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Medgold brings in the big-hitters to Portugal and Serbia

Wednesday, October 12, 2016 5:25
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Medgold Resources Corp (CVE:MED) has signed up two separate billion dollar mining companies to share risk and provide finance for assets in Portugal and Serbia.

It’s an enviable position to be in, but it hasn’t come out of the blue.

Medgold got into position early, backing a Portuguese asset portfolio into a Canadian shell back in 2012, in the days when mining equity markets were on their knees and not many people were daring to put their heads over the parapets.

But Medgold is run by a seasoned team of mining veterans, led by Canadian entrepreneur Simon Ridgway as chief executive and seasoned explorationist Dan James as President.

Alongside these two sits Ralph Rushton, a former Anglo man, who worked with Ridgway for many years as an integral part of his team. There’s also Jeremy Martin, the key man at Horizonte Minerals (LON:HZM) and David Hall, another old Anglo hand, whose worked with both Rushton and James before.

So why has Medgold managed to sign up the C$1.6bn gold giant Centerra (TSE:CG) as a partner in Portugal and the C$1bn silver company Fortuna Silver Mines (TSE:FVI) as a 15% direct equity investor?

The answer is that these are people who know how to source assets, know how to work them up and create value, and they know how to play a long game.

With these strong foundations in place and with the mining equity markets once again beginning to show real signs of life, Medgold is itself reaching an interesting stage in its development.

The bulk of the Portuguese portfolio is being funded by Centerra as part of an earn-in deal. Centerra has the option to earn 51% of the Boticas and Lagares licences in northern Portugal by spending US$3 mln over three years. It will then have the option to earn a further 19% by spending US$3 mln over a further two years.

Crucially though, while Centerra is putting up the funding, Medgold is still doing the work – and getting paid for it.

This means that unusually for pure-play explorer or project generator, Medgold can demonstrate a regular income of between €10,000 and €20,000 per month. This helps the company “keep the lights on”, as the investment community vernacular has it, and also allows it to fund its own exploration work on a third Portuguese project outside of the joint venture, known as Marrancos.

The target here is a large resource of open-pittable gold mineralization; recent channel sampling has delivered very encouraging grades of up to 6.88 grams per tonne gold, and work is continuing.

Meanwhile, over in Serbia, the company has applied for nine licenses that are prospective for gold and base metals.

It is the potential for this ground that brought Fortuna to the table, although since Ridgway has been a been key driver of Fortuna’s success over the years, no formal introductions needed to be made.

Still, the commitment is considerable. Fortuna bought in for US$1.5 mln, securing as part of the package its 15% in Medgold and the right of first refusal to joint venture any project that Medgold secures.

According to James the indications are that Fortuna will trigger that second part of the agreement on the project very soon.

Not much can be said about this ground yet until it is fully secured, but it’s worth noting that the geological and the political context dovetail quite nicely. Serbia remains relatively unexplored due to its long-standing period of pariah status following the break-up of Yugoslavia.

But the wider geology in the Balkans is very attractive, hosting amongst others the Skouries and Olympias deposits that formed the central core of the multi-billion dollar sale of European Goldfields to Eldorado Gold (TSE:ELD).

So all told, Medgold looks well set for a new phase of expansion. There’s the ongoing drilling in Portugal, sponsored by Centerra. There’s the additional work on the wholly-owned Marrancos. And there’s the new potential of the Serbian licenses.

So what next?

“Our speciality is in developing new ideas and bringing other people in to finance them,” says James.

So far it’s a model that’s worked very well. And with the mining markets now gearing up in a big way, there could be plenty more to come.


Story by ProactiveInvestors


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