mine Finance for US$20.6 million. Firesteel intends to buy an additional 50% interest in Nordic Mines Marknad, making it a 60% owner of Nordic, itself the 100% owner of Laiva. [caption id="attachment_1003721064" align="alignnone" width="451"] The snow covered Laiva gold mine in Finland. Credit: Firesteel.[/caption] The company says it will immediately execute its option to buy out the remaining interest by issuing 66 million shares when it receives the cash. “It’s not an un-daunting project by any means,” Firesteel president and CEO Michael Hepworth says. “There are some mining challenges, but we think we’ve got answers to it. We’re just waiting for the cash to come in and we’ll start operating in January.” Firesteel will use US$4-6 million of the money to refurbish Laiva’s plant. “The leach tanks need some work,” Hepworth says. “Some of the conveyors need work. Some of the pumps need to be replaced.” Pondion will advance the money in one tranche in early December as partial consideration for a total 67,155 oz. gold delivered within 17-60 months. Firesteel has not completed a feasibility study or reserve estimate at Laiva. It intends to move forward with a combination of historical data and its own resource estimate. “We are basing our numbers and production plans on reports done by (consulting firms) JT Boyd and RPM Global,” Hepworth says. “JT Boyd has been working with us since March and has done extensive calculations and financial modeling for us. Unfortunately, because these numbers are not National Instrument 43-101 compliant, I can’t release the information. That said RPM and JT Boyd agree on the numbers and Pandion is doing the gold forward sale based on the numbers. We are currently working to have this information converted into a PFS and will release the details as soon as it is ready, but it won’t be for several months.” Firesteel’s resource estimate shows 3.8 million measured and indicated tonnes grading 1.2 grams gold per tonne for 151,000 contained oz. gold plus 9 million inferred tonnes grading 1.5 grams gold for 445,000 contained ounces gold. It plans to infill drill an additional 20,000 metres to convert inferred resources to probable reserves. Laiva would have two open pits operating at 6,000 tonnes per day. The 17 sq. km project is already fully permitted. Hepworth says he sees this as the first step in a company transition from being an explorer to a junior producer. “We’re looking for less risk and potentially bigger upside,” Hepworth says.  “Here’s a project that’s had €220 million spent on it, and we’re picking up 60% of it for CAD$20 million — it’s a lot less than 10% — and the project is largely de-risked. Now, if we were to spend $20 million on one of our other exploration properties, we still wouldn’t know whether we had a mine.” Nordic spent $300 million on the project before shutting it down. Production at Laiva peaked in the second quarter of 2013 at 12,344 oz. gold. It cast first doré in 2011 but closed in early 2013. Nordic released an updated reserve report in 2015 and a preliminary economic assessment in 2016. Hepworth says Laiva shut down for several reasons including: insufficient metallurgy, poor recoveries, plant utilization and mining practices that resulted in severe dilution and a €70,000,000 hedge book that turned against them. He intends Firesteel to mine more selectively than Nordic, which he says blasted ore and waste at the same time and brought too much oversized material through the mills. “These came together like a perfect storm and very quickly put them out of business,” Hepworth says. “Their all in sustaining costs were around US$1,760 per ounce. “It’s just an unusual set of circumstances where we’ve got a bankrupt company, but all the work has been done and it’s been thoroughly checked.” Laiva’s host rock is dominated by intermediary to basaltic volcanic rock and quartz diorites. Nordic also owns three exploration properties within 2 km of Laiva totaling 43 sq. km. “It’s built into our budget that we will be exploring those,” Hepworth says. “And it’s permitted for exploration.” Nordic acquired Laiva in 2005 and completed the last reserve estimate in January 2015. It estimates Laiva contains 9.4 million proven and probable tonnes grading 1.19 grams gold for 395,000 contained oz. gold. A November 2013 report estimated 24.3 million indicated tonnes at 1.13 grams gold (885,000 contained oz. gold) and 4.37 million inferred tonnes at 1.64 grams gold for 231,000 contained oz. gold. Trading of Nordic shares was discontinued in July 2017. It recorded no revenue in 2017.