World Gold Council data shows that the Nevada gold mines in the United States produce 115.8 tonnes of the stuff per year, the highest amount on the planet by a significant distance. Fortitude Gold Corp (OTCQB:FTCO) plans to be a producer in Nevada for a very long time and its flagship Isabella Pearl mine is a powerhouse, having transitioned quickly from project ramp-up to an annual run rate of 40,000 gold ounces per year for 2021.
Fortitude has a land parcel that is among the most valuable in the goldfields of Nevada: the Walker Lane Mineral Belt.
“We have locked up a terrific land position in a very prospective portion of Nevada’s Walker Lane Mineral Belt that best positions the company to be a long-term gold producer in arguably the best mining jurisdiction in the world,” Fortitude Gold CEO and director Jason Reid told Proactive.
Fortitude has five high-grade gold properties in the Walker Lane Mineral Belt, with the Isabella Pearl in current production. Fortitude was spun out of Gold Resource Corporation (NYSEAMERICAN:GORO) (FRA:GIH), and Reid previously served as that company’s CEO. Investors are aware that under Reid’s tenure, Gold Resource achieved over a decade of production, generated over $1 billion in revenue, and returned over $116 million in dividends to shareholders.
Proactive sat down with Reid to learn more about Fortitude Gold’s exciting projects in the Silver State and how he wants the company to generate outsized returns for shareholders.
Proactive: Is it part of Fortitude Gold’s strategy to have a strong footprint in the Silver State?
Jason Reid: Yes, and for good reason. Nevada is consistently ranked among the top mining-friendly jurisdictions in the world, not to mention its prolific resource production history and future mineral potential. Mining-friendly jurisdictions are becoming increasingly scarce. This industry is challenging enough without added pressures from exterior forces. Many gold and silver companies look for properties with open-pit heap leach potential.
We acquired our core Nevada mining unit property portfolio years ago back in the precious metal bear market and prior to the recent competitive bull market. Being an early mover during a bear market enabled us to acquire five exciting properties, each with indications of high-grade gold and each with open-pit heap leach deposit potential. We are in the early stages of the next gold bull market and competition for quality properties has increased. We have locked up a terrific land position in a very prospective portion of Nevada’s Walker Lane Mineral Belt.
Walk us through the company’s Isabella Pearl gold mine which is in production.
Isabella Pearl is a high-grade open-pit heap leach operation with an average life of mine gold grade above 2 grams per tonne (g/t). For perspective, many mining companies in Nevada chase 0.5 g/t gold projects with low margins and need to make up for the low grade by moving more tonnes. We have demonstrated our Isabella Pearl Project as being a high-grade, low-cost operation with excellent margins.
We have made the transition from project ramp-up phase to our targeted annual run rate of 40,000 gold ounces per year for 2021. During 2021, we target moving about 7.5 million tonnes, in 2022 about 2.5 million tonnes and in 2023 about 1 million tonnes, while keeping our targeted production rate at 40,000 gold ounces per year. As we move fewer tonnes each year, taking advantage of the high-grade gold, our costs will move lower while production remains strong. This equates to healthy project margins and is expected to enable us to execute on our business plan of organic growth and substantial shareholder dividends.
What are some of your key priority targets at Isabella Pearl and what does your work program look like this year?
We plan to be a producer in Nevada for a very long time and the Isabella Pearl mine is the first of potentially many mines on our exciting portfolio of properties. All our properties are within a 30-mile radius and we expect good equipment and infrastructure sharing synergies. At Isabell Pearl, we have locked up 10-kilometers along a structural and mineralized corridor and expect to find additional deposits on-trend.
Our Scarlet target is on this trend and located close to our Isabella Pearl mine, and has returned some very exciting mineralized widths and high-grade gold drill results. We are delineating Scarlet mineralization trying to move it forward towards a production decision. We have numerous other targets along our 10-kilometer trend at Isabella Pearl. Not all targets will become deposits, but I am optimistic at least a few will be.
We have touched on Isabella Pearl, so please tell us about your exploration efforts to advance the company’s four other gold properties.
Our Golden Mile property is a district size land position and has also returned exciting near-surface high-grade gold drill results as reported earlier this year. We are delineating mineralization at Golden Mile as well as pursuing a production decision. Our East Camp Douglas property is also a huge district-sized land position with high-grade gold at surface and exciting open pit potential. We also have our Mina Gold and County Line properties, each with high-grade gold present as well. Grade is everything in our business and all our properties have indications of high-grade gold.
Are you planning to take a leaf out of Gold Resource Corp’s playbook where you directed over a decade of production, over $1 billion in revenue, and returned steady dividends to shareholders?
This industry is often notoriously poor at return on capital and return on investment. Companies often serial dilute their shareholders for growth and rely solely on the greater fool theory as an equity investment. While we ran Gold Resource, we differentiated ourselves by not participating in the aforementioned industry norm. We are proud of our track record in building and operating Gold Resource. Few others have achieved over a decade of production, over a decade of consistent profitability, keeping a very tight capital structure and built two mining units with two open-pit mines and two underground mines, all while returning over $116 million in consecutive monthly shareholder dividends during that same timeframe.
Gold Resource grew into a sizable company unable to return outsized dividends going forward due to the large capital projects needed to continue to grow. Rather than walk away from substantial dividends and our shareholder base that demanded dividends, we could have the best of both worlds by spinning off the Nevada Mining unit. This could allow Gold Resource to walk its most effective path going forward paying less dividends and putting more money into the ground while creating Fortitude Gold for shareholders as a dividend vehicle. The spin-off of Fortitude Gold not only made excellent business sense, optimizing each business strategy going forward, but it stayed true and delivered on the company’s dividend roots.
Fortitude Gold is in the best global mining jurisdiction, with an ultra-tight capital structure for a gold producer, demonstrating excellent margins with potential to grow organically, all the while distributing substantial dividends. Our initial dividend was announced at $0.24 annually, which is paid monthly at $0.02 per share. We have absolutely taken the very leaf out of the original playbook from Gold Resource’s early days and applied it to Fortitude. It worked extremely well in the past and I believe it will work going forward. Putting money in shareholders’ hands every month transcends being just a gold equity. The results speak for themselves in Fortitude’s share price thus far that has seen it’s low at $0.75 on the first trading day to a high of $5.80 per share in about four months. What excites me the most is that I feel we are just getting started creating shareholder value.
How much cash do you have on hand, and how long will it last?
We ended 2020 with about $28 million cash and I expect to add to that cash balance for the foreseeable future.
Why did you decide to step down as the CEO of Gold Resource after it had completed the spin-off of its Nevada Mining Unit into Fortitude?
There were only two members remaining of the original team that were around from day one at Gold Resource, Bill Conrad and myself. We walked the entire path at Gold Resource delivering on $116 million in dividends. Fortitude is both a growth and a dividend strategy. Bill and I were best suited to lead Fortitude down the same dividend path and we both transitioned over to Fortitude. Bill is chairman of the Board I am CEO. While it was bittersweet leaving Gold Resource after a decade and a half of hard work and all we had accomplished, we couldn’t be happier and more excited as the new chapter in shareholder value creation is well underway at Fortitude Gold.
Contact the author Uttara Choudhury at [email protected]
Follow her on Twitter: @UttaraProactive
Story by ProactiveInvestors
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